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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) May 12, 1997
ANDOVER TOGS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-14674 13-5677957
(State or Other Jurisdiction of (Commission File Number) (I.R.S. Employer Identification Number)
Incorporation or Organization)
</TABLE>
1333 BROADWAY
NEW YORK, NEW YORK 10018
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 212-244-0700
NOT APPLICABLE
(Former name or former address, if changed since last report)
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Item 5. Other Events
On January 31, 1997, Andover Togs, Inc. (the "Company"), filed a Joint
Plan of Reorganization (the "Plan"), together with its wholly-owned
subsidiaries, Springdale Fashions, Inc. ("Springdale"), Tortoni Manufacturing
Corp. ("Tortoni"), and Stonehenge Financial Corp ("Stonehenge" and collectively
the "Subsidiaries"). On April 10, 1997, an order confirming the Plan was entered
by the United States Bankruptcy Court for the Southern District of New York.
A condition precedent to the effectiveness of the Plan was the
implementation of an exit financing facility ("Exit Financing") as well as the
execution and delivery of notes issued by the Company to the holders of Allowed
General Unsecured Claims (the "Class 4 Claims") and the related security
agreements and note agreement referred to in the Plan (collectively the "Note
Documents").
On May 12, 1997, in connection with the consummation of the Exit
Financing, the Company and the Subsidiaries entered into an Amended and Restated
Financing and Security Agreement (the "Financing Agreement") with The CIT
Group/Commercial Services, Inc. ("CIT") and executed various security documents
to collateralize the obligations of the Company and its Subsidiaries with
substantially all of the assets of such entities. The Exit Financing is on
substantially the same terms as the previous financing entered into between the
Company and CIT in September 1996 except that the Exit Financing provides the
Company with up to $10,500,000 of revolving credit (with a $3,610,000 sublimit
for documentary letters of credit). The facility is secured by a first priority
lien on substantially all of the assets of the Company and the Subsidiaries.
On May 12, 1997, in connection with the consummation of the Note
Documents, the Company delivered a note (the "Class 4 Note") in the initial
principal amount of $3,317,532.06, payable to the holders of the Class 4 Claims
to be administered by a collateral trustee (the "Collateral Trustee"). The
principal amount of the Class 4 Note represents the amount of allowed unsecured
claims from time to time less the cash to be paid in respect thereof. As of May
12, 1997, there remains Disputed Claims, as that term is defined in the Plan, in
excess of $1,000,000. The principal amount of the Class 4 Note will be increased
to the extent that such Disputed Claims are ultimately allowed. Payment of the
Class 4 Note is to be made in twenty (20) consecutive quarterly installments of
principal and interest commencing June 30, 1997, based on a ten-year
amortization schedule with the balance payable on March 31, 2002. Accordingly,
the first nineteen (19) installments are in the amount of 1/40th of the Class 4
Note and the twentieth (20th) installment due March 31, 2002 is in the amount of
the then unpaid balance of such Class 4 Note. The Class 4 Note bears interest at
a rate of six percent (6%) per annum. The obligations of the Company under the
Class 4 Note are secured by a second priority lien on the assets of the Company
and the Subsidiaries. The rights of the holders of the Class 4 Note are subject
to the terms of the Intercreditor Agreement entered into between CIT and the
Collateral Trustee.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
99(a) Amended and Restated Financing Security Agreement dated as of
May 12, 1997 between the Registrant and CIT.
99(b) Amended and Restated Subsidiary Security Agreement dated as of
May 12, 1997 made by Springdale, Tortoni and Stonehenge in
favor of CIT.
99(c) Amended and Restated Guaranty dated as of May 12, 1997 by
Springdale in favor of CIT.
99(d) Amended and Restated Guaranty dated as of May 12, 1997 by
Tortoni in favor of CIT.
99(e) Amended and Restated Guaranty dated as of May 12, 1997 by
Stonehenge in favor of CIT.
99(f) Amended and Restated Security Agreement and Mortgage for
Trademarks and Patents dated as of May 12, 1997 between the
Registrant and CIT.
99(g) Amended and Restated Security Agreement and Mortgage for
Trademarks and Patents dated as of May 12, 1997 between Tortoni
and CIT.
99(h) Amended and Restated Security Agreement and Mortgage for
Trademarks and Patents dated as of May 12, 1997 between
Springdale and CIT.
99(i) Amended and Restated Security Agreement and Mortgage for
Trademarks and Patents dated as of May 12, 1997 between
Stonehenge and CIT.
99(j) Intercreditor Agreement dated as of May 12, 1997 between CIT
and M.J. Sherman and Associates (the "Collateral Trustee").
99(k) Class 4 Note dated as of May 12, 1997 made by the Registrant in
favor of the Collateral Trustee.
99(l) Note and Collateral Trust Agreement dated as of May 12, 1997
between the Registrant, Springdale, Tortoni and Stonehenge and
the Collateral Trustee.
99(m) Class 4 Security Agreement dated as of May 12, 1997 by the
Registrant, Springdale, Tortoni and Stonehenge in favor of the
Collateral Trustee.
99(n) Guaranty dated as of May 12, 1997 by Springdale in favor of the
Collateral Trustee.
99(o) Guaranty dated as of May 12, 1997 by Stonehenge in favor of the
Collateral Trustee.
99(p) Guaranty dated as of May 12, 1997 by Tortoni in favor of the
</TABLE>
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<TABLE>
<S> <C>
Collateral Trustee.
99(q) Class 4 Security Agreement and Mortgage for Trademarks and
Patents dated as of May 12, 1997 between Springdale and the
Collateral Trustee.
99(r) Class 4 Security Agreement and Mortgage for Trademarks and
Patents dated as of May 12, 1997 between the Registrant and the
Collateral Trustee.
99(s) Class 4 Security Agreement and Mortgage for Trademarks and
Patents dated as of May 12, 1997 between Stonehenge and the
Collateral Trustee.
99(t) Class 4 Security Agreement and Mortgage for Trademarks and
Patents dated as of May 12, 1997 between Tortoni and the
Collateral Trustee.
99(u) Press Release dated May 13, 1997.
</TABLE>
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ANDOVER TOGS, INC.
(Registrant)
May 23, 1997 By: /s/ William L. Cohen
________________________
William L. Cohen,
Chairman, President and Chief
Executive Officer
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
----------- ------------
<S> <C>
99(a) Amended and Restated Financing Security Agreement dated as of
May 12, 1997 between the Registrant and CIT.
99(b) Amended and Restated Subsidiary Security Agreement dated as of
May 12, 1997 made by Springdale, Tortoni and Stonehenge in favor
of CIT.
99(c) Amended and Restated Guaranty dated as of May 12, 1997 by
Springdale in favor of CIT.
99(d) Amended and Restated Guaranty dated as of May 12, 1997 by
Tortoni in favor of CIT.
99(e) Amended and Restated Guaranty dated as of May 12, 1997 by
Stonehenge in favor of CIT.
99(f) Amended and Restated Security Agreement and
Mortgage for Trademarks and Patents dated as of May
12, 1997 between the Registrant and CIT.
99(g) Amended and Restated Security Agreement and
Mortgage for Trademarks and Patents dated as of May
12, 1997 between Tortoni and CIT.
99(h) Amended and Restated Security Agreement and
Mortgage for Trademarks and Patents dated as of May
12, 1997 between Springdale and CIT.
99(i) Amended and Restated Security Agreement and
Mortgage for Trademarks and Patents dated as of May
12, 1997 between Stonehenge and CIT.
99(j) Intercreditor Agreement dated as of May 12, 1997 between CIT and
M.J. Sherman and Associates (the "Collateral Trustee").
99(k) Class 4 Note dated as of May 12, 1997 made by the Registrant in
favor of the Collateral Trustee.
99(l) Note and Collateral Trust Agreement dated as of May 12, 1997
between the Registrant, Springdale, Tortoni and Stonehenge and the
Collateral Trustee.
99(m) Class 4 Security Agreement dated as of May 12, 1997 by the
Registrant, Springdale, Tortoni and Stonehenge in favor of the
Collateral Trustee.
99(n) Guaranty dated as of May 12, 1997 by Springdale in favor of the
Collateral Trustee.
99(o) Guaranty dated as of May 12, 1997 by Stonehenge in favor of the
Collateral Trustee.
99(p) Guaranty dated as of May 12, 1997 by Tortoni in favor of the
Collateral Trustee.
</TABLE>
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<TABLE>
<S> <C>
99(q) Class 4 Security Agreement and Mortgage for
Trademarks and Patents dated as of May 12, 1997
between Springdale and the Collateral Trustee.
99(r) Class 4 Security Agreement and Mortgage for Trademarks and
Patents dated as of May 12, 1997 between the Registrant and the
Collateral Trustee.
99(s) Class 4 Security Agreement and Mortgage for
Trademarks and Patents dated as of May 12, 1997
between Stonehenge and the Collateral Trustee.
99(t) Class 4 Security Agreement and Mortgage for Trademarks and
Patents dated as of May 12, 1997 between Tortoni and the Collateral
Trustee.
99(u) Press Release dated May 13, 1997.
</TABLE>
STATEMENT OF DIFFERENCES
The section symbol shall be expressed as.................'SS'
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AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
The CIT Group/Commercial Services, Inc.
(as Lender)
And
The CIT Group/Commercial Services, Inc.
(as Agent)
And
ANDOVER TOGS, INC.
(as Borrower)
Dated: As of May 12, 1997
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Table of Contents
Page
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SECTION 1. Definitions......................................... 1
SECTION 2. Revolving Loans.....................................27
2.01. General.............................................27
2.02. Notice of Manner of Borrowing.......................27
2.03. Lenders' Obligations Under the Revolving Line
of Credit...........................................28
2.04. Funding of Loans....................................28
2.05. Mandatory Payments..................................29
2.06. Repayment Upon Termination..........................29
2.07. Increased Costs.....................................30
2.08. Capital Adequacy....................................31
SECTION 3. Sharing of Payments; Applications...................32
3.01. Sharing of Payments, Etc............................32
3.02. Apportionment of Payments...........................32
SECTION 4. Interest, Fees and Expenses and Payments............33
4.01. Interest on the Revolving Loans.....................33
4.02. Default Interest....................................33
4.03. Field Examination Fee...............................33
4.04. Out-of-Pocket Expenses..............................34
4.05. Unused Letter of Credit Line Fee and Unused
Line Fees...........................................34
4.06. Letter of Credit Issuance and
Lock Box Fees.......................................34
4.07. Mandatory Prepayments...............................34
4.08. Statements..........................................34
4.09. Method of Payment...................................35
4.10. Use of Proceeds.....................................35
SECTION 5. Letters of Credit...................................35
5.01. Letters of Credit Guaranty..........................35
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Page
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5.02. Participations......................................40
5.03. Issuing Letters of Credit;
Cash Collateral.....................................42
SECTION 6. Conditions Precedent to Revolving
Loans on the Closing Date...........................43
6.01. Delivery of Documents...............................43
6.02. Intercreditor Agreement.............................43
6.03. Field Examination and Due Diligence.................43
6.04. No Violation of Law or Agreement....................43
6.05. Financial Information...............................44
6.06. The Effective Date..................................44
6.07. Licensing and Union Agreements......................44
6.08. Material Adverse Change.............................44
6.09. Corporate Organization..............................44
6.10. Proceedings.........................................44
6.11. Board Resolutions...................................45
6.12. Legal Restraints/Litigation.........................45
6.13. Lock Box Account....................................45
6.14. Disbursement Authorization..........................45
6.15. Fees and Expenses...................................46
6.16. Insurance...........................................46
6.17. Certain Plans.......................................46
6.18. UCC Filings.........................................46
6.19. Security Agreement -
Patents and Trademarks..............................47
6.20. Examination and Verification........................47
6.21. Officer's Certificate...............................47
6.22. Use of Proceeds.....................................47
6.23. Key Man Life Insurance..............................47
6.24. Additional Documents................................47
6.25. No Default..........................................48
6.26. Opinions............................................48
6.27. Confirmation of Plan of Reorganization..............48
6.28. Consummation of Transactions Under Plan of
Reorganization......................................48
6.29. Consents............................................48
6.30. Minimum Availability................................48
ii
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Page
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SECTION 7. Conditions Precedent to
Each Revolving Loan.................................49
7.01. Representations and Warranties......................49
7.02. No Default..........................................49
7.03. Additional Documents................................49
7.04. Deemed Representation...............................49
SECTION 8. Management, Collection And Status of Accounts
Receivable And Other Collateral.....................49
8.01. Management of Collateral............................50
8.02. Accounts Documentation..............................52
8.03. Status of Accounts and Other Collateral.............52
8.04. Collateral Custodian................................54
SECTION 9. Collateral..........................................55
9.01. Grant of Lien.......................................55
9.02. Inventory...........................................55
9.03. Equipment...........................................56
9.04. Loan Account........................................56
9.05. Lock Box Accounts...................................57
9.06. Real Estate.........................................58
9.07. Continuance of Security Interests...................58
9.08. Election of Actions by the Lenders..................59
9.09. Credits and Charges.................................59
9.10. Additional Collateral...............................59
SECTION 10. Representations and Warranties......................59
10.01. Corporate Existence.................................59
10.02. Authorization of Agreement and Other
Documents...........................................60
10.03. Financial Statements................................61
10.04. No Violation........................................61
10.05. Full Disclosure.....................................62
10.06. Litigation..........................................62
10.07. Labor Matters.......................................63
10.08. Material Agreements.................................63
iii
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Page
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10.09. Compliance with Laws................................63
10.10. Governmental Regulations............................64
10.11. Outstanding Debt; No Default........................64
10.12. Title, Liens........................................64
10.13. Taxes...............................................64
10.14. Collateral; Real Estate.............................64
10.15. Broker's or Finder's Commissions....................66
10.16. Application of Proceeds.............................66
10.17. ERISA...............................................67
10.18. Environmental Compliance............................68
10.19. Capital Structure...................................69
10.20. Subsidiaries........................................70
10.21. Survival of Representations
and Warranties......................................70
SECTION 11. Certain Covenants...................................70
11.01. Collateral Covenants................................70
11.02. Insurance...........................................73
11.03. Taxes...............................................75
11.04. Compliance with Laws................................75
11.05. Financial Statements................................76
11.06. Certain Restrictions................................79
11.07. Negative Pledge.....................................81
11.08. Environmental Compliance............................81
11.09. Transactions with Affiliates; Payment of
Management Fee......................................82
11.10. ERISA Notices.......................................82
11.11. ERISA Covenant......................................83
11.12. Key Man Life Insurance..............................84
11.13. Notice of Default; Notice to Block Class 4
Payments............................................84
11.14. Financial Covenants.................................85
SECTION 12. Events of Default and Remedies......................86
12.01. Events of Default...................................86
12.02. Acceleration of Obligations, etc....................91
12.03. Other Remedies......................................91
iv
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Page
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SECTION 13. Powers..............................................93
13.01. Attorney-in-Fact....................................93
13.02. Right to Set-Off....................................94
13.03. Sale and Assignment of Lenders' Interest............94
13.04. Disclosure to Participants..........................96
SECTION 14. Termination.........................................96
14.01. Termination of Revolving Line of Credit.............96
14.02. Termination Upon an Event of Default................97
14.03. Maturity of Obligations Upon Termination............97
14.04. Termination by Lenders..............................97
SECTION 15. Indemnification.....................................98
SECTION 16. Miscellaneous.......................................99
16.01. Waivers.............................................99
16.02. Entire Agreement....................................99
16.03. Amendments..........................................99
16.04. Permitted Interest and Fees.........................99
16.05. Illegality.........................................100
16.06. Jurisdiction of Claims.............................100
16.07. No Subrogation; Continuing Obligation..............101
16.08. Notices............................................102
16.09. Governing Law......................................103
16.10. Satisfaction of Agent..............................103
16.11. Description Headings...............................103
16.12. Counterparts.......................................104
16.13. Further Assurances.................................104
16.14. Confidentiality....................................104
SECTION 17. Agency.............................................104
17.01. The Agent..........................................105
17.02. Delegation of Duties...............................105
17.03. Exculpatory Provisions.............................105
17.04. Reliance by Agent..................................106
17.05. Notice of Default..................................106
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Page
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17.06. Non-Reliance on Agent and Other Lenders............107
17.07. Indemnification....................................107
17.08. The Agent in Its Individual Capacity...............108
17.09. Successor Agent....................................108
17.10. Collateral Matters.................................109
17.11. Amendments Concerning Agency Function..............110
17.12. Liability of Agent.................................110
17.13. Transfer of Agency Function........................110
17.14. Withholding Taxes..................................110
SECTION 18. Lender Provisions..................................111
18.01. Lenders' Accounting Statement......................111
18.02. Settlement of Accounts.............................111
18.03. Shared Liability...................................112
vi
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EXHIBITS
Exhibit A - Form of Revolving Loan Promissory Note
Exhibit B - Form of Assignment and Transfer Agreement
Exhibit C - Form of Guaranty
Exhibit D - Form of Security Agreement and Mortgage -
Trademark and Patents
Exhibit E - Form of Opinion
Exhibit F - Form of Subsidiary Security Agreement
Exhibit G - Form of Landlords' Waiver and Consent
SCHEDULES
Schedule 1(a) - Revolving Loan Amount
Schedule 1.01 - Indebtedness not in Financial
Statements
Schedule 5.03 - Existing Letters of Credit
Schedule 9.05 - Lock Box Accounts
Schedule 10.1(d) - Name, Jurisdiction, Shares
Schedule 10.01(e) - Convertibles, Exchangeables,
Options, Calls
Schedule 10.06(a) - Litigation - Material Adverse
Effect
Schedule 10.06(b) - Litigation - All
Schedule 10.07 - Labor Matters
Schedule 10.08 - Material Agreements - Defaulted
or Requiring Consents
Schedule 10.09 - Compliance with laws
Schedule 10.14(a) - Permitted Encumbrances
Schedule 10.14(b)(i) - Fee Properties
Schedule 10.14(b)(ii) - Leased Properties
Schedule 10.14(d) - Intellectual Property
Schedule 10.14(e)(i) - Jurisdictions for UCC filings
(Inventory)
Schedule 10.17 - ERISA
Schedule 10.18 - Environmental Compliance
Schedule 10.19 - Capital Structure
Schedule 10.20 - Assets of Stonehenge
vii
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AMENDED AND RESTATED FINANCING AND SECURITY AGREEMENT
THE CIT GROUP/COMMERCIAL SERVICES, INC., a New York corporation
(hereinafter "CIT/CS"), with offices located at 1211 Avenue of the Americas, New
York, NY 10036 (such office, or any other office designated by CIT/CS as its
Head Office for purposes hereof being referred to herein as the "Head Office")
and The CIT Group/Commercial Services, Inc. as agent for the Lenders (in such
capacity, together with its successors in such capacity, the "Agent") are
pleased to confirm the terms and conditions under which Lenders shall make
revolving loans, advances and other financial accommodations to Andover Togs,
Inc., a Delaware corporation, with offices located at 1333 Broadway, New York,
New York 10018 (the "Borrower").
BACKGROUND
A. On March 19, 1996, the Borrower and the Guarantors (as
hereinafter defined) filed voluntary petitions for relief under chapter 11 of
the Bankruptcy Code (as hereinafter defined) with the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court").
B. CIT/CS, individually and as Agent, and Borrower have previously
entered into that certain Replacement DIP Financing and Security Agreement dated
as of September 19, 1996 (the "Original Agreement"), pursuant to which Borrower
requested and CIT/CS agreed to provide a secured credit facility to the Borrower
of up to $15,000,000 subject to the terms and conditions set forth therein.
C. In connection with the implementation of Borrower's Plan of
Reorganization (as hereinafter defined) Lender (as hereinafter defined) and
Borrower desires to amend and restate the Original Agreement to provide a
secured credit facility to the Borrower of up to $10,500,000, but only upon the
terms and subject to the conditions contained herein.
SECTION 1. Definitions.
The following terms have the meanings indicated:
Accounts shall have the meaning set forth in the definition of
"Collateral".
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<PAGE>
Account Debtor shall mean each debtor, customer or obligor in any
way obligated on or in connection with any Account.
Agent shall have the meaning set forth in the introductory paragraph
to this Financing Agreement.
Applicable Lending Office shall mean, for each Lender and for each
Revolving Loan, the lending office of such Lender (or of an Affiliate of such
Lender) designated as such for such type of loan on its signature page hereof or
in the applicable Assignment and Transfer Agreement or such other office of such
Lender (or of an Affiliate of such Lender) as such Lender may from time to time
specify to the Agent and the Borrower in writing as the office by which its
loans of such type are to be made and maintained.
Assignee shall mean any Person to whom a Lender shall assign any of
its Commitment hereunder in accordance with Section 13.03 of this Financing
Agreement.
Assignment and Transfer Agreement shall mean an Assignment and
Transfer Agreement, substantially in the form of Exhibit B hereto, pursuant to
which a Lender assigns and an Assignee assumes rights and obligations in
accordance with Section 13.03 of this Financing Agreement.
Availability shall mean, as to the Borrower, the excess of
(i) 85% of the Eligible Accounts Receivable of the Borrower,
plus
(ii) 50% of the Eligible Inventory of the Borrower but Availability
with respect to Eligible Inventory shall in no event be more
than the Inventory Sublimit,
over
2
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(iii) the sum of (A) the outstanding aggregate principal amount of
all Revolving Loans of the Borrower and the maximum amount
drawable under the outstanding documentary and standby Letters
of Credit of the Borrower (including unreimbursed amounts
under drawn Letters of Credit) which such maximum amount
drawable and unreimbursed amount shall in no event exceed the
Maximum Letter of Credit Amount, (B) the outstanding amount of
all other interest and fees of the Borrower then due and owing
hereunder and (C) the Availability Reserve, if any.
Availability Reserve shall mean reserves imposed by the Agent in its
reasonable discretion.
Bankruptcy Code shall mean Title 11, United States Code, 11 U.S.C.
ss. 101 et seq.
Bankruptcy Court shall have the meaning assigned to it in the
"Background" section hereof.
Borrower shall have the meaning set forth in the introductory
paragraph to this Financing Agreement.
Borrowing Notice shall mean the notice described in Section 2.02 of
this Financing Agreement.
Business Day shall mean a day other than (A) a Saturday, Sunday or
other day in which commercial banks in New York City are authorized or required
by law to close or (B) a day on which the Agent at its Head Office is closed.
Capital Expenditures shall mean in any fiscal year, the cost of any
fixed asset or improvement, or replacement, substitution, or addition thereto,
having a useful life of more than one year, including as a cost the aggregate
amount of expenses, charges or payments due or arising in connection with the
direct or indirect acquisition of such assets or improvements, replacements,
substitutions or additions or in connection with any lease of property by the
Borrower that, in accordance with GAAP, has been or should be reflected as a
liability on the balance sheet of the Borrower, and the entire
3
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<PAGE>
principal amount of any Indebtedness assumed or incurred in connection
therewith.
Capital Stock of any Person shall mean any and all shares,
interests, participations, or other equivalents (however designated including
stock appreciation rights) of its capital stock and any rights (other than debt
securities convertible into capital stock), warrants or options to acquire such
capital stock.
CERCLA shall have the meaning set forth in Section 10.18(a) hereof.
Change In Control shall mean a Person, entity or "group" (within the
meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as
amended) other than the Cohen Family shall have acquired direct or indirect
beneficial ownership of 50% or more of any outstanding class of Capital Stock of
the Borrower.
Chapter 11 Cases shall mean the Borrower's and the Guarantors'
jointly administered reorganization cases under chapter 11 of the Bankruptcy
Code, pending in the Bankruptcy Court.
Chase shall mean The Chase Manhattan Bank, formerly known as
Chemical Bank.
Chase Bank Rate shall mean the rate of interest per annum announced
by Chase from time to time as its prime rate in effect at its principal office
in the city of New York (the prime rate is not intended to be the lowest rate of
interest charged by Chase to its borrowers).
Chase Bank Revolving Loan shall mean a Revolving Loan bearing
interest at the Chase Bank Rate plus .85%.
CIT/CS shall have the meaning set forth in the introductory
paragraph to this Financing Agreement.
Class 3 Creditors shall mean the holders of Allowed Class 3 Claims
as defined in the Plan of Reorganization.
Class 4 Creditors shall mean the holders of Allowed Class 4 Claims
as defined in the Plan of Reorganization and from and after the transfer and
assignment of any Allowed Class 4 Claim means any transferee of such Allowed
Class 4 Claim holding a Certificate of Beneficial Interest evidencing such
Allowed Class 4 Claim.
4
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<PAGE>
Class 4 Note shall mean the Class 4 Note of Borrower dated the
Effective Date and due March 31, 2002 issued to the Collateral Trustee for the
benefit of the Class 4 Creditors.
Closing Date shall mean the date set forth in the "IN WITNESS
WHEREOF" paragraph at the end of this Financing Agreement, which date shall in
no event be (x) earlier than the date on which all the conditions set forth in
Section 6 hereof shall have been satisfied or waived or (y) later than May 15,
1997.
Code shall mean the Internal Revenue Code of 1986, as amended.
Cohen Family shall mean William Cohen, Peter Cohen, Carolyn
Zelikovic, or their spouse or issue or any trust for which any of the foregoing
are beneficiaries.
Collateral shall mean:
(a) all of the Borrower's right, title and interest in and to all
equipment (including Borrower's screen print machinery), vehicles, furniture,
fixtures and machinery wherever located and whether now or hereafter existing
and whether now owned or hereafter acquired, together with all substitutes,
replacements, accessions and additions thereto, and all tools, parts,
accessories and attachments used in connection therewith (hereinafter
collectively referred to as the "Equipment");
(b) all of the Borrower's right, title and interest in and to all
inventory of any kind wherever located and whether now or hereafter existing and
whether now owned or hereafter acquired (including, without limitation, all
types of inventory, merchandise, goods, tangible personal property and other
assets that are held by the Borrower for sale, lease or other disposition in the
ordinary course of the Borrower's business or to be furnished under a contract
for services, whether such inventory, merchandise, goods, tangible personal
property and other assets, are raw, in process or finished, and materials used
or consumed in the business of the Borrower, and goods returned to or
repossessed by the Borrower and goods in which the Borrower has an interest in
mass or in joint or other interest or right of any kind including consigned
goods and goods being possessed), and all accessions thereto and products
thereof and all packing
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and shipping materials (hereinafter collectively referred to as the
"Inventory");
(c) all of the Borrower's right, title and interest in and to,
whether now or hereafter existing, (i) all present and future accounts, contract
rights, chattel paper, documents and instruments (as such terms are defined in
the UCC); (ii) all monies, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, the Agent from
or for the Borrower, whether for safekeeping, pledge, custody, transmission,
collection or otherwise; (iii) all of the Borrower's right, title and interest,
and all of the Borrower's rights, remedies, security and liens, in, to and in
respect of any credit, insurance, accounts (including, without limitation,
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party), guaranties or
other contracts of suretyship with respect to accounts, and deposits or other
security for the obligation of any Account Debtor; (iv) all rights relating to
the sale or other transfer of property to, or the construction, renovation or
other improvement of property by or for the Borrower; (v) all rights now or
hereafter existing in and to all security agreements, leases and other contracts
now or hereafter existing and securing or otherwise relating to any accounts,
contract rights, chattel paper, instruments, documents, or other rights or
obligations; and (vi) all of the Borrower's right, title and interest in, to and
in respect of all goods relating to, or which by sale have resulted in,
accounts, including, without limitation, all goods described in invoices or
other documents or instruments with respect to, or otherwise representing or
evidencing, any accounts, and all returned, reclaimed or repossessed goods (any
and all such accounts, contract rights, chattel paper, instruments, documents
and rights and obligations being hereinafter referred to as the "Accounts");
(d) (i) all of the Borrower's right, title and interest in and to
all general intangibles; (ii) all rights, interest, choses in action, causes of
actions, claims and all other intangible property of every kind and nature, in
each instance whether now owned or hereafter acquired by the Borrower,
including, without limitation, all corporate and other business records, all
loans, royalties, and all other forms of obligations receivable whatsoever
(other than Accounts); (iii) all Trademarks, trademark applications, Trademark
Licenses, Patents,
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patent applications, Patent Licenses, trade secrets, copyrights, goodwill,
inventions, designs, registrations, permits, franchises and licenses; (iv) all
computer programs, software, printouts and other computer materials, customer
lists, credit files, correspondence, and advertising materials; (v) all customer
and supplier contracts, sale orders, rights under license and franchise
agreements, and other contracts and contract rights; (vi) all interests in
partnerships and joint ventures, including all moneys due from time to time in
respect thereof; (vii) all federal, state and local tax refunds and federal,
state and local tax refund claims; (viii) all right, title and interest under
leases, subleases, licenses and concessions and other agreements relating to
personal property, including all moneys due from time to time in respect
thereof; (ix) all payments due or made to the Borrower in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of any property
by any Person or Governmental Authority; (x) all deposit accounts (general or
special) with any bank or other financial institution, including, without
limitation, any depositary or other accounts maintained by the Borrower at the
Agent or any other Lender and all funds on deposit thereon; (xi) all credits
with and other claims against third parties (including carriers and shippers)
(other than Accounts); (xii) all rights to indemnification; (xiii) all
reversionary interests in pension and profit sharing plans and reversionary,
beneficial and residual interests in trusts; (xiv) all proceeds of insurance
(except Excess Key Man Life Insurance Proceeds), including credit insurance, of
which such Borrower is the beneficiary; (xv) all letters of credit, guaranties,
liens, security interests and other security held by or granted to the Borrower;
and (xvi) all other intangible property, whether or not similar to the
foregoing, in each instance, however and wherever and whenever arising and
whether now owned or hereafter acquired (hereinafter collectively referred to as
"General Intangibles");
(e) the books and records of the Borrower relating to any of the
foregoing Collateral, including, without limitation, all customer contracts,
sale orders, minute books, ledgers, records, computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence and advertising materials, in each case indicating, summarizing
or evidencing any of the Collateral; and
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(f) all cash and non-cash proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Agent is the loss payee thereof) (except Excess
Key Man Life Insurance Proceeds), and any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Collateral;
in each case, howsoever and whensoever the Borrower's interest therein may arise
or appear (whether by ownership, security interest, claim or otherwise).
Collateral Trust Agreement shall mean the Note and Collateral Trust
Agreement dated of even date herewith among the Borrower, the Guarantors and the
Collateral Trustee, as the same may hereafter be amended, modified or
supplemented.
Collateral Trustee shall mean M.J. Sherman & Associates, Inc., as
trustee for the benefit of Class 4 Creditors under the Plan of Reorganization.
Commitment shall mean, as to any Lender at any time, such Lender's
Revolving Loan Amount.
Confirmation Order shall mean the order of the Bankruptcy Court
dated April 10, 1997 confirming the Plan of Reorganization.
Contracts shall mean any agreement relating to the terms of payment
or the terms of performance thereof, including, without limitation, (a) all
rights of the Borrower to receive moneys due and to become due to it thereunder
or in connection therewith, (b) all rights of the Borrower to damages arising
out of, or for, breach or default in respect thereof and (c) all rights of the
Borrower to perform and to exercise all remedies thereunder.
Customarily Permitted Liens shall mean:
(a) liens for franchise taxes which are not yet due or which are
being contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained in accordance with
GAAP and as to
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which the priority of the liens in favor of the Agent are unaffected;
(b) statutory liens of landlords and liens of carriers, warehousemen
or suppliers (or their lenders) and other like liens imposed by law,
created in the ordinary course of business and for amounts not yet due by
their terms and with respect to which adequate reserves or other
appropriate provisions are being maintained in accordance with GAAP;
(c) deposits made (and the liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases,
surety bonds and appeal bonds) in connection with workers' compensation,
unemployment insurance and other types of social security benefits or to
secure the performance of tenders, bids, contracts (other than for the
repayment or guarantee of borrowed money or purchase money obligations),
statutory obligations and other similar obligations arising as a result of
progress payments under government contracts; and
(d) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the real property and
which do not detract from the value of such real property and which do not
interfere in any material respect with the use or enjoyment of such real
property in the ordinary course of business of the Person owning such real
property.
Default shall mean any event specified in Section 12 hereof, whether
or not any requirement for the giving of notice, the lapse of time, or both has
been satisfied.
Default Rate of Interest shall mean a rate of interest per annum
equal to the sum of: (a) two percent (2%) and (b) the rate of interest then
otherwise payable on the relevant Obligations, which the Agent shall be entitled
to charge the Borrower on all Obligations due the Lenders by the Borrower to the
extent provided in Section 12.02 of this Financing Agreement, but in no event in
excess of the maximum amount of interest permitted by law.
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Dollar(s) and the sign "$" shall mean lawful money of the United
States of America.
Early Termination Fee shall mean the fee the Lenders are entitled to
charge to the Borrower in the event the Borrower terminates the Revolving Line
of Credit or this Financing Agreement at any time on or before one year from the
Closing Date to be determined by calculating for the immediately preceding
thirty day period (x) the average daily outstanding principal of the Revolving
Loans plus (y) the average daily outstanding Letters of Credit multiplied by one
half of one percent (1/2 of 1%).
EBITDA shall mean consolidated net income determined in accordance
with GAAP plus interest expense (paid or accrued), plus depreciation,
amortization and restructuring costs plus extraordinary non-cash expenses minus
extraordinary income determined in accordance with GAAP plus, to the extent
included in determining net income, taxes paid or accrued.
Effective Date shall have the meaning assigned to it in the Plan of
Reorganization.
Eligible Accounts Receivable means such Accounts of the Borrower
which are, and at all times shall continue to be, acceptable to the Agent in the
exercise of its reasonable business judgment. Criteria for eligibility may be
fixed and revised from time to time in the exercise of the Agent's reasonable
business judgment (and the Agent shall notify the Borrower as a courtesy of a
change in criteria but a failure to do so shall have no effect hereunder). In
general, Accounts may be deemed to be eligible if: (i) delivery of the
merchandise has been completed; (ii) no return, rejection or repossession has
occurred; (iii) such merchandise has been accepted by the Account Debtor without
dispute, setoff, defense or counterclaim or if such delivered merchandise is
subject to a dispute, setoff, defense or counterclaim (after notification by the
Borrower of same to the Agent), then the Account shall be eligible to the extent
that such Account will be accepted by such Account Debtor; (iv) such Account is
owned by the Borrower free and clear of any lien, security interest or other
encumbrance other than in favor of the Agent and the Lenders and otherwise
continues to be in full conformity with any representation and warranty made
herein by the Borrower to the Agent and the Lenders with respect
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thereto; (v) such Account is unconditionally payable in U.S. Dollars within
ninety (90) days from the invoice date and is not evidenced by a promissory
note, chattel paper or any other instrument or document; (vi) no more than sixty
(60) days have elapsed from the invoice due date and no more than one hundred
and twenty (120) days have elapsed from the invoice date; (vii) the Account
Debtor with respect thereto is not an Affiliate of the Borrower or any
Guarantor; (viii) such Account does not constitute an obligation of the United
States or any other Governmental Authority, except to the extent that the
aggregate face amount of the subject Accounts so owed exceeds ten percent (10%)
of the aggregate amount of all of the Borrower's Accounts and the Borrower
assigns its right to payment of such excess Accounts to Agent pursuant to the
Assignment of Claims Act of 1940, as amended (31 U.S.C. Subsection 3727 et seq.
and 41 U.S.C. Subsection 15 et seq.) and has otherwise complied with other
applicable statutes or ordinances; (ix) the Account Debtor (or the applicable
office of the Account Debtor) with respect thereto is located in the continental
United States, Hawaii, Puerto Rico or the Virgin Islands unless the Account is
supported by a letter of credit, guaranty, acceptance or other similar
obligation satisfactory to the Agent; (x) the Account Debtor with respect
thereto is not also a supplier to or creditor of the Borrower or Guarantor,
unless such supplier or creditor has executed a no-offset letter satisfactory to
the Agent; (xi) not more than 50% of the aggregate amount of all Accounts of the
Account Debtor with respect to such Account have remained unpaid sixty (60) days
past the invoice due date or one hundred and twenty (120) days past the invoice
date; (xii) the Account Debtor is not the subject of a "Bankruptcy Proceeding"
(for purposes hereof an Account Debtor is subject to a "Bankruptcy Proceeding"
if that Account Debtor has filed a petition for bankruptcy or any other relief
under the United States Bankruptcy Code or any other law relating to bankruptcy,
insolvency, reorganization or relief of debtors, made an assignment for the
benefit of creditors, had filed against it any petition or other application for
relief under the United States Bankruptcy Code or any such other law, has
suspended business operations, called a meeting of its creditors for the purpose
of obtaining any financial concession or accommodation, or had or suffered a
receiver or a trustee to be appointed for all or a significant portion of its
assets or affairs); provided, however, that an Account due from an Account
Debtor which was created subsequent to the commencement of a case under chapter
11 of the Bankruptcy Code by or against that
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Account Debtor shall not be deemed ineligible solely by virtue of this clause if
such Account would otherwise be deemed eligible by the Agent hereunder; and
(xiii) the Agent is, and continues to be, satisfied with the credit standing of
the Account Debtor in relation to the amount of credit extended.
Eligible Inventory means all tangible personal property, wherever
located, which is owned by the Borrower and held for sale or to be furnished
under contracts of sale, including all piece goods and raw materials which meet
all of the following specifications: (i) the Inventory is lawfully owned by the
Borrower and is not subject to any existing lien, claim, security interest or
prior assignment; (ii) the Borrower has the right to assignment thereof and the
power to grant liens and security interests therein; (iii) the Inventory arose
or was acquired in the ordinary course of the business of the Borrower and such
Inventory does not represent damaged goods; (iv) no Account or, except as
permitted by clause (vi)(B) below, document of title has been created or issued
with respect to such Inventory; (v) the Inventory is readily marketable for sale
by the Borrower; (vi) the Inventory is (A) located in one of the locations
listed on Schedule 10.14(e)(i) hereto as the same may be amended from time to
time in accordance with the terms of the Loan Documents or (B) "in transit",
provided that such "in-transit" Inventory is finished goods inventory that is
shipped under a Letter of Credit issued by the L/C Issuer pursuant to this
Financing Agreement or is "in transit" from a location outside the United
States; (vii) except as permitted by clause (vi)(B) above, such Inventory is
located within the United States; (viii) the Inventory is not work in process or
supplies; and (ix) the Inventory is not otherwise regarded by Agent, in its sole
and absolute discretion exercised reasonably, as unsuitable Collateral for the
Obligations. Finished goods inventory covered by Letters of Credit issued
hereunder shall be included as Eligible Inventory so long as such finished goods
inventory is otherwise deemed to be Eligible Inventory pursuant to the criteria
herein set forth.
Employee Benefit Plan shall mean any plan, agreement, arrangement or
commitment which is an employee benefit plan (other than a Multiemployer Plan),
as defined in Section 3(3) of ERISA, maintained by the Borrower or any ERISA
Affiliate of the Borrower or with respect to which the Borrower or any ERISA
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Affiliate of the Borrower at any relevant time has any liability or obligation
to contribute.
Environmental Laws shall have the meaning set forth in Section
10.18(a) hereof.
EPA shall have the meaning set forth in Section 10.18(b) hereof.
Equipment shall have the meaning set forth in the definition of
"Collateral".
ERISA shall mean the Employee Retirement Income Security Act of
1974, as amended and, unless the context otherwise requires, the rules and
regulations promulgated thereunder from time to time.
ERISA Affiliate shall mean, with respect to the Borrower or any
other Person, any entity required to be aggregated with the Borrower, or Person
under Section 414(b), (c), (m) or (o) of the Code.
Event(s) of Default shall have the meaning set forth in Section 12
of this Financing Agreement.
Excess Key Man Life Insurance Proceeds shall have the meaning set
forth in Section 11.12 hereof.
Executive Officers shall mean the chairman, president, chief
executive officer, chief operating officer, chief financial officer, executive
vice president(s), senior vice president(s), vice president(s) and treasurer of
the Borrower or any one of them, as the context may require.
Existing Letter of Credit shall have the meaning set forth in
Section 5.03(c) hereof.
Fee Property shall have the meaning set forth in Section 10.14(b) of
this Financing Agreement.
Financing Agreement shall mean this Financing and Security
Agreement, as amended, modified or renewed from time to time.
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GAAP shall mean generally accepted accounting principles in the
United States of America as in effect from time to time and for the period as to
which such accounting principles are to apply.
General Intangibles shall have the meaning set forth in the
definition of "Collateral".
Governmental Authority shall mean any nation or government, any
federal, state, city, town, municipality, county, local or other political
subdivision thereof or hereto and any department, commission, board, bureau,
instrumentality, agency or other entity exercising executive, legislative,
judicial regulatory or administrative function of or pertaining to government.
Guarantors shall mean Springdale Fashions, Inc., Tortoni
Manufacturing Corp. and Stonehenge.
Guaranty shall mean the guaranties of the Obligations by the
Guarantors under each guaranty in favor of the Agent dated as of even date
herewith in the form of Exhibit C attached hereto as the same may be from time
to time amended or modified (collectively, the "Guaranties").
Hazardous Substances shall have the meaning set forth in Section
10.18(b) of this Financing Agreement.
Head Office shall have the meaning set forth in the introductory
paragraph to this Financing Agreement.
Indebtedness of any Person shall mean, without duplication:
(a) all indebtedness of such Person for borrowed money;
(b) all obligations of such Person for the deferred purchase price
of property or services;
(c) all obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies of
the seller or lender
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under such agreement in the event of default are limited to repossession
or sale of such property);
(d) all obligations of such Person with respect to any lease of (or
other agreement conveying the right to use) any property (whether real,
personal or mixed) which is or should be classified and accounted for as a
capital lease on a balance sheet of such Person in accordance with GAAP;
(e) all obligations, contingent or otherwise, of such Person under
acceptances, letters of credit, surety bonds or similar obligations;
(f) all obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock of
or other ownership or profit interest in such Person or any other Person
or any warrants, rights or options to acquire such capital stock, valued,
in the case of capital stock redeemable at the option of the issuer or
pursuant to the terms thereof at a fixed or determinable date or dates or
upon the occurrence of a condition not solely within the control of the
issuer, at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends;
(g) all obligations of such Person in respect of interest rate,
currency hedging or other derivative products;
(h) all Indebtedness of others referred to in clauses (a) through
(g) above guaranteed directly or indirectly in any manner by such Person,
or in effect guaranteed directly or indirectly by such Person through an
agreement, (i) to pay or purchase such Indebtedness or to advance or
supply funds for the payment or purchase of such Indebtedness, (ii) to
purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make
payment of such indebtedness or to assure the holder of such Indebtedness
against loss, (iii) to supply funds to or in any other manner invest in
the debtor (including, without limitation, any agreement to pay for
property or services irrespective of whether such property is received or
such services are
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rendered) or (iv) to otherwise assure a creditor against loss;
(i) all Indebtedness referred to in clauses (a) through (g) above
secured by (or for which the holder of such Indebtedness has an existing
right, contingent or otherwise, to be secured by) any lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for
the payment of such Indebtedness; and
(j) the Class 4 Note.
Indemnified Liabilities shall have the meaning set forth in Section
15 hereof.
Indemnitees shall have the meaning set forth in Section 15 hereof.
Initial Termination Date shall mean the date occurring two (2) years
from the Closing Date and the same date in every year thereafter, if this
Financing Agreement has been renewed, extended or is otherwise in effect.
Insolvency or Insolvent shall mean, with respect to a Multiemployer
Plan, at any particular time, a Multiemployer Plan which is insolvent within the
meaning of Section 4245 of ERISA.
Intangible Assets shall mean the book value of all assets which
would be treated as intangibles under GAAP including, without limitation, good
will, non-competition agreements, transaction costs which are capitalized on the
balance sheet, deferred taxes and licenses.
Intercreditor Agreement shall mean the Intercreditor Agreement dated
of even date herewith between the Collateral Trustee and CIT/CS, individually
and as Agent, as the same may hereafter be amended, modified or supplemented
with the express written consent of the Agent.
Inventory shall have the meaning set forth in the definition of
"Collateral".
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Inventory Sublimit shall mean up to $3,000,000.
Investments shall have the meaning set forth in Section 11.06(j)
hereof.
Issuing Bank shall have the same meaning as "L/C Issuer" herein.
Landlords' Waiver and Consent shall mean each of the Landlord Waiver
and Consents made by each landlord with respect to the Leased Property in favor
of the Agent in the form of Exhibit G attached hereto.
Leased Property shall have the meaning set forth in Section 10.14(b)
of this Financing Agreement.
Lender(s) shall mean CIT/CS, each Assignee which becomes a Lender
pursuant to Section 13.03 hereof, and its respective successors.
Letter of Credit or Letters of Credit shall mean all letters of
credit issued pursuant to this Financing Agreement with the assistance of the
Lenders by any Issuing Bank for the account of the Borrower, as defined in
Section 5.01(a) hereof.
Letter of Credit Application shall have the meaning set forth in
Section 5.01(a) hereof.
Letter of Credit Guaranties shall mean (i) the guaranties delivered
by CIT/CS to any L/C Issuer, providing the guaranty of the obligations of the
Borrower to such L/C Issuer under the reimbursement and/or application agreement
(or other similar document) between such L/C Issuer and the Borrower and (ii)
the obligation of CIT/CS to any L/C Issuer if the Agent has become a
co-applicant on any Letter of Credit.
Letter of Credit Issuance Fee shall mean the fee the Lenders may
charge the Borrower under Section 4.06 hereof.
Letter of Credit Standby Fee shall mean a fee of two percent (2%)
per annum of the outstanding amount of standby Letters of Credit issued,
guaranteed or replaced hereunder payable monthly.
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L/C Issuer shall have the meaning set forth in Section 5.01(a)
hereof.
License shall mean any license naming the Borrower as licensee or
licensor.
Loan Account shall have the meaning set forth in Section 9.04
hereof.
Loan Documents shall mean each of this Financing Agreement, the
Revolving Loan Promissory Notes, the Guaranty, the Subsidiary Security
Agreement, the Letters of Credit, the Security Agreement - Patents and
Trademarks, the Landlord Waiver and Consents and the Intercreditor Agreement.
Loans shall mean the Revolving Loans.
Lock Box Account shall have the meaning set forth in Section 9.05(a)
hereof.
Material Adverse Effect shall mean a material adverse effect upon
(i) the business, operations or condition (financial or otherwise) of the
Borrower and the Guarantors taken as a whole, (ii) the ability of the Borrower
and the Guarantors taken as a whole, to perform their obligations hereunder or
under any other Loan Document, (iii) the legality, validity or enforceability of
this Financing Agreement or any other Loan Document, (iv) the aggregate value of
the property included in the calculation of Availability, or (v) the Collateral.
Maximum Letter of Credit Amount shall mean $3,610,000 of Letters of
Credit (of which a maximum of $610,000 may be issued for standby letters of
credit) and shall include (i) the aggregate undrawn face amount of outstanding
Letters of Credit and (ii) the aggregate unreimbursed amount under drawn Letters
of Credit.
Maximum Revolving Loan shall mean $10,500,000 (including sums
directly advanced or charged to the Loan Account in accordance with this
Financing Agreement) minus the sum of the aggregate undrawn face amount of
outstanding standby or documentary Letters of Credit and the unreimbursed amount
under drawn Letters of Credit.
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Multiemployer Plan shall mean any employee benefit plan which is a
multiemployer plan, as defined in Section 3(37) of ERISA, to which the Borrower
or any ERISA Affiliate of the Borrower at any relevant time has any liability or
obligation to contribute or which covers any employees of the Borrower or any of
its ERISA Affiliates.
Net Worth shall mean assets in excess of liabilities, determined in
accordance with GAAP, on a consistent basis with the latest audited financial
statements of the Borrower and its consolidated subsidiaries.
Note shall mean each Revolving Loan Promissory Note.
Obligations shall mean all loans and advances now or hereafter made
by the Lenders to the Borrower or to others for the Borrower's account; any and
all indebtedness and obligations which may at any time be owing by the Borrower
to the Lenders or the Agent pursuant to this Financing Agreement (including,
without limitation, the Out-of-Pocket Expenses) or any other Loan Document or
any other document entered into in connection herewith or therewith or the
transactions contemplated hereby or thereby, whether now in existence or
incurred by the Borrower from time to time hereafter; whether secured by pledge,
lien upon or security interest in any of the Borrower's assets or property or
the assets or property of any other person, firm, entity or corporation; whether
such obligations and indebtedness are absolute or contingent, joint or several,
matured or unmatured, direct or indirect and whether the Borrower is liable to
the Lenders for such indebtedness as principal, surety, endorser, guarantor or
otherwise and shall include, after a Default or Event of Default, all
obligations incurred by you to any other concern factored or financed by any
Lender. Obligations shall include indebtedness, obligations or liability
incurred by, or imposed on, the Lenders or the Agent as a result of
environmental claims arising out of the Borrower's operation, premises or waste
disposal practices or sites, the Borrower's liability to the Lenders or the
Agent in connection with this Financing Agreement, under any instrument or
guaranty or indemnity entered into, or arising under, any guaranty, endorsement
or undertaking which the Lenders or the Agent may make or issue to others for
the Borrower's account, including any accommodation extended with respect to
applications for Letters of Credit entered into in connection with this
Financing Agreement, the Lenders' or the
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Agent's acceptance of drafts or endorsement of notes or other instruments for
the Borrower's accounts and benefit in connection with this Financing Agreement.
Officer's Certificate shall mean a certificate signed in the name of
the Borrower by its President, Vice President, Controller or Treasurer.
Original Agreement shall have the meaning set forth in "Background"
clause B.
Out-of-Pocket Expenses shall mean all of the Lenders' and the
Agent's present and future reasonable out-of-pocket expenses incurred relative
to this Financing Agreement and any other Loan Document (and any amendment,
restatement or supplement thereof), whether incurred prior to the date hereof or
hereafter, including, without limitation, such expenses in connection with the
preparation and execution of and closing under this Financing Agreement or any
other Loan Document, any revisions or waivers of this Financing Agreement or any
other Loan Document, any audits or field examinations, the enforcement of any
rights of the Lenders or the Agent under this Financing Agreement or any other
Loan Document, including, without limitation, the perfection and maintenance of
liens and security interests in favor of the Agent pursuant to this Financing
Agreement or any other Loan Document, including, without limitation, any costs,
fees or expenses incurred by the Agent and/or the Lenders in connection with the
loss of or damage to Collateral by fire or other casualty, the cost of record
searches, all costs and expenses incurred by the Lenders or the Agent in opening
bank accounts, depositing checks, receiving and transferring funds, and any
charges imposed on the Lenders or the Agent due to "insufficient funds" of
deposited checks and the Lenders' or the Agent's standard fee relating thereto,
any amounts paid by the Lenders or the Agent incurred by or charged to the
Lenders or the Agent by the Issuing Bank under any Letter of Credit Guaranty or
the Borrower's reimbursement agreement, application for letter of credit or
other like document which pertains either directly or indirectly to such Letters
of Credit (to the extent such expense is paid pursuant to another section of
this Agreement the same expense shall not be deemed an out-of-pocket expense
hereunder), all reasonable fees and expenses of Kaye, Scholer, Fierman, Hays &
Handler, LLP, special counsel to the Agent incurred in connection with this
Financing Agreement and all of the transactions contemplated
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hereunder, fees and taxes relative to the filing of financing statements and all
such expenses, costs and fees set forth in Section 12.03 of this Financing
Agreement.
Patent License shall mean all agreements, whether written or oral,
providing for the grant by or to the Borrower of any right to manufacture, use
or sell any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule 10.14(d) hereto.
Patents shall mean (a) all letters patent of the United States or
any other country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 10.14(d) hereto, and (b) all
applications for letters patent of the United States and all divisions,
continuations and continuations-in-part thereof or any other country, including,
without limitation, any thereof referred to in Schedule 10.14(d) hereto.
PBGC shall mean Pension Benefit Guaranty Corporation.
Pension Plan shall mean any Employee Benefit Plan which is a
"pension plan" within the meaning of Section 3(2) of ERISA.
Permitted Encumbrances shall mean: (i) existing liens described on
Schedule 10.14(a) hereto (including extensions or renewals thereof, subject to
the limitations on Permitted Indebtedness) and other liens expressly permitted,
or consented to, by the Agent in writing; (ii) Purchase Money Liens; (iii)
Customarily Permitted Liens; (iv) liens granted to the Agent for the benefit of
the Lenders by the Borrower; (v) liens of judgment creditors provided such liens
do not exceed, in the aggregate for the Borrower, at any time, $50,000; (vi)
liens for taxes not yet due and payable or which are being diligently contested
in good faith by the Borrower by appropriate proceedings and which liens are
not pari passu or senior to the liens of the Agent; (vii) liens granted pursuant
to the Letter of Credit Application; and (viii) liens and security interests
granted (A) to First National Bank of Scottsboro as a Class 3 Creditor pursuant
to the Plan of Reorganization, (B) pursuant to the Class 4 Security Agreement
among the Borrower, the Guarantors and the Collateral Trustee and (C) pursuant
to the Subsidiary Security Agreement.
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Permitted Indebtedness shall mean: (i) Indebtedness maturing in less
than one year and incurred in the ordinary course of business for raw materials,
supplies, services, taxes or labor; (ii) Indebtedness secured by Purchase Money
Liens; (iii) deferred taxes and other expenses incurred in the ordinary course
of business;(iv) Indebtedness arising under the Letters of Credit and this
Financing Agreement; and (v) Reorganized Debt.
Person shall mean and include an individual, a corporation, an
association, a partnership, a trust estate, a government or any department or
agency thereof.
Plan of Reorganization shall mean the Joint Plan of Reorganization
dated January 30, 1997 of Andover Togs, Inc. and certain of its Affiliates and
all exhibits, schedules and attachments thereto as confirmed by Order of the
Bankruptcy Court entered on April 10, 1997, together with all amendments,
modifications and supplements thereto.
Premises shall mean the premises described in Schedule 1.02 hereto,
including all of the easements, rights, privileges and appurtenances (including
air rights) thereunto belonging or in any way appertaining, and all of the
estate, right, title, interest, claim or demand whatsoever of the Borrower
therein and in the streets and ways adjacent thereto, either at law or in
equity, in possession or expectancy, now or hereafter acquired, and as used
herein and in the Mortgages shall, unless the context otherwise requires, be
deemed to include the Improvements on such premises.
Proceeds shall mean "proceeds", as such term is defined in Section
9-306(1) of the UCC and, to the extent not included in such definition, shall
include, without limitation, (a) any and all proceeds of any insurance (except
Excess Key Man Life Insurance Proceeds), indemnity, warranty, guaranty or letter
of credit payable to the Borrower from time to time with respect to any of the
Collateral, (b) all payments (in any form whatsoever) paid or payable to the
Borrower from time to time in connection with any taking of all or any part of
the Collateral by any governmental authority or any Person acting under color of
governmental authority, (c) all judgments in favor of the Borrower in respect of
the Collateral and (d) all other amounts from time to time paid or payable or
received or receivable under or in connection with any of the Collateral.
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Purchase Money Liens shall mean liens on any item of Equipment
existing on the date hereof or acquired after the date of this Financing
Agreement; provided that (i) each such lien shall attach only to the property to
be acquired, (ii) a description of the property so acquired is furnished to the
Lenders and (iii) the debt incurred in connection with such acquisitions after
the date hereof shall not exceed $100,000 in the aggregate in any fiscal year.
Quarterly Operating Reports shall mean a quarterly balance sheet and
a profit and loss statement.
Real Estate shall mean all estate, right, title and interest of the
Borrower in, to and under any and all of the following described property,
whether now held or hereafter acquired: (i) the Premises; (ii) all of the
Borrower's interests, if any, in and to all rents, royalties, issues, profits,
revenue, income and other benefits of the Real Estate (the "Rents") and all
leases of the Real Estate or portions thereof now or hereafter entered into and
all right, title and interest of the Borrower thereunder, including, without
limitation, cash or securities deposited thereunder to secure performance by the
lessees of their obligations thereunder, whether such cash or securities are to
be held until the expiration of the terms of such leases or applied to one or
more of the installments of rent coming due immediately prior to the expiration
of such terms, including any guaranties of such leases; and (iii) all of the
Borrower's interests, if any, in and to all proceeds of the conversion,
voluntary or involuntary, of any of the foregoing into cash or liquidated
claims, including, without limitation, proceeds of insurance and condemnation
awards, and all rights of the Borrower to refunds of real estate taxes and
assessments.
Reimbursement Obligation shall have the meaning set forth in Section
5.01(a)(ii) hereof.
Reorganization shall mean with respect to any Multiemployer Plan,
the condition that such plan is in reorganization within the meaning of such
term as used in Section 4241 of ERISA.
Reorganized Debt shall mean all of the Indebtedness of Borrower or
any Guarantor incurred pursuant to the terms of the
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Plan of Reorganization and any renewal, extension or refinancing of any of the
foregoing.
Reportable Event shall mean an event described in Section 4043(b) of
ERISA or in the regulations thereunder.
Revolving Line of Credit shall mean the Revolving Loan Amounts not
to exceed the Maximum Revolving Loan.
Revolving Line of Credit Termination Date shall mean the earlier of
(a) the Initial Termination Date as of which the Revolving Line of Credit shall
terminate pursuant to Section 14.01 hereof, and (b) such other date as the
Revolving Line of Credit shall terminate hereunder.
Revolving Loan Amount shall mean, as to any Lender, the maximum
amount of the Revolving Loans to the Borrower pursuant to Section 2 hereof, in
an aggregate amount not to exceed the amount set forth under such Lender's name
in Schedule 1(a) under the caption "Revolving Loan Amount" or in Schedule 1 to
the Assignment and Transfer Agreement by which such Lender acquired its
Revolving Loan Amount, collectively, as to all Lenders, the "Revolving Loan
Amounts."
Revolving Loan Percentage shall mean as to any Lender at any time,
the percentage of the aggregate Revolving Loan Amounts attributable to such
Lender.
Revolving Loan Promissory Notes shall mean collectively, the Notes,
in the form of Exhibit A attached hereto, delivered by the Borrower to the
Lenders to evidence the Revolving Loans pursuant to, and repayable in accordance
with, the provisions of this Financing Agreement.
Revolving Loans shall mean the loans made (or at such time as they
are deemed made hereunder, in the case of Letters of Credit) from time to time,
to or for the account of the Borrower by the Lenders pursuant to Section 2 and
Section 5 of this Financing Agreement.
Security Agreement - Trademarks and Patents shall mean each of the
Security Agreement and Mortgages - Trademarks and Patents made by the Borrower
and the Guarantors in favor of the
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Agent in the form of Exhibit D attached hereto as the same may be from time to
time amended or modified.
Settlement Date shall mean the periodic date, as reasonably
determined by the Agent, on which the Agent shall determine and settle the
amounts owed to the Agent and each Lender such that, after giving effect to such
settlement, the Agent shall be fully reimbursed by the Lenders for (i) all
amounts advanced to the Borrower by the Agent on behalf of the Lenders in
respect of the Loans and (ii) all other amounts owing to the Agent hereunder,
and the Agent will make such distributions to the Lenders that will result in
each Lender having outstanding Revolving Loans to the Borrower in an amount
equal to its Revolving Loan Percentage of the aggregate outstanding principal
amount of all Revolving Loans.
Spill Act shall have the meaning set forth in Section 10.18(a)
hereof.
Stonehenge shall mean Stonehenge Financial Corp.
Subsidiary shall mean, as to any Person, a corporation of which
shares of stock having ordinary voting power (other than stock having such power
only by reason of the happening of a contingency) to elect a majority of the
board of directors or other managers of such corporation are at the time owned,
or the management of which is otherwise controlled, directly, or indirectly
through one or more intermediaries, or both, by such Person (all such Persons,
the "Subsidiaries").
Subsidiary Security Agreement shall mean the Security Agreement made
by the Guarantors in favor of the Agent in the form of Exhibit F attached hereto
as the same may be from time to time amended or modified.
Tangible Net Worth shall mean Net Worth minus
Intangible Assets.
Trademark License shall mean any agreement, written or oral,
providing for the grant by or to the Borrower of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 10.14(d)
hereto.
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Trademarks shall mean (a) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all
registrations and recordings thereof, and all applications in connection
therewith, whether in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, or otherwise, including, without
limitation, any thereof referred to in Schedule 10.14(d) hereto, and (b) all
renewals thereof.
UCC shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York; provided that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or non-perfection
of the security interest in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, "UCC" means the Uniform
Commercial Code as in effect in such other jurisdiction for purposes of the
provisions hereof relating to such perfection or effect of perfection or
non-perfection.
Unused Letter of Credit Line Fee shall mean a fee payable monthly in
arrears in the amount of one quarter of one percent (1/4 of 1%) per annum
multiplied by the difference from time to time of the aggregate amount of all
outstanding Letters of Credit for the immediately preceding 30-day period and
$2,000,000.
Unused Revolving Loans Line Fee shall mean a fee payable monthly in
arrears in the amount of one quarter of one percent (1/4 of 1%) per annum
multiplied by the difference from time to time of the average daily outstanding
principal amount of the Revolving Loans for the immediately preceding 30-day
period and $7,500,000.
Working Capital shall mean the positive difference, if any, of (i)
the amount at which the current assets of the Borrower would be shown on a
consolidated balance sheet of the Borrower and its consolidated subsidiaries,
prepared in accordance with GAAP, over (ii) the amount at which the current
liabilities of the Borrower would be shown on a consolidated
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balance sheet of the Borrower and its consolidated, prepared in accordance with
GAAP.
SECTION 2. Revolving Loans.
2.01. General. The Lenders agree, subject to the terms and
conditions of this Financing Agreement, on or after the Closing Date, and within
(x) the Availability and (y) the Maximum Revolving Loan, to make loans,
severally, on a pro rata percentage basis among the Lenders as set forth on
Schedule 1(a) hereto, to the Borrower on a revolving basis (i.e., subject to the
limitations set forth herein, the Borrower may borrow, repay and re-borrow
Revolving Loans), but in no event may the aggregate outstanding Revolving Loans
by a Lender exceed the Revolving Loan Amount of such Lender. All Revolving Loans
made by each Lender to the Borrower under this Financing Agreement shall be
evidenced by, and repaid with interest in accordance with, a single Revolving
Loan Promissory Note, in the principal amount equal to the lesser of (a) such
Lender's initial Revolving Loan Amount to the Borrower and (b) the aggregate
unpaid principal amount of all Revolving Loans made by such Lender to the
Borrower payable to the order of such Lender for the account of its Applicable
Lending Office and maturing as to principal on the Revolving Line of Credit
Termination Date. Each Lender is hereby authorized by the Borrower to endorse on
the schedule attached to the Revolving Loan Promissory Note held by it the
amount of each Revolving Loan and payment of principal amount received by such
Lender for the account of its Applicable Lending Office on account of the
Revolving Loans made to the Borrower by such Lender, and whether a specific
Revolving Line of Credit Termination Date has been established pursuant to
action of the Borrower or the Agent taken under Section 14.01 hereof, and, if
so, the specific date so established, which endorsement shall, in the absence of
manifest error, be conclusive as to the outstanding balance of the Revolving
Loans made by such Lender to the Borrower and the accuracy of the other
information so recorded; provided, however, that the failure to make such
notation with respect to any Revolving Loan or payment or other information
shall not limit or otherwise affect the obligations of the Borrower under this
Financing Agreement or the Revolving Loan Promissory Note so held by such
Lender. Each Lender agrees that prior to any assignment of the Revolving Loan
Promissory Note it will endorse the schedule attached to its Revolving Loan
Promissory Note to reflect the current amount of outstanding Revolving Loans.
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2.02. Notice of Manner of Borrowing. If required by the Agent, a
written or telegraphic or facsimile notice (effective upon receipt) (the
"Borrowing Notice") of any Revolving Loan must be received by the Agent at its
Head Office with a copy to each Lender not later than 12:00 P.M. (New York time)
on the date of such Revolving Loan. Each Borrowing Notice must specify the date
and the amount of such Revolving Loan.
2.03. Lenders' Obligations Under the Revolving Line of Credit. Each
Lender is solely responsible for the portion of the Revolving Line of Credit
comprising its Revolving Loan Amount and neither the Agent nor any Lender shall
be responsible for, nor assume any obligations for, the failure of any Lender to
make available its portion of the Revolving Line of Credit. Should any Lender
refuse to make available its portion of the Revolving Line of Credit, then each
of the other Lenders may, but without obligation to do so, increase,
unilaterally, its portion of the Revolving Line of Credit in which event the
Borrower shall be so obligated to such other Lender for any Revolving Loan made
by such other Lender pursuant to such increase. The parties hereto agree that,
on the Closing Date, CIT/CS, as sole Lender on such date, shall have the
obligation to make available the full portion of the Revolving Line of Credit
being drawn down by the Borrower on such date in accordance with the terms and
conditions set forth herein.
2.04. Funding of Loans. (a) The Agent, for the account of the
Lenders, shall disburse all Revolving Loans to the Borrower and shall handle all
collections with respect to Collateral and the repayment of the Obligations. It
is understood that for purposes of the Loans to the Borrower and for purposes of
this Section 2 and prior to settlement among the Lenders on any Settlement Date,
the Agent is using the funds of CIT/CS.
(b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Borrower that such Lender will not make the
amount which would constitute its share of the borrowing on such date available
to the Agent, the Agent may assume that such Lender shall make such amount
available to the Agent on a Settlement Date, and the Agent may, in reliance upon
such assumption, make available to the Borrower for the benefit of the Borrower
a corresponding amount. Absent such notice each Lender's obligation to make such
share available
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on such date shall be absolute and unconditional, and such Lender shall
reimburse the Agent upon demand such Lender's ratable portion of such borrowing
made available by the Agent. A certificate of the Agent submitted to any Lender
with respect to any amount owing under this subsection shall be conclusive,
absent manifest error. If such Lender's share of such borrowing is not in fact
made available to the Agent by such Lender on the Settlement Date, the Agent
shall be entitled to charge to the Borrower's account the amount advanced by the
Agent on account of such Lender's share with interest thereon at the rate per
annum applicable to Revolving Loans hereunder, payable within fifteen (15) days
of demand by the Borrower and such charge to Borrower's account and payment
demand with respect thereto shall be without prejudice to any rights which the
Agent or the Borrower may have against such Lender hereunder. Nothing contained
in this subsection shall relieve any Lender which has failed to make available
its ratable portion of any borrowing hereunder from its obligation to do so in
accordance with the terms hereof. Nothing contained herein shall be deemed to
obligate the Agent to make available to the Borrower the full amount of a
requested advance when the Agent has not received any Lender's pro rata share of
such Revolving Loan or if the Agent otherwise has any notice that any of the
Lenders will not advance its ratable portion thereof.
2.05. Mandatory Payments. If the Borrower's Availability is less
than zero as a result of the Agent's change in eligibility criteria or the
Availability Reserve hereunder, the Agent shall provide the Borrower with
written notice thereof. If Borrower has not restored Availability to a number
not less than zero within four (4) Business Days after such notice, the Borrower
shall immediately make a mandatory prepayment on its Revolving Loans in an
amount necessary to restore Availability to a number not less than zero and
shall not have the benefit of any grace periods set forth in Section 12.01
hereof. If the Borrower's Availability is less than zero for any other reason,
upon demand by the Agent the Borrower shall make a mandatory prepayment on its
Revolving Loans in an amount necessary to restore Availability of the Borrower
to zero.
2.06. Repayment Upon Termination. In the event this Financing
Agreement or the Revolving Line of Credit is terminated by either the Lenders or
the Borrower for any reason whatsoever in accordance with the terms hereof, the
Revolving Loans (subject, in the case of Letters of Credit, to 'SS' 5.01(a)(i)
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hereof) shall become due and payable on the effective date of such termination.
2.07. Increased Costs. In the event that, with respect to any
Lender, (i) any change occurs after the date of this Financing Agreement in any
law, regulation or treaty; or (ii) there is enacted, adopted or made after such
date any law, regulation or treaty or any interpretation, directive or request
applying to a class of lenders including such Lender of or under any law or
regulation (whether or not having the force of law) by any court or governmental
or monetary authority or agency charged with the interpretation thereof, and any
such change, enactment, adoption or making, or compliance by the Lender (or any
corporation directly or indirectly owning or controlling such entity) therewith:
(a) does or shall subject any Lender to any tax of any kind
whatsoever with respect to any Loans or its obligations under this
Financing Agreement to make Loans, or changes the basis of taxation of
payments to any Lender of principal, interest or any other amount payable
hereunder in respect of its Loans (except for imposition of, or change in
the rate of, tax on the overall net income of such Lender, other than a
tax imposed solely or primarily on United States branches or subsidiaries
of foreign corporations); or
(b) does or shall impose, modify or make applicable any reserve,
special deposit, compulsory loan, assessment, increased cost or similar
requirement against assets held by, or deposits of, or advances or loans
by, or other credit extended by, or any other acquisitions of funds by,
any office of such Lender in respect of its Loans which is not otherwise
included in the determination of the applicable rate or rates of interest
hereunder;
and the result of any of the foregoing is to increase the cost to such Lender of
making, renewing or maintaining its Loans hereunder, or to reduce any amount
receivable hereunder in respect of its Loans, then, in any such case, the
Borrower shall, on a pro rata basis, promptly pay such Lender, upon its written
demand, any additional amounts necessary to compensate such Lender for such
additional cost or reduction in such amount receivable which such Lender deems
to be material as determined by such Lender. No failure by any Lender to demand
compensation
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for any increased cost shall constitute a waiver of such Lender's right to
demand such compensation at any time, provided that such Lender shall endeavor
to notify the Borrower of any such increased cost within thirty (30) days after
such increased cost is incurred, provided that failure by such Lender to so
notify the Borrower shall not affect the ability of such Lender to demand such
compensation at any time prior to the Revolving Line of Credit Termination Date.
A statement setting forth in reasonable detail the calculations of any
additional amounts payable pursuant to the foregoing sentence, submitted by a
Lender to the Borrower, shall be conclusive absent manifest error.
2.08. Capital Adequacy. If either (i) the effectiveness of, or any
change or phasing in of any law or regulation or in the interpretation thereof
by any United States or foreign governmental authority charged with the
administration thereof, (ii) compliance with any directive, guideline, decision
or request from any central bank or United States or foreign governmental
authority (whether or not having the force of law) promulgated or made after the
Closing Date, or (iii) compliance with the Risk-Based Capital Guidelines of the
Federal Reserve System as set forth in 12 C.F.R., Parts 208 and 225, or of the
Comptroller of the Currency, Department of Treasury, as set forth in 12 C.F.R.,
Part 3 or similar legislation, rules, guidelines, directives or regulations
issued by any United States or foreign governmental authority affects or would
affect the amount of capital required or expected to be maintained by a Lender
(or any Applicable Lending Office of such Lender), and such Lender shall have
determined that such introduction, change or compliance has or would have the
effect of reducing the rate of return on such Lender's capital or the asset
value to such Lender of any Revolving Loan made by such Lender as a consequence,
directly or indirectly, of its obligations to make and maintain the funding of
Revolving Loans hereunder to a level below that which such Lender could have
achieved but for such introduction, change or compliance (after taking into
account such Lender's policies regarding capital adequacy) by an amount
reasonably deemed by such Lender to be material, then, upon demand by such
Lender, the Borrower shall, within fifteen (15) days after demand, pay to such
Lender such additional amount or amounts as shall be sufficient to compensate
such Lender for such reduction in the rate of return. With respect to an event
to which the provisions of both Section 2.07 and this Section 2.08 may apply,
such payments shall be required only to the extent that they are not
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duplicative of payments previously made pursuant to Section 2.07 hereof in
respect of such event. A certificate as to the required payments submitted to
the Borrower and the Agent setting forth in reasonable detail the basis for the
determination shall be presumed correct absent manifest error.
SECTION 3. Sharing of Payments; Applications.
3.01. Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of any obligation of the Borrower or Guarantor
hereunder or under any other Loan Document in excess of its ratable share of
payments on account of similar obligations obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
such similar obligations held by them as shall be necessary to cause such
purchasing Lender to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender, such purchase from each Lender
shall be rescinded and such Lender shall repay to the purchasing Lender the
purchase price to the extent of such recovery together with an amount equal to
such Lender's ratable share (according to the proportion of (i) the amount of
such Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid by the purchasing Lender
in respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section 3.01
may, to the fullest extent permitted by law, exercise all its rights (including
the Lender's right of set-off) with respect to such participation as fully as if
such Lender were the direct creditor of the Borrower in the amount of such
participation.
3.02. Apportionment of Payments. After the occurrence and during the
continuance of an Event of Default, the Agent may apply all payments in respect
of any Obligations and all proceeds of the Collateral, subject to the provisions
of this Agreement (i) first, to pay the Obligations in respect of any fees,
expense reimbursements or indemnities then due to the Agent; (ii) second, to pay
the Obligations in respect of any fees and indemnities then due to the Lenders;
(iii) third, ratably to pay interest due in respect of the Loans; (iv) fourth,
ratably to pay or prepay principal of the Loans (or, to the extent
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obligations under the Letters of Credit are contingent, to prepay or provide
cash collateral in respect of such Obligations); (v) fifth, to the ratable
payment of all other Obligations then due and payable and (vi) sixth, any
balance remaining shall be returned to the Borrower. To the extent the Agent or
any Lender is entitled by the terms of this Financing Agreement to apply
payments in respect of any Obligations or proceeds of Collateral prior to an
Event of Default, the Agent or such Lender shall remit any balance remaining
after all of the Obligations are paid in full to the Borrower or Guarantor as
the case may be.
SECTION 4. Interest, Fees and Expenses and Payments.
4.01. Interest on the Revolving Loans. Interest on the Revolving
Loans (including with respect to Letters of Credit at such time as Revolving
Loans are deemed made hereunder) shall be payable monthly, in arrears, on the
last Business Day of each month commencing May 31, 1997 and shall be an amount
equal to the Chase Bank Rate plus eighty-five one hundredths of one percent per
annum, for the Revolving Loans (but in no event in excess of the maximum amount
of interest permitted by law), computed on the average of the net balances owing
by the Borrower to the Lenders in the Borrower's accounts at the close of each
day during such month. In the event of any change in said Chase Bank Rate, the
rate applicable to the Revolving Loans shall change, as of the first day of the
month following any change, so as to remain eighty-five one hundredths of one
percent above the then current Chase Bank Rate. Interest on the Revolving Loans
shall be calculated based on a 360-day year. The Agent shall be entitled to
charge the Borrower's Loan Account for interest on the Revolving Loan at the
rates provided for in this Financing Agreement when due until all Obligations of
the Borrower have been paid in full.
4.02. Default Interest. As set forth in Section 12.02 hereof, when
the Borrower is obligated to pay the Default Rate of Interest, the Loans, and to
the extent permitted by law, interest which is not paid when due, shall be paid
at a fluctuating rate per annum equal at all times to the Default Rate of
Interest. Such Default Rate of Interest shall be payable on demand.
4.03. Field Examination Fee. The Borrower shall pay to the Agent
$500.00 per day per examiner for the cost of any
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field examination reasonably requested by the Agent, plus any reasonable
out-of-pocket expenses; provided, however, that such examinations shall not, so
long as no Event of Default shall have occurred and be continuing, be conducted
more often than once each fiscal quarter.
4.04. Out-of-Pocket Expenses. The Borrower shall reimburse or pay
the Agent and the Lenders, as the case may be, for all reasonable Out-of-Pocket
Expenses of the Agent and the Lenders.
4.05. Unused Letter of Credit Line Fee and Unused Line Fees. The
Borrower shall pay to the Lenders the Unused Letter of Credit Line Fee and the
Unused Revolving Loans Line Fee.
4.06. Letter of Credit Issuance and Lock Box Fees. The Borrower
shall pay to the Agent for the account of the Lenders, the Letter of Credit
Issuance Fee which shall be .25% for the issuance of each Letter of Credit and
.25% on the average daily balance of outstanding documentary letters of credit
payable monthly plus all customary bank charges as set forth in a schedule from
time to time submitted to the Borrower by the Agent, the Letter of Credit
Standby Fee and all fees pursuant to the lock box agreement.
4.07. Mandatory Prepayments. The Borrower shall make mandatory
prepayments of the Revolving Loans immediately upon receipt by the Borrower of
Proceeds (i) without limiting any prohibitions related thereto, from the sale of
assets of the Borrower subject to the rights of any holder of a Permitted
Encumbrance hereunder senior to the liens granted hereunder or (ii) resulting
from a casualty covered by insurance. All prepayments of any portion of Loans
shall include payment of any interest thereon accrued but unpaid.
4.08. Statements. After the end of each month, the Agent shall
promptly send to the Borrower a statement showing the accounting for the
charges, loans, advances and other transactions occurring between the Lenders
and the Borrower during that month. The monthly statements shall be deemed
correct and binding upon the Agent, the Lenders and the Borrower and shall
constitute an account stated between the Borrower, as the case may be, and the
Lenders absent manifest error unless the
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Agent receives a written statement of the exceptions within thirty (30) days of
the date of the monthly statement.
4.09. Method of Payment. The Borrower shall make each payment under
this Financing Agreement and under the Notes not later than 12:00 noon (New York
time) on the date when due in Dollars to the Agent at the Agent's office
referred to in Section 2.02 hereof in immediately available funds. The Borrower
hereby authorizes the Agent to charge from time to time against any account it
maintains with the Agent or with any Lender any amount so due to the Agent
and/or the Lenders.
Except to the extent provided in this Financing Agreement, whenever
any payment to be made under this Financing Agreement or under the Notes shall
be stated to be due on any day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of the payment of interest, the Unused
Line and other fees, as the case may be.
4.10. Use of Proceeds. The proceeds of the initial Revolving Loans
shall be used to fund working capital in the ordinary course of business and for
other general corporate purposes.
The Borrower will not, directly or indirectly, use any part of such
proceeds for the purpose of purchasing or carrying any margin stock within the
meaning of Regulation U of the Board of Governors of the Federal Reserve System
or to extend credit to any Person for the purpose of purchasing or carrying any
such margin stock. Nothing herein shall limit the right of the Agent to object
to any use or proposed use of proceeds of Revolving Loans; provided, however,
that the Agent shall not object to any use of proceeds of loans if such use is
expressly permitted under the terms of this Agreement.
SECTION 5. Letters of Credit.
5.01. Letters of Credit Guaranty.
(a) General. In order to assist the Borrower in establishing or
opening letters of credit, which shall not have expiration dates that exceed one
hundred and eighty (180) days (or, with the prior approval of the Agent, such
longer period as
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may be approved by the Agent) from the date of issuance (the "Letters of
Credit"), with Chase or another issuer selected by the Agent (the "L/C Issuer"),
the Borrower has requested CIT/CS to join in the applications for such Letters
of Credit, and/or guarantee payment or performance of such Letters of Credit
through the issuance of a Letter of Credit Guaranty, thereby lending CIT/CS's
credit to the Borrower. These arrangements shall be handled by CIT/CS subject to
Sections 6 or 7 below, as the case may be (upon the opening of each such Letter
of Credit) and to the terms and conditions set forth below. CIT/CS shall not be
required to be the issuer of any Letter of Credit. The Borrower will be the
account party for any application for a Letter of Credit, which shall be in a
form acceptable to the L/C Issuer and CIT/CS and shall be duly completed in a
manner acceptable to CIT/CS, together with such other certificates, documents
and other papers and information as the L/C Issuer or CIT/CS may request (the
"Letter of Credit Application"). Any collateral security interest granted
pursuant to the Letter of Credit Application is a Permitted Encumbrance
hereunder. In the event of any inconsistency between the Letter of Credit
Application and this Financing Agreement, this Financing Agreement shall govern.
(i) The aggregate amount of all outstanding Letters of Credit
and the unreimbursed portion of drawn Letters of Credit shall not exceed, in the
aggregate, at any one time, the Maximum Letter of Credit Amount. In addition,
changes or modifications of the Letters of Credit by the Borrower and/or the L/C
Issuer of the terms and conditions thereof shall in all respects be subject to
the prior approval of CIT/CS which shall not be unreasonably withheld, provided,
however, that (a) the expiry date of all Letters of Credit shall be no later
than one (1) day prior to the Initial Termination Date or, if notice is given
pursuant to Section 14.01 hereof, such earlier Revolving Line of Credit
Termination Date unless, in the case of Letters of Credit, on or prior to three
(3) Business Days prior to the Revolving Line of Credit Termination Date either
such Letters of Credit shall be cash collateralized in an amount equal to 105%
of the face amount of such Letters of Credit (provided that such cash shall be
returned to the Borrower upon the expiration of such Letter of Credit if such
Letter of Credit has expired without a draw being made thereon (there being no
dispute between the L/C Issuer and the beneficiary with respect to payment on
such Letter of Credit) or upon the payment in full of all
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reimbursement and other obligations in connection therewith) or the Borrower
shall provide the Lenders with an indemnification, in form and substance
reasonably satisfactory to the Agent, from a commercial bank or other financial
institution acceptable to the Agent for any Letter of Credit obligations with
respect to such Letters of Credit and (b) the Letters of Credit and all
documentation in connection therewith shall be in form and substance
satisfactory to CIT/CS and L/C Issuer.
(ii) The Agent shall have the right, without notice to the
Borrower, to charge the Loan Account with the amount of any and all
indebtedness, liability or obligation of any kind (including indemnification for
breakage costs, capital adequacy and reserve requirement charges) incurred by
CIT/CS under the Letter of Credit Guaranty (the "Reimbursement Obligation") at
the earlier of (A) payment by CIT/CS under the Letter of Credit Guaranty, or (B)
the occurrence of an Event of Default. Any amount charged to the Loan Account
shall be deemed a Revolving Loan hereunder made by the Lenders to the Borrower,
funded by the Agent on behalf of the Lenders. Any charges, fees, commissions,
costs and expenses charged to CIT/CS for the Borrower's account by the L/C
Issuer in connection with or arising out of Letters of Credit issued pursuant to
this Financing Agreement or out of transactions relating thereto will be charged
to the Loan Account in full when charged to or paid by CIT/CS and when charged
shall be conclusive on the Borrower, provided, however, that the Borrower shall
not be required to pay any such charge, fee or commission, cost or expense of
the L/C Issuer if such amounts are duplicative of amounts charged by the Agent
and paid by the Borrower hereunder. Each of the Lenders and the Borrower agree
that the Agent shall have the right to make such charges regardless of whether
any Event of Default or Default shall have occurred and be continuing.
(iii) The Borrower unconditionally indemnifies the Agent,
CIT/CS and each Lender and holds the Agent, CIT/CS and each Lender harmless from
any and all loss, claim or liability incurred by the Agent, CIT/CS or any Lender
arising from any transactions or occurrences relating to Letters of Credit
established or opened for the Borrower's account, the Collateral relating
thereto, and all Obligations thereunder, including any such loss or claim due to
any action taken by the L/C Issuer, other than for any such loss, claim or
liability arising out of the gross negligence or willful misconduct of the
Agent, CIT/CS
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or any Lender as determined by a final judgment of a court of competent
jurisdiction. The Borrower further agrees to hold the Agent, CIT/CS and each
Lender (other than the L/C Issuer, to the extent the L/C Issuer is a Lender
hereunder) harmless from any errors or omissions, negligence or misconduct by
the L/C Issuer. The Borrower's unconditional obligations to the Agent, CIT/CS
and each Lender hereunder shall not be modified or diminished for any reason or
in any manner whatsoever, other than as a result of the Agent's, CIT/CS's or
such Lender's gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction.
(iv) None of the Agent, CIT/CS, the Lenders or the L/C Issuer
shall be responsible for the existence, character, quality, quantity, condition,
packing, value or delivery of the goods purporting to be represented by any
documents; any difference or variation in the character, quality, quantity,
condition, packing, value or delivery of the goods from that expressed in the
documents; the validity, sufficiency or genuineness of any documents or of any
endorsements thereof even if such documents should in fact prove to be in any or
all respects invalid, insufficient, fraudulent or forged; the time, place,
manner or order in which shipment is made; partial or incomplete shipments, or
failure or omission to ship any or all of the goods referred to in the Letters
of Credit or documents; any deviation from instructions; delay, default, or
fraud by the shipper and/or anyone else in connection with the Collateral or the
shipping thereof; or any breach of contract between the shipper or vendors and
the Borrower. Furthermore, without being limited by the foregoing, none of the
Agent, CIT/CS or the Lenders shall be responsible for any act or omission with
respect to or in connection with any goods covered by Letters of Credit.
(v) The Borrower agrees that any action taken by the Agent,
CIT/CS or any Lender, if taken in good faith, or any action taken by the L/C
Issuer, under or in connection with the Letters of Credit, the Letter of Credit
Guaranty, or the Collateral, shall be binding on the Borrower (with respect to
the L/C Issuer, the Agent, CIT/CS and the Lenders) and shall not put the Agent,
CIT/CS or the Lenders in any resulting liability to the Borrower. In furtherance
thereof, CIT/CS shall have the full right and authority to clear and resolve any
questions of non-compliance of documents; to give any instructions as to
acceptance or rejection of any documents or goods; to execute any
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and all steamship or airways guaranties (and applications therefor), indemnities
or delivery orders; to grant any extensions of the maturity of, time of payment
for, or time of presentation of, any drafts or documents; and to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letters of Credit or
drafts; all in CIT/CS's sole name, and the L/C Issuer shall be entitled to
comply with and honor any and all such documents or instruments executed by or
received solely from CIT/CS, all without any notice to or any consent from the
Borrower. CIT/CS shall use reasonable efforts to consult with the Borrower
before taking any action pursuant to this Section 5.01(a)(v).
(vi) Without CIT/CS's express consent, which consent shall not
be unreasonably withheld (it being agreed that if the L/C Issuer's consent is
required, and it declines to give such consent, then if CIT/CS declines to
consent on that basis, it shall not be deemed unreasonable hereunder), the
Borrower agrees: (x) not to execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders; to grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts or
documents; or to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit or drafts; and (y) after the occurrence and
during the continuance of an Event of Default not to (A) clear and resolve any
questions of non-compliance of documents, or (B) give any instructions as to
acceptances or rejection of any documents or goods.
(vii) The Borrower agrees that any necessary and material
import, export or other license or certificates for the import or handling of
Inventory will have been promptly procured; all foreign and domestic material
governmental laws and regulations in regard to the shipment and importation of
Inventory or the financing thereof will have been promptly and fully complied
with; and any certificates in that regard that CIT/CS may at any time reasonably
request will be promptly furnished. In this connection, the Borrower warrants
and represents that all shipments made under any Letters of Credit are in
accordance with the laws and regulations of the countries in which the shipments
originate and terminate, and are not prohibited by any such laws and
regulations. As between the
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Borrower, on the one hand, and the Agent, CIT/CS, the Lenders and the L/C
Issuer, on the other hand, the Borrower assumes all risk, liability and
responsibility for, and agrees to pay and discharge, all present and future
local, state, federal or foreign taxes, duties or levies. As between the
Borrower, on the one hand, and the Agent, CIT/CS, the Lenders and the L/C
Issuer, on the other hand, any embargo, restriction, laws, customs or
regulations of any country, state, city, or other political subdivision, where
such Inventory is or may be located, or wherein payments are to be made, or
wherein drafts may be drawn, negotiated, accepted, or paid, shall be solely the
Borrower's risk, liability and responsibility.
(viii) Upon any payments made to the L/C Issuer under the
Letter of Credit Guaranty, CIT/CS or the Lenders, as the case may be, shall,
without prejudice to its rights under this Agreement (including that such
unreimbursed amounts shall constitute Loans hereunder), acquire by subrogation,
any rights, remedies, duties or obligations granted or undertaken by the
Borrower to the L/C Issuer in any application for Letters of Credit or any
outstanding agreement relating to Letters of Credit, all of which shall be
deemed to have been granted to the Agent and apply in all respects to the Agent
and shall be in addition to any rights, remedies, duties or obligations
contained herein.
5.02. Participations.
(a) Purchase of Participations. Immediately upon issuance by the L/C
Issuer of any Letter of Credit, each Lender shall be deemed to have irrevocably
and unconditionally purchased and received from CIT/CS, without recourse or
warranty, an undivided interest and participation, to the extent of such
Lender's pro rata share, in all obligations of CIT/CS with respect to such
Letter of Credit (including, without limitation, all reimbursement obligations
of the Borrower with respect thereto pursuant to the Letter of Credit Guaranty
or otherwise).
(b) Sharing of Payments. In the event that CIT/CS makes any payment
in respect of the Letter of Credit Guaranty and the Borrower shall not have
repaid such amount to the Agent for the account of CIT/CS (or such L/C Issuer),
the Agent shall charge the Loan Account in the amount of the Reimbursement
Obligation in accordance with Section 5.01(a)(ii).
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(c) Obligations Irrevocable. The obligations of a Lender to make
payments to the Agent for the account of the Agent, CIT/CS or an L/C Issuer with
respect to a Letter of Credit shall be irrevocable, not subject to any
qualification or exception whatsoever and shall be made in accordance with, but
not subject to, the terms and conditions of this Agreement under all
circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Financing
Agreement or any of the other Loan Documents;
(ii) the existence of any claim, setoff, defense or other right
which the Borrower may have at any time against a beneficiary named in a
Letter of Credit or any transferee of any Letter of Credit (or any Person
for whom any such transferee may be acting) , the Agent, L/C Issuer, any
Lender, or any other Person, whether in connection with this Agreement,
any Letter of Credit, the transactions contemplated herein or any
unrelated transactions (including any underlying transactions between the
Borrower or any other party and the beneficiary named in any Letter of
Credit);
(iii) any draft, certificate or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the performance
or observance of any of the terms of any of the Loan Documents;
(v) any failure by the Agent to provide any notices required
pursuant to this Agreement relating to Letters of Credit; or
(vi) the occurrence of any Event of Default or Default.
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5.03. Issuing Letters of Credit; Cash Collateral.
(a) Request for Issuance. The Borrower may from time to time, upon
notice not later than 12:00 noon, New York City time, at least three (3)
Business Days in advance, request CIT/CS to assist the Borrower in establishing
or opening a Letter of Credit by delivering to the Agent, with a copy to the L/C
Issuer, a Letter of Credit Application, together with any necessary related
documents. Nothing herein shall preclude the Borrower from modifying any Letter
of Credit Application within such three Business Days; however, the Borrower
acknowledges hereunder that any such modification may cause a delay in the
issuance of such Letter of Credit by the L/C Issuer (the Agent agreeing to use
its best efforts to cause the issuance of such Letter of Credit in one (1)
Business Day from the day the L/C Issuer is notified in writing of such
modification but a failure to do so shall give rise to no liability hereunder).
(b) Charges to Loan Account. The Borrower hereby authorizes the
Agent to, and the Agent may, from time to time, charge the Loan Account pursuant
to Section 5.01(a)(ii) of this Agreement with the amount of any Letter of Credit
Issuance Fee, the Letter of Credit Standby Fee or charges due hereunder.
(c) Existing Letters of Credit. Schedule 5.03 hereto contains a
description of all letters of credit issued and outstanding on the Closing Date.
Each such letter of credit, including any extension or renewal thereof (each, as
amended from time to time in accordance with the terms thereof and hereof, an
"Existing Letter of Credit") shall constitute a "Letter of Credit" for all
purposes of this Agreement as if originally issued hereunder.
(d) Cash Collateral. Upon demand by the Agent after the occurrence
and continuance of any Event of Default, the Borrower shall deposit with the
Agent with respect to each Letter of Credit then outstanding cash or
equivalents, acceptable to the Agent, readily convertible into cash in an amount
equal to the greatest amount for which such Letter of Credit may be drawn. Such
deposits shall be held by the Agent in an interest bearing account maintained at
the payment office of the Agent as security for, and to provide for the payment
of, the Letters of Credit or the Letter of Credit Guaranty. If such Event of
Default has been cured or if such Letter of Credit shall have expired without a
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draw being made thereon (there being no dispute between the L/C Issuer and the
beneficiary with respect to payment on such Letter of Credit), the Agent shall
return such cash collateral to the Borrower. In the event that insurance
proceeds on the life of William Cohen are delivered to the Agent at a time when
there are outstanding Letters of Credit and no Revolving Loans, the Borrower
hereby directs the Agent to hold such proceeds as cash collateral until there
are Revolving Loans (at which time such cash collateral shall be applied to
reduce the Revolving Loans), or if there are no Revolving Loans until any
Reimbursement Obligation is satisfied.
SECTION 6. Conditions Precedent to Revolving Loans on the Closing Date.
The obligation of the Lenders to make Revolving Loans or to cause
Letters of Credit to be issued pursuant to the terms hereof to the Borrower on
the Closing Date is subject to the satisfaction of immediately prior to or
concurrently with the making of such Loans or the causing such Letters of Credit
to be opened, the following conditions precedent:
6.01. Delivery of Documents. The Agent shall have received the Loan
Documents in form and substance satisfactory to the Agent.
6.02. Intercreditor Agreement. The Agent shall have received an
Intercreditor Agreement (in form and substance satisfactory to the Agent in its
sole discretion), duly executed by each of the respective parties thereto.
6.03. Field Examination and Due Diligence. All field examinations
and due diligence conducted by the Agent shall have been completed and the
results thereof shall have been satisfactory to the Agent in all respects.
6.04. No Violation of Law or Agreement. The Agent shall be satisfied
that the transactions contemplated by this Financing Agreement or related
thereto do not present any exposure under any laws relating to bulk sales,
fraudulent conveyances or similar matters or could have a material adverse
effect on any distributing, agency, supplier, license agreement or any other
contractual agreement of the Borrower.
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6.05. Financial Information. The Agent shall have received in form
and substance satisfactory to the Agent:
(a) projected balance sheets, income statements and cash flow
projections, with applicable assumptions, all prepared on a monthly basis for
the remaining 1997 fiscal year; and
(b) the most recent available Quarterly Operating Report.
6.06. Effective Date. The Effective Date shall have occurred and the
closing conditions set forth in this Section 6 shall have been satisfied on or
before May 15, 1997.
6.07. Licensing and Union Agreements. The Agent shall have received
information as to the status of the Borrower's existing licensing agreements and
union agreements and such information shall be reasonably satisfactory to the
Agent in all material respects.
6.08. Material Adverse Change. There has not occurred or become
known to the Agent any material adverse change with respect to the condition,
financial or otherwise, operations, assets or prospects of the Borrower since
March 19, 1996 except for the filing of the Chapter 11 petition and changes
attendant thereto.
6.09. Corporate Organization. The Agent shall have received (a) a
copy of the Certificate of Incorporation of the Borrower and each Subsidiary
certified by the Secretary of State of the state of its incorporation, (b) a
certificate as to the good standing of the Borrower and each Subsidiary
certified by such Secretary of State, and (c) a copy of the By-Laws (as amended
through the Closing Date) of the Borrower and each Subsidiary and certified by
the Secretary or Assistant Secretary of the Borrower and each Subsidiary. The
Borrower is duly incorporated and in good standing under the laws of the State
of Delaware and is qualified to do business in all of the states in which such
qualification is necessary to conduct business or own property.
6.10. Proceedings. On or prior to the Closing Date, all corporate
and other proceedings taken or to be taken in connection with the transactions
contemplated hereby and all
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documents incident thereto shall be satisfactory in form and substance to the
Agent, and the Agent shall have received all such counterpart originals or
certified or other copies of such documents as it may reasonably request.
6.11. Board Resolutions. The Agent shall have received a copy of the
resolutions of the Board of Directors of each Guarantor with respect to each
Guaranty and the Borrower authorizing the execution, delivery and performance of
(a) the Loan Documents, and (b) any related agreements, in each case certified
by the Secretary or Assistant Secretary of the Borrower or of the Guarantor, as
the case may be, as of the Closing Date, together with a certificate of the
Secretary or Assistant Secretary of the Borrower or of the Guarantor, as the
case may be, as to the incumbency and signature of the officers of the Borrower
or of the Guarantor, as the case may be, executing the Loan Documents on behalf
of the Borrower or the Guaranty on behalf of the Guarantor and any certificate
or other documents to be delivered by the Borrower or any Guarantor, as the case
may be pursuant hereto, together with evidence of the incumbency of such
Secretary or Assistant Secretary.
6.12. Legal Restraints/Litigation. There shall be no (x) litigation,
investigation or proceeding (judicial or administrative) pending or, to the
knowledge of the Borrower, threatened against the Borrower, or its assets, by
any governmental authority arising out of the transactions contemplated by the
Loan Documents (including the proposed use of proceeds), (y) injunction, writ or
restraining order restraining or prohibiting the transactions contemplated by
the financing arrangements contemplated under the Loan Documents or (z) suit,
action, investigation or proceeding (judicial or administrative) pending or, to
the best knowledge of the Borrower threatened against the Borrower, or its
assets, which, in the opinion of the Agent (after full disclosure to the Agent
of the existence of any such suit, action, investigation or proceeding), if
adversely determined could have a Material Adverse Effect.
6.13. Lock Box Account. The lock box account shall have been
established with agreements in form and substance satisfactory to the Agent and
the Lenders.
6.14. Disbursement Authorization. The Borrower shall have delivered
to the Agent all information necessary for the
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Agent to issue wire transfer instructions on behalf of the Borrower for the
initial and subsequent Loans to be made under this Financing Agreement,
including, but not limited to, disbursement authorizations in form acceptable to
the Agent.
6.15. Fees and Expenses. On the Closing Date, the Borrower shall
have reimbursed CIT/CS for all fees and Out-of-Pocket Expenses incurred in
connection herewith and for any fees and expenses owed by the Borrower in
connection with the Original Agreement for which a written request for payment
(the delivery of a narrative billing statement containing detail of the work
performed or charges incurred shall constitute such written request) shall have
been made at or prior to the Closing Date.
6.16. Insurance. The Borrower shall have delivered to the Agent a
certificate from each of its insurance carriers in form satisfactory to the
Agent evidencing that the coverage required by Section 11.02 hereof and the
endorsements thereof listing the Agent, for the benefit of the Lenders, as loss
payee or mortgagee, as the case may be, are in full force and effect, all as set
forth in Section 11.02 of this Financing Agreement.
6.17. Certain Plans. The Agent shall have received a copy of each
agreement or plan or, if not available, a summary thereof, providing for
employment, severance, deferred payments, bonus payments or accruals, profit
sharing arrangements, stock option or stock appreciation rights, incentive
payments, pension or employment benefit contributions or similar payments or
arrangements for the benefit of Borrower's or any of its Subsidiaries'
management personnel, in form and substance as has been approved by Lender.
6.18. UCC Filings. Any documents (including, without limitation,
financing statements) required to be filed in order to create, in favor of the
Agent for the benefit of the Lenders, a first priority perfected security
interest in the Collateral with respect to which a security interest may be
perfected by a filing under the UCC shall have been properly filed in each
office in each jurisdiction required in order to create in favor of the Agent
for the benefit of the Lenders, a perfected lien on the Collateral and all
recording or "intangibles" taxes shall have been paid. The Agent shall have
received acknowledgment copies of all such filings (or, in lieu thereof, the
Agent shall have received other evidence satisfactory to the Agent that all
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such filings have been made); and the Agent shall have received evidence that
all necessary filing fees and all taxes or other expenses related to such
filings have been paid in full.
6.19. Security Agreement - Patents and Trademarks. The Security
Agreement - Patents and Trademarks, substantially in the form of Exhibit G
hereto, shall have been duly executed by each of the Borrower and the Guarantors
and the Agent, and delivered to the Agent.
6.20. Examination and Verification. The Agent shall have completed
to its satisfaction an updated examination and verification of the Accounts,
Inventory, Equipment, other assets, books and records of the Borrower.
6.21. Officer's Certificate. The Agent shall have received an
executed officer's certificate of the Borrower signed in the name of the
Borrower by one of its Executive Officers, satisfactory in form and substance to
the Agent certifying that: (i) the representations and warranties contained
herein are true and correct in all material respects on and as of the Closing
Date; (ii) the Borrower is in compliance with all of the terms and provisions
set forth herein; and (iii) no Default or Event of Default has occurred.
6.22. Use of Proceeds. The Borrower shall have furnished the Lenders
with evidence reasonably satisfactory to them that all proceeds of the Loans are
being applied on the Closing Date as described in Section 4.10 hereof.
6.23. Key Man Life Insurance. The Agent shall have been named as a
beneficiary of at least $500,000 of insurance proceeds from the life insurance
policy on the life of William Cohen as its interest may appear, and a copy of
such policy evidencing Agent as beneficiary shall be delivered within thirty
days after the date hereof.
6.24. Additional Documents. The Borrower shall have executed and
delivered to the Agent all other approvals, opinions or documents as the Agent
may reasonably request in order to consummate the transactions contemplated
hereby.
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6.25. No Default. No Default or Event of Default shall have occurred
and be continuing, or would result from providing the Loans.
6.26. Opinions. Counsel for the Borrower and the Guarantors shall
have delivered to the Agent for the benefit of the Lenders opinions dated the
Closing Date in the forms of Exhibit E attached hereto.
6.27. Confirmation of Plan of Reorganization. The Agent shall have
received evidence reasonably satisfactory to it that (either prior to or
simultaneously with the making of the initial Revolving Loans hereunder) the
Plan of Reorganization shall have been confirmed under Section 1129 of the
Bankruptcy Code pursuant to the Confirmation Order, as to which no order
modifying or vacating the Confirmation Order shall have been entered, and no
appeal regarding the Confirmation Order shall have been timely filed or, if such
an appeal has been taken, no stay of the Confirmation Order pending such appeal
has been granted.
6.28. Consummation of Transactions Under Plan of Reorganization. The
Agent shall have received evidence satisfactory to it that (either prior to or
simultaneously with the making of the initial Revolving Loans hereunder) the
transactions contemplated by the Plan of Reorganization shall have been
consummated in accordance with the terms of the Plan of Reorganization as
confirmed pursuant to the Confirmation Order.
6.29. Consents. All necessary consents (contractual, regulatory or
otherwise) with respect to the transactions contemplated by this Financing
Agreement shall have been received in form and substance satisfactory to the
Agent.
6.30. Minimum Availability. After giving effect to (a) the Revolving
Loans and the Letters of Credit issued on the Closing Date and (b) the
incurrence of all indebtedness and the payment of all fees and expenses in
connection with the transactions contemplated hereby, there shall be a minimum
of $2,000,000 undrawn Availability under the Revolving Line of Credit.
Upon the execution of this Financing Agreement and the initial disbursement of
Loans hereunder, all of the above conditions
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precedent shall have been deemed satisfied except as the Borrower and the Agent
shall otherwise agree in a separate writing.
SECTION 7. Conditions Precedent to Each Revolving Loan.
The obligations of the Lenders to make each Revolving Loan or to
cause Letters of Credit to be issued hereunder shall be subject to the
satisfaction of, or waiver of, immediately prior to or concurrently with the
making of such Revolving Loans, the following further conditions precedent:
7.01. Representations and Warranties. All the representations and
warranties contained in this Financing Agreement and in each other Loan Document
shall be true and correct on and as of the date of providing such Revolving Loan
as though made on and as of such date, except representations and warranties
made with respect to a specified earlier date in which case such representation
and warranty shall be correct on and as of such specified earlier date.
7.02. No Default. No Default or Event of Default shall have occurred
and be continuing, or could result from providing such Revolving Loan.
7.03. Additional Documents. Upon the request of the Agent, the
Borrower shall have executed and delivered to the Agent a certificate of an
Executive Officer of the Borrower stating that the conditions set forth in
Sections 7.01 and 7.02 hereof have been satisfied as of the date of the
requested Revolving Loan.
7.04. Deemed Representation. Each delivery of a Borrowing Notice by
the Borrower requesting a Revolving Loan shall constitute a representation and
warranty that the statements contained in Section 7.01 hereof are true and
correct both on the date of such delivery of the Borrowing Notice and, unless
the Borrower otherwise notifies the Agent prior to the receipt of such Revolving
Loan, as of the date of the providing of such Revolving Loan.
SECTION 8. Management, Collection And Status of Accounts Receivable And Other
Collateral.
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8.01. Management of Collateral. (a) After the occurrence and during
the continuance of an Event of Default, the Agent may, in its sole discretion,
send a notice of assignment and/or notice of the Agent's security interest to
any and all Account Debtors or any third party holding or otherwise concerned
with any of the Collateral, and thereafter the Agent shall have the sole right
to collect the Accounts and/or take possession of the Collateral and the books
and records relating thereto. The Borrower and the Guarantors shall not without
prior written consent of the Agent, grant any extension of time of payment of
any Account, compromise or settle any Account for less than the full amount
thereof, release, in whole or in part, any Person or property liable for the
payment thereof, or allow any credit or discount whatsoever thereon, except,
prior to the occurrence and continuance of an Event of Default and in the normal
course of business.
(b) (i) The Borrower and the Guarantors hereby constitute the Agent
or its designee on behalf of the Agent as the Borrower's and the Guarantors'
attorney-in-fact with power to endorse the Borrower's or Guarantor's name upon
any notes, acceptances, checks, drafts, money orders or other evidences of
payment or Collateral that may come into its possession, to sign the Borrower's
or Guarantor's name (but in all instances before an Event of Default in the name
of the Borrower or a Guarantor and not the Agent) on any invoice or bill of
lading relating to any of the Accounts, drafts against Account Debtors,
assignments and verifications of Accounts and notices to Account Debtors, to
send verification of Accounts, and following an Event of Default to notify the
postal service authorities to change the address for delivery of mail addressed
to the Borrower and the Guarantors to such address as the Agent may designate
and to do all other acts and things necessary to carry out this Agreement. All
acts of said attorney or designee are hereby ratified and approved, and said
attorney or designee shall not be liable for any acts of omission or commission
(other than acts or omissions constituting gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction), nor for any error of judgment or mistake of fact or law; this
power being coupled with an interest is irrevocable until all of the Loans and
any other Obligations under the Loan Documents are paid in full and all of the
Loan Documents are terminated.
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(ii) The Agent, without notice to or consent of the Borrower
or any Guarantor upon the occurrence and during the continuance of an Event of
Default (A) may sue upon or otherwise collect, extend the time of payment of, or
compromise or settle for cash, credit or otherwise upon any terms, any of the
Accounts or any securities, instruments or insurance applicable thereto and/or
release the Account Debtor thereon; (B) is authorized and empowered to accept
the return of the goods represented by any of the Accounts, and (C) shall have
the right to receive, endorse, assign and/or deliver in its name or the name of
any Borrower or Guarantor any and all checks, drafts, and other instruments for
the payment of money relating to the Accounts. The Borrower and the Guarantors
hereby waive notice of presentment, protest and non-payment of any instrument so
endorsed, all in a commercially reasonable manner and without discharging or in
any way affecting liability hereunder.
(c) Nothing herein contained shall be construed to constitute the
Borrower or any Guarantor as agent of the Agent or the Lenders for any purpose
whatsoever, and the Agent and the Lenders shall not be responsible or liable for
any shortage, discrepancy, damage, loss or destruction of any part of the
Collateral wherever the same may be located and regardless of the cause thereof
(other than from acts or omissions of the Agent or the Lenders constituting
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction). The Agent or the Lenders shall not, under any
circumstances or in any event whatsoever, have any liability for any error or
omission or delay of any kind occurring in the settlement, collection or payment
of any of the Accounts or any instrument received in payment thereof or for any
damage resulting therefrom (other than acts or omissions of the Agent or the
Lenders constituting gross negligence or willful misconduct as determined by a
final judgment of a court of competent jurisdiction). The Agent or the Lenders,
by anything herein or in any assignment or otherwise, do not assume the
Borrower's or any Guarantor's obligations under any contract or agreement
assigned to the Agent and the Agent or the Lenders shall not be responsible in
any way for the performance by such Borrower or Guarantor of any of the terms
and conditions thereof.
(d) If any of the Accounts includes a charge for any tax payable to
any Governmental Authority, the Agent is hereby authorized (but in no event
obligated) in its discretion to pay
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the amount thereof to the proper taxing authority for the Borrower's or any
Guarantor's account and to charge the Borrower or Guarantors therefor. The
Borrower or Guarantors shall notify the Agent if any Accounts include any taxes
due to any such authority and, in the absence of such notice, the Agent shall
have the right to retain the full proceeds of such Accounts and shall not be
liable for any taxes that may be due from such Borrower or Guarantor by reason
of the sale and delivery creating such Accounts.
8.02. Accounts Documentation. The Borrower and the Guarantors will
at such intervals as the Agent may require, execute and deliver confirmatory
written assignments of the Accounts to the Agent and furnish such further
schedules and/or information as the Agent may require relating to the Accounts,
including, without limitation, sales invoices or the equivalent, credit memos
issued, remittance advises, reports and copies of deposit slips and copies of
original shipping or delivery receipts for all merchandise sold. In addition,
the Borrower or Guarantor shall notify the Agent of any non-compliance in
respect of the representations, warranties and covenants contained in Section
8.03 below. The items to be provided under this Section 8.02 are to be in form
reasonably satisfactory to the Agent and are to be executed and delivered to the
Agent from time to time solely for its convenience in maintaining records of the
Collateral. The Borrower's or any Guarantor's failure to give any of such items
to the Agent shall not affect, terminate, modify or otherwise limit the Agent's
lien or security interest in the Collateral. The Borrower or Guarantor shall not
re-date any invoice or sale or make sales on extended dating beyond that
customary in the Borrower's or Guarantors' industry, and shall not re-bill any
Accounts without promptly disclosing the same to the Agent and providing the
Agent with a copy of such re-billing, identifying the same as such. If the
Borrower or any Guarantor becomes aware of anything materially detrimental to
any of the Borrower's or the Guarantors' customers' credit, the Borrower or the
relevant Guarantor will promptly advise the Agent thereof.
8.03. Status of Accounts and Other Collateral. With respect to
Collateral of the Borrower or any Guarantor, the Borrower or such Guarantor
covenants, represents and warrants: (a) the Borrower or such Guarantor shall be
the sole owner, free and clear of all liens, mortgages, pledges or other
encumbrances except in the favor of the Agent for the benefit of the Lenders
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or otherwise permitted hereunder (including Collateral subject to Permitted
Encumbrances), of and fully authorized to sell, transfer, pledge and/or grant a
security interest in each and every item of said Collateral; (b) on the date an
Account becomes an Eligible Account Receivable and is included in the borrowing
base, each Account shall be a good and valid account representing an undisputed
bona fide indebtedness incurred or an amount indisputably owed by the Account
Debtor therein named, for a fixed sum as set forth in the invoice relating
thereto with respect to any absolute sale and delivery upon the specified terms
of goods sold by the Borrower or such Guarantor, or work, labor and/or services
theretofore rendered by the Borrower and such Guarantor; (c) on the date an
Account becomes an Eligible Account Receivable and is included in the borrowing
base, no Account is subject to any defense, offset, counterclaim, discount or
allowance except as may be stated in the invoice relating thereto or discounts
and allowances as may be customary in the Borrower's or such Guarantor's
business, and each of such Accounts will be, to the best of the Borrower's
knowledge, paid when due; (d) none of the transactions underlying or giving rise
to any Accounts shall violate any applicable state or federal laws or
regulations, and all documents relating thereto shall be legally sufficient
under such laws or regulations and shall be legally enforceable in accordance
with their terms; (e) no agreement under which any deduction or offset of any
kind, other than normal trade discounts, may be granted or shall have been made
by the Borrower or such Guarantor at or before the time such Account is created;
(f) all documents and agreements relating to Accounts shall be true and correct
and in all respects what they purport to be; (g) all signatures and endorsements
of the Borrower, or to the best of the Borrower's knowledge of any other party
that appear on all documents and agreements relating to Accounts shall be
genuine and all signatories and endorsers shall have full capacity to contract;
(h) the Borrower and such Guarantor shall maintain books and records pertaining
to said Collateral in such detail, form and scope as the Agent shall reasonably
require; (i) the Borrower or such Guarantor will immediately notify the Agent if
any of their accounts arise out of contracts with the United States or any
department, agency, or instrumentality thereof and will execute any instruments
and take any steps required by the Agent in order that all monies due or to
become due under any such contract shall be assigned to the Agent and notice
thereof given to the United States Government under the Federal Assignment of
Claims Act; (j) the Borrower and
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such Guarantor will, immediately upon learning thereof, report to the Agent any
material loss or destruction of, or substantial damage to, any of the
Collateral, and any other matters affecting the value, enforceability or
collectibility of any of the Collateral; (k) if any amount payable under or in
connection with any Account is evidenced by a promissory note or other
instrument, as such term is defined in the UCC, such promissory note or
instrument shall be immediately pledged, endorsed, assigned and delivered to the
Agent as additional Collateral; (l) the Borrower and such Guarantor shall not
redate any invoice or sale or make sales on extended dating beyond that which is
customary in the ordinary course of its business and in the industry; (m) the
Borrower and such Guarantor shall conduct a physical count of its Inventory each
May and November and after the occurrence and during the continuance of an Event
of Default, at such intervals as the Agent may request and the Borrower and such
Guarantor shall promptly supply the Agent with a copy of such count accompanied
by a report of the value (based on the lower of cost (on a FIFO basis) or market
value) of such Inventory; and (n) the Borrower and such Guarantor are not and
shall not be entitled to pledge the Agent's or the Lenders' credit on any
purchases for or any purpose whatsoever, except as otherwise provided herein
with respect to a Letter of Credit Guaranty.
8.04. Collateral Custodian. Upon the occurrence of and during the
continuance of an Event of Default or Default, the Agent may at any time and
from time to time employ and maintain in the premises of the Borrower or the
Guarantors a custodian selected by the Agent who shall have full authority to do
all acts reasonably necessary to protect the Agent's interest in the Collateral.
The Borrower and Guarantors hereby agree to cooperate with any such custodian
and to do whatever the Agent may reasonably request to preserve the Collateral.
All costs and expenses incurred by the Agent, by reason of the employment of the
custodian shall be charged to the Loan Account and the Borrower shall be
provided with a written statement describing such costs and expenses.
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SECTION 9. Collateral.
9.01. Grant of Lien. As security for the prompt payment in full of
all Loans made and to be made to the Borrower from time to time by the Lenders
pursuant hereto, as well as to secure the payment in full of all other
Obligations, the Borrower hereby pledges and grants to the Agent for the benefit
of the Lenders a continuing general lien upon and first priority, perfected
security interest in all of the Collateral whether presently in existence or
hereafter acquired or created, however acquired or created, and which is owned
by the Borrower or in which the Borrower has any interest, whether held by the
Borrower or others for its account; provided, however, that if any Collateral is
subject to a Permitted Encumbrance, and as a matter of law the lien reflected
thereby is senior to the lien of the Agent hereunder, then the lien of the Agent
hereunder shall be subject to such Permitted Encumbrance.
9.02. Inventory. The Borrower agrees to hold all Inventory subject
to the liens of the Agent and make no disposition of any Inventory except in the
ordinary course of the business of the Borrower. Until the Agent has given the
Borrower notice to the contrary, as provided for below, any Inventory may be
sold and shipped by the Borrower to its customers in the ordinary course of the
Borrower's business, on open account and on terms currently being extended by
the Borrower to its customers, provided that all proceeds of all sales
(including cash, accounts receivable, checks, notes, instruments for the payment
of money and similar proceeds) are forthwith transferred, endorsed, and turned
over and delivered to the Agent by deposit to the Lock Box Account. The Lenders
shall have the right to withdraw this permission at any time upon the occurrence
and during the continuance of an Event of Default, in which event no further
disposition shall be made of the Inventory by the Borrower without the Agent's
prior written approval. The proceeds of sales of Inventory, in cash, check or
other form of payment shall be deposited in the Lock Box Account and all cash
amounts so deposited shall be reflected on a weekly cash report (or on a more
frequent basis as may be requested by the Agent in its sole discretion). Upon
the sale, exchange, or other disposition of Inventory, as herein provided, the
security interest in the Borrower's Inventory provided for herein shall, without
break in continuity and without further formality or act, continue in, and
attach to, all Proceeds, including any
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instruments for the payment of money, accounts receivable, contract rights,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sale, exchange or disposition. As to any such sale,
exchange or other disposition, the Agent shall have all of the same rights as
the Borrower as an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation.
9.03. Equipment. The Borrower will, at its own cost and expense,
keep its Equipment in as good and substantial repair and condition as the same
is now or at the time the lien and security interest granted herein shall attach
thereto, reasonable wear and tear excepted, making any and all repairs and
replacements when and where necessary. The Borrower also agrees to hold all of
its Equipment subject to the liens of the Agent and make no disposition of
Equipment, whether by sale, exchange or otherwise, unless the Borrower first
obtains the prior written approval of the Agent (provided, however, that the
Borrower may sell up to $250,000 of Equipment in any fiscal year without the
Agent's prior written approval) and the proceeds of any such sales shall not be
commingled with the Borrower's other property but shall be segregated, held by
the Borrower in trust for the Agent as the Lenders' exclusive property, and
shall be delivered immediately by the Borrower to the Agent in the identical
form received by the Borrower by deposit to the Lock Box Account. Upon the sale,
exchange, or other disposition of the Equipment as herein provided, the security
interest provided for herein shall, without break in continuity and without
further formality or act, continue in, and attach to, all Proceeds, including
any instruments for the payment of money, accounts receivable, contract rights,
documents of title, shipping documents, chattel paper and all other cash and
non-cash proceeds of such sales, exchange or disposition. As to any such sale,
exchange or other disposition, the Lenders shall have all of the same rights as
the Borrower as an unpaid seller, including stoppage in transit, replevin,
rescission and reclamation.
9.04. Loan Account. The Agent shall maintain a separate account (the
"Loan Account") on its books in the name of the Borrower in which the Borrower
will be charged with loans and advances made by the Lenders to the Borrower or
for the Borrower's account, and with any other Obligations, including (i) in the
case of a Lender party to this Agreement on the Closing Date, any and all costs,
expenses and reasonable
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attorney's fees which such Lenders or the Agent may reasonably incur in
connection with the exercise by or for such Lenders or the Agent of any of the
rights or powers herein conferred upon the Lenders or the Agent, or in the
prosecution or defense of any action or proceeding to enforce or protect any
rights of the Lenders or the Agent in connection with this Financing Agreement
or the Collateral, or any Obligations and (ii) in the case of any Lender who
becomes party to this Agreement after the Closing Date, any of the foregoing
costs and expenses, but only after the occurrence and during the continuance of
an Event of Default. The Borrower will be credited with all amounts received by
the Agent from the Borrower or from others for the Borrower's account,
including, as above set forth, all amounts received by the Agent in payment of
assigned Accounts, and such amounts will be applied to payment of the
Obligations. In no event shall prior recourse to any Accounts or other security
granted to or by the Borrower be a prerequisite to the Lenders' or the Agent's
right to demand payment of any Obligation. Further, it is understood that
neither the Lenders nor the Agent shall have any obligation whatsoever to
perform in any respect any of the Borrower's Contracts or other obligations
relating to the Accounts.
9.05. Lock Box Accounts. (a) The Borrower shall maintain lock box
bank accounts (the "Lock Box Accounts") in accordance with lock box agreements
and arrangements which shall be satisfactory to the Agent hereunder in the name
of the Agent with the Agent or an Affiliate of the Agent to be designated as the
Lock Box Accounts. The Lock Box Accounts on the Closing Date are identified on
Schedule 9.05 hereto. The Borrower shall instruct its customers to remit payment
of all Accounts on which such customers are debtors directly to the Lock Box
Account, and the Borrower shall promptly deposit in the Lock Box Accounts all
amounts nevertheless or otherwise remitted to the Borrower on the Accounts and
all other amounts received by the Borrower, whether from a disposition of assets
or otherwise, on or after the Closing Date. Notwithstanding anything to the
contrary in this Financing Agreement or in any lock box agreements, in the event
there are no Revolving Loans, or there are Revolving Loans in an amount less
than amounts then contained in the Lock Box Accounts, as the case may be, the
Agent shall remit directly to the Borrower for working capital purposes and not
as a Revolving Loan hereunder any funds in the Lock Box Account in excess of the
sum of the (x) then outstanding Revolving Loans and (y) the maximum
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amount drawable under outstanding Letters of Credit (to the extent not already
deemed a Revolving Loan hereunder).
(b) On or prior to the Closing Date, the Borrower shall have
established the Lock Box Accounts required by the Agent pursuant to agreements
and subject to terms satisfactory to Agent, into which the Proceeds shall be
deposited.
(c) The Agent shall credit (based on two collection Business Days)
all amounts deposited in the Lock Box Accounts created under this Financing
Agreement pursuant to this Section 9.05 which are "good funds" in New York City
to the repayment of Revolving Loans and to the repayment of other outstanding
Obligations due and payable from time to time. The Lock Box Accounts created
under this Financing Agreement are, and shall remain, under the sole dominion
and control of the Agent. Subject to subsection (a) above, the Borrower
acknowledges and agrees that (A) the Borrower has no right of withdrawal from
any Lock Box Account and (B) the funds on deposit in any Lock Box Account shall
continue to be Collateral for all of the Obligations.
9.06. Real Estate. The Borrower will, at its sole cost and expense,
do, execute, acknowledge and deliver all and every such acts, information
reports, returns and withholding of monies as shall be necessary or appropriate
to comply fully, or to cause full compliance, with applicable law in respect of
the Real Estate and all transactions related to the Real Estate, and will to the
extent reasonably requested by the Agent provide the Agent with satisfactory
evidence of such compliance and notify the Agent of the information reported in
connection with such compliance.
9.07. Continuance of Security Interests. The rights and security
interests granted to the Agent and the Lenders hereunder are to continue in full
force and effect, notwithstanding the termination of this Financing Agreement or
the fact that the account maintained in the name of the Borrower on the books of
the Agent or the Lenders may from time to time be temporarily in a credit
position, until the final payment in full to the Lenders of all Loans and other
amounts due and payable hereunder and the termination of this Financing
Agreement.
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9.08. Election of Actions by the Lenders. To the extent that the
Obligations are now or hereafter secured by any assets or property other than
the Collateral or by the guaranty, endorsement, assets or property of any other
person, then the Agent shall have the right in its sole discretion to determine
which rights, security, liens, security interests or remedies the Lenders shall
at any time pursue, foreclose upon, relinquish, subordinate, modify or take any
other action with respect to, without in any way modifying or affecting any of
them, or any of the Lenders' rights hereunder.
9.09. Credits and Charges. Any reserves or balances to the credit of
the Borrower and any other property or assets of the Borrower in the possession
of the Lenders and/or the Agent shall be held by the Lenders and/or the Agent as
security for any Obligations and applied in whole or partial satisfaction of
such Obligations when due and payable. The liens and security interests granted
herein and any other lien or security interest the Lenders and/or the Agent may
have in any other assets of the Borrower, shall secure payment and performance
of all now existing and future Obligations. The Agent may in its discretion
charge any or all of the Obligations to the Loan Account of the Borrower when
due.
9.10. Additional Collateral. This Financing Agreement and the
obligation of the Borrower to perform all of its covenants and obligations
hereunder are further secured by the Loan Documents.
SECTION 10. Representations and Warranties.
The Borrower represents and warrants to the Lenders and the Agent as
follows:
10.01. Corporate Existence. (a) The Borrower is a corporation duly
organized and existing in good standing under the laws of the state in which the
Borrower is incorporated and is duly qualified and in good standing as a foreign
corporation to do business in every jurisdiction where the character of the
properties owned or leased by it or the nature of any business transacted by it
makes such qualification necessary and where such nonqualification or lack of
good standing would have a Material Adverse Effect.
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(b) The Borrower has the corporate power to own its property and to
carry on its business as now being conducted. The Borrower has delivered to the
Agent and has caused each Guarantor to deliver to the Agent true, complete and
correct copies of the Borrower's and each such Guarantor's Certificate of
Incorporation and By-laws, as amended and in full force and effect on the
Closing Date.
(c) The Borrower has all requisite power and authority to enter into
and perform all its obligations under this Financing Agreement and the other
Loan Documents.
(d) The Borrower has identified on Schedule 10.01(d) (i) the name
and jurisdiction of incorporation or organization of the Borrower and each
Guarantor; (ii) each jurisdiction where the Borrower and each Guarantor is
qualified to do business as of the Closing Date; and (iii) the number of shares
of Capital Stock and other equity securities authorized, issued and outstanding
as of the Closing Date and the percentage of the issued and outstanding Capital
Stock of each Subsidiary owned by the Borrower as of the Closing Date. All such
shares of Capital Stock and other equity securities have been validly issued and
are fully paid and nonassessable and all such shares and securities of a
Subsidiary are owned by the Borrower indicated on Schedule 10.01(d) beneficially
and of record, free and clear of any lien or other encumbrance, except for
Permitted Encumbrances.
(e) The Borrower has no outstanding stock or securities convertible
into or exchangeable or exercisable for any shares of its Capital Stock, nor
does it have outstanding any rights to subscribe for or to purchase, or any
options for the purchase of, or any agreement providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to, any shares of its Capital Stock or any securities
convertible into or exchangeable or exercisable for any shares of its Capital
Stock other than as set forth on Schedule 10.01(e).
10.02. Authorization of Agreement and Other Documents. The Borrower
has taken all actions necessary to authorize it to enter into and perform its
obligations under this Financing Agreement and the other Loan Documents to which
it is a party, and to consummate the transactions contemplated hereby and
thereby. This Financing Agreement and the other Loan Documents
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to which the Borrower is a party, when executed and delivered by the Borrower as
provided in this Financing Agreement, will be, legal, valid and binding
obligations of the Borrower, enforceable in accordance with their respective
terms, subject as to enforcement, to applicable bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting the
rights of creditors generally and limitations imposed by federal or state law or
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions hereof and thereof.
10.03. Financial Statements. (a) The financial statements (otherwise
required to be delivered hereunder) of the Borrower (including any related
schedules and/or notes) have been prepared in accordance with GAAP consistently
applied. Such information fairly presents the financial condition of the
Borrower and its Subsidiaries on a consolidated basis as at the date thereof.
(b) There have been no material adverse changes in the properties,
business, operations, earnings, assets, liabilities or condition (financial or
otherwise) of the Borrower, since March 31, 1997, except as disclosed in the
Quarterly Operating Reports.
10.04. No Violation. Neither the execution or delivery of this
Financing Agreement or any other Loan Document nor the performance by the
Borrower of its obligations under this Financing Agreement or any other Loan
Document nor the consummation by the Borrower of the transactions contemplated
hereby and thereby will:
(a) violate any provision of the charter or by-laws of the
Borrower;
(b) violate any statute or law or any judgment, decree, order,
regulation or rule of any court or governmental authority to which the
Borrower or any of its properties may be subject; or
(c) require any consent, approval or other action by any court or
administrative or governmental body or any other Person pursuant to the
charter or by-laws (other than such as have been obtained or taken) of the
Borrower, or any
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post-petition agreement, instrument, order, judgment or decree to which
the Borrower is subject, unless the Agent has been notified in writing and
such consent has been obtained.
The Borrower is not a party to, or otherwise subject to any
provision contained in, any instrument evidencing Indebtedness of the Borrower,
any agreement relating thereto or any other contract or agreement (including its
charter) which, except to the extent complied with by the Borrower or consented
to in connection with the execution of this Financing Agreement or any other
Loan Document, restricts or otherwise limits the incurring of the Indebtedness
evidenced by this Financing Agreement.
10.05. Full Disclosure. Neither this Financing Agreement or any
other Loan Document, nor any of the other documents, certificates or statements
furnished to the Agent in writing by or on behalf of the Borrower in connection
herewith contains any untrue statement of a material fact or, when read
together, omits to state a material fact respecting the Borrower or any
Guarantor necessary to make the statements contained herein or therein, in light
of the circumstances under which they were made, not misleading in any material
respect. There is no fact known to the Borrower respecting the Borrower or any
Guarantor, which the Borrower has not disclosed to the Lenders which materially
adversely affects, or insofar as the Borrower can reasonably foresee will
materially adversely affect, the properties, business, prospects, operations,
earnings, assets, liabilities or condition (financial or otherwise) of the
Borrower or the Borrower and the Guarantors taken as a whole or the ability of
the Borrower to perform its obligations under this Financing Agreement, any
other Loan Document or any other document contemplated hereby or thereby.
10.06. Litigation. (a) Except as set forth on Schedules 10.06(a) and
(b), there is no action, proceeding or investigation pending, or to the best
knowledge of the Executive Officers of the Borrower, threatened, against or
affecting the Borrower in any court or before any governmental authority or
arbitration board or tribunal, foreign or domestic, except for such actions
which, if adversely determined, singly and in the aggregate, would not have a
Material Adverse Effect and there is no such action seeking to restrain, enjoin,
prevent the
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consummation of or otherwise challenge this Financing Agreement, any other Loan
Document or any of the other documents or the transactions contemplated hereby
or thereby. All actions, proceedings or investigations (pending or threatened
against the Borrower) are set forth on Schedules 10.06(a) and (b).
(b) The Borrower is not subject to any judgment, order, decree, rule
or regulation of any court, governmental authority or arbitration board or
tribunal which has had or which can reasonably be expected to have a Material
Adverse Effect.
10.07. Labor Matters. Except as set forth on Schedule 10.07 hereto,
there are no strikes or other material labor disputes against the Borrower or,
to the knowledge of the Borrower, threatened against the Borrower. To the
knowledge of the Borrower, hours worked by and payments made to employees of the
Borrower have not been in violation of the Fair Labor Standards Act or any other
applicable law dealing with such matters, except to the extent that any such
violation would not result in a Material Adverse Effect.
10.08. Material Agreements. Except as set forth on Schedule 10.08
hereto, all material leases and other material agreements (including Licenses)
to which the Borrower is a party are valid and binding and in full force and
effect and, to the knowledge of the Borrower, no default has occurred or is
continuing thereunder which would have a Material Adverse Effect and no consent
need be obtained (other than consents which have been or will be obtained prior
to the Closing Date) from any Person in respect of any such lease or agreement
in connection with the transactions contemplated hereby. The Borrower enjoys
peaceful and undisturbed possession of all leases necessary or in any respect
material to the business of the Borrower for the operation of its properties and
assets, unless the Borrower has made other lease arrangements for the operation
of its properties and assets.
10.09. Compliance with Laws. Except as set forth on Schedule 10.09,
the Borrower (a) is not in violation of any statutes, laws, ordinances,
governmental rules or regulations or any judgment, order, writ, injunction,
decree, rule or regulation (federal, state, local or foreign) to which it is
subject or (b) has not failed to obtain any licenses, permits, franchises or
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other governmental authorizations necessary to the ownership or operation of its
properties or the conduct of its business.
10.10. Governmental Regulations. The Borrower is not subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act or to any federal or state statute or regulation
limiting its ability to incur indebtedness for borrowed money.
10.11. Outstanding Debt; No Default. The Borrower has no outstanding
Indebtedness other than Permitted Indebtedness. No event has occurred or failed
to occur which would constitute a Default or Event of Default under this
Financing Agreement or any other Loan Document.
10.12. Title, Liens. Except for Permitted Encumbrances, the Borrower
has good and marketable title to its properties and assets.
10.13. Taxes. The Borrower has filed all Federal, State and other
income tax returns that are required to have been filed, and has paid all taxes
as shown on said returns and on all assessments received by it to the extent
that such taxes have become due, except any such taxes that are being diligently
contested in good faith by appropriate proceedings, for which adequate reserves
in accordance with GAAP are set aside on its books and as to which no liens have
been asserted which are or may be pari passu or senior to the liens of the
Agent.
10.14. Collateral; Real Estate. (a) Security Interest and Liens.
Except for Permitted Encumbrances, the security interests and liens granted
herein and in the Loan Documents constitute and shall at all times constitute
valid first priority perfected liens and the only liens on the Collateral; the
Borrower is the absolute owner of its Collateral with full right to pledge,
sell, consign, transfer and create a security interest therein, free and clear
of any and all claims or liens in favor of others, except for the Permitted
Encumbrances; and the Equipment does not comprise a part of the Inventory of the
Borrower and the Equipment is and will only be used by the Borrower in its
business and will not be held for sale or lease, or removed from its premises,
or otherwise disposed of by the Borrower without the prior written approval of
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the Agent, except as otherwise permitted under Section 9.03 hereof.
(b) Real Estate. With respect to real property or interests in real
property the Borrower has (i) good and marketable fee title to all of its real
property which is listed on Schedule 10.14(b)(i) under the heading "Fee
Properties" and such other real property title to which it may acquire after the
Closing Date (each, a "Fee Property"), and (ii) good and valid title to the
leasehold estates in all of the real property leased by it and which is listed
in Schedule 10.14(b)(ii) under the heading "Leased Properties" and such other
real property to which it may acquire a leasehold interest after the Closing
Date, in each case free and clear of all mortgages, liens, security interests,
easements, covenants, rights-of-way and other similar restrictions of any nature
whatsoever, except Permitted Encumbrances. The Fee Properties so listed in
respect of the Borrower constitute all of the real property owned in fee by the
Borrower and, a true, correct and complete legal description for each such Fee
Property has been previously delivered to the Agent.
(c) Possession of Trademarks. The Borrower possesses or has the
right to the use of all the trademarks, trade names, service marks, licenses and
other rights free from burdensome restrictions that are currently used by it or
are necessary in any material respect for the ownership, maintenance and
operation of its respective businesses, properties and assets. The Borrower is
not in violation of any thereof in any material respect or has received notice
from or has knowledge of any material claim by any Person that it is now
infringing any of the foregoing which if adversely determined would have a
Material Adverse Effect.
(d) Intellectual Property. To the best knowledge of the Borrower,
except as set forth on Schedule 10.14(d) hereto, the Borrower has no Trademarks,
Patents or registered copyrights or any applications pending for any Trademarks,
Patents or copyrights.
(e) Collateral Information. (I) Schedule 10.14(e)(i) lists (i) the
chief place of business and chief executive office of the Borrower and each
Guarantor, (ii) all of the locations of Equipment and Inventory owned by the
Borrower and each Guarantor,
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(iii) the place where the Borrower and each Guarantor maintains its books and
records concerning its Accounts and its other Collateral, and all locations
presently occupied or used by the Borrower with respect to which it is necessary
to file UCC financing statements to perfect a security interest in the
Collateral in favor of the Lenders to the extent such interest can be perfected
by such filings; UCC searches have been completed for all such locations and the
results have been delivered to the Agent.
(II) All documents (including, without limitation, financing
statements) required to be filed or instruments required to be delivered to the
Agent in order to create, in favor of the Agent for the benefit of the Lenders,
a perfected security interest in the Collateral with respect to which a security
interest may be perfected by filing or delivery under the UCC have been, in the
case of such filing, delivered to the Agent for filing in the appropriate office
in the jurisdictions set forth on Schedule 10.14(e) to this Financing Agreement
and, in the case of such delivery, delivered to the Agent, and all other
procedures otherwise required in order to create in favor of the Agent, for the
benefit of the Lenders, a perfected lien on the Collateral have been taken by or
on behalf of the Borrower.
10.15. Broker's or Finder's Commissions. To the extent that any
broker's or finder's or placement fee or commission is payable with respect to
this Financing Agreement or any other Loan Document or the transactions
contemplated hereby or thereby, it has been paid in full and the Borrower will
hold the Lenders and the Agent harmless from any claim, demand or liability for
broker's or finder's or placement fees or commissions alleged to have been
incurred in connection with this Financing Agreement or any other Loan Document
or such transactions.
10.16. Application of Proceeds. The Borrower does not own any
"margin security" within the meaning of Regulation G (12 C.F.R. Part 207) of the
Board of Governors of the Federal Reserve System (herein called a "margin
security"). The proceeds of the Revolving Loans will be used by the Borrower
only for the purposes described in Section 4.10 hereof. Neither the Borrower nor
any agent acting on its behalf has taken or will take any action which might
cause the Loans made pursuant to this Financing Agreement to violate Regulation
G, Regulation T,
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Regulation U, Regulation X or any other regulation of the Board of Governors of
the Federal Reserve System or to violate the Securities Exchange Act of 1934, as
amended in each case as in effect now or as the same hereafter may be in effect.
10.17. ERISA. The Borrower has not engaged in any transaction prohibited by
Section 4975 of the Code or Section 406 of ERISA which could subject the
Borrower, or any entity which the Borrower has an obligation to indemnify, to
any material tax or penalty imposed under Section 4975 of the Code or Section
502 of ERISA. Except as set forth on Schedule 10.17 hereto, each Pension Plan
intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter from the Internal Revenue Service that it is so
qualified and nothing has occurred since the date of such determination letter
that could reasonably be expected to adversely affect the qualification of such
Pension Plan. Each Employee Benefit Plan is administered in all material
respects in accordance with its terms and applicable law. With respect to any
Employee Benefit Plan, the Borrower has not failed to make any contribution due
under the terms of such plan or as required by law. Except as set forth on
Schedule 10.17 hereto, as of the Closing Date, the fair market value of the
assets of each Pension Plan are at least equal to the present value of all
benefit liabilities under each such Pension Plan, determined as if each such
Pension Plan terminated as of the Closing Date and using interest rates and
assumptions adopted by the PBGC for such purpose. There is no lien outstanding
or security interest imposed under the Code or ERISA in connection with a
Pension Plan. The Borrower and each ERISA Affiliate of the Borrower has
fulfilled its obligations under the minimum funding standards of ERISA and the
Code with respect to each Pension Plan subject to Section 412 of the Code or
Section 302 of ERISA. Except as disclosed on Schedule 10.17 hereto, as of the
Closing Date, neither the Borrower nor any ERISA Affiliate of the Borrower has
incurred or expects to incur any liability under Title IV of ERISA (other than
the payment of premiums, none of which are overdue). Except as set forth on
Schedule 10.17 hereto, neither the Borrower nor any ERISA Affiliate of the
Borrower has liability for retiree medical, life insurance or other death
benefits (contingent or otherwise) other than as a result of a continuation of
medical coverage required under Section 4980B of the Code.
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10.18. Environmental Compliance. (a) Except as set forth in Schedule
10.18 hereto, the Borrower is not (i) in violation, or alleged to be in
violation, of any judgment, decree, order, or license, and is in compliance with
all laws, rules and regulations pertaining to environmental matters, including,
without limitation, those arising under the Resource Conservation and Recovery
Act, title III of the Superfund Amendments and Reauthorization Act of 1986, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, the New Jersey Spill Compensation and Control Act, N.J.S. 58:10-23.11 et
seq. (the "Spill Act") or any other federal, state or local statute, regulation,
ordinance, order or decree relating to health, safety or the environment or (ii)
subject to a remedial response obligation or other liability under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA") or any state law of similar effect (hereinafter collectively
"Environmental Laws"), which violation or obligation or liability (as described
in (a)(i) and (ii) of this subsection (a)) would have an adverse effect on the
Collateral or a Material Adverse Effect.
(b) Except as set forth in Schedule 10.18 hereto, the Borrower has
no knowledge from any third party, including, without limitation, any federal,
state or local governmental authority, (i) that the Borrower has been identified
by the United States Environmental Protection Agency ("EPA") or the New Jersey
Department of Environmental Protection as a potentially responsible party under
CERCLA or the Spill Act with respect to a site listed on the National Priorities
List or The Comprehensive Environmental Response, Compensation and Liability
Information Systems list; (ii) that any hazardous waste, as defined by 42 U.S.C.
'SS' 6903(5), any hazardous substances as defined by 42 U.S.C. 'SS' 9601(14),
any pollutant or contaminant as defined by 42 U.S.C. 'SS' 9601(33), any medical
waste and any toxic substances or extremely hazardous substances as defined in
or appearing on a list compiled under The Federal Emergency Planning and
Community Right-to-Know Act, oil or hazardous materials or other chemicals or
substances regulated by any Environmental Laws ("Hazardous Substances") which
the Borrower has generated, transported or disposed of has been released at any
site at which a federal, state or local agency has conducted or has ordered
that the Borrower conduct a remedial investigation, removal or other response
action pursuant to any Environmental Law or has named the Borrower as a
potentially responsible party or is seeking
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contributions from the Borrower or (iii) that it is or shall be a named party to
any claim, action, cause of action, complaint, or legal or administrative
proceeding (in each case, contingent or otherwise) arising out of any third
party's incurrence of costs, expenses, losses or damages of any kind whatsoever
in connection with the release of Hazardous Substances; and
(c) To the knowledge of the Borrower, except as set forth on
Schedule 10.18 hereto: (i) no portion of the property of the Borrower has been
used for the handling, processing, storage or disposal of Hazardous Substances,
except in accordance with applicable Environmental Laws; and no underground tank
or other underground storage receptacle for Hazardous Substances is located on
any portion of the property; (ii) in the course of any activities conducted by
the Borrower or operators of its properties, no Hazardous Substances have been
generated or are being used on the property except in accordance with applicable
Environmental Laws; (iii) there have been no releases (i.e., any past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, disposing or dumping) or threatened releases of Hazardous
Substances on, upon, into or from the property of the Borrower, which releases
would have a material adverse effect on the value of any of the property or
adjacent properties or the environment; and (iv) in addition, any Hazardous
Wastes as defined by 42 U.S.C. 'SS' 6903(5), if any, that have been generated on
any of the property have been transported offsite only by carriers having an
identification number issued by the EPA, and treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
applicable Environmental Laws, and such carrier and facilities have been and
are, to the best of the Borrower's knowledge, operating in material compliance
with such permits and applicable Environmental Laws.
10.19. Capital Structure. On the Closing Date, (i) the authorized
capital stock of the Borrower consists of 7,500,000 shares of Common Stock, $.10
par value, of which 4,470,815 shares are issued and outstanding and (ii) there
are no outstanding options, warrants, rights or convertible securities providing
for the issuance of any Capital Stock of the Borrower, except as set forth on
Schedule 10.19. All outstanding shares of Common Stock of the Borrower have been
duly and validly issued and are fully paid and nonassessable.
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10.20. Subsidiaries. The Guarantors are the Borrower's only
Subsidiaries. Stonehenge is an inactive entity and holds no assets except as set
forth on Schedule 10.20. The Borrower shall form no new Subsidiary without the
prior consent of the Agent.
10.21. Survival of Representations and Warranties. All statements
contained in any certificate or other document delivered to the Lenders or the
Agent by or on behalf of the Borrower pursuant to or in connection with this
Financing Agreement or under any other Loan Document shall be deemed to
constitute representations and warranties under this Financing Agreement with
the same force and effect as the representations and warranties expressly set
forth herein. All the Borrower's representations and warranties thereunder and
hereunder shall survive the execution and delivery of the same and any
investigation by the Lenders.
SECTION 11. Certain Covenants.
11.01. Collateral Covenants. (a) The Borrower hereby covenants that,
except for the Permitted Encumbrances, and in the case of General Intangibles,
the rights of third parties from which such General Intangibles are derived, the
Borrower will be at the time additional Collateral is acquired by it, the
absolute owner of the Collateral with full right to pledge, sell, consign,
transfer and create a security interest therein, free and clear of any and all
claims or liens in favor of others; that the Borrower will at its expense
forever warrant and, at the Lenders' and/or the Agent's request, defend the same
from any and all claims and demands of any other person other than the Permitted
Encumbrances. At any time and from time to time, upon the request of the Agent,
the Borrower will, at the sole expense of the Borrower, promptly and duly
execute and deliver such further instruments and documents and take such further
action as the Agent may reasonably request for the purpose of obtaining or
preserving the full benefits of this Financing Agreement and the Loan Documents
and of the rights and powers herein and therein granted for the benefit of the
Agent and the Lenders.
(b) The Borrower will maintain books and records pertaining to the
Collateral in such detail, form and scope as is consistent with current
practices and will not change such record-keeping practices without the prior
written consent of the
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Agent, which consent will not be unreasonably withheld. The Borrower agrees that
its books and records will reflect the Lenders' interest in the Collateral. The
Borrower further agrees that all of the books and records of the Borrower,
including records handled or maintained for the Borrower by any other company or
entity, will be available to the Agent and the Lenders and that the Agent, the
Lenders or their respective agents, accountants and attorneys may, upon prior
notice (which shall be not less than one Business Day unless a Default or Event
of Default shall have occurred and be continuing), enter on a Business Day upon
the Borrower's premises or any other properties on or in which any of the
Borrower's Collateral may be located at any time during normal business hours,
and from time to time, for the purpose of inspecting the Collateral, and any and
all records pertaining thereto, including, without limitation, copies of
agreements with, or purchase orders from, the Borrower's customers, and copies
of invoices to customers, proof of shipment or delivery and such other
documentation and information relating to the Accounts and other Collateral as
the Agent may reasonably require. The Borrower hereby further agrees that the
Lenders may, from and after the Closing Date, request any information relating
to the Collateral or the business operations or condition of the Borrower from,
and have reasonable access to the Borrower's officers and its independent public
accountants, and the Borrower will cause such officers and direct such
accountants to make available to the Lenders such information.
(c) The Borrower will not sell, transfer, lease or otherwise dispose
of any of the Collateral, or attempt, offer or contract to do so, except for the
sale of Inventory in the ordinary course of business or as otherwise expressly
provided hereunder. In the event of such permitted sales, the security interest
created by this Financing Agreement shall in any event continue in the Proceeds
of Collateral. The Borrower shall pay all of the Agent's reasonable
Out-of-Pocket expenses in connection with any release of Collateral.
(d) The Borrower will not (i) amend, modify, terminate or waive any
provision of any contract, license or agreement in any manner which could
reasonably be expected to materially adversely affect the value of such
contract, license or agreement as Collateral, (ii) fail to exercise promptly and
diligently each and every material right which it may have under each material
contract, license or agreement (other than any right of
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termination), except in a manner consistent with the ordinary and customary
conduct of its business or (iii) fail to deliver to the Agent upon its
reasonable request a copy of each material demand, notice or document received
by it relating in any way to any material contract, license or agreement.
(e) Other than in the ordinary course of business as generally
conducted by the Borrower, the Borrower will not grant any extension of the time
of payment of any of the Accounts, compromise, compound or settle the same for
less than the full amount thereof, release, wholly or partially, any Person
liable for the payment thereof, or allow any credit or discount whatsoever
thereon.
(f) The Borrower will not (i) change the location of its chief
executive office/chief place of business from that specified in Schedule
10.14(e) or remove its books and records from the location specified in such
Schedule 10.14(e), (ii) permit any of the Inventory or Equipment to be kept at a
location other than those listed on such Schedule 10.14(e) hereto or (iii)
change its name (including the adoption of any new trade name), identity or
corporate structure unless, in each case, it shall have provided at least ten
(10) days' prior written notice to the Agent of any such change. The Borrower
will, from time to time, notify the Agent of each location at which any material
amount of the Collateral or such books and records are to be kept including for
temporary processing, storage or similar purposes. The Borrower shall not remove
any Collateral or such books or records to a location not set forth on Schedule
10.14(e) or otherwise keep any Collateral at a location not set forth on
Schedule 10.14(e) unless, not less than ten (10) days prior to the day such
removal or other change occurs, the Borrower shall give written notice to the
Agent of such removal or other change and the new location of such Collateral or
such books and records. No action requiring notice to the Agent under this
paragraph (f) shall be effected until such filings and other measures required
under applicable law to continue uninterrupted the first perfected security
interest and lien of the Agent in the Collateral affected thereby shall have
been taken, and until the Agent shall have received such opinions of counsel
with respect to the liens granted hereunder thereto as it shall have reasonably
requested. The Borrower also agrees to advise the Agent promptly, in sufficient
detail, of any material adverse change relating to the type, quantity or quality
of the
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Collateral or to the security interests granted to the Lenders or the Agent
therein. The Borrower as to itself hereby authorizes the Agent to regard its
printed name or rubber stamp signature on assignment schedules or invoices as
the equivalent of a manual signature by one of its authorized officers or
agents.
(g) The Borrower will execute and deliver to the Agent, from time to
time, such written statements and schedules as the Agent may reasonably require,
designating, identifying or describing the Collateral pledged to the Lenders or
the Agent hereunder, including, without limitation, such schedules of Accounts
as the Agent may reasonably request to support or confirm any information
previously given, and such other appropriate reports designating, identifying
and describing the Accounts as the Agent may reasonably require. The Borrower's
failure, however, to promptly give the Agent such statements or schedules shall
not affect, diminish, modify or otherwise limit the Lenders' or the Agent's
security interests in the Collateral.
(h) The Borrower will comply with the requirements of all state and
federal laws in order to grant to the Agent for the benefit of the Lenders valid
and perfected first priority security interests and liens in the Collateral,
subject only to the Permitted Encumbrances. The Agent is hereby authorized by
the Borrower to file any financing statements covering the Collateral whether or
not the Borrower's signature appears thereon. The Borrower will do whatever the
Agent may reasonably request, from time to time, by way of: filing notices of
liens, financing statements, amendments, renewals and continuations thereof;
cooperating with the Agent; keeping stock records; and performing such further
acts as the Agent may reasonably require in order to perfect the liens
contemplated by this Financing Agreement in favor of the Agent for the benefit
of the Lenders.
(i) The Borrower will use its best efforts to obtain mortgagee,
landlord and bailee waivers on all properties owned or leased by the Borrower
within thirty (30) days of the date hereof or within thirty (30) days from the
date of entering into new mortgages, leases or warehouse arrangements.
11.02. Insurance. (a) The Borrower will maintain, with financially
sound and reputable companies, insurance policies (i) insuring the Borrower and
the Agent (on behalf of the Lenders) against comprehensive general liability for
personal
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injury and property damage relating to the Premises, Equipment and Inventory of
the Borrower, workers' compensation, auto liability and auto physical damage
(comprehensive and collision) and (ii) all risk insurance insuring the Premises,
Equipment and Inventory of the Borrower against loss by fire, explosion, theft
and such other casualties as may be satisfactory to the Agent, such policies
(and any deductibles related thereto) to be in such amounts and on such terms as
are currently in effect. All policies covering the Real Estate, Equipment and
Inventory are to be made payable to the Agent for the benefit of the Lenders, in
case of loss, under a standard non-contributory "lender" or "secured party"
clause and are to contain such other provisions as the Lenders may require to
fully protect the Lenders' interest therein and any payments to be made under
such policies. All original policies or true copies thereof are to be delivered
to the Agent, premium prepaid, with the loss payable endorsement in the Agent's
favor for the benefit of the Lenders, and shall provide for not less than thirty
(30) days' prior written notice to the Agent of the exercise of any right of
cancellation and a breach of warranty clause keeping the interests of the Agent
and the Lenders insured notwithstanding a breach by the Borrower of any
warranty, representation or other provision contained in any policy. At the
request of the Borrower or if the Borrower fails to maintain such insurance, the
Agent may arrange for such insurance, but at the Borrower's expense and without
any responsibility on the Lenders' part for: obtaining the insurance, the
solvency of the insurance companies, the adequacy of the coverage, or the
collection of claims. Upon the occurrence and during the continuance of an Event
of Default, the Agent shall have the sole right, in the name of the Agent for
the benefit of the Lenders or the Borrower, to file claims under any insurance
policies, to receive, receipt and give acquittance for any payments that may be
payable thereunder, and to execute any and all endorsements, receipts, releases,
assignments, reassignments or other documents that may be necessary to effect
the collection, compromise or settlement of any claims under any such insurance
policies. The Agent and the Lenders have no obligation to pay any premiums
hereunder and shall not be deemed to have made or to make any representation or
warranty to any insurance company or underwriter.
(b) (i) In the event of any loss or damage by fire, theft or other
casualty, insurance proceeds relating to Inventory shall first reduce the
outstanding Revolving Loans and any other
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outstanding amounts due hereunder and then be paid over to the Borrower or to
the Collateral Trustee, as their interests may appear.
(ii) In the event any part of the Borrower's Equipment as to
which there is a first priority security interest in favor of the Agent is
damaged by fire or other casualty and the insurance Proceeds for such damage or
other casualty is more than $250,000, the Agent shall either (A) promptly apply
such Proceeds to reduce the outstanding balances of the Revolving Loans and then
pay the balance to the Borrower or (B) in its sole discretion permit the
Borrower to repair or restore such Equipment.
(iii) As long as no Event of Default shall have occurred and
be continuing, and the Proceeds are $250,000 or less, the Borrower may elect (by
delivering written notice to the Agent) to repair or restore such Equipment to
substantially the equivalent condition prior to such fire or other casualty as
set forth herein, or to acquire other equivalent or functionally equivalent
Equipment. If the Borrower does not, or cannot, elect to use the Proceeds as set
forth above, the Agent may apply the Proceeds to the payment of the Obligations
in accordance with Section 4.07 hereof.
11.03. Taxes. The Borrower will pay, when due, all taxes,
assessments, claims and other charges (herein "taxes") lawfully levied or
assessed upon the Borrower or the Collateral and (i) if such taxes remain unpaid
after the date fixed for the payment thereof unless such taxes are being
diligently contested in good faith by the Borrower by appropriate proceedings or
(ii) if any lien shall be claimed thereunder (x) for taxes due the United States
of America or (y) which in the Lenders' reasonable opinion might reasonably be
expected to create a valid obligation having priority over the rights granted to
the Lenders herein, the Agent may, on the Borrower's behalf, pay such taxes, and
the amount thereof shall be charged to the Borrower as a Revolving Loan and
shall be an Obligation secured hereby. If the amount of taxes paid by the Agent
pursuant to this Section 11.03 is in excess of Availability, then the Borrower
shall be deemed to be in default of Section 2.05 hereof and this Section.
11.04. Compliance with Laws. (a) The Borrower (i) will comply with
all statutes, acts, rules, regulations and
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orders of any legislative, administrative or judicial body or official, except
to the extent that failure to do so would not have a material and adverse impact
on the Collateral, or any material part thereof, or on the properties, business,
operations, earnings, assets, liabilities or condition (financial or otherwise)
of the Borrower; provided that the Borrower may contest any acts, rules,
regulations, orders and directions of such bodies or officials in any reasonable
manner which will not, in the Lenders' reasonable opinion, adversely affect the
Lenders' rights or priority in the Collateral and with respect to which adequate
reserves have been maintained; (ii) will comply with all Environmental Laws or
any other environmental statutes, acts, rules, regulations or orders as
presently existing or as adopted or amended in the future, applicable to the
ownership and/or use of its real property and operation of its business, except
to the extent that failure to do so would not have an adverse effect on the
Collateral, or any material part thereof, or a Material Adverse Effect.
(b) The Borrower hereby agrees to indemnify the Lenders and the
Agent and agrees to defend and hold the Lenders and the Agent harmless from and
against any and all loss, damage, claim, liability, injury or expense which the
Lenders or the Agent may sustain or incur (other than as a result of wilful
misconduct or gross negligence of the Lenders or the Agent) in connection with:
the transactions contemplated hereby, and proposed or actual sale of the
Borrower or any claim or expense asserted against the Lenders or the Agent as a
result of any environmental pollution, hazardous material or environmental
clean-up of the Borrower's real property; or any claim or expense which results
from the Borrower's operations (including, but not limited to, the Borrower's
off-site disposal practices) and the Borrower further agrees that this
indemnification shall survive termination of this Financing Agreement as well as
the payment of all Obligations.
11.05. Financial Statements. The Borrower shall furnish to the
Agent:
(i) as soon as available, and in any event within one hundred and
five (105) days after the end of each fiscal year of the Borrower (commencing
with the year ending November 30, 1996), unless otherwise agreed to by the
Agent, consolidated balance sheets, consolidated statements of income and
retained
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earnings and consolidated statements of cash flow of the Borrower and the
Guarantors as at the end of such fiscal year, setting forth in comparative form
the corresponding figures for the immediately proceeding fiscal year, all in
reasonable detail and prepared in accordance with GAAP, and accompanied by a
report and an unqualified opinion, prepared in accordance with generally
accepted auditing standards, of Deloitte & Touche or other independent certified
public accountants of recognized standing selected by the Borrower and
satisfactory to the Agent (it being understood that the firm of Mahoney, Cohen,
Rashba & Pokart, CPA, PC, is satisfactory to the Agent), together with a written
statement of such accountants (1) to the effect that, in making the examination
necessary for their certification of such financial statements they have not
obtained any knowledge of the existence of Default or an Event of Default and
(2) if such accountants shall have obtained any knowledge of the existence of a
Default or an Event of Default, describing the nature thereof;
(ii) simultaneously with the delivery of the financial statements
required by clause (i) of this Section 11.05, a certificate of the chief
financial officer of the Borrower, stating that such officer has reviewed the
provisions of this Agreement and the other Loan Documents to which the Borrower
and the Guarantors are a party and has made or caused to be made under his
supervision a review of the condition and operations of the Borrower and the
Guarantors during the period covered by such financial statements with a view to
determining whether the Borrower and the Guarantors were in compliance with all
of the provisions of such agreements at the times such compliance is required by
such agreements, and that such review has not disclosed, and such officer has no
knowledge of, the existence during such period of a Default or an Event of
Default or, if a Default or an Event of Default existed, describing the nature
and period of existence thereof and the action which the Borrower and the
Guarantors propose to take or took with respect thereto;
(iii) within fifteen (15) days after the end of each month, a
schedule and computer report, in form and substance reasonably satisfactory to
the Agent, current as of the close of business on the last day of such month,
certified by the chief financial officer of the Borrower, containing a breakdown
of the Borrower's and the Guarantors' Inventory by amount and valued at cost
(which shall include dollar valuation by location) and
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warehouse and production facility location, appropriately completed with
information satisfactory to the Agent, incorporating all appropriate month-end
adjustments and current as of the close of business on the last day of such
month immediately prior to such date;
(iv) the Quarterly Operating Reports;
(v) on each Business Day on which a request is made for a
Revolving Loan or to cause a Letter of Credit to be issued, but in any case not
less frequently than once a week, a borrowing base certificate;
(vi) within five (5) Business Days of the end of each month, a
monthly receivable trial balance with reconciliation from the previous month;
(vii) on or before November 1 of each calendar year, financial
projections, in form and substance satisfactory to the Agent, for the succeeding
calendar year for the Borrower and the Guarantors, such financial projections to
be reasonable, to be prepared on a reasonable basis and in good faith, and to be
based on assumptions believed by the Borrower and the Guarantors to be
reasonable at the time made and from the best information then available to the
Borrower and the Guarantors;
(viii) promptly after submission to any Governmental Authority, all
documents and information furnished to such Governmental Authority in connection
with any investigation of any Borrower or Guarantor other than routine inquiries
by such Governmental Authority;
(ix) as soon as possible, and in any event within five (5) days
after the occurrence of an Event of Default or Default, or a material adverse
change in the condition or operations, financial or otherwise, of the Borrower
or the Guarantors, the written statement of the chief executive officer or the
chief financial officer of the Borrower, setting forth the details of such Event
of Default, Default or material adverse change and the action which the Borrower
and the Guarantors propose to take with respect thereto;
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(x) promptly as prepared, copies of public filings made by the
Borrower or any Subsidiary under any state or federal securities law;
(xi) promptly upon request, such other information concerning the
condition or operations, financial or otherwise, of the Borrower or the
Guarantors as the Agent from time to time may reasonably request.
11.06. Certain Restrictions. Until termination of this Financing
Agreement and payment of all Loans and other amounts then due and payable
hereunder, the Borrower will not, and will cause each Subsidiary to not, without
the written consent of the Agent:
(a) Mortgage, assign, pledge or otherwise permit any lien, charge,
security interest, encumbrance or judgment (whether as a result of a
purchase money or title retention transaction, or other security interest,
or otherwise) to exist on any of its assets or goods, whether real,
personal or mixed, whether now owned or hereafter acquired, except for the
Permitted Encumbrances;
(b) Incur or create any Indebtedness other than Permitted
Indebtedness;
(c) Borrow any money (other than Permitted Indebtedness) on the
security of the Collateral from sources other than the Lenders pursuant to
the Financing Agreement;
(d) Sell, lease, assign, transfer or otherwise dispose of
Collateral, except as otherwise specifically permitted by this Financing
Agreement;
(e) Merge or consolidate with or into any other Person;
(f) Enter into or engage in any business other than businesses of
the types conducted by the Borrower (including the sleepwear business) on
the Closing Date;
(g) Change its corporate name, principal place of business or
structure;
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(h) Assume, guarantee, endorse, or otherwise become liable upon the
obligations of any Person, except for the endorsement of negotiable
instruments for deposit or collection or similar transactions in the
ordinary course of business;
(i) Declare or pay any dividend of any kind on, or purchase,
acquire, redeem or retire, any of its Capital Stock or equity interest, of
any class whatsoever, whether now or hereafter outstanding, or make any
other distribution;
(j) Make any advance or loan to, any investment in or acquisition
(directly or indirectly) of the stock, Indebtedness or the assets of
(collectively, "Investments"), any Person other than (i) with respect to
the purchase of inventory in the ordinary course of the Borrower's
business and (ii) Investments in certificates of deposit or banker's
acceptances issued by any commercial bank located in the United States
which is owned by a bank holding company, the commercial paper of which is
rated A2 or P2, respectively by Standard & Poor's Corporation or Moody's
Investors Service, or higher, and which has capital, surplus and undivided
profits aggregating at least $100,000,000; provided, however, no Default
or Event of Default has occurred and is continuing prior to making any of
the foregoing Investments or after giving effect thereto; or
(k) (A) Optionally prepay, retire, redeem, purchase, defease or
exchange, or make any optional deposits or segregation of funds in respect
of, any principal of or interest on or other amounts payable in respect of
any Indebtedness of the Borrower or subordinated debt of the Borrower or
make any other payment on account of such subordinated debt (unless it is
a regularly scheduled payment of principal or interest pursuant to the
Class 4 Note or payment on account of "excess cash flow" as more fully
described in the Class 4 Note and related documents in effect on the
Closing Date and there is no Default or Event of Default hereunder) or (B)
amend, supplement or otherwise modify such subordinated debt without
obtaining the prior written consent of the Agent.
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11.07. Negative Pledge. In the event there are any assets of the
Borrower or any Guarantor now existing or hereafter acquired for which the Agent
does not obtain a security interest or lien, the Borrower and any such Guarantor
shall not pledge, assign, transfer or grant any interest in such asset to any
party other than the Agent, without the Agent's prior written consent which
shall not be unreasonably withheld.
11.08. Environmental Compliance. (a) The Borrower will not, except
in compliance with applicable Environmental Laws, or in the event of any
noncompliance with applicable Environmental Laws, only to the extent to which
such noncompliance would not have an adverse effect on the Collateral nor a
Material Adverse Effect, (i) use any of the property of the Borrower or any
portion thereof for the handling, processing, storage or disposal of Hazardous
Substances, (ii) cause or permit to be located on any of the property any
underground tank or other underground storage receptacle for Hazardous
Substances, (iii) generate any Hazardous Substances on any of the property, (iv)
conduct any activity on the property or use any property in any manner so as to
cause a release (i.e., releasing, spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, disposing or dumping) or
threatened release of Hazardous Substances on, upon or into the property or (v)
otherwise conduct any activity on the property or use any property in any manner
that would lead to any environmental claim or violate any Environmental Law or
bring such property in violation of any Environmental Law.
(b) The Borrower will advise the Agent in writing of: (i) all
expenditures (actual or anticipated) in excess of $100,000 for (A) environmental
clean-up, (B) environmental compliance or (C) environmental testing and the
impact of said expenses on the Borrower's working capital; and (ii) any written
notices the Borrower receives involving potential or actual liability in excess
of $100,000 from any local, state or federal authority or any notice from any
other third party advising the Borrower of any environmental liability (real or
potential) stemming from the Borrower's operations, its premises, its waste
disposal practices, or waste disposal sites used by the Borrower.
(c) The Borrower hereby agrees to defend, indemnify, and hold
harmless the Agent, the Lenders and the L/C Issuer, their employees, agents,
officers, and directors, from and
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against any claims, demands, penalties, fines, liabilities, settlements,
damages, costs, or expenses (including, without limitation, attorney and
consultant fees, investigation and laboratory fees, court costs, and litigation
expenses) arising out of (i) the presence, disposal, release, or threatened
release of any Hazardous Substances on any property at any time owned or
occupied by the Borrower or the Guarantors (or its predecessors in interest or
title); (ii) any personal injury (including wrongful death) or property damage
(real or personal) arising out of or related to such Hazardous Substances; (iii)
any investigation, lawsuit brought or threatened, settlement reached, or
government order relating to such Hazardous Substances; (iv) any violation of
any Environmental Laws, and/or (v) the breach of any representation or warranty
made by the Borrower and the Guarantors in Section 10.18 hereof or the breach of
any covenant made by any of the Borrowers in this Section 11.08.
11.09. Transactions with Affiliates; Payment of Management Fee. (a)
Without the prior written consent of the Agent, which consent shall not be
unreasonably withheld, the Borrower will not enter into any transaction,
including, without limitation, any purchase, sale, lease, loan or exchange of
property with any Subsidiary or Affiliate of the Borrower unless such
transaction shall be on terms no less favorable to the Borrower than would be
obtainable at the time in a comparable arm's-length transaction with an
unrelated third party.
(b) Without the prior written consent of the Agent, the Borrower
will not pay any management or similar fees, except in connection with existing
arrangements which have been approved by the Bankruptcy Court prior to the date
hereof.
11.10. ERISA Notices. The Borrower will deliver to the Agent, if and
when (but within ten (10) Business Days from the date of such event) (i) the
Borrower or any ERISA Affiliate of the Borrower gives or is required to give
notice to the PBGC of any Reportable Event (other than a Reportable Event not
subject to the provision for 30-day notice to the PBGC) with respect to any
Pension Plan, a copy of the notice of such Reportable Event; (ii) the Borrower
or any ERISA Affiliate of the Borrower becomes obligated to contribute to a
Multiemployer Plan to which such entity was not obligated to contribute on the
Closing Date; (iii) the Borrower or any ERISA Affiliate of the Borrower receives
notice of complete or partial withdrawal
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liability with respect to a Multiemployer Plan or receives notice that a
Multiemployer Plan may be or has been terminated, in Reorganization or
Insolvency, a copy of such notice, or receives notice from the administrator of
a Multiemployer Plan that indicates the existence of potential withdrawal
liability in excess of $200,000 under a Multiemployer Plan, a copy of such
notice; (iv) the Borrower or any ERISA Affiliate of the Borrower receives notice
from the PBGC of an intent to terminate or appoint a trustee to administer any
Pension Plan, a copy of such notice; (v) the Borrower or any ERISA Affiliate of
the Borrower fails to make a timely contribution to a Pension Plan which may
give rise or has given rise to an accumulated funding deficiency or a lien, a
letter of an Executive Officer describing such event; (vi) the Borrower or any
ERISA Affiliate of the Borrower adopts or proposes to adopt an amendment which
requires the granting of a security interest within the meaning of Section 307
of ERISA, a letter of an Executive Officer describing such event; (vii) the
Borrower or any ERISA Affiliate of the Borrower fails to make a contribution
required under the terms of an Employee Benefit Plan or as required by law, a
letter of an Executive Officer describing such event; (viii) the Borrower
becomes liable for material increases in retiree medical, life insurance or
other death benefits (contingent or otherwise) (other than as a result of a
continuation of medical coverage required under Section 4980B of the Code), a
letter of an Executive Officer describing such event; (ix) any Pension Plan
intending to qualify under Section 401(a) of the Code as determined by the
Internal Revenue Service fails to so qualify and such failure to qualify cannot
be retroactively eliminated within the remedial amendment period, a letter of an
Executive Officer describing such event; (x) a transaction prohibited under
Section 4975 of the Code or Section 406 of ERISA occurs resulting in material
liability to the Borrower or any entity which the Borrower has an obligation to
indemnify, a letter of an Executive Officer describing such event. Upon the
request of the Lenders made from time to time, the Borrower will deliver a copy
of the most recent actuarial report and annual report completed with respect to
any Employee Benefit Plan or any other financial information the Borrower or any
ERISA Affiliate has with respect to any Employee Benefit Plan.
11.11. ERISA Covenant. The Borrower will, and will cause each of its
ERISA Affiliates to, maintain all Employee Benefit Plans, if any, in compliance
in all material respects
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with all applicable law, including any reporting requirements, and make all
contributions due under the terms of each Employee Benefit Plan, if any, and
Multiemployer Plan, if any, or as otherwise required by law.
11.12. Key Man Life Insurance. The Borrower shall maintain key man
life insurance on the life of William Cohen in the amount of at least $500,000,
and in the event a claim is made by the Agent under such life insurance policy,
the Agent shall have the right to apply $500,000 of the proceeds received
thereunder to the Revolving Loans under this Financing Agreement and the
Borrower shall be entitled to receive and retain an amount, if any, in excess of
$500,000 (such excess amount of key man life insurance, the "Excess Key Man Life
Insurance Proceeds"). Notwithstanding the foregoing, in the event there are no
Revolving Loans and no outstanding Letters of Credit at the time when insurance
proceeds on the life of William Cohen are received by the Agent, the Agent shall
deliver such proceeds to the Borrower and the Borrower may retain such proceeds
and use the same for working capital purposes. If there are no Revolving Loans
and there are outstanding Letters of Credit, such proceeds shall cash
collateralize outstanding Letters of Credit and Availability shall be restored
in respect of such Letters of Credit.
11.13. Notice of Default; Notice to Block Class 4 Payments. Promptly
upon becoming aware of a Default or an Event of Default, the Borrower shall give
the Agent notice thereof, together with a written statement of the chief
financial officer of the Borrower setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by the Borrower.
The Agent shall have no obligation to provide to the Borrower a notice of a
Default or an Event of Default; provided, however, that if the Agent makes a
determination that, based on an Event of Default, it elects to notify the
Borrower not to make a payment on the Class 4 Note, the Agent must so notify the
Borrower and the Collateral Trustee in writing at least 5 days in advance of the
due date of any such payment.
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11.14. Financial Covenants.
(a) The Company shall maintain EBITDA of not less than:
For the six months
ending 5/31/97 ($300,000);
For the nine months
ending 8/31/97 $325,000;
For the twelve months
ending 11/30/97 $231,000;
For the three months
ending 2/28/98 $187,000;
For the six months
ending 5/31/98 $152,000;
For the nine months
ending 8/31/98 $350,000; and
For the twelve months
ending 11/30/98 $300,000.
(b) The Company shall maintain Working Capital of not less than:
For the quarters ending:
5/31/97 $4,800,000;
8/31/97 $5,200,000;
11/30/97 $5,600,000;
2/28/98 $5,300,000;
5/31/98 $5,200,000;
8/31/98 $5,500,000; and
11/30/98 $5,600,000.
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(c) The Company shall maintain Tangible Net Worth of not less than:
For the quarters ending:
5/31/97 $3,500,000;
8/31/97 $3,900,000;
11/30/97 $3,600,000;
2/28/98 $3,400,000;
5/31/98 $3,400,000;
8/31/98 $3,600,000; and
11/30/98 $3,600,000.
(d) The Borrower may make Capital Expenditures for each of the 1997
and 1998 fiscal years of not more than $300,000; provided, however, that amounts
not used in 1997 may be used in 1998; provided, further, that, in such case,
Capital Expenditures for 1998 shall not exceed $500,000.
(e) No later than October 31, 1997, the Borrower shall deliver to
the Agent revised projections and cash flows for the 1998 fiscal year.
SECTION 12. Events of Default and Remedies.
12.01. Events of Default. Notwithstanding anything hereinabove to
the contrary, and subject to Section 12.02 hereof, the Agent may terminate this
Financing Agreement immediately upon the occurrence of any of the following
(herein "Events of Default"):
(a) the Borrower fails to pay when due any of the principal or
interest of any of the Loans, or shall fail to pay or
reimburse the Agent or any Lender any fee or other amount due
hereunder when due and such failure shall continue unremedied
for more than four (4) Business Days;
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(b) any representation or warranty of the Borrower or any
Guarantor contained herein or in any other Loan Document shall
prove to have been false in any material respect when made,
unless the fact resulting in such breach of representation or
warranty is capable of cure and is cured within ten (10) days
of the occurrence of an Event of Default based on such breach;
(c) breach by the Borrower of any covenant in this Financing
Agreement (other than those referred to in sub-paragraph (a)
above or (d) below) or by the Borrower or any Guarantor in any
other Loan Document (other than those referred to in
sub-paragraphs (e) through (k) below) or written agreement
entered into in connection with this Financing Agreement,
between the Borrower and the Lenders or the Agent or delivered
by the Borrower to any of the Lenders or the Agent in
connection herewith or the transactions contemplated hereby,
if such breach shall not have been remedied within thirty (30)
days after such breach;
(d) breach by the Borrower of any covenant contained in Article 9
(other than Section 9.06 as to which sub-paragraph (c) above
is applicable) and Article 11 (other than Section 11.04 as to
which sub-paragraph (c) above is applicable);
(e) The Borrower or any Subsidiary shall have entered into any
consent or settlement decree or agreement or similar
arrangement with a Governmental Authority or any judgment,
order, decree or similar action shall have been entered
against any such Person based on or arising from the violation
of or pursuant to any Environmental Law, or the generation,
storage, transportation, treatment, disposal or release of any
Hazardous Material and, in connection with any of the
foregoing, any such Person shall incur Environmental
Liabilities and Costs which are unstayed, due and owing in an
amount in excess of $250,000; or
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(f) The Borrower or any Subsidiary shall fail to pay any principal
or interest on any of its Indebtedness in excess of $100,000
(excluding Indebtedness evidenced by the Note), or any premium
thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) (except that a
failure to pay the Class 4 Notes shall not constitute a
default hereunder if the time for payment has been extended or
the default for a failure to pay has been waived) and such
failure shall continue after the applicable grace period, if
any, specified in the agreement or instrument relating to such
Indebtedness, or any other default under any agreement or
instrument relating to any such Indebtedness, or any other
event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or
instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration to the maturity of,
such Indebtedness; or any such Indebtedness in excess of such
amount shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof; or
(g) The Borrower or any Subsidiary (i) shall institute any
proceeding or voluntary case seeking to adjudicate it a
bankrupt or insolvent, or seeking dissolution, liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any
law relating to bankruptcy, insolvency, reorganization or
relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, custodian or other
similar official for the Borrower or any Subsidiary or for any
substantial part of its property, (ii) shall be generally not
paying its debts as such debts become due, or shall admit in
writing its inability to pay its debts generally, (iii) shall
make a general assignment for the benefit of creditors, or
(iv) shall take any
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action to authorize or effect any of the actions set forth
above in this subsection (g); or
(h) Any proceeding shall be instituted against the Borrower or any
Subsidiary seeking to adjudicate it a bankrupt or insolvent,
or seeking dissolution, liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief of
debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar
official for the Borrower or any Subsidiary or for any
substantial part of its property, and either such proceeding
shall remain undismissed or unstayed for a period of
forty-five (45) days or any of the actions sought in such
proceeding (including, without limitation, the entry of an
order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any
substantial part of its property) shall occur; or
(i) Any material provision of any Loan Document shall at any time
for any reason be declared to be null and void, or the
validity or enforceability thereof shall be contested by the
Borrower, or a proceeding shall be commenced by the Borrower,
or by any Governmental Authority or other regulatory body
having jurisdiction over the Borrower, seeking to establish
the invalidity or unenforceability thereof, or the Borrower
shall deny in writing that the Borrower has any liability or
obligation purported to be created under any Loan Document
(unless the Borrower is questioning in good faith a
computational error); or
(j) Any Loan Document pursuant to which a security interest is
granted after delivery thereof pursuant hereto, shall for any
reason fail or cease to create a valid and perfected and,
except to the extent permitted by the terms hereof or thereof,
first priority Lien on or security
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interest in any Collateral purported to be covered thereby; or
(k) One or more judgments or orders for the payment of money
exceeding any applicable insurance or bond coverage by more
than $100,000 in the aggregate shall be rendered against the
Borrower or any Subsidiary and either (i) enforcement
proceedings shall have been commenced by any creditor upon any
such judgment or order or (ii) there shall be any period of
twenty (20) consecutive days during which a stay of
enforcement of any such judgment or order by reason of a
pending appeal or otherwise shall not be in effect; or
(l) A modification to the Confirmation Order to which Lender has
not consented or a determination shall have been made
regarding the Confirmation Order that is materially adverse to
Lender in its discretion;
(m) (i) the Borrower or any other Person engages in a transaction
in connection with which the Borrower or any entity which the
Borrower has an obligation to indemnify, could be subject to
liability for either a civil penalty assessed pursuant to
Section 502 of ERISA or a tax imposed under Section 4975 of
the Code; (ii) an accumulated funding deficiency (as defined
in Section 302 of ERISA or Section 412 of the Code) exists
with respect to any Pension Plan; (iii) a lien arises or
security interest is granted under the Code or ERISA with
respect to any Pension Plan; (iv) a Pension Plan is
terminated; (v) a Reportable Event occurs or proceedings
commence to terminate or to have a trustee appointed to
terminate any Pension Plan which Reportable Event or
commencement of proceedings or appointment is likely to result
in the termination of any such Pension Plan; (vi) the Borrower
or any ERISA Affiliate of the Borrower incurs or is likely to
incur any liability in connection with a withdrawal from or
the Insolvency, Reorganization or termination of a
Multiemployer Plan or with respect to Section 515
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of ERISA; (vii) any other similar event or condition shall
occur or exist with respect to any Employee Benefit Plan; and
in each case in clauses (i), (ii), (iv), (vi) and (vii) of
this subsection (m), such event or condition, together with
all other such events or conditions, if any, could, in the
opinion of the Agent, subject the Borrower to any taxes,
penalties or liabilities (including, without limitation, any
joint and several liability of the Borrower for a tax, penalty
or liability imposed on an ERISA Affiliate of the Borrower or
any penalty or tax imposed on any entity which the Borrower
has an obligation to indemnify) which exceed $100,000 in any
year (on a non-cumulative basis with any other year);
(n) a Change in Control occurs; or
(o) a change in the condition or operations, financial or
otherwise, of the Borrower or any Guarantor that may have a
Material Adverse Effect, as determined by the Agent in its
sole discretion, shall have occurred after the Closing Date
and written notice thereof shall have been given to the
Borrower or Guarantor by the Agent.
12.02. Acceleration of Obligations, etc. If an Event of Default
shall occur and be continuing, the Agent may (i) declare this Financing
Agreement to be, and the same shall thereafter be, terminated and all
Obligations shall become immediately due and payable; and (ii) charge the
Borrower the Default Rate of Interest from the date such Event of Default
occurred on all then outstanding or thereafter incurred Obligations in lieu of
the interest provided for in Section 4 of this Financing Agreement; provided,
however, that no notice of the foregoing matters is required if the Event of
Default is the event listed in paragraphs (g) and (h) of Section 12.01 hereof.
The exercise by the Lenders of any option or remedy hereunder is not exclusive
of any other option or remedy which may be exercised at any time by the Lenders,
acting through the Agent.
12.03. Other Remedies. Upon the occurrence of any Event of Default
and so long as such Event of Default is continuing, the Agent may to the extent
permitted by law:
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(a) remove from any premises where same may be located any and all documents,
instruments, files and records, and any receptacles or cabinets containing same,
relating to the Accounts, or the Agent may use, at the Borrower's expense, such
of the Borrower's personnel, supplies or space at the Borrower's places of
business or otherwise, as may be necessary to properly administer and control
the Accounts or the handling of collections and realizations thereon; (b) bring
suit, in the name of the Borrower or the Agent, and generally shall have all
other rights respecting said Accounts, including, without limitation, the right
to: accelerate or extend the time of payment, settle, compromise, release in
whole or in part any amounts owing on any Accounts and issue credits in the name
of the Borrower or the Agent; (c) sell, assign and deliver the Collateral and
any returned, reclaimed or repossessed merchandise, with or without
advertisement, at public or private sale, for cash, on credit or otherwise, at
the Lenders' sole option and discretion, and the Agent may bid or become a
purchaser at any such public sale, free from any right of redemption, which
right is hereby expressly waived by the Borrower to the extent permitted by law;
(d) foreclose the security interests created herein by any available judicial
procedure, or take possession of any or all of the Inventory and Equipment
without judicial process, and to enter any premises where any Inventory and
Equipment may be located for the purpose of taking possession of or removing the
same and (e) exercise any other rights and remedies provided in law, in equity,
by contract or otherwise. Upon four Business Days' written notice, the Agent
shall have the right, without advertisement, to sell, lease, or otherwise
dispose of all or any part of the Collateral whether in its then condition or
after further preparation or processing, in the name of the Borrower or the
Agent, or in the name of such other party as the Agent may designate, either at
public or private sale or at any broker's board, in lots or in bulk, for cash or
for credit, with or without warranties or representations, and upon such other
terms and conditions as the Lenders in its sole discretion may deem advisable.
If any Inventory and Equipment shall require rebuilding, repairing, maintenance
or preparation, the Agent shall have the right, at its option, to do such of the
aforesaid as is necessary, for the purpose of putting the Inventory and
Equipment in such saleable form as the Agent shall deem appropriate. The
Borrower agrees, at the request of the Lenders, to assemble the Inventory and
Equipment and to make it available to the Agent at premises of the Borrower or
elsewhere and to make
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available to the Agent the premises and facilities of the Borrower for the
purpose of the Agent's taking possession of, removing or putting the Inventory
and Equipment in saleable form. The net cash proceeds resulting from the
Lenders' or the Agent's exercise of any of the foregoing rights (after deducting
all charges, costs and expenses, including attorneys' fees) shall be applied by
the Agent to the payment of the Borrower's Obligations, whether due or to become
due, in such order as the Lenders may elect, and the Borrower shall remain
liable to the Lenders for any deficiencies, and the Agent in turn agrees to
remit to the Borrower or its successors or assigns any surplus resulting
therefrom. The enumeration of the foregoing rights is not intended to be
exhaustive and the exercise of any right shall not preclude the exercise of any
other rights, all of which shall be cumulative.
SECTION 13. Powers.
13.01. Attorney-in-Fact. The Borrower hereby authorizes the Agent or
any person or agent the Agent may designate as its attorney-in-fact, at the
Borrower's cost and expense, to exercise all of the following powers, which
being coupled with an interest, shall be irrevocable until all of the Borrower's
Obligations to the Lenders have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in
the name of the Agent or the Borrower, any and all checks,
notes, drafts, and other documents or instruments relating to
the Collateral;
(b) To receive, open and dispose of all mail addressed to the
Borrower and to notify postal authorities to change the
address for delivery thereof to such address as the Agent may
designate;
(c) To request from customers indebted or obligated on Accounts,
Contracts or Licenses at any time, in the name of the Agent or
the Borrower or that of the Agent's designee, information
verifying the amounts owing on the Accounts, Contracts or
Licenses or other terms relating to such Accounts, Contracts
or Licenses;
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(d) To transmit to customers indebted or obligated on Accounts,
Contracts or Licenses notice of the Lenders' interest therein
and to notify customers indebted on Accounts, Contracts or
Licenses to make payment directly to the Agent for the benefit
of the Lenders for the Borrower's account; and
(e) To take or bring, in the name of the Agent or the Borrower,
all steps, actions, suits or proceedings deemed by the Agent
necessary or desirable to enforce or effect collection of the
Accounts, Contracts or Licenses.
Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (c), (d) and (e) above may only be exercised after the
occurrence and during the continuance of an Event of Default.
13.02. Right to Set-Off. The Borrower authorizes the Lenders, and
the Lenders shall have the right upon any amount becoming due and payable
hereunder, to set-off and apply against any and all property held by, or in the
possession of the Lenders or the Collateral, the Obligations due and payable the
Lenders.
13.03. Sale and Assignment of Lenders' Interest.
(a) Each Lender, with the consent of the Agent, may assign its
rights and delegate its obligations under this Financing
Agreement and further may assign, or sell participations in,
all or any part of the Obligations, its Revolving Loan Amount
and its Revolving Loans and any other interest herein or
therein to one or more other Persons; provided, however, that,
(i) any such partial assignment or participation shall be of a
pro rata interest in all portions of such Lender's rights and
obligations hereunder, (ii) no Lender shall assign or sell
participations in any of its interests under this Financing
Agreement (A) in an amount less than $2,000,000, additional
increments thereto of $500,000, (B) without the consent of the
Borrower, which such consent shall not be unreasonably
withheld and (C) if such transfer would result in any Lender
or participant having
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an aggregate interest in loans and commitments in an amount
less than $2,000,000, and (iii) in connection with any such
assignment such Lender shall have delivered to the Agent and
the Borrower a duly executed Assignment and Transfer
Agreement. Any agreement pursuant to which any Lender may
grant such a participating interest shall provide that such
Lender shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder and under
any other Loan Document including, without limitation, the
right to approve any amendment, modification or waiver of any
provision of this Financing Agreement or any other Loan
Document.
(b) Upon the execution and delivery of an Assignment and Transfer
Agreement, after notice thereof to, and consent thereto by,
the Borrower, and the payment of the purchase price as agreed
between the assigning party and such Assignee, such Assignee
shall have, to the extent of such assignment, the same rights,
benefits and obligations as it would if it were a party
hereunder and the assigning party shall be relieved of its
obligations hereunder with respect to the assigned portion of
its Revolving Loan Amounts and its Revolving Loans, on and
after the date of such assignment. The Borrower hereby
acknowledges and agrees that any assignment permitted
hereunder will give rise to a direct obligation of the
Borrower to the Assignee and that the Assignee shall be
considered to be a Lender under this Financing Agreement. Upon
the consummation of any assignment pursuant to this paragraph,
a new Note or Notes shall be issued by the Borrower, provided
that any "old" Note(s) is marked "canceled" and returned to
the Borrower. If the Assignee is not incorporated under the
laws of the United States of America or a state thereof or the
District of Columbia, it shall, prior to the first date on
which interest or fees are payable hereunder for its account,
deliver to the Borrower and the Agent certification as to its
exemption from deduction or withholding of any
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United States federal income taxes in accordance with Section
17.14 hereof.
(c) The Borrower may not assign or transfer any of its rights
and/or obligations hereunder.
(d) The Borrower agrees to provide all assistance reasonably
requested by a Lender to enable such Lender either to sell the
participations or make the assignments permitted by this
Section 13.03.
13.04. Disclosure to Participants. Subject to Section 16.14 hereof,
the Borrower authorizes each Lender to disclose to any actual or prospective
participant or purchasing lender, after consent by the Borrower, any and all
financial information in such Lender's possession concerning the Borrower, any
Guarantor and its Affiliates which has been delivered to such Lender by or on
behalf of the Borrower or any Guarantor pursuant to this Financing Agreement or
which has been delivered to such Lender by or on behalf of the Borrower or any
Guarantor in connection with such Lender's credit evaluation of the Borrower or
any Guarantor and its Affiliates prior to entering into this Financing
Agreement. The Agent shall request that any such materials shall be promptly
returned by any prospective purchaser who does not consummate a purchase.
SECTION 14. Termination.
14.01. Termination of Revolving Line of Credit.
(a) Subject to Section 14.02 hereof, the Agent on behalf of the
Lenders may terminate the Revolving Line of Credit as of the
Initial Termination Date and by giving the Borrower at least
fifteen (15) Business Days' prior written notice of
termination.
(b) The Borrower may terminate the Revolving Line of Credit prior
to the Initial Termination Date upon fifteen (15) Business
Days' prior written notice by the Borrower to the Agent,
provided that the Borrower pays to the Agent for the account
of the
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Lenders, on or prior to such termination (if such termination
is on or before one year from the Closing Date), the Early
Termination Fee.
14.02. Termination Upon an Event of Default. Notwithstanding the
foregoing, the Agent may terminate this Financing Agreement upon the occurrence
of an Event of Default as provided in Section 12.01 hereof.
14.03. Maturity of Obligations Upon Termination. All Obligations
shall become due and payable as of any termination hereunder or under Section 12
hereof and, pending a final accounting, if the Agent determines in its good
faith judgment that there is a reasonable basis for doing so, the Agent may
withhold any balances in the Borrower's account (unless supplied with an
indemnity satisfactory to the Agent) to cover all of the Obligations then due
and payable hereunder. All of the Lenders' and the Agent's rights, liens and
security interests shall continue after any termination until payment in full of
all Loans and other amounts then due and payable hereunder at the date of such
termination. Notwithstanding the foregoing, the Borrower may upon such
termination cash collateralize outstanding Letters of Credit as provided in
Section 5.01(a)(i) hereof.
14.04. Termination by Lenders. All or any Lender's obligations under
this Financing Agreement shall terminate with respect to such Lender on the
Initial Termination Date by such Lender giving the Agent and the other Lenders
at least ninety (90) days' prior written notice of termination. Without limiting
Section 14.01(a), within sixty (60) days of receipt of such notice from any
Lender, the Agent shall either: (i) give notice to the Borrower that such Lender
(other than CIT/CS) has given the Agent a notice of termination in which event
the obligations of the Lenders hereunder and thereunder (subject to the notice
required by Section 14.01(a)) shall terminate as of the Initial Termination
Date, or (ii) if the other Lenders so elect, they shall have the right to
purchase the terminating Lender's or Lenders' pro rata share of its or their
interest hereunder for the full amount thereof on a pro rata basis among such
electing Lenders, together with any accrued interest. Termination of this
Financing Agreement by any Lender as herein provided shall not affect the
Lenders' respective rights and obligations under this
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Financing Agreement incurred prior to the effective date of termination as set
forth in the preceding sentence.
SECTION 15. Indemnification.
In addition to the payment of expenses pursuant to Section 4 of this
Financing Agreement, whether or not the transactions contemplated hereby shall
be consummated, the Borrower agrees to indemnify (which such agreement shall
survive the termination of the Financing Agreement), pay and hold the Lenders
and the Agent and the officers, directors, partners, employees, agents,
affiliates and attorneys of the Lenders and the Agent (collectively called the
"Indemnitees") harmless from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, claims, costs, expenses
and disbursements of any kind or nature whatsoever (including the fees and
disbursements of counsel and accountants for such Indemnitees in connection with
any investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto)
that may be imposed on, incurred by, or asserted against that Indemnitee, in any
manner relating to or arising out of this Financing Agreement or any other Loan
Document or the consummation of the transactions contemplated hereby or
thereby, the use or intended use of the proceeds of the Revolving Loans or the
exercise of any right or remedy hereunder, including, without limitation, any
obligations which may become due and payable after the termination of this
Financing Agreement (the "Indemnified Liabilities"); provided that the Borrower
shall not have any obligation to an Indemnitee hereunder with respect to
Indemnified Liabilities to the extent arising solely from the gross negligence
or willful misconduct of such Indemnitee as determined by a final non-appealable
determination of a court of competent jurisdiction. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in the preceding
sentence may be unenforceable because it is violative of any law or public
policy, the Borrower will contribute the maximum portion that it is permitted to
pay and satisfy under applicable law to the payment and satisfaction of all
Indemnified Liabilities incurred by the Indemnitee or any of them.
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SECTION 16. Miscellaneous.
16.01. Waivers. The Borrower hereby waives diligence, demand,
presentment and protest and any notices thereof as well as notice of nonpayment.
No delay or omission of the Agent or the Lenders or the Borrower to exercise any
right or remedy hereunder, whether before or after the happening of any Event of
Default, shall impair any such right or shall operate as a waiver thereof or as
a waiver of any such Event of Default or be deemed a waiver of any other right,
unless such waiver be in writing and signed by the Agent. No single or partial
exercise by the Agent or the Lenders of any right or remedy precludes any other
or further exercise thereof, or precludes any other right or remedy.
16.02. Entire Agreement. This Financing Agreement, including its
exhibits, and the documents executed and delivered in connection herewith,
constitute the entire agreement among the Borrower, the Agent and the Lenders,
supersede any prior agreements of the parties as to the subject matter hereof,
and shall bind and benefit the Borrower, the Agent and the Lenders and their
respective successors and assigns.
16.03. Amendments. This Financing Agreement may be amended, and the
Borrower may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, if the Borrower shall obtain the written
consent to such amendment, action or omission to act given by the Agent, except
that, without the written consent of all of the Lenders, no amendment to this
Financing Agreement shall (a) increase the Revolving Line of Credit; (b) reduce
the interest rate; (c) reduce or waive (1) any fees or (2) the repayment of any
Obligations due the Lenders; (d) extend the maturity of the Obligations; (e)
alter or amend this Section 16.03; or (f) release Collateral in bulk without a
corresponding reduction in the Obligations secured thereby. Each Lender shall be
bound by any consent authorized by this Section 16.03.
16.04. Permitted Interest and Fees. In no event shall the Borrower,
upon demand by the Lenders for payment of any indebtedness relating hereto, by
acceleration of the maturity thereof, or otherwise, be obligated to pay interest
and fees in
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excess of the maximum amount permitted by law. Regardless of any provision
herein or in any agreement made in connection herewith, the Lenders shall never
be entitled to receive, charge or apply, as interest on any indebtedness
relating hereto, any amount in excess of the maximum amount of interest
permissible under applicable law. If the Lenders ever receive, collect or apply
any such excess, it shall be deemed a partial repayment of principal and treated
as such; and if principal is paid in full, any remaining excess shall be
refunded to the Borrower. This paragraph shall control every other provision
hereof and of any other agreement made in connection herewith.
16.05. Illegality. If any provision hereof or of any other agreement
made in connection herewith is held to be illegal or unenforceable, such
provision shall be fully severable, and the remaining provisions of the
applicable agreement shall remain in full force and effect and shall not be
affected by such provision's severance. Furthermore, in lieu of any such
provision, there shall be added automatically as a part of the applicable
agreement a legal and enforceable provision as similar in terms to the severed
provision as may be possible.
16.06. Jurisdiction of Claims. (a) THE BORROWER, THE AGENT AND THE
LENDERS HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS FINANCING AGREEMENT, OR ANY OF THE OTHER DOCUMENTS ENTERED
INTO IN CONNECTION WITH THIS FINANCING AGREEMENT, TO WHICH THE BORROWER IS A
PARTY, AND THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY AGREE THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH NEW YORK STATE COURT OR IN SUCH FEDERAL COURT. THE BORROWER, THE AGENT
AND THE LENDERS HEREBY IRREVOCABLY WAIVE THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING. THE BORROWER, THE AGENT AND THE
LENDERS AGREE THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR
IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING HEREIN SHALL LIMIT THE BORROWER'S
OR GUARANTORS' ABILITY TO BE HEARD IN THE BANKRUPTCY COURT.
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(b) THE BORROWER, THE AGENT AND THE LENDERS EACH HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS
FINANCING AGREEMENT. THE BORROWER, THE AGENT AND THE LENDERS HEREBY IRREVOCABLY
WAIVE PERSONAL SERVICE OF PROCESS AND CONSENT TO SERVICE OF PROCESS BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO THE BORROWER, THE
AGENT AND THE LENDERS, AS THE CASE MAY BE, AT THE ADDRESS PROVIDED HEREIN FOR
NOTICES.
16.07. No Subrogation; Continuing Obligation. (a) The Borrower will
not exercise any rights which it may acquire by way of subrogation hereunder, by
any payment made by it hereunder or otherwise, until this Financing Agreement is
terminated and all of the Obligations and all other expenses to be paid by the
Borrower pursuant hereto shall have been satisfied in full. If any amount shall
be paid to the Borrower on account of such subrogation rights at any time when
all of the Obligations and all such other expenses shall not have been paid in
full or this Financing Agreement shall not have been terminated, such amount
shall be held in trust for the benefit of the Agent, shall be segregated from
the other funds of the Borrower and shall forthwith be paid over to the Agent to
be applied in whole or in part by the Agent against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of this Financing Agreement.
(b) Notwithstanding anything contained herein to the contrary, if
after receipt of any payment for all or any part of the Obligations, the Agent
or any Lender is for any reason compelled to surrender such payment to any
Person or entity because such payment is determined to be void or voidable as a
preference, an impermissible setoff, a diversion of trust funds or for any other
reason, this Financing Agreement shall continue in full force, and the Borrower
shall be liable to, and shall indemnify and hold such Lender or the Agent
harmless for, the amount of such payment surrendered until such Lender or the
Agent, as the case may be, shall have been finally and irrevocably paid in full.
The provisions of the foregoing sentence shall be and remain effective
notwithstanding any contrary action which may have been taken by the Lenders or
the Agent in reliance upon such payment, and any such contrary action so taken
shall be without prejudice to the Lenders' or the
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Agent's rights under this Financing Agreement and shall be deemed to have been
conditioned upon such payment having become final and irrevocable.
16.08. Notices. Except as otherwise herein provided, any notice or
other communication required hereunder shall be in writing, and shall be deemed
to have been validly served, given or delivered when (i) hand delivered, (ii)
sent by telegram or telex, (iii) by telecopy if receipt is confirmed by
receiving party, (iv) by overnight courier, the next Business Day after delivery
to such overnight courier or (v) three (3) days after deposit in the United
States mails, with proper first class postage prepaid and addressed to the party
to be notified as follows:
(A) if to the Agent, at:
The CIT Group/Commercial Services, Inc.
1211 Avenue of the Americas
22nd Floor
New York, New York 10036
Telecopy Number: (212) 382-9036
Attn: Anthony Lombardi, Vice President
with a copy to:
Nancy R. Finkelstein, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Telecopy Number: (212) 836-7151
(B) if to the Borrower, at:
Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman
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with a copy to:
Norman N. Kinel, Esq.
Whitman Breed Abbott and Morgan
200 Park Avenue
New York, New York 10166
Telecopy Number: (212) 351-3131
and
Donald D. Shack, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telecopy Number: (212) 730-1964
(C) if to any Lender, at the address set forth in the
applicable Assignment and Transfer Agreement
or to such other address as any party may designate for itself by
like notice.
16.09. Governing Law. THE VALIDITY, INTERPRETATION AND ENFORCEMENT
OF THIS FINANCING AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (OTHER THAN CONFLICTS OF LAWS PRINCIPLES THEREOF).
16.10. Satisfaction of Agent. If any agreement, certificate or other
writing, or any action taken or to be taken, is by the terms of this Financing
Agreement required to be satisfactory to the Agent, the determination of such
satisfaction shall, unless expressly stated otherwise, be made by the Agent in
its sole and exclusive judgment exercised in good faith.
16.11. Description Headings. The descriptive headings of the several
paragraphs of this Financing Agreement and the table of contents are inserted
for convenience only and do not constitute a part of this Financing Agreement.
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16.12. Counterparts. This Financing Agreement may be executed in two
or more counterparts, all of which shall be deemed but one and the same
instrument and each of which shall be deemed an original, and it shall not be
necessary in making proof of this Financing Agreement to produce or account for
more than one such counterpart.
16.13. Further Assurances. Each party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as any other party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Financing Agreement and the
consummation of the transactions contemplated hereby. The assurances
contemplated by this Section 16.13 shall be given under applicable nonbankruptcy
law as well as the Bankruptcy Code, it being the intention of the parties that
the Agent may request assurances under applicable nonbankruptcy law, and such
request shall be complied with.
16.14. Confidentiality. Any information disclosed by or on behalf of
the Borrower to the Agent or any of the Lenders and any information obtained by
the Agent or any of the Lenders pursuant to or in connection with this Financing
Agreement shall be used solely for purposes of this Financing Agreement and not
in any other manner, and, if such information is not otherwise in the public
domain, shall not be disclosed by the Agent or such Lender to any other Person
except (i) to its independent accountants and legal counsel, (ii) pursuant to
statutory and regulatory requirements or otherwise as required by law, (iii)
pursuant to any court order, subpoena or other legal process or (iv) subject to
an agreement containing provisions substantially the same as those of this
Section, to any participant in or assignee of, or prospective participant in or
assignee of, any Loan. Notwithstanding anything to the contrary contained
herein, this Section 16.14 shall not apply to any communication between CIT
Group/Commercial Services, Inc. and any of its Affiliates.
SECTION 17. Agency.
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17.01. The Agent. Each Lender hereby irrevocably designates and
appoints CIT/CS as the Agent for the Lenders under this Financing Agreement and
any ancillary loan documents and irrevocably authorizes CIT/CS as Agent for such
Lender, to take such action on its behalf under the provisions of the Financing
Agreement and all ancillary documents and to exercise such powers and perform
such duties as are expressly delegated to the Agent by the terms of the
Financing Agreement and all ancillary documents together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to the
contrary elsewhere in this Financing Agreement, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into the
Financing Agreement, any other Loan Document or any of the ancillary documents
or otherwise exist against the Agent.
17.02. Delegation of Duties. The Agent may execute any of its duties
under this Financing Agreement or any other Loan Document and all ancillary
documents by or through agents or attorneys-in-fact and shall be entitled to the
advice of counsel concerning all matters pertaining to such duties.
17.03. Exculpatory Provisions. Neither the Agent nor any of its
officers, directors, employees, agents, or attorneys-in-fact shall be liable to
any Lender for any action lawfully taken or omitted to be taken by it or such
person under or in connection with the Financing Agreement or any other Loan
Document and all ancillary documents (except for its or such person's own gross
negligence or willful misconduct), or responsible in any manner to any of the
Lenders for any recitals, statements, representations or warranties made by the
Borrower or any officer thereof contained in the Financing Agreement or any
other Loan Document and all ancillary documents or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, the Financing Agreement or any other Loan
Document and all ancillary documents or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of the Financing Agreement or any
other Loan Document and all ancillary documents or for any failure of the
Borrower to perform its obligations
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thereunder. The Agent shall not be under any obligation to any Lender to
ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, the Financing Agreement or any other
Loan Document and ancillary documents or to inspect the properties, books or
records of the Borrower.
17.04. Reliance by Agent. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or conversation believed by
it to be genuine and correct and to have been signed, sent or made by the proper
person or persons and upon advice and statements of legal counsel (including,
without limitation, an opinion of counsel to the Borrower), independent
accountants and other experts selected by the Agent. The Agent shall be fully
justified in failing or refusing to take any action under the Financing
Agreement or any other Loan Document and all ancillary documents unless it shall
first receive such advice or concurrence of all of the Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by all of the
Lenders against any and all liability and expense which may be incurred by it by
reason of taking or continuing to take any such action. The Agent shall in all
cases be fully protected in acting, or in refraining from acting, under the
Financing Agreement or any other Loan Document and all ancillary documents in
accordance with a request of any of the Lenders and such request and any action
taken or failure to act pursuant thereto shall be binding upon all the Lenders.
17.05. Notice of Default. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received written notice from a Lender or the
Borrower describing such Default or Event of Default. In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders. The Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by one hundred percent (100%)
of the Lenders; provided that unless and until the Agent shall have received
such direction, the Agent may in the interim (but shall not be
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obligated to) take such action, or refrain from taking any such action, with
respect to such Default or Event of Default as it shall deem advisable and in
the best interests of the Lenders.
17.06. Non-Reliance on Agent and Other Lenders. Each Lender
expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents or attorneys-in-fact has made any representations
or warranties to it and that no act by the Agent hereinafter taken, including
any review of the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each Lender represents to
the Agent that it has, independently and without reliance upon the Agent or any
other Lender and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, financial and other condition and creditworthiness of the
Borrower and made its own decision to enter into this Financing Agreement and
any other Loan Document. Each Lender also represents that it will, independently
and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under the Financing Agreement or any other Loan Document and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition or creditworthiness of the
Borrower. The Agent, however, shall provide the Lenders with copies of all
financial statements, projections and business plans which come into the
possession of the Agent or any of its officers, employees, agents or
attorneys-in-fact.
17.07. Indemnification. The Lenders agree to indemnify the Agent in
its capacity as such, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind whatsoever which may at any time be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Financing Agreement, any other Loan Document or any ancillary documents
or any documents contemplated by or referred to herein or the transactions
contemplated hereby or any action taken or omitted by the Agent under or in
connection with
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any of the foregoing; provided, however, that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
solely from the Agent's gross negligence or willful misconduct. The agreements
in this paragraph shall survive the payment of the Obligations.
17.08. The Agent in Its Individual Capacity. With respect to the
Loans made by it and in connection with any Letters of Credit Guaranty (and any
Letter of Credit hereunder), CIT/CS and its Affiliates shall have the same
rights and powers under this Agreement as any other Lender and may exercise the
same as though it were not the Agent; and the term "Lender" or "any Lenders"
shall, unless otherwise expressly indicated, include CIT/CS in its individual
capacity. CIT/CS and its Affiliates may accept deposits from, lend money to, act
as trustee or paying agent under indentures of, and generally engage in any kind
of business with, the Borrower or any Guarantor, any of their Affiliates, or any
person who may do business with or own securities of the Borrower or Guarantor,
or any of their Affiliates, all as if CIT/CS were not the Agent and without any
duty to account therefor to any Lenders. The Lenders acknowledge and agree that
the L/C Issuer which may be an Affiliate of the Agent, may take actions which
are not in the interests of, or may have an adverse effect on, the Lenders, or
may omit to take actions which would be in the interests of, or would have a
favorable effect on, the Lenders, and the Lenders will not assert any claim
against the Agent based on actions or omissions by the L/C Issuer (if an
Affiliate thereof) and will not assert any such actions or omissions as a
defense or offset to the Lender's obligations hereunder.
17.09. Successor Agent. The Agent may resign as Agent upon thirty
(30) days' notice to the Lenders and such resignation shall be effective upon
the appointment of a successor Agent acceptable to the Borrower. If the Agent
shall resign as Agent, then one hundred percent (100%) of the Lenders shall,
subject to the consent of the Borrower, such consent not to be unreasonably
withheld, appoint a successor agent for the Lenders whereupon such successor
agent shall succeed to the rights, powers and duties of the Agent and the term
"Agent" shall mean such successor agent effective upon its appointment, and the
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former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Financing Agreement. In the event that the Lenders do not
appoint a successor agent for the Lenders within forty-five (45) days of notice
to the Lenders of the Agent's resignation, the resigning Agent shall be
authorized to appoint a successor Agent in its good faith judgment. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
17 shall inure to its benefit as to any actions taken or omitted to be taken by
it while it was Agent.
17.10. Collateral Matters.
(a) The Agent may from time to time, make such disbursements and
advances ("Agent Advances") which the Agent, in its sole discretion, deems
necessary or desirable to preserve or protect the Collateral or any portion
thereof, to enhance the likelihood or maximize the amount of repayment by the
Borrower, any Guarantor or other Person of the Loans, and other obligations or
to pay any other amount chargeable to the Borrower or Guarantor pursuant to the
terms of this Agreement, including, without limitation, costs, fees and
expenses. The Agent Advances shall be repayable on demand and be secured by the
Collateral. Each Lender agrees that it shall make available to the Agent, upon
the Agent's demand, in Dollars in immediately available funds, the amount equal
to such Lender's pro rata share of such Agent Advance. If such funds are not
made available to the Agent by such Lender the Agent shall be entitled to
recover such funds, on demand from Lender together with interest thereon, for
each day from the date such payment was due until the date such amount is paid
to the Agent, at the federal funds rate for three (3) Business Days and
thereafter at the Chase Bank Rate.
(b) The Agent shall have no obligation whatsoever to any Lenders to
assure that the Collateral exists or is owned by the Borrower or any Guarantor
or is cared for, protected or insured or has been encumbered or that the liens
granted to the Agent herein or pursuant hereto have been properly or
sufficiently or lawfully created, perfected, protected or enforced or are
entitled to any particular priority, or to exercise at all or in any particular
manner or under any duty of
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care, disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Agent in this Section 17.10
or in any of the Loan Documents, it being understood and agreed that in respect
of the Collateral, or any act, omission or event related thereto, the Agent may
act in any manner it may deem appropriate, in its sole discretion, given the
Agent's own interest in the Collateral as one of the Lenders and that the Agent
shall have no duty or liability whatsoever to any other Lender.
17.11. Amendments Concerning Agency Function. The Agent shall not be
bound by any waiver, amendment, supplement or modification of this Financing
Agreement or any other Loan Document which affects its duties hereunder or
thereunder unless it shall have given its prior consent thereto.
17.12. Liability of Agent. The Agent shall not have any liabilities
or responsibilities to the Borrower on account of the failure of any Lender to
perform its obligations hereunder or to any Lender on account of the failure of
the Borrower to perform its obligations hereunder or under any other Loan
Document.
17.13. Transfer of Agency Function. Without the consent of any
Lender, the Agent may at any time or from time to time transfer its functions as
Agent hereunder to any of its offices wherever located within the United States,
provided that the Agent shall promptly notify the Borrower and the Lenders
thereof and obtain the consent of the Borrower, which such consent shall not be
unreasonably withheld.
17.14. Withholding Taxes. Each Lender will furnish to the Agent and
to the Borrower such forms, certifications, statements and other documents as
the Agent or the Borrower may request from time to time to evidence such
Lender's exemption from the withholding of any tax imposed by any jurisdiction
or to enable the Agent or the Borrower to comply with any applicable laws or
regulations relating thereto. Without limiting the effect of the foregoing, if
any Lender is not created or organized under the laws of the United States of
America or any state thereof, such Lender will furnish to the Agent and to the
Borrower two copies of (i) Form 4224 or Form 1001 of the Internal
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Revenue Service, or such other forms, certifications, statements or documents,
duly executed and completed by such Lender as evidence of such Lender's complete
exemption from the withholding of U.S. tax with respect to any payments of
interest made hereunder in respect of any Loan or such Lender's Revolving Loan
Amount and (ii) new Forms 4224 or 1001, as applicable, or any successor forms
thereto, upon the expiration or obsolescence of any previously entered form. If
the Agent or such Lender fails to provide the required forms, certifications or
documents, then (i) the Borrower shall be entitled to deduct or withhold on
payments to the Agent or such Lender as a result of such failure, as required by
law, and (ii) to the extent such withholding is required solely by reason of the
failure of the Agent or such Lender to provide the necessary form or other
required evidence of exemption from withholding, the Borrower shall not be
liable for any increased costs with respect to such withheld amounts under
Section 2.07 hereof.
SECTION 18. Lender Provisions.
18.01. Lenders' Accounting Statement. The Agent shall forward to
each Lender, at the end of each month, a copy of the account statement rendered
by the Agent to the Borrower.
18.02. Settlement of Accounts. (a) Unless otherwise provided herein,
the Agent shall promptly, after receipt of any interest earned under the
Financing Agreement, remit to each Lender interest, computed at the rate and as
provided for in Section 4 of this Financing Agreement on all outstanding amounts
advanced by such Lender on each Settlement Date, prior to adjustment, that
predate the last remittance by the Agent to such Lender of its interest.
(b) On the Settlement Date, the Agent and each Lender shall each
remit to the other, in immediately available funds, all amounts necessary so as
to ensure that, as of the Settlement Date, the Lenders shall have pro rata and
undivided portion of all outstanding Revolving Loans.
(c) Unless the Agent shall have received notice from the Borrower
prior to the date on which any payment is due to any Lender hereunder that the
Borrower will not make such payment in
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full, the Agent may assume that the Borrower has made such payment in full to
the Agent on such date and the Agent in its sole discretion may, but shall not
be obligated to, in reliance upon such assumption, cause to be distributed to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent the Borrower shall not have so made such payment in full to
the Agent, each Lender shall repay to the Agent forthwith on demand such amount
distributed to such Lender together with interest thereon, for each day from the
date such amount is distributed to such Lender until the date such Lender repays
such amount to the Agent, at the Chase Bank Rate.
18.03. Shared Liability. In the event that the Agent, the Lenders or
any one of them is sued or threatened with suit by the Borrower, or by any
receiver, trustee, creditor or any committee of creditors of the Borrower on
account of any preference, voidable transfer or lender liability issue, alleged
to have occurred or been received as a result of, or during the transactions
contemplated under this Financing Agreement or any other Loan Document, then in
such event any money paid in satisfaction or compromise of such suit, action,
claim or demand and any expenses, costs and attorneys' fees paid or incurred in
connection therewith, whether by the Agent, the Lenders or any one of them,
shall be shared pro rata by the Lenders. In addition, any costs, expenses, fees
or disbursements incurred by outside agencies or attorneys retained by the Agent
to effect collection or enforcement of any rights in the Collateral, including
enforcing (including, without limitation, appearing, monitoring and
participating as a party-in-interest in any bankruptcy case involving the
Borrower), preserving or maintaining rights under this Financing Agreement or
any other Loan Document shall be shared pro rata between the Lenders to the
extent not reimbursed by the Borrower, or from the proceeds of Collateral. The
provisions of this paragraph shall not apply to any suits, actions, proceedings
or claims that are based on transactions, actions or omissions unrelated hereto
that predate the date of this Financing Agreement.
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This Financing Agreement, including its Exhibits, supersedes all
prior written or oral agreements of the parties as to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by its proper and duly authorized
officers as of May __, 1997.
LENDER:
THE CIT GROUP/COMMERCIAL SERVICES,
INC. as Lender and Agent
By /s/ John Hendrickson
-----------------------------------
Name: John Hendrickson
Title: Vice President
BORROWER:
ANDOVER TOGS, INC.
By /s/ William L. Cohen
-----------------------------------
Name: William L. Cohen
Title: President
The Guarantors by their respective signatures below acknowledge receipt and
review of the Financing Agreement and the provisions thereof applicable to each
Guarantor, respectively.
GUARANTORS:
SPRINGDALE FASHIONS, INC.
By /s/ William L. Cohen
-------------------------------------
Name: William L. Cohen
Title: President
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TORTONI MANUFACTURING CORP.
By /s/ William L. Cohen
-------------------------------------
Name: William L. Cohen
Title: President
STONEHENGE FINANCIAL CORP.
By /s/ William L. Cohen
-------------------------------------
Name: William L. Cohen
Title: President
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EXHIBITS AND SCHEDULES OMITTED
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AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT
AMENDED AND RESTATED SUBSIDIARY SECURITY AGREEMENT, dated May 12, 1997,
made by SPRINGDALE FASHIONS, INC., a Delaware corporation, TORTONI MANUFACTURING
CORP., a Delaware corporation, STONEHENGE FINANCIAL CORP., a New York
corporation (individually and collectively, the "Grantor"), in favor of THE CIT
GROUP/COMMERCIAL SERVICES, INC., as agent (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, Andover Togs, Inc. (the "Borrower") and each Grantor filed a
voluntary petition for relief under chapter 11, title 11, of the United States
Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the
Southern District of New York (the "Court").
WHEREAS, the Grantors have heretofore executed and delivered to Lender
that certain Subsidiary Security Agreement ("Original Security Agreement") (each
such Grantor is hereafter referred to as an "Original Grantor"), under which
each such Original Grantor has granted, to CIT, liens on and security interests
in the properties, rights, interests, and privileges therein described, for the
benefit and security of the Obligations (as such term is defined in the Original
Security Agreement) to CIT.
WHEREAS, each Grantor entered into a Guaranty dated as of September 19,
1996 (the "Original Guaranty") and secured the obligations thereunder pursuant
to the Original Security Agreement.
WHEREAS, the Borrower and CIT have heretofore entered into that certain
Replacement DIP Financing and Security Agreement dated as of September 19, 1996
(as amended, the "Original Financing Agreement").
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs, Inc.
("Plan of Reorganization") and under chapter 11 of the Bankruptcy Code, the
Original Grantors will reorganize
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their businesses and operations, which Plan of Reorganization was confirmed by
order of the Court entered on April 10, 1997.
WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Borrower and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement and
the Grantors have entered into that certain amended and Restated Guaranty (the
"Guaranty") of the date hereof, amending and restating, in its entirety, the
Original Guaranty.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to renew,
modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that each Original Grantor
confirm and assure by its execution and delivery of this Amended and Restated
Security Agreement that the Collateral (as hereinafter defined) is and remains
collateral security for the Guaranteed Obligations (as such term is defined in
the Guaranty Agreement), for all other credit from time to time extended by CIT
to the Borrower under the Financing Agreement and for all other Obligations (as
hereinafter defined).
NOW, THEREFORE, in consideration of the premises and the agreements herein
and in order to induce the Lender to make and maintain the Loans and assist the
Borrower in opening Letters of Credit pursuant to the Financing Agreement, the
Grantor hereby agrees with the Agent as follows:
1. Definitions. Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement which are
defined in the Financing Agreement or in Article 9 of the Uniform Commercial
Code currently in effect in the State of New York (the "Code") and which are not
otherwise defined herein shall have the same meanings herein as set forth
therein. In the event of any
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inconsistencies in such definitions, the provisions of the Financing Agreement
shall control.
2. Grant of Security Interest. As collateral security for all of the
Obligations (as defined in Section 3 hereof), the Grantor hereby pledges and
assigns to the Agent and grants to the Agent, for the benefit of itself and the
Lender, a continuing general lien upon and first priority, perfected security
interest in, all of the following, wherever located and whether presently in
existence or hereafter acquired or created, however acquired or created and
which is owned by the Grantor or in which the Grantor has any interest, wherever
held by the Grantor or others for its account (collectively, the "Collateral").
(a) all of the Grantor's right, title and interest in and to all
equipment, vehicles, furniture, fixtures and machinery wherever located and
whether now or hereafter existing and whether now owned or hereafter acquired,
together with all substitutes, replacements, accessions and additions thereto,
and all tools, parts, accessories and attachments used in connection therewith
(hereinafter collectively referred to as the "Equipment");
(b) all of the Grantor's right, title and interest in and to all inventory
of any kind wherever located and whether now or hereafter existing and whether
now owned or hereafter acquired (including, without limitation, all types of
inventory, merchandise, goods, tangible personal property and other assets that
are held by the Grantor for sale, lease or other disposition in the ordinary
course of the Grantor's business or to be furnished under a contract for
services, whether such inventory, merchandise, goods, tangible personal property
and other assets are raw, in process and finished, and materials used or
consumed in the business of the Grantor, and goods returned to or repossessed by
the Grantor and goods in which the Grantor has an interest in mass or in joint
or other interest or right of any kind including consigned goods and goods being
possessed), and all accessions thereto and products thereof and all packing and
shipping materials (hereinafter collectively referred to as the "Inventory");
(c) all of the Grantor's right, title and interest in and to, whether now
or hereafter existing, (i) all present and future accounts, contract rights,
chattel paper, documents and
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instruments (as such terms are defined in the Code); (ii) all moneys, securities
and other property and the proceeds thereof, now or hereafter held or received
by, or in transit to, the Agent from or for the Grantor, whether for
safekeeping, pledge, custody, transmission, collection or otherwise; (iii) all
of the Grantor's right, title and interest, and all of the Grantor's rights,
remedies, security and liens, in, to and in respect of any credit, insurance
(the right of the Agent to insurance proceeds is subject to the terms of the
Financing Agreement), accounts (including, without limitation, rights of
stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lienor or secured party), guaranties or other
contracts of suretyship with respect to accounts, and deposits or other security
for the obligation of any account debtor; (iv) all rights relating to the sale
or other transfer of property to, or the construction, renovation or other
improvement of property by or for the Grantor; (v) all rights now or hereafter
existing in and to all security agreements, leases and other contracts now or
hereafter existing and securing or otherwise relating to any accounts, contract
rights, chattel paper, instruments, documents, or other rights or obligations;
and (vi) all of the Grantor's right, title and interest in, to and in respect of
all goods relating to, or which by sale have resulted in, accounts, including,
without limitation, all goods described in invoices or other documents or
instruments with respect to, or otherwise representing or evidencing, any
accounts, and all returned, reclaimed or repossessed goods (any and all such
accounts, contract rights, chattel paper, instruments, documents, and rights and
obligations being hereinafter referred to as the "Accounts" and any and all such
security agreements, leases and other contracts being hereinafter referred to as
the "Related Contracts");
(d) (i) all of the Grantor's right, title and interest in and to all
general intangibles; (ii) all rights, interest, choses in action, causes of
action, claims and all other intangible property of every kind and nature, in
each instance whether now owned or hereafter acquired by the Grantor, including,
without limitation, all corporate and other business records, all loans,
royalties, and all other forms of obligations receivable whatsoever (other than
Accounts); (iii) all trademarks, trademark applications, trademark licenses,
patents, patent applications, patent licenses, trade secrets, licenses,
copyrights, goodwill, inventions, designs, registrations,
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permits, franchises and licenses; (iv) all computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence, and advertising materials; (v) all customer and supplier
contracts, sale orders, rights under license and franchise agreements, and other
contracts and contract rights; (vi) all interests in partnership and joint
ventures, including all moneys due from time to time in respect thereof; (vii)
all federal, state and local tax refunds and federal, state and local tax refund
claims; (viii) all right, title and interest under leases, subleases, licenses
and concessions and other agreements relating to personal property, including
all moneys due from time to time in respect thereof; (ix) all payments due or
made to the Grantor in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any property by any Person or
Governmental Authority; (x) all deposit accounts (general or special) with any
bank or other financial institution, including, without limitation, any
depositary or other accounts maintained by the Grantor at the Agent or any other
Lender and all funds on deposit thereon; (xi) all credits with and other claims
against third parties (including carriers and shippers) (other than Accounts);
(xii) all rights to indemnification; (xiii) all reversionary interests in
pension and profit sharing plans and reversionary, beneficial and residual
interests in trusts; (xiv) all proceeds of insurance (except Excess Key Man Life
Insurance Proceeds (as defined in the Financing Agreement)), including credit
insurance, of which such Grantor is the beneficiary; (xv) all letters of credit
guaranties, liens, security interests and other security held by or granted to
such Grantor; and (xvi) all other intangible property, whether or not similar to
the foregoing, in each instance, however and wherever and whenever arising and
whether now owned or hereafter acquired (hereinafter collectively referred to as
"General Intangibles");
(e) the books and records of the Grantor relating to any of the foregoing
Collateral, including, without limitation, all customer contracts, sale orders,
minute books, ledgers, records, computer programs, software, printouts and other
computer materials, customer lists, credit files, correspondence and advertising
materials, in each case indicating, summarizing or evidencing any of the
Collateral; and
(f) all cash and non-cash proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise
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included, all payments under insurance (whether or not the Agent is the loss
payee thereof) (except Excess Key Man Life Insurance Proceeds (as defined in the
Financing Agreement)), and any indemnity, warranty or guaranty, payable by
reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral;
in each case, howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
3. Security for Obligations. The security interest created hereby in the
Collateral constitutes continuing collateral security for all of the Obligations
(as defined in the Financing Agreement) and the due performance and observance
by the Borrower, the Grantor or any other Guarantor of all of their other
obligations from time to time existing in respect of the Financing Agreement and
all other Loan Documents, whether now existing or hereafter incurred (the
"Obligations"). The Grantors hereby confirm and assure that the terms of the
Original Security Agreement are hereby superseded and restated in their entirety
by this Agreement without thereby cancelling, releasing or discharging the
security interests created thereby.
4. Representations and Warranties. The Grantor represents and warrants as
follows:
(a) The Grantor (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of its incorporation as set forth
on the first page hereof, and (ii) has all requisite power and authority to
execute, deliver and perform this Agreement.
(b) The execution, delivery and performance by the Grantor of this
Agreement (i) have been duly authorized by all necessary corporate action, (ii)
do not and will not contravene its charter or by-laws, any other applicable law
or any contractual restriction binding on or affecting the Grantor or any of its
properties, and (iii) do not and will not result in or require the creation of
any lien, security interest or other charge or encumbrance upon or with respect
to any of its properties other than as set forth in this Agreement.
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(c) This Agreement is a legal, valid and binding obligation of the
Grantor, enforceable against the Grantor in accordance with its terms.
(d) All Equipment and Inventory now existing is, and all Equipment and
Inventory hereafter existing will be, unless consented to in writing by the
Agent, located at the address(es) specified therefor in Schedule I hereto. The
Grantor's chief place of business and chief executive office, the place where
the Grantor keeps its records concerning Accounts and General Intangibles and
all originals of all chattel paper which constitutes Accounts are located at the
address specified therefor in such Schedule I. None of the Accounts or General
Intangibles is evidenced by a promissory note or other instrument. Set forth as
Schedule II hereto is a complete and correct list of each trade name used by the
Grantor.
(e) The Grantor has delivered to the Agent complete and correct copies of
each Related Contract, including all schedules and exhibits thereto. Each
Related Contract sets forth the entire agreement and understanding of the
parties thereto relating to the subject matter thereof, and there are no other
agreements, arrangements or understandings, written or oral, relating to the
matters covered thereby or the rights of the Grantor in respect thereof. Each
Related Contract now existing is, and each other prospective Related Contract
will be, the legal, valid and binding obligation of the parties thereto,
enforceable against such parties in accordance with its terms. No material
default thereunder by any such party has occurred, nor does any defense, offset,
deduction or counterclaim exist thereunder in favor of any such party.
(f) The Grantor is and will be at all times the owner of the Collateral
free and clear of any lien, security interest or other charge or encumbrance,
except for (i) the security interest created by this Agreement, and (ii) the
security interests and other encumbrances described in Schedule III hereto. No
effective financing statement or other instrument similar in effect covering all
or any part of the Collateral is on file in any recording or filing office,
except (i) such as may have been filed in favor of the Agent relating to this
Agreement, and (ii) such as may have been filed to perfect or protect any
security interest or encumbrance described in Schedule III hereto.
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(g) The exercise by the Agent of any of its rights and remedies hereunder
will not contravene any law or any contractual restrictions binding on or
affecting the Grantor or any of its properties and will not result in or require
the creation of any lien, security interest or other charge or encumbrance upon
or with respect to any of the Grantor's properties other than as set forth in
this Agreement.
(h) Except with respect to any authorization or approval required under
the laws of another country as to Tortoni, no authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority or other
regulatory body is required for (i) the due execution, delivery and performance
by the Grantor of this Agreement, (ii) the grant by the Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or (iii) the exercise by the Agent of any of its rights and remedies
hereunder, except for the filing of the financing statements required to be
filed to perfect the security interest created by this Agreement, all of which
financing statements have been duly filed and are in full force and effect.
(i) There is no pending or, to the best of Grantor's knowledge, threatened
action, suit, proceeding or claim before any court or other Governmental
Authority or any arbitrator, or any order, judgment or award by any court or
other Governmental Authority or arbitrator, that may adversely affect the grant
by the Grantor, or the perfection, of the security interest purported to be
created hereby in the Collateral, or the exercise by the Agent of any of its
rights and remedies hereunder.
(j) This Agreement creates a valid security interest in favor of the Agent
in the Collateral, as security for the Obligations. The Agent's having
possession of all Collateral that are instruments and cash and the filing of the
financing statements required to perfect the security interest created by this
Agreement result in the perfection of such security interests. Such security
interests are, or in the case of Collateral in which the Grantor obtains rights
after the date hereof, will be, perfected, first priority security interests,
subject only to the security interests and other encumbrances described in
Schedule III hereto. Such filings and all other action necessary or desirable to
perfect and protect such security interests have been duly taken, except for the
Agent's
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having possession of Collateral constituting instruments or cash after the date
hereof.
5. Covenants as to the Collateral. So long as any of the Obligations shall
remain outstanding, unless the Agent shall otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at any time and
from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Agent may reasonably request in order (i) to perfect and protect the
security interest created hereby; (ii) after the occurrence and during the
continuance of an Event of Default, to enable the Agent to exercise and enforce
its rights and remedies hereunder in respect of the Collateral; or (iii) to
otherwise effect the purposes of this Agreement, including, without limitation,
(A) marking conspicuously each chattel paper included in the Accounts and
General Intangibles and, at the request of the Agent, each of its records
pertaining to the Collateral with a legend, in form and substance reasonably
satisfactory to the Agent, indicating that such chattel paper or Collateral is
subject to the security interest created hereby, (B) if any Account or General
Intangible shall be evidenced by a promissory note or other instrument or
chattel paper, delivering and pledging to the Agent hereunder such note,
instrument or chattel paper duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance satisfactory to
the Agent, (C) executing and filing such financing or continuation statements,
or amendments thereto, as may be necessary or desirable or that the Agent may
reasonably request in order to perfect and preserve the security interest
purported to be created hereby, and (D) furnishing to the Agent from time to
time statements and schedules further identifying and describing the Collateral
and such other reports in connection with the Collateral as the Agent may
reasonably request, all in reasonable detail.
(b) Location of Equipment and Inventory. The Grantor will keep the
Equipment and Inventory (other than Inventory sold in the ordinary course of
business) at the location(s) specified therefor in Schedule I hereto, or, upon
not less than 30 Business Days' prior written notice to the Agent accompanied by
a new Schedule I hereto indicating each new location of the Equipment and
Inventory, at such other locations as the Grantor may elect,
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<PAGE>
provided that the Agent's rights in such Equipment and Inventory, including,
without limitation, the existence, perfection and priority of the security
interest created hereby in such Equipment and Inventory, are not adversely
affected thereby.
(c) Condition of Equipment. The Grantor will cause Equipment necessary for
the operation of its business to be maintained and preserved in good repair and
working order, ordinary wear and tear excepted, and will forthwith, or in the
case of any loss or damage to any Equipment as quickly as practicable after the
occurrence thereof, make or cause to be made all repairs, replacements, and
other improvements in connection therewith which are necessary or desirable or
that the Agent may reasonably request to such end. The Grantor will promptly
furnish to the Agent a statement regarding any loss or damage in excess of
$100,000 to any Equipment.
(d) Taxes. The Grantor will pay promptly when due all property and other
taxes, assessments and governmental charges or levies imposed upon, and all
claims (including claims for labor, materials and supplies) against any
Collateral, except to the extent the validity thereof is being contested in good
faith by proper proceedings which stay the imposition of any penalty, fine or
lien resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof.
(e) Insurance.
(i) The Grantor will, at its own expense, maintain insurance
(including, without limitation, comprehensive general liability insurance
and all risk insurance insuring against loss by fire, explosion, theft and
such other casualties as may be satisfactory to the Agent) with respect to
the Equipment and Inventory in such amounts, against such risks, in such
form and with such insurers, as is currently in effect. Each policy for
liability insurance shall provide for all losses to be paid on behalf of
the Agent and the Grantor as their respective interests may appear, and
each policy for property damage shall provide for all losses to be paid
directly to the Agent upon the occurrence and during the continuance of an
Event of Default. In addition, each such policy for property
10
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<PAGE>
damage insurance shall provide for all losses to be paid directly to the
Agent and shall (A) include the Agent as an insured party thereunder
(without any representation or warranty by or obligation upon the Agent)
as its interest may appear, (B) contain the agreement by the insurer that
any loss pursuant to clause (iii) of this Section 5(e) shall be payable to
the Agent on its own account, notwithstanding any action, inaction or
breach of representation or warranty by the Grantor, (C) provide that
there shall be no recourse against the Agent for payment of premiums or
other amounts with respect thereto, and (D) provide that at least 30 days'
prior written notice of cancellation or of lapse shall be given to the
Agent by the insurer. The Grantor will, if so requested by the Agent,
deliver to the Agent original or duplicate policies of all liability and
property damage insurance and, as often as the Agent may reasonably
request, a report of a reputable insurance broker with respect to such
insurance. The Grantor will also, after the occurrence and during the
continuance of an Event of Default, at the request of the Agent, duly
exercise and deliver instruments of assignment of such insurance policies
and cause the respective insurers to acknowledge notice of such
assignment.
(ii) Reimbursement under any liability insurance maintained by the
Grantor pursuant to this Section 5(e) may be paid directly to the Person
who shall have incurred liability covered by such insurance. In the case
of any loss involving damage to Equipment or Inventory as to which clause
(iii) of this Section 5(e) is not applicable, the Grantor will make or
cause to be made the necessary repairs to or replacements of such
Equipment and Inventory, and any proceeds of insurance maintained by the
Grantor pursuant to this Section 5(e) shall be paid to the Grantor as
reimbursement for the costs of such repairs or replacements.
(iii) Upon the occurrence and during the continuance of an Event of
Default, or the actual or constructive total loss (in excess of $100,000
per occurrence) of any Equipment or Inventory, all insurance payments in
respect of such Equipment and
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Inventory and all other Collateral shall be paid to the Agent and applied
as specified in Section 7(b) hereof.
(f) Provisions Concerning the Accounts, General Intangibles and the
Related Contracts.
(i) The Grantor will (A) give the Agent at least 30 days' prior
written notice of any change in the Grantor's name, identity or corporate
structure, (B) keep its chief place of business and chief executive office
and all originals of all chattel paper which constitutes Accounts or
General Intangibles at the locations specified therefor in Schedule I
hereof, and (C) keep adequate records concerning the Accounts and General
Intangibles and such chattel paper and permit representatives of the Agent
to inspect and make abstracts from such records and chattel paper at any
time during normal business hours.
(ii) The Grantor will duly perform and observe all of its
obligations under each Related Contract and, except as otherwise provided
in this subsection (f), continue to collect, at its own expense, all
amounts due or to become due under the Accounts and General Intangibles.
In connection with such collections, the Grantor may (and, at the Agent's
direction, will) take such action as the Grantor or the Agent may deem
necessary or advisable to enforce collection or performance of the
Accounts and General Intangibles; provided, however, the Agent shall have
the right at any time, upon the occurrence and during the continuance of
an Event of Default, to notify the account debtors or obligors under any
Account or General Intangible of the assignment of such Account or General
Intangible to the Agent and to direct such account debtors or obligors to
make payment of all amounts due or to become due to the Grantor thereunder
directly to the Agent and, upon such notification and at the expense of
the Grantor and to the extent permitted by law, to enforce collection of
any such Accounts or General Intangibles and to adjust, settle or
compromise the amount or payment thereof, in the same manner and to the
same extent as the Grantor might have done. In addition, upon the
occurrence and during
12
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the continuance of an Event of Default, the Agent shall have the right to
notify the United States Postal Service authorities to change the address
for delivery of mail addressed to the Grantor at such address as the Agent
may designate and to do all other acts and things necessary to carry out
this Agreement. After an Event of Default, (A) all amounts and proceeds
(including instruments) received by the Grantor in respect of the Accounts
and General Intangibles shall be received in trust for the benefit of the
Agent hereunder, shall be segregated from other funds of the Grantor and
shall be forthwith paid over to the Agent in the same form as so received
(with any necessary indorsement) to be held as cash collateral and either
(1) released to the Grantor so long as no Event of Default or an event
which, with the giving of notice or lapse of time or both, would
constitute an Event of Default under the Financing Agreement shall be
continuing or (2) if any Event of Default shall be continuing, applied as
specified in Section 7(b) hereof, and (B) the Grantor will not adjust,
settle or compromise the amount or payment of any Account or General
Intangible or release wholly or partly any account debtor or obligor
thereof or allow any credit or discount thereon.
(iii) Upon the occurrence and during the continuance of any material
breach or default under the Related Contracts by any party thereto other
than the Grantor, the Grantor will (A) promptly after obtaining knowledge
thereof, give the Agent written notice of the nature and duration thereof,
specifying what action, if any, it has taken and proposes to take with
respect thereto, (B) not, without the prior written consent of the Agent,
declare or waive any such breach or default or affirmatively consent to
the cure thereof, and (C) upon written instructions from the Agent and at
the Grantor's expense, take such action as the Agent may reasonably deem
necessary or advisable in respect thereof.
(iv) The Grantor will, at its expense, promptly deliver to the Agent
a copy of each notice or other communication received by it by which any
other party to the Related Contracts purports to exercise any of
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<PAGE>
its rights or affect any of its obligations thereunder, together with a
copy of any reply by the Grantor thereto.
(v) The Grantor will not, without the prior written consent of the
Agent which shall not be unreasonably withheld, cancel, terminate, amend,
modify or waive any provision of any Related Contract.
(g) Transfers and Other Liens. The Grantor will not (i) sell, transfer or
assign (by operation of law or otherwise), lease, exchange or otherwise dispose
of any of the Collateral (except for (A) sales or disposals of Inventory in the
ordinary course of business and (B) sales and dispositions of obsolete equipment
in the ordinary course of business so long as the amount thereof sold in any
fiscal year by the Grantor shall not have a fair market value in excess of
$100,000), or (ii) create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the Collateral,
except for (A) the security interest created hereby, (B) the security interests
and other encumbrances described in Schedule III hereto, and (C) the security
interests and other encumbrances permitted under the Financing Agreement.
6. Additional Provisions Concerning the Collateral.
(a) So long as any Obligations remain outstanding and so long as the
Financing Agreement has not been terminated, the Grantor hereby authorizes the
Agent to file, without the signature of the Grantor where permitted by law, one
or more financing or continuation statements, and amendments thereto, relating
to the Collateral.
(b) The Grantor hereby irrevocably appoints the Agent the Grantor's
attorney-in-fact and proxy, with full authority in the place and stead of the
Grantor and in the name of the Grantor or otherwise, from time to time in the
Agent's discretion, to take any action and to execute any instrument which the
Agent may reasonably deem necessary or advisable to accomplish the purposes of
this Agreement (subject to the rights of the Grantor under Section 5(f) hereof),
including, without limitation: (A) to receive, take, endorse, sign, assign and
deliver, all in the name of the Agent or the Grantor, any and all checks, notes,
drafts, and other documents or instruments relating to the Collateral
14
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<PAGE>
(but in all instances before an Event of Default in the name of the Grantor and
not the Agent); (B) to obtain and adjust insurance required to be paid to the
Agent pursuant to Section 5(e) hereof, and to receive, indorse and collect any
drafts or other instruments, documents and chattel paper in connection
therewith; and (C) in addition to the foregoing and without limitation, upon the
occurrence of an Event of Default, (i) to receive, indorse and collect any
notes, drafts or other instruments, documents and chattel paper relating to the
Collateral; (ii) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under or in
respect of any Collateral; (iii) to receive, indorse, and collect any drafts or
other instruments, documents and chattel paper in connection with clause (B),
(C)(i) or (C)(ii) of this subsection (b); and (iv) to file any claims or take
any action or institute any proceedings which the Agent may deem necessary or
desirable for the collection of any Collateral or otherwise to enforce the
rights of the Agent with respect to any Collateral, including, without
limitation, the sole right, in the name of the Agent for the benefit of the
Lender or the Grantor, to file claims under any insurance policies, to receive,
receipt and give acquittance for any payments that may be payable thereunder,
and to execute any and all endorsements, receipts, releases, assignments,
reassignments or other documents that may be necessary to effect the collection,
compromise or settlement of any claims under any such insurance policies.
(c) If the Grantor fails to perform any agreement contained herein, the
Agent may itself perform, or cause performance of, such agreement or obligation,
and the expenses of the Agent incurred in connection therewith shall be payable
by the Grantor pursuant to Section 8 hereof.
(d) The powers conferred on the Agent hereunder are solely to protect its
interest in the Collateral and shall not impose any duty upon it to exercise any
such powers. Except for the safe custody of any Collateral in its possession and
the accounting for moneys actually received by it hereunder, the Agent shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
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(e) Anything herein to the contrary notwithstanding, (i) the Grantor shall
remain liable under the Related Contracts to the extent set forth therein to
perform all of its obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Agent of any of its
rights hereunder shall not release the Grantor from any of its obligations under
the Related Contracts, and (iii) the Agent shall not have any obligation or
liability by reason of this Agreement under the Related Contracts, nor shall the
Agent be obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
7. Remedies Upon Default. If any Event of Default under the Financing
Agreement shall have occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in addition to
other rights and remedies provided for herein or otherwise available to it, all
of the rights and remedies of a secured party on default under the Code (whether
or not the Code applies to the affected Collateral), and may also (i) require
the Grantor to, and the Grantor hereby agrees that it will at its expense and
upon request of the Agent forthwith, assemble all or part of the Collateral as
directed by the Agent and make it available to the Agent at a place to be
designated by the Agent which is reasonably convenient to both parties, and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at a public or private sale, at any of the
Agent's offices or elsewhere, for cash, on credit or for future delivery, and at
such price or prices and upon such other terms as the Agent may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least 10 days' notice to the Grantor of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. The Agent shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
The Agent may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned. The
Grantor hereby waives any claims against the Agent and the Lender arising by
reason of the fact that the price at which the Collateral may
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<PAGE>
have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Obligations, even if the Agent accepts the first offer received and does not
offer the Collateral to more than one offeree.
(b) Any cash held by the Agent as Collateral and all cash proceeds
received by the Agent in respect of any sale of, collection from, or other
realization upon, all or any part of the Collateral may, in the discretion of
the Agent, be held by the Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Agent pursuant
to Section 8 hereof) in whole or in part by the Agent against, all or any part
of the Obligations in the order determined by the Agent in its discretion. Any
surplus of such cash or cash proceeds held by the Agent and remaining after
payment in full of all of the Obligations shall be paid over to the Grantor or
to such Person as may be lawfully entitled to receive such surplus.
(c) In event that the proceeds of any such sale, collection or realization
are insufficient to pay all amounts to which the Agent is legally entitled, the
Grantor shall be liable for the deficiency, together with interest thereon at
the highest rate specified in the Financing Agreement for interest on overdue
principal thereof or such other rate as shall be fixed by applicable law,
together with the costs of collection and the reasonable fees and expenses of
any attorneys employed by the Agent to collect such deficiency.
8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Agent and the Lender from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely and directly
from the Agent's or the Lender's gross negligence or willful misconduct.
(b) The Grantor will, upon demand, pay to the Agent the amount of any and
all costs and expenses, including the reasonable fees and disbursements of the
Agent's counsel and of any experts and agents, which the Agent may incur in
connection
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with (i) the preparation, administration, amendment, waiver or other
modification or termination of this Agreement; (ii) the custody, preservation,
use or operation of, or the sale of, collection from, or other realization upon,
any Collateral; (iii) the exercise or enforcement of any of the rights of the
Agent hereunder; or (iv) the failure by the Grantor to perform or observe any of
the provisions hereof.
9. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered, if
to the Grantor, to each of:
Springdale Fashions, Inc.
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman
Tortoni Manufacturing Corp.
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman
and
Stonehenge Financial Corp.
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman;
with a copy to
Norman N. Kinel, Esq.
Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
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if to the Agent, to it at its address specified in the Financing Agreement; or
as to such Person at such other address as shall be designated by such Person in
a written notice to such other Person complying as to delivery with the terms of
this Section 9. All such notices and other communications shall be effective (i)
if mailed, when received or three Business Days after mailing, whichever occurs
first, (ii) if telecopied, when received, or (iii) if delivered, upon delivery.
10. Security Interest Absolute. All rights of the Agent, all security
interests and all obligations of the Grantor hereunder shall be absolute and
unconditional irrespective of (i) any lack of validity or enforceability of the
Financing Agreement or any other agreement or instrument relating thereto; (ii)
any change in the time, manner or place of payment of, or in any other term in
respect of, all or any of the Obligations, or any other amendment or waiver of
or consent to any departure from the Financing Agreement or any other agreement
or instrument relating thereto; (iii) any increase in, addition to, exchange or
release of, or non-perfection of any lien on or security interest in, any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations; or (iv) the absence of any
action on the part of the Agent to obtain payment or performance of the
Obligations from the Grantor or any other party.
11. Miscellaneous.
(a) Amendments. No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Grantor therefrom, shall be effective unless it is in writing and signed by
the Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) Waivers; Cumulative Rights; Etc. No failure on the part of the Agent
to exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Agent provided
herein and in the Financing
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Agreement are cumulative and are in addition to, and not exclusive of, any
rights or remedies provided by law. The rights of the Agent under this Agreement
and the Financing Agreement are not conditional or contingent on any attempt by
the Agent to exercise any of its rights against any other person.
(c) Captions; Separability. The captions of the various sections and
paragraphs of this Agreement have been inserted only for the purposes of
convenience; such captions are not a part of this Agreement and shall not be
deemed in any manner to modify, explain, enlarge or restrict any of the
provisions of this Agreement. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(d) Continuing Security Interest; Assignments. This Agreement shall create
a continuing security interest in the Collateral and shall (i) remain in full
force and effect until the payment in full of the Obligations after the
Revolving Loans have been reduced to zero and all Letters of Credit have been
canceled, (ii) be binding on the Grantor and its successors and assigns and
shall inure, together with all rights and remedies of the Agent hereunder, to
the benefit of the Agent and its successors, transferees and assigns.
(e) GOVERNING LAW. THIS AGREEMENT AND THE SECURED OBLIGATIONS SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
(f) WAIVER OF JURY TRIAL AND SETOFF; CONSENT TO JURISDICTION; ETC. (1) In
any litigation in any court with respect to, in connection with, or arising out
of this Agreement, the Collateral, or any other Loan Document or any instrument
or document delivered pursuant to this Agreement, or the validity, protection,
interpretation, collection or enforcement thereof, or any other claim or dispute
howsoever arising, between the Grantor on the one hand and the Agent and the
Lender on the other hand, the Grantor, to the fullest extent it may effectively
do so, (i) waives the right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such
20
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litigation, irrespective of the nature of such setoff, recoupment, counterclaim
or cross-claim, unless such setoff, recoupment, counterclaim or cross-claim
could not, by reason of any applicable Federal or State procedural laws, be
interposed, pleaded or alleged in any other action and (ii) WAIVES TRIAL BY JURY
IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE
GRANTOR AGREES THAT THIS SECTION 11(f) IS A SPECIFIC AND MATERIAL ASPECT OF THIS
AGREEMENT AND ACKNOWLEDGES THAT THE LENDER WOULD NOT EXTEND TO THE GRANTOR ANY
FINANCIAL ACCOMMODATIONS UNDER THE FINANCING AGREEMENT IF THIS SECTION 11(f)
WERE NOT PART OF THIS AGREEMENT.
(2) The Grantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Agreement, the Collateral, or any other Loan
Document or any document or instrument delivered pursuant to this Agreement. In
any such litigation, the Grantor waives, to the fullest extent it may
effectively do so, personal service of any summons, complaint or other process
and agrees that the service thereof may be made by certified or registered mail
directed to the Grantor at its address for notice determined in accordance with
Section 9 hereof. The Grantor hereby waives, to the fullest extent it may
effectively do so, the defenses of forum non conveniens and improper venue.
(g) Admissibility of Security Agreement. The Grantor agrees that any copy
of this Agreement signed by the Grantor and transmitted by telecopier for
delivery to the Agent shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence.
(h) Binding Nature. This Agreement shall be binding upon and inure to the
benefit of the successors, assigns or other legal representatives of the
Grantor, and shall, together with the rights and remedies of the Agent and the
Lender hereunder, be binding upon and inure to the benefit of the Agent and the
Lender, each of its successors, assigns or other legal representatives.
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(i) Counterparts. This Agreement may be executed by the parties hereto
individually or in any combination, in one or more counterparts, each of which
shall be an original and all of which shall together constitute one and the same
agreement.
(j) Schedules. The Agent is authorized to annex hereto any schedules
referred to herein.
(k) Acknowledgment of Receipt. The Grantor acknowledges receipt of a copy
of this Agreement.
(l) Controlling Agreement. The parties hereto further specifically agree
that the Financing Agreement shall be deemed controlling in the event of any
conflict with this Agreement with respect to the Collateral.
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<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed
and delivered by its officer thereunto duly authorized, as of the date first
above written.
SPRINGDALE FASHIONS, INC.
By: /s/ William L. Cohen
------------------------------
Name: William L. Cohen
Title: President
TORTONI MANUFACTURING CORP.
By: /s/ William L. Cohen
------------------------------
Name: William L. Cohen
Title: President
STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
------------------------------
Name: William L. Cohen
Title: President
23
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SCHEDULE I
TO
SUBSIDIARY SECURITY AGREEMENT
1. Location(s) of Equipment and Inventory:
(1) SPRINGDALE FASHIONS, INC.:
605 East Railroad Street
Clinton, North Carolina 28328
(2) TORTONI MANUFACTURING CORP.:
Zona Franca II
La Romana, Dominican Republic
(3) STONEHENGE FINANCIAL CORP.:
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
2. Grantor's chief place of business, chief executive office and place where
the Grantor keeps its records concerning Accounts and General Intangibles:
(1) SPRINGDALE FASHIONS, INC.:
(a) Location Where Records Kept:
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
(b) Chief Place of Business:
605 East Railroad Street
Clinton, N.C. 28328
(c) Chief Executive Office:
Main Street
Pisgah, Alabama 35765
(2) TORTONI MANUFACTURING CORP.:
Zona Franca II
La Romana, Dominican Republic
24
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<PAGE>
(3) STONEHENGE FINANCIAL CORP.:
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
25
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<PAGE>
SCHEDULE II
TO
SUBSIDIARY SECURITY AGREEMENT
Trade Names, Etc.
Name Corporation
- ---- -----------
None Stonehenge Financial Corp.
None Springdale Fashions, Inc.
None Tortoni Manufacturing Corp.
26
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<PAGE>
SCHEDULE III
TO
SUBSIDIARY SECURITY AGREEMENT
Permitted Encumbrances
None
27
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<PAGE>
AMENDED AND RESTATED GUARANTY
AMENDED AND RESTATED GUARANTY dated as of May 12, 1997, by
Springdale Fashions, Inc., a Delaware corporation, (the "Guarantor"), in favor
of The CIT Group/Commercial Services, Inc., a Delaware corporation, as agent
("Agent") for the Lenders named in the Amended and Restated Financing and
Security Agreement dated of even date herewith, among The CIT Group/Commercial
Services, Inc. ("CIT") and the other lender party thereto (the "Lender"), the
Agent and Andover Togs, Inc. (the "Borrower"), as Borrower (as the same may from
time to time be amended, modified or supplemented, the "Financing Agreement");
capitalized terms used herein and not otherwise defined herein shall have the
meanings attributed thereto in the Financing Agreement.
WHEREAS, Andover Togs, Inc. (the "Borrower") and the Guarantor filed
a voluntary petition for relief under chapter 11, title 11, of the United States
Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the
Southern District of New York (the "Court").
WHEREAS, the Borrower and CIT have heretofore entered into that
certain Replacement DIP Financing and Security Agreement dated as of September
19, 1996 (as amended, the "Original Financing Agreement").
WHEREAS, Springdale Fashions, Inc., a debtor in possession (the
"Original Guarantor") has heretofore executed and delivered to CIT that certain
Guaranty dated September 19, 1996 (the "Original Guaranty") under the Original
Guarantor agreed to guaranty the obligations of the Borrower in favor of CIT.
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs,
Inc. and certain affiliates including the Guarantor (the "Plan of
Reorganization") and under chapter 11 of the Bankruptcy Code, the Original
Guarantor will reorganize its business and operations, which Plan of
Reorganization was confirmed by order of the Court entered on April 10, 1997.
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WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Borrower and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement and
Springdale Fashions, Inc. has entered into that certain amended and Restated
Guaranty (the "Guaranty") of the date hereof, amending and restating, in its
entirety, the Original Guaranty.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to
renew, modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that Springdale Fashions,
Inc. confirm and assure by its execution and delivery of this Guaranty that it
remains liable in its capacity as Guarantor for the obligations of the Borrower
that the Collateral (as hereinafter defined) is and remains collateral security
for the Guaranteed Obligations (as such term is defined in the Guaranty
Agreement) and for all other credit from time to time extended by CIT to the
Borrower under the Financing Agreement and for all other obligations thereunder.
The Agent and the Lender have agreed to extend Loans and certain
other financial accommodations, including, without limitation, assisting in the
issuance of the Letters of Credit to the Borrower pursuant to, and subject to
the terms and conditions of, the Financing Agreement. The obligations of the
Lender under the Financing Agreement to extend such Loans and other financial
accommodations and to assist the Borrower in obtaining Letters of Credit are
conditioned on the execution and delivery by the Guarantor of a guaranty in the
form hereof of the Obligations (such Obligations to include, without limitation,
the due and punctual payment and performance of (a) the obligation of the
Borrower to pay the principal of and interest on the Loans, when and as due,
whether at maturity, by acceleration, upon one or
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more dates set for prepayment or otherwise, (b) Indebtedness of the Borrower at
any time and from time to time under any Letters of Credit and (c) all other
obligations of the Borrower at any time and from time to time under the
Financing Agreement and the other Loan Documents.
Accordingly, in consideration of the premises and in order to induce
the Agent and the Lender to make Loans and extend other financial accommodations
under the Financing Agreement, the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Borrower (including, without limitation,
obligations under the Financing Agreement)(the foregoing being herein referred
to as the "Guaranteed Obligations"); provided, however, that anything to the
contrary notwithstanding, the maximum liability of the Guarantor hereunder and
under the other Loan Documents shall not exceed an amount equal to the largest
amount that would not render the Guarantor's obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
equivalent provision of the law of any state.
Section 2. Waiver. The Guarantor hereby absolutely, unconditionally
and irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment, demand of payment, protest, notice of dishonor or
nonpayment and any other notice with respect to the Guaranteed Obligations,
(iii) any requirement that the Agent or Lender protect, secure, perfect or
insure any security interest or Lien or any property subject thereto or exhaust
any right or take any action against the Borrower or any other person or any
Collateral, and (iv) any other action, event or precondition to the enforcement
of this Guaranty or the performance by the Guarantor of the obligations
hereunder.
Section 3. Guaranty Absolute. (a) The Guarantor guarantees that, to
the fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in
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accordance with their terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or any Lender with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Financing Agreement, the Note(s), or any other Loan
Document or any other agreement or instrument relating thereto, or of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty.
(c) This Guaranty is one of payment and performance and not
collection and the obligations of the Guarantor under this Guaranty are
independent of the Obligations of the Borrower, and a separate action or actions
may be brought and prosecuted against the Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Borrower or whether
the Borrower is joined in any such action or actions.
(d) The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Financing Agreement or the Notes or any other Loan Document,
including any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrower or any of its subsidiaries
or otherwise;
(ii) any sale, exchange, release, surrender, realization upon
any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or any of the Guaranteed Obligations, and/or any
offset thereagainst, or failure to perfect, or continue the perfection of,
any Lien in any such property, or delay in the perfection of any such
Lien, or any amendment or waiver
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of or consent to departure from any other guaranty for all or any of the
Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against
the Borrower or others (including the Guarantor);
(iv) any settlement or compromise of any security for any
Obligation, or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and any subordination
of the payment of all or any part thereof to the payment of any Obligation
(whether due or not) of the Borrower to creditors of the Borrower other
than the Guarantor;
(v) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other assets of the Borrower or any of its
subsidiaries;
(vi) any change, restructuring or termination of the existence
of the Borrower or any of its subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or a
discharge of, this Guaranty and/or obligations of the Guarantor hereunder,
or a defense to, or discharge of, the Borrower or any other person or
party relating to this Guaranty or the obligations of the Guarantor
hereunder or otherwise with respect to the Loans, Letters of Credit or
other financial accommodations to the Borrower.
(e) The Agent may at any time and from time to time (whether or not
after revocation or termination of this Guaranty) without the consent of, or
notice (except as shall be required by applicable statute and cannot be waived)
to, the Guarantor, and without incurring responsibility to the Guarantor or
impairing or releasing the obligations of the Guarantor hereunder, apply any
sums by whomsoever paid or howsoever realized to any Guaranteed
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Obligation regardless of what Guaranteed Obligations remain unpaid.
(f) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if claim is ever made upon the Agent or any Lender for
repayment or recovery of any amount or amounts received by the Agent or such
Lender in payment or on account of any of the Guaranteed Obligations and the
Agent or such Lender repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over the Agent or such Lender or the respective property of each,
or any settlement or compromise of any such claim effected by the Agent or such
Lender with any such claimant (including the Borrower), then and in such event
the Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantor, notwithstanding any revocation
hereof or the cancellation of any note (including the Notes) or other instrument
evidencing any Obligation, and the Guarantor shall be and remain liable to the
Agent and/or such Lender hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by the Agent or
such Lender.
Section 4. Continuing Guaranty. This Guaranty is a continuing one
and shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Agent and its successors, transferees and assigns. All
obligations to which this Guaranty applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon.
Section 5. Representations, Warranties and Covenants. The Guarantor
hereby represents, warrants and covenants to and with the Agent that:
(a) The Guarantor has the corporate power to execute and deliver
this Guaranty and to incur and perform its obligations hereunder;
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(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of this Guaranty and to
incur and perform its obligations hereunder;
(c) Other than the entry by the Bankruptcy Court of the Confirmation
Order, no consent, approval, authorization or other action by, and no
notice to or of, or declaration or filing with, any governmental or other
public body, or any other Person, is required for the due authorization,
execution, delivery and performance by the Guarantor of this Guaranty or
the consummation of the transactions contemplated hereby;
(d) The execution, delivery and performance by the Guarantor of this
Guaranty do not and will not violate or otherwise conflict with any term
or provision of any material agreement, instrument, judgment, decree,
order or any statute, rule or governmental regulation applicable to the
Guarantor or result in the creation of any Lien upon any of its properties
or assets pursuant thereto;
(e) This Guaranty has been duly authorized, executed and delivered
by the Guarantor and constitutes the legal, valid and binding obligation
of the Guarantor, and is enforceable against the Guarantor in accordance
with its terms, except as enforcement thereof may be subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law); and
(f) No proceeding referred to in paragraph (e) or (f) of Section
12.01 the Financing Agreement is pending against the Guarantor and no
other event referred to in such Section 12.01 has occurred and is
continuing, and the property of the Guarantor is not subject to any
assignment for the benefit of creditors.
Section 6. Expenses. The Guarantor will upon demand reimburse the
Agent for any sums, costs, and expenses which the
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Agent may reasonably pay or incur pursuant to the provisions of this Guaranty or
in negotiating, executing, perfecting, defending, protecting or enforcing this
Guaranty or in enforcing payment of the Guaranteed Obligations or otherwise in
connection with the provisions hereof, including court costs, collection
charges, travel expenses, and reasonable attorneys' fees, together with interest
thereon as specified in Section 12 hereof. The Guarantor shall not be required
to pay any such sums if such sums have been paid by the Borrower under the
Financing Agreement.
Section 7. Terms. (a) All terms defined in the UCC and used herein
shall have the meanings as defined in the UCC, unless the context otherwise
requires.
(b) The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guaranty unless the
context shall otherwise require.
Section 8. Amendments and Modification. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring to
this Guaranty and to such provision, and executed by the party to be charged.
Section 9. Subrogation. The Guarantor will not exercise any rights
which it may acquire by way of subrogation hereunder, by any payment made by it
hereunder or otherwise, until the Financing Agreement is terminated and all of
the Obligations and all other expenses to be paid by the Guarantor pursuant
hereto shall have been satisfied in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all of the
Obligations and all such other expenses shall not have been paid in full or the
Financing Agreement is not terminated, such amount shall be held in trust for
the benefit of the Agent, shall be segregated from the other funds of the
Guarantor and shall forthwith be paid over to the Agent to be applied in whole
or in part by the Agent against the
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Obligations, whether matured or unmatured, and all such other expenses in
accordance with the terms of the Financing Agreement.
Section 10. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Agent may,
without notice to or demand upon the Borrower or the Guarantor, declare any
Guaranteed Obligations immediately due and payable, and shall be entitled to
enforce the obligations of the Guarantor hereunder.
(b) Upon such declaration by the Agent, the Agent and any Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Agent or any Lender to or for the credit or the account of
the Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under this Guaranty, whether or not the Agent or such Lender
shall have made any demand under this Guaranty and although such obligations may
be contingent and unmatured. The Agent agrees promptly to notify the Guarantor
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Agent and Lender under this Section 10 are in addition to other rights
and remedies (including other rights of set-off) which the Agent and Lender may
have.
Section 11. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether by
the Borrower or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Agent or Lender shall have commenced to run, toll the
running of such statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.
Section 12. Interest. All amounts payable from time to time by the
Guarantor pursuant to Section 6 hereunder shall bear interest at the Default
Rate of Interest.
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Section 13. Rights and Remedies Not Waived. No act, omission or
delay by the Agent shall constitute a waiver of its rights and remedies
hereunder or otherwise. No single or partial waiver by the Agent of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 14. Admissibility of Guaranty. The Guarantor agrees that any
copy of this Guaranty signed by the Guarantor and transmitted by telecopier for
delivery to the Agent shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence.
Section 15. Notices. All notices, requests and demands to or upon
the Agent or the Guarantor under this Agreement shall be in writing and given as
provided in the Financing Agreement, provided that in the case of the Guarantor,
notice shall be given to the Borrower.
Section 16. Counterparts. This Guaranty may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original
and all of which shall together constitute one and the same agreement.
Section 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. (a)
In any litigation in any court with respect to, in connection with, or arising
out of this Guaranty or any instrument or document delivered pursuant to this
Guaranty, or the validity, protection, interpretation, collection or enforcement
thereof, or any other claim or dispute howsoever arising, between the Guarantor
on the one hand and the Agent and the Lender on the other hand, the Guarantor,
to the fullest extent it may effectively do so, (i) waives the right to
interpose any setoff, recoupment, counterclaim or cross-claim in connection with
any such litigation, irrespective of the nature of such setoff, recoupment,
counterclaim or cross-claim, unless such setoff, recoupment, counterclaim or
cross-claim could not, by reason of any applicable Federal or State procedural
laws, be interposed, pleaded or alleged in any other action and
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(ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE GUARANTOR AGREES THAT THIS SECTION 17(a) IS A SPECIFIC AND
MATERIAL ASPECT OF THIS GUARANTY AND ACKNOWLEDGES THAT THE LENDER WOULD NOT
EXTEND TO THE BORROWER ANY FINANCIAL ACCOMMODATIONS UNDER THE FINANCING
AGREEMENT IF THIS SECTION 17(a) WERE NOT PART OF THIS GUARANTY.
(b) The Guarantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Guaranty or any document or instrument
delivered pursuant to this Guaranty. In any such litigation, the Guarantor
waives, to the fullest extent it may effectively do so, personal service of any
summons, complaint or other process and agrees that the service thereof may be
made by certified or registered mail directed to the Guarantor at its address
for notice determined in accordance with Section 15 hereof. The Guarantor hereby
waives, to the fullest extent it may effectively do so, the defenses of forum
non conveniens and improper venue.
(c) The Guarantor hereby waives presentment, notice of dishonor and
protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
Section 18. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. Captions; Separability. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Guaranty.
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(b) If any term of this Guaranty shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
Section 20. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guaranty and each of the Loan Documents.
Section 21. Confirmation and Restatement of the Guaranties. The
Original Guarantor hereby confirms its guaranty of the Guaranteed Obligations
and all other obligations under this Guaranty and by the execution and delivery
of this Guaranty by each Original Guarantor, each Original Guarantor
acknowledges and agrees that the terms of the Original Guaranty are hereby
superseded and restated in their entirety by this Guaranty without thereby
cancelling, satisfying or discharging the obligations of each Original Guarantor
thereunder.
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IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guaranty to be duly executed in the State of New York as of the date first above
set forth.
SPRINGDALE FASHIONS, INC.
By: /s/ William L. Cohen
-----------------------
Name: William L. Cohen
Title: President
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AMENDED AND RESTATED GUARANTY
AMENDED AND RESTATED GUARANTY dated as of May 12, 1997, by Tortoni
Manufacturing Corp., a Delaware corporation, (the "Guarantor"), in favor of The
CIT Group/Commercial Services, Inc., a Delaware corporation, as agent ("Agent")
for the Lender named in the Amended and Restated Financing and Security
Agreement dated of even date herewith, among The CIT Group/Commercial Services,
Inc. ("CIT") and the lender party thereto (the "Lender"), the Agent and Andover
Togs, Inc. (the "Borrower"), as Borrower (as the same may from time to time be
amended, modified or supplemented, the "Financing Agreement"); capitalized terms
used herein and not otherwise defined herein shall have the meanings attributed
thereto in the Financing Agreement.
WHEREAS, Andover Togs, Inc. (the "Borrower") and the Guarantor filed
a voluntary petition for relief under chapter 11, title 11, of the United States
Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the
Southern District of New York (the "Court").
WHEREAS, the Borrower and CIT have heretofore entered into that
certain Replacement DIP Financing and Security Agreement dated as of September
19, 1996 (as amended, the "Original Financing Agreement").
WHEREAS, Tortoni Manufacturing Corp., a debtor in possession (the
"Original Guarantor") has heretofore executed and delivered to CIT that certain
Guaranty dated September 19, 1996 (the "Original Guaranty") under the Original
Guarantor agreed to guaranty the obligations of the Borrower in favor of CIT.
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs,
Inc. and certain affiliates including the Guarantor (the "Plan of
Reorganization") and under chapter 11 of the Bankruptcy Code, the Original
Guarantor will reorganize its business and operations, which Plan of
Reorganization was confirmed by order of the Court entered on April 10, 1997.
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WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Borrower and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement and
Tortoni Manufacturing Corp., has entered into that certain amended and Restated
Guaranty (the "Guaranty") of the date hereof, amending and restating, in its
entirety, the Original Guaranty.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to
renew, modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that Tortoni Manufacturing
Corp., confirms and assures by its execution and delivery of this Guaranty that
it remains liable in its capacity as Guarantor for the obligations of the
Borrower that the Collateral (as hereinafter defined) is and remains collateral
security for the Guaranteed Obligations (as such term is defined in the Guaranty
Agreement) and for all other credit from time to time extended by CIT to the
Borrower under the Financing Agreement and for all other obligations thereunder.
The Agent and the Lender have agreed to extend Loans and certain
other financial accommodations, including, without limitation, assisting in the
issuance of the Letters of Credit to the Borrower pursuant to, and subject to
the terms and conditions of, the Financing Agreement. The obligations of the
Lenders under the Financing Agreement to extend such Loans and other financial
accommodations and to assist the Borrower in obtaining Letters of Credit are
conditioned on the execution and delivery by the Guarantor of a guaranty in the
form hereof of the Obligations (such Obligations to include, without limitation,
the due and punctual payment and performance of (a) the obligation of the
Borrower to pay the principal of and interest on the Loans, when and as due,
whether at maturity, by acceleration, upon one or
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more dates set for prepayment or otherwise, (b) Indebtedness of the Borrower at
any time and from time to time under any Letters of Credit and (c) all other
obligations of the Borrower at any time and from time to time under the
Financing Agreement and the other Loan Documents.
Accordingly, in consideration of the premises and in order to induce
the Agent and the Lender to make Loans and extend other financial accommodations
under the Financing Agreement, the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Borrower (including, without limitation,
obligations under the Financing Agreement)(the foregoing being herein referred
to as the "Guaranteed Obligations"); provided, however, that anything to the
contrary notwithstanding, the maximum liability of the Guarantor hereunder and
under the other Loan Documents shall not exceed an amount equal to the largest
amount that would not render the Guarantor's obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
equivalent provision of the law of any state.
Section 2. Waiver. The Guarantor hereby absolutely, unconditionally
and irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment, demand of payment, protest, notice of dishonor or
nonpayment and any other notice with respect to the Guaranteed Obligations,
(iii) any requirement that the Agent or Lender protect, secure, perfect or
insure any security interest or Lien or any property subject thereto or exhaust
any right or take any action against the Borrower or any other person or any
Collateral, and (iv) any other action, event or precondition to the enforcement
of this Guaranty or the performance by the Guarantor of the obligations
hereunder.
Section 3. Guaranty Absolute. (a) The Guarantor guarantees that, to
the fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in
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accordance with their terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or any Lender with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Financing Agreement, the Note(s), or any other Loan
Document or any other agreement or instrument relating thereto, or of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty.
(c) This Guaranty is one of payment and performance and not
collection and the obligations of the Guarantor under this Guaranty are
independent of the Obligations of the Borrower, and a separate action or actions
may be brought and prosecuted against the Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Borrower or whether
the Borrower is joined in any such action or actions.
(d) The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Financing Agreement or the Notes or any other Loan Document,
including any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrower or any of its subsidiaries
or otherwise;
(ii) any sale, exchange, release, surrender, realization upon
any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or any of the Guaranteed Obligations, and/or any
offset thereagainst, or failure to perfect, or continue the perfection of,
any Lien in any such property, or delay in the perfection of any such
Lien, or any amendment or waiver
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of or consent to departure from any other guaranty for all or any of the
Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against
the Borrower or others (including the Guarantor);
(iv) any settlement or compromise of any security for any
Obligation, or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and any subordination
of the payment of all or any part thereof to the payment of any Obligation
(whether due or not) of the Borrower to creditors of the Borrower other
than the Guarantor;
(v) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other assets of the Borrower or any of its
subsidiaries;
(vi) any change, restructuring or termination of the existence
of the Borrower or any of its subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or a
discharge of, this Guaranty and/or obligations of the Guarantor hereunder,
or a defense to, or discharge of, the Borrower or any other person or
party relating to this Guaranty or the obligations of the Guarantor
hereunder or otherwise with respect to the Loans, Letters of Credit or
other financial accommodations to the Borrower.
(e) The Agent may at any time and from time to time (whether or not
after revocation or termination of this Guaranty) without the consent of, or
notice (except as shall be required by applicable statute and cannot be waived)
to, the Guarantor, and without incurring responsibility to the Guarantor or
impairing or releasing the obligations of the Guarantor hereunder, apply any
sums by whomsoever paid or howsoever realized to any Guaranteed
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Obligation regardless of what Guaranteed Obligations remain unpaid.
(f) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if claim is ever made upon the Agent or any Lender for
repayment or recovery of any amount or amounts received by the Agent or such
Lender in payment or on account of any of the Guaranteed Obligations and the
Agent or such Lender repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over the Agent or such Lender or the respective property of each,
or any settlement or compromise of any such claim effected by the Agent or such
Lender with any such claimant (including the Borrower), then and in such event
the Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantor, notwithstanding any revocation
hereof or the cancellation of any note (including the Notes) or other instrument
evidencing any Obligation, and the Guarantor shall be and remain liable to the
Agent and/or such Lender hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by the Agent or
such Lender.
Section 4. Continuing Guaranty. This Guaranty is a continuing one
and shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Agent and its successors, transferees and assigns. All
obligations to which this Guaranty applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon.
Section 5. Representations, Warranties and Covenants. The Guarantor
hereby represents, warrants and covenants to and with the Agent that:
(a) The Guarantor has the corporate power to execute and deliver
this Guaranty and to incur and perform its obligations hereunder;
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(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of this Guaranty and to
incur and perform its obligations hereunder;
(c) Other than the entry by the Bankruptcy Court of the Confirmation
Order, no consent, approval, authorization or other action by, and no
notice to or of, or declaration or filing with, any governmental or other
public body, or any other Person, is required for the due authorization,
execution, delivery and performance by the Guarantor of this Guaranty or
the consummation of the transactions contemplated hereby;
(d) The execution, delivery and performance by the Guarantor of this
Guaranty do not and will not violate or otherwise conflict with any term
or provision of any material agreement, instrument, judgment, decree,
order or any statute, rule or governmental regulation applicable to the
Guarantor or result in the creation of any Lien upon any of its properties
or assets pursuant thereto;
(e) This Guaranty has been duly authorized, executed and delivered
by the Guarantor and constitutes the legal, valid and binding obligation
of the Guarantor, and is enforceable against the Guarantor in accordance
with its terms, except as enforcement thereof may be subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law); and
(f) No proceeding referred to in paragraph (e) or (f) of Section
12.01 the Financing Agreement is pending against the Guarantor and no
other event referred to in such Section 12.01 has occurred and is
continuing, and the property of the Guarantor is not subject to any
assignment for the benefit of creditors.
Section 6. Expenses. The Guarantor will upon demand reimburse the
Agent for any sums, costs, and expenses which the
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Agent may reasonably pay or incur pursuant to the provisions of this Guaranty or
in negotiating, executing, perfecting, defending, protecting or enforcing this
Guaranty or in enforcing payment of the Guaranteed Obligations or otherwise in
connection with the provisions hereof, including court costs, collection
charges, travel expenses, and reasonable attorneys' fees, together with interest
thereon as specified in Section 12 hereof. The Guarantor shall not be required
to pay any such sums if such sums have been paid by the Borrower under the
Financing Agreement.
Section 7. Terms. (a) All terms defined in the UCC and used herein
shall have the meanings as defined in the UCC, unless the context otherwise
requires.
(b) The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guaranty unless the
context shall otherwise require.
Section 8. Amendments and Modification. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring to
this Guaranty and to such provision, and executed by the party to be charged.
Section 9. Subrogation. The Guarantor will not exercise any rights
which it may acquire by way of subrogation hereunder, by any payment made by it
hereunder or otherwise, until the Financing Agreement is terminated and all of
the Obligations and all other expenses to be paid by the Guarantor pursuant
hereto shall have been satisfied in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all of the
Obligations and all such other expenses shall not have been paid in full or the
Financing Agreement is not terminated, such amount shall be held in trust for
the benefit of the Agent, shall be segregated from the other funds of the
Guarantor and shall forthwith be paid over to the Agent to be applied in whole
or in part by the Agent against the
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Obligations, whether matured or unmatured, and all such other expenses in
accordance with the terms of the Financing Agreement.
Section 10. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Agent may,
without notice to or demand upon the Borrower or the Guarantor, declare any
Guaranteed Obligations immediately due and payable, and shall be entitled to
enforce the obligations of the Guarantor hereunder.
(b) Upon such declaration by the Agent, the Agent and any Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Agent or any Lender to or for the credit or the account of
the Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under this Guaranty, whether or not the Agent or such Lender
shall have made any demand under this Guaranty and although such obligations may
be contingent and unmatured. The Agent agrees promptly to notify the Guarantor
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Agent and Lender under this Section 10 are in addition to other rights
and remedies (including other rights of set-off) which the Agent and Lender may
have.
Section 11. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether by
the Borrower or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Agent or Lender shall have commenced to run, toll the
running of such statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.
Section 12. Interest. All amounts payable from time to time by the
Guarantor pursuant to Section 6 hereunder shall bear interest at the Default
Rate of Interest.
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Section 13. Rights and Remedies Not Waived. No act, omission or
delay by the Agent shall constitute a waiver of its rights and remedies
hereunder or otherwise. No single or partial waiver by the Agent of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 14. Admissibility of Guaranty. The Guarantor agrees that any
copy of this Guaranty signed by the Guarantor and transmitted by telecopier for
delivery to the Agent shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence.
Section 15. Notices. All notices, requests and demands to or upon
the Agent or the Guarantor under this Agreement shall be in writing and given as
provided in the Financing Agreement, provided that in the case of the Guarantor,
notice shall be given to the Borrower.
Section 16. Counterparts. This Guaranty may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original
and all of which shall together constitute one and the same agreement.
Section 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. (a)
In any litigation in any court with respect to, in connection with, or arising
out of this Guaranty or any instrument or document delivered pursuant to this
Guaranty, or the validity, protection, interpretation, collection or enforcement
thereof, or any other claim or dispute howsoever arising, between the Guarantor
on the one hand and the Agent and the Lender on the other hand, the Guarantor,
to the fullest extent it may effectively do so, (i) waives the right to
interpose any setoff, recoupment, counterclaim or cross-claim in connection with
any such litigation, irrespective of the nature of such setoff, recoupment,
counterclaim or cross-claim, unless such setoff, recoupment, counterclaim or
cross-claim could not, by reason of any applicable Federal or State procedural
laws, be interposed, pleaded or alleged in any other action and
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(ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE GUARANTOR AGREES THAT THIS SECTION 17(a) IS A SPECIFIC AND
MATERIAL ASPECT OF THIS GUARANTY AND ACKNOWLEDGES THAT THE LENDER WOULD NOT
EXTEND TO THE BORROWER ANY FINANCIAL ACCOMMODATIONS UNDER THE FINANCING
AGREEMENT IF THIS SECTION 17(a) WERE NOT PART OF THIS GUARANTY.
(b) The Guarantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Guaranty or any document or instrument
delivered pursuant to this Guaranty. In any such litigation, the Guarantor
waives, to the fullest extent it may effectively do so, personal service of any
summons, complaint or other process and agrees that the service thereof may be
made by certified or registered mail directed to the Guarantor at its address
for notice determined in accordance with Section 15 hereof. The Guarantor hereby
waives, to the fullest extent it may effectively do so, the defenses of forum
non conveniens and improper venue.
(c) The Guarantor hereby waives presentment, notice of dishonor and
protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
Section 18. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. Captions; Separability. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Guaranty.
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(b) If any term of this Guaranty shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
Section 20. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guaranty and each of the Loan Documents.
Section 21. Confirmation and Restatement of the Guaranties. The
Original Guarantor hereby confirms its guaranty of the Guaranteed Obligations
and all other obligations under this Guaranty and by the execution and delivery
of this Guaranty by each Original Guarantor, each Original Guarantor
acknowledges and agrees that the terms of the Original Guaranty are hereby
superseded and restated in their entirety by this Guaranty without thereby
cancelling, satisfying or discharging the obligations of each Original Guarantor
thereunder.
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IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guaranty to be duly executed in the State of New York as of the date first above
set forth.
TORTONI MANUFACTURING CORP.
By: /s/ William L. Cohen
-----------------------------
Name: William L. Cohen
Title: President
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AMENDED AND RESTATED GUARANTY
AMENDED AND RESTATED GUARANTY dated as of May 12, 1997, by
Stonehenge Financial Corp., a New York corporation, (the "Guarantor"), in favor
of The CIT Group/Commercial Services, Inc., a Delaware corporation, as agent
("Agent") for the Lender named in the Amended and Restated Financing and
Security Agreement dated of even date herewith, among The CIT Group/ Commercial
Services, Inc. ("CIT") and the other lender party thereto (the "Lender"), the
Agent and Andover Togs, Inc. (the "Borrower"), as Borrower (as the same may from
time to time be amended, modified or supplemented, the "Financing Agreement");
capitalized terms used herein and not otherwise defined herein shall have the
meanings attributed thereto in the Financing Agreement.
WHEREAS, Andover Togs, Inc. (the "Borrower") and the Guarantor filed
a voluntary petition for relief under chapter 11, title 11, of the United States
Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the
Southern District of New York (the "Court").
WHEREAS, the Borrower and CIT have heretofore entered into that
certain Replacement DIP Financing and Security Agreement dated as of September
19, 1996 (as amended, the "Original Financing Agreement").
WHEREAS, Stonehenge Financial Corp., a debtor in possession (the
"Original Guarantor") has heretofore executed and delivered to CIT that certain
Guaranty dated September 19, 1996 (the "Original Guaranty") under the Original
Guarantor agreed to guaranty the obligations of the Borrower in favor of CIT.
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs,
Inc. and certain affiliates including the Guarantor (the "Plan of
Reorganization") and under chapter 11 of the Bankruptcy Code, the Original
Guarantor will reorganize its business and operations, which Plan of
Reorganization was confirmed by order of the Court entered on April 10, 1997.
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WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Borrower and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement and
Stonehenge Financial Corp. has entered into that certain amended and Restated
Guaranty (the "Guaranty") of the date hereof, amending and restating, in its
entirety, the Original Guaranty.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to
renew, modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that Stonehenge Financial
Corp. confirms and assures by its execution and delivery of this Guaranty that
it remains liable in its capacity as Guarantor for the obligations of the
Borrower that the Collateral (as hereinafter defined) is and remains collateral
security for the Guaranteed Obligations (as such term is defined in the Guaranty
Agreement) and for all other credit from time to time extended by CIT to the
Borrower under the Financing Agreement and for all other obligations thereunder.
The Agent and the Lender have agreed to extend Loans and certain
other financial accommodations, including, without limitation, assisting in the
issuance of the Letters of Credit to the Borrower pursuant to, and subject to
the terms and conditions of, the Financing Agreement. The obligations of the
Lenders under the Financing Agreement to extend such Loans and other financial
accommodations and to assist the Borrower in obtaining Letters of Credit are
conditioned on the execution and delivery by the Guarantor of a guaranty in the
form hereof of the Obligations (such Obligations to include, without limitation,
the due and punctual payment and performance of (a) the obligation of the
Borrower to pay the principal of and interest on the Loans, when and as due,
whether at maturity, by acceleration, upon one or
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more dates set for prepayment or otherwise, (b) Indebtedness of the Borrower at
any time and from time to time under any Letters of Credit and (c) all other
obligations of the Borrower at any time and from time to time under the
Financing Agreement and the other Loan Documents.
Accordingly, in consideration of the premises and in order to induce
the Agent and the Lender to make Loans and extend other financial accommodations
under the Financing Agreement, the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Borrower (including, without limitation,
obligations under the Financing Agreement)(the foregoing being herein referred
to as the "Guaranteed Obligations"); provided, however, that anything to the
contrary notwithstanding, the maximum liability of the Guarantor hereunder and
under the other Loan Documents shall not exceed an amount equal to the largest
amount that would not render the Guarantor's obligations hereunder subject to
avoidance under Section 548 of the United States Bankruptcy Code or any
equivalent provision of the law of any state.
Section 2. Waiver. The Guarantor hereby absolutely, unconditionally
and irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment, demand of payment, protest, notice of dishonor or
nonpayment and any other notice with respect to the Guaranteed Obligations,
(iii) any requirement that the Agent or Lender protect, secure, perfect or
insure any security interest or Lien or any property subject thereto or exhaust
any right or take any action against the Borrower or any other person or any
Collateral, and (iv) any other action, event or precondition to the enforcement
of this Guaranty or the performance by the Guarantor of the obligations
hereunder.
Section 3. Guaranty Absolute. (a) The Guarantor guarantees that, to
the fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in
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accordance with their terms, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of the Agent or any Lender with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Financing Agreement, the Note(s), or any other Loan
Document or any other agreement or instrument relating thereto, or of all or any
part of the Guaranteed Obligations or of any security therefor shall affect,
impair or be a defense to this Guaranty.
(c) This Guaranty is one of payment and performance and not
collection and the obligations of the Guarantor under this Guaranty are
independent of the Obligations of the Borrower, and a separate action or actions
may be brought and prosecuted against the Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against the Borrower or whether
the Borrower is joined in any such action or actions.
(d) The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Financing Agreement or the Notes or any other Loan Document,
including any increase in the Guaranteed Obligations resulting from the
extension of additional credit to the Borrower or any of its subsidiaries
or otherwise;
(ii) any sale, exchange, release, surrender, realization upon
any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or any of the Guaranteed Obligations, and/or any
offset thereagainst, or failure to perfect, or continue the perfection of,
any Lien in any such property, or delay in the perfection of any such
Lien, or any amendment or waiver
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of or consent to departure from any other guaranty for all or any of the
Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against
the Borrower or others (including the Guarantor);
(iv) any settlement or compromise of any security for any
Obligation, or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and any subordination
of the payment of all or any part thereof to the payment of any Obligation
(whether due or not) of the Borrower to creditors of the Borrower other
than the Guarantor;
(v) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other assets of the Borrower or any of its
subsidiaries;
(vi) any change, restructuring or termination of the existence
of the Borrower or any of its subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or a
discharge of, this Guaranty and/or obligations of the Guarantor hereunder,
or a defense to, or discharge of, the Borrower or any other person or
party relating to this Guaranty or the obligations of the Guarantor
hereunder or otherwise with respect to the Loans, Letters of Credit or
other financial accommodations to the Borrower.
(e) The Agent may at any time and from time to time (whether or not
after revocation or termination of this Guaranty) without the consent of, or
notice (except as shall be required by applicable statute and cannot be waived)
to, the Guarantor, and without incurring responsibility to the Guarantor or
impairing or releasing the obligations of the Guarantor hereunder, apply any
sums by whomsoever paid or howsoever realized to any Guaranteed
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Obligation regardless of what Guaranteed Obligations remain unpaid.
(f) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if claim is ever made upon the Agent or any Lender for
repayment or recovery of any amount or amounts received by the Agent or such
Lender in payment or on account of any of the Guaranteed Obligations and the
Agent or such Lender repays all or part of said amount by reason of any
judgment, decree or order of any court or administrative body having
jurisdiction over the Agent or such Lender or the respective property of each,
or any settlement or compromise of any such claim effected by the Agent or such
Lender with any such claimant (including the Borrower), then and in such event
the Guarantor agrees that any such judgment, decree, order, settlement or
compromise shall be binding upon the Guarantor, notwithstanding any revocation
hereof or the cancellation of any note (including the Notes) or other instrument
evidencing any Obligation, and the Guarantor shall be and remain liable to the
Agent and/or such Lender hereunder for the amount so repaid or recovered to the
same extent as if such amount had never originally been received by the Agent or
such Lender.
Section 4. Continuing Guaranty. This Guaranty is a continuing one
and shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Agent and its successors, transferees and assigns. All
obligations to which this Guaranty applies or may apply under the terms hereof
shall be conclusively presumed to have been created in reliance hereon.
Section 5. Representations, Warranties and Covenants. The Guarantor
hereby represents, warrants and covenants to and with the Agent that:
(a) The Guarantor has the corporate power to execute and deliver
this Guaranty and to incur and perform its obligations hereunder;
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(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of this Guaranty and to
incur and perform its obligations hereunder;
(c) Other than the entry by the Bankruptcy Court of the Confirmation
Order, no consent, approval, authorization or other action by, and no
notice to or of, or declaration or filing with, any governmental or other
public body, or any other Person, is required for the due authorization,
execution, delivery and performance by the Guarantor of this Guaranty or
the consummation of the transactions contemplated hereby;
(d) The execution, delivery and performance by the Guarantor of this
Guaranty do not and will not violate or otherwise conflict with any term
or provision of any material agreement, instrument, judgment, decree,
order or any statute, rule or governmental regulation applicable to the
Guarantor or result in the creation of any Lien upon any of its properties
or assets pursuant thereto;
(e) This Guaranty has been duly authorized, executed and delivered
by the Guarantor and constitutes the legal, valid and binding obligation
of the Guarantor, and is enforceable against the Guarantor in accordance
with its terms, except as enforcement thereof may be subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law); and
(f) No proceeding referred to in paragraph (e) or (f) of Section
12.01 the Financing Agreement is pending against the Guarantor and no
other event referred to in such Section 12.01 has occurred and is
continuing, and the property of the Guarantor is not subject to any
assignment for the benefit of creditors.
Section 6. Expenses. The Guarantor will upon demand reimburse the
Agent for any sums, costs, and expenses which the
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Agent may reasonably pay or incur pursuant to the provisions of this Guaranty or
in negotiating, executing, perfecting, defending, protecting or enforcing this
Guaranty or in enforcing payment of the Guaranteed Obligations or otherwise in
connection with the provisions hereof, including court costs, collection
charges, travel expenses, and reasonable attorneys' fees, together with interest
thereon as specified in Section 12 hereof. The Guarantor shall not be required
to pay any such sums if such sums have been paid by the Borrower under the
Financing Agreement.
Section 7. Terms. (a) All terms defined in the UCC and used herein
shall have the meanings as defined in the UCC, unless the context otherwise
requires.
(b) The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guaranty unless the
context shall otherwise require.
Section 8. Amendments and Modification. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring to
this Guaranty and to such provision, and executed by the party to be charged.
Section 9. Subrogation. The Guarantor will not exercise any rights
which it may acquire by way of subrogation hereunder, by any payment made by it
hereunder or otherwise, until the Financing Agreement is terminated and all of
the Obligations and all other expenses to be paid by the Guarantor pursuant
hereto shall have been satisfied in full. If any amount shall be paid to the
Guarantor on account of such subrogation rights at any time when all of the
Obligations and all such other expenses shall not have been paid in full or the
Financing Agreement is not terminated, such amount shall be held in trust for
the benefit of the Agent, shall be segregated from the other funds of the
Guarantor and shall forthwith be paid over to the Agent to be applied in whole
or in part by the Agent against the
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Obligations, whether matured or unmatured, and all such other expenses in
accordance with the terms of the Financing Agreement.
Section 10. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Agent may,
without notice to or demand upon the Borrower or the Guarantor, declare any
Guaranteed Obligations immediately due and payable, and shall be entitled to
enforce the obligations of the Guarantor hereunder.
(b) Upon such declaration by the Agent, the Agent and any Lender is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by the Agent or any Lender to or for the credit or the account of
the Guarantor against any and all of the obligations of the Guarantor now or
hereafter existing under this Guaranty, whether or not the Agent or such Lender
shall have made any demand under this Guaranty and although such obligations may
be contingent and unmatured. The Agent agrees promptly to notify the Guarantor
after any such set-off and application, provided that the failure to give such
notice shall not affect the validity of such set-off and application. The rights
of the Agent and Lender under this Section 10 are in addition to other rights
and remedies (including other rights of set-off) which the Agent and Lender may
have.
Section 11. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether by
the Borrower or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Agent or Lender shall have commenced to run, toll the
running of such statute of limitations and, if the period of such statute of
limitations shall have expired, prevent the operation of such statute of
limitations.
Section 12. Interest. All amounts payable from time to time by the
Guarantor pursuant to Section 6 hereunder shall bear interest at the Default
Rate of Interest.
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Section 13. Rights and Remedies Not Waived. No act, omission or
delay by the Agent shall constitute a waiver of its rights and remedies
hereunder or otherwise. No single or partial waiver by the Agent of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 14. Admissibility of Guaranty. The Guarantor agrees that any
copy of this Guaranty signed by the Guarantor and transmitted by telecopier for
delivery to the Agent shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the original is in
existence.
Section 15. Notices. All notices, requests and demands to or upon
the Agent or the Guarantor under this Agreement shall be in writing and given as
provided in the Financing Agreement, provided that in the case of the Guarantor,
notice shall be given to the Borrower.
Section 16. Counterparts. This Guaranty may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original
and all of which shall together constitute one and the same agreement.
Section 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC.
(a) In any litigation in any court with respect to, in connection with, or
arising out of this Guaranty or any instrument or document delivered pursuant to
this Guaranty, or the validity, protection, interpretation, collection or
enforcement thereof, or any other claim or dispute howsoever arising, between
the Guarantor on the one hand and the Agent and the Lender on the other hand,
the Guarantor, to the fullest extent it may effectively do so, (i) waives the
right to interpose any setoff, recoupment, counterclaim or cross-claim in
connection with any such litigation, irrespective of the nature of such setoff,
recoupment, counterclaim or cross-claim, unless such setoff, recoupment,
counterclaim or cross-claim could not, by reason of any applicable Federal or
State procedural laws, be interposed, pleaded or alleged in any other action and
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(ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE GUARANTOR AGREES THAT THIS SECTION 17(a) IS A SPECIFIC AND
MATERIAL ASPECT OF THIS GUARANTY AND ACKNOWLEDGES THAT THE LENDER WOULD NOT
EXTEND TO THE BORROWER ANY FINANCIAL ACCOMMODATIONS UNDER THE FINANCING
AGREEMENT IF THIS SECTION 17(a) WERE NOT PART OF THIS GUARANTY.
(b) The Guarantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Guaranty or any document or instrument
delivered pursuant to this Guaranty. In any such litigation, the Guarantor
waives, to the fullest extent it may effectively do so, personal service of any
summons, complaint or other process and agrees that the service thereof may be
made by certified or registered mail directed to the Guarantor at its address
for notice determined in accordance with Section 15 hereof. The Guarantor hereby
waives, to the fullest extent it may effectively do so, the defenses of forum
non conveniens and improper venue.
(c) The Guarantor hereby waives presentment, notice of dishonor and
protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
Section 18. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. Captions; Separability. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Guaranty.
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(b) If any term of this Guaranty shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
Section 20. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guaranty and each of the Loan Documents.
Section 21. Confirmation and Restatement of the Guaranties. The
Original Guarantor hereby confirms its guaranty of the Guaranteed Obligations
and all other obligations under this Guaranty and by the execution and delivery
of this Guaranty by each Original Guarantor, each Original Guarantor
acknowledges and agrees that the terms of the Original Guaranty are hereby
superseded and restated in their entirety by this Guaranty without thereby
cancelling, satisfying or discharging the obligations of each Original Guarantor
thereunder.
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IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guaranty to be duly executed in the State of New York as of the date first above
set forth.
STONEHENGE FINANCIAL CORP.,
By: /s/ Alan Kanis
------------------------
Name: Alan Kanis
Title: CFO
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AMENDED AND RESTATED
SECURITY AGREEMENT AND MORTGAGE - TRADEMARKS AND PATENTS
AMENDED AND RESTATED AGREEMENT made as of this 12th day of May, 1997
between Andover Togs, Inc., a Delaware corporation (the "Debtor"), having an
office at 1333 Broadway, New York, New York, and The CIT Group/Commercial
Services, Inc., a Delaware corporation ("CIT") having an office at 1211 Avenue
of the Americas, New York, New York 10036, as agent (referred to herein as the
"Secured Party") for (i) the lender (the "Lender") named in the Amended and
Restated and Security Agreement, dated of even date herewith, among Debtor, the
Lender and the Secured Party (the "Financing Agreement"), and (ii) for itself as
facilitator of the issuance of the Letters of Credit.
WHEREAS, Debtor and certain affiliates filed a voluntary petition for
relief under chapter 11, title 11, of the United States Code (the "Bankruptcy
Code") with the United States Bankruptcy Court for the Southern District of New
York (the "Court").
WHEREAS, the Debtor has heretofore executed and delivered to Lender that
certain Security Agreement and Mortgage-Trademarks and Patents (the "Original
Security Agreement") under which Debtor has granted, to CIT, liens on and
security interests in the properties, rights, interests, and privileges therein
described.
WHEREAS, the Debtor and CIT have heretofore entered into that certain
Replacement DIP Financing and Security Agreement dated as of September 19, 1996
(as amended, the "Original Financing Agreement").
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs, Inc.
("Plan of Reorganization") and under chapter 11 of the Bankruptcy Code, the
Debtor will reorganize its businesses and operations, which Plan of
Reorganization was confirmed by order of the Court entered on April 10, 1997.
<PAGE>
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WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Debtor and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to renew,
modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that the Debtor confirm and
assure by its execution and delivery of this Amended and Restated Security
Agreement and Mortgage-Trademarks and Patents that the Collateral (as
hereinafter defined) is and remains collateral security for the Obligations (as
such term is defined in the Financing Agreement).
A. Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof.
B. Debtor is the owner and holder of the patents listed on Schedule B
hereto.
C. The Secured Party and the Lender have agreed to extend Loans and
certain other financial accommodations including, without limitation, assisting
in the issuance of Letters of Credit to the Debtor pursuant to, and subject to
the terms and conditions of, the Financing Agreement. The obligation of the
Lender under the Financing Agreement to extend such Loans and to assist in the
issuance of the Letters of Credit is conditioned on the execution and delivery
by the Debtor of a security agreement in the form hereof to secure the
Obligations (such Obligations to include, without limitation, the due and
punctual payment and performance of (a) the principal of and interest on the
Loans, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (b) Indebtedness at any time and from
time to time under
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the Letters of Credit, (c) all obligations of the Debtor at any time and from
time to time under this security agreement and (d) all obligations of the Debtor
at any time and from time to time under the Financing Agreement and the other
Loan Documents.
NOW, THEREFORE, IT IS AGREED that, for and in consideration of the Loans
and other financial accommodations to be made under the Financing Agreement, and
other good and valuable consideration, the receipt of which is hereby
acknowledged, and as collateral security for the full and prompt payment and
performance of all Obligations, as hereinafter defined, Debtor does hereby
mortgage to and pledge with the Secured Party, and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations listed on Schedule B hereto;
and (iii) any and all proceeds of the foregoing, including, without limitation,
any claims by Debtor against third parties for infringement of the Trademarks or
the Patents (collectively, the "Collateral").
1. Terms defined in the Financing Agreement and not otherwise defined
herein, shall have the meaning set forth in the Financing Agreement. As used in
this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or any
other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or
divisionals thereof and all licenses thereof.
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"Trademarks" shall mean (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof, or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Debtor, including, but not limited to, those described in Schedule A
annexed hereto and made a part hereof, and (ii) all reissues, extensions or
renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents, including,
without limitation, assignments for security in form suitable for filing with
the United States Patent and Trademark Office, substantially in the forms of
Exhibits 1 and 2 hereof, respectively, requested by the Secured Party at any
time to evidence, perfect, maintain, record and enforce the Secured Party's
interest in the Collateral or otherwise in furtherance of the provisions of this
Agreement, and Debtor hereby authorizes the Secured Party to execute and file
one or more financing statements (and similar documents) or copies thereof or of
this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior written
notice of Debtor, shall consent, or (ii) Debtor shall not have used a Trademark
within the previous twelve months, Debtor (either itself or through licensees)
will continue to maintain the Trademarks on each and every trademark class of
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goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain the Trademarks in full force free
from any claim of abandonment for nonuse and Debtor will not (and will not
permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents shown
on Schedule B hereto and the registrations thereof are valid and subsisting and
in full force and effect. None of the Patents has been abandoned or dedicated,
and, except to the extent that the Secured Party, upon prior written notice by
Debtor, shall consent, Debtor will not do any act, or omit to do any act,
whereby the Patents may become abandoned or dedicated and shall notify the
Secured Party immediately if it knows of any reason or has reason to know that
any application or registration may become abandoned or dedicated.
(e) Debtor will promptly pay the Secured Party for any and all sums, costs,
and expenses which the Secured Party may pay or incur pursuant to the provisions
of this Agreement or in enforcing the Obligations, the Collateral or the
security interest granted hereunder, including, but not limited to, all filing
or recording fees, court costs, collection charges, travel, and reasonable
attorneys' fees, all of which together with interest at the highest rate then
payable on the Obligations shall be part of the Obligations and be payable on
demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured
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Party may request to evidence the Secured Party's interest in such Patent or
Trademark and the goodwill and general intangibles of Debtor relating thereto or
represented thereby, and Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations are
paid in full.
(g) Debtor has the right and power to make the assignment and to grant the
security interest herein granted; and the Collateral is not now, and at all
times hereafter will not be, subject to any liens, mortgages, assignments,
security interests or encumbrances of any nature whatsoever, except in favor of
the Secured Party, and to the best knowledge of Debtor none of the Collateral is
subject to any claim.
(h) Except to the extent that Secured Party, upon prior written notice
from Debtor, shall consent, Debtor will not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, and nothing in this Agreement shall be deemed a consent
by the Secured Party to any such action except as expressly permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or subsidiary
thereof owns any Patents or Trademarks or has any Patents or Trademarks
registered in, or the subject of pending applications in, the United States
Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, to maintain each application and registration of the Trademarks and
Patents, including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings (except to the extent
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that dedication, abandonment or invalidation is permitted under paragraphs 2(c)
and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the use
of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do any
act required of Debtor hereunder or requested by Secured Party to preserve,
defend, protect, maintain, record or enforce Debtor's obligations contained
herein, the Obligations, the Collateral, or the right, title and interest
granted Secured Party herein, and which Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to Debtor and shall be
payable on demand together with interest at the highest rate then payable on the
Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary thereof,
learns of any use by any person of any term or design likely to cause confusion
with any Trademark, it shall promptly notify Secured Party of such use and, if
requested by Secured Party, shall join with Secured Party, at its expense, in
such action as Secured Party, in its reasonable discretion, may deem advisable
for the protection of Secured Party's interest in and to such Trademarks.
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(n) All licenses of its Trademarks and Patents which Debtor has granted to
third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all other
rights and remedies of the Secured Party, whether under law, the Financing
Agreement or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of it,
either with or without special or other conditions or stipulations, with power
to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which the Secured Party shall, in its sole discretion, deem
appropriate or proper; and (e) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
pursuant to subparagraph 3(d) hereof, the Secured Party may, at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 4 hereof (such authority becoming effective on the occurrence or
continuation as
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hereinabove provided of an Event of Default), execute and deliver on behalf of
Debtor, one or more instruments of assignment of the Patents or Trademarks (or
any application or registration thereof), in form suitable for filing, recording
or registration in any country. Debtor agrees to pay when due all reasonable
costs incurred in any such transfer of the Patents or Trademarks, including any
taxes, fees and reasonable attorneys' fees, and all such costs shall be added to
the Obligations. The Secured Party may apply the proceeds actually received from
any such license, assignment, sale or other disposition to the reasonable costs
and expenses thereof, including, without limitation, reasonable attorneys' fees
and all legal, travel and other expenses which may be incurred by the Secured
Party, and then to the Obligations, in such order as to principal or interest
as the Secured Party may desire; and Debtor shall remain liable and will pay the
Secured Party on demand any deficiency remaining, together with interest thereon
at a rate equal to the highest rate then payable on the Obligations and the
balance of any expenses unpaid. Nothing herein contained shall be construed as
requiring the Secured Party to take any such action at any time. In the event of
any such license, assignment, sale or other disposition of the Collateral, or
any of it, after the occurrence or continuation as hereinabove provided of an
Event of Default, Debtor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing or in connection with the
Trademarks or Patents, and its customer lists and other records relating to the
Trademarks or Patents and to the distribution of said products, to the Secured
Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the Secured Party to be held as cash collateral to the extent of
the undrawn amount, if any, of outstanding Letters of Credit;
SECOND, to the payment of all reasonable costs and expenses incurred by the
Secured Party in connection with such sale or otherwise in connection with this
Agreement or any of the Obligations, including, but not limited to, all court
costs and the reasonable fees and expenses of its agents and legal counsel,
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the repayment of all advances made by the Secured Party hereunder on behalf of
the Debtor and any other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder;
THIRD, pro rata to the payment in full of principal and interest in respect
of any Loans outstanding (pro rata as among the Lender(s) in accordance with the
amounts of the Loans made by them pursuant to the Financing Agreement);
FOURTH, pro rata to the payment in full of all Obligations (other than
those referred to above) owed to the Lender(s) (pro rata as among the Lender(s)
in accordance with the amount of Obligations owing to them); and
FIFTH, to the Debtor, its successors or assigns, or as a court of competent
jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs
3(d) and (e) hereof and Debtor hereby releases the Secured Party from any
claims, causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Secured Party under the
powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Agreement and executed by the
party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED
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IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Debtor hereby submits to the nonexclusive jurisdiction of the Supreme Court of
the State of New York and the federal courts of the United States of America
located in such State in any action or proceeding arising under this Agreement.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
6. The Debtor hereby confirms and assures that the terms of the Original
Security Agreement are hereby superseded and restated in their entirety by this
Agreement without thereby cancelling, releasing or discharging the security
interests created thereby.
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IN WITNESS WHEREOF, Debtor and the Secured Party have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
ANDOVER TOGS, INC.
By
-----------------------------------
Name:
----------------------------
Title:
----------------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC.
By /s/ John A. Hendrickson
-----------------------------------
Name: John A. Hendrickson
Title: Vice President
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IN WITNESS WHEREOF, Debtor and the Secured Party have caused this Agreement
to be executed by their respective officers thereunto duly authorized as of the
day and year first above written.
ANDOVER TOGS, INC.
By /s/ William L. Cohen
-----------------------------------
Name: William L. Cohen
----------------------------
Title: President
----------------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC.
By
-----------------------------------
Name:
----------------------------
Title:
----------------------------
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Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
American Expressions 09/15/87 1,457,541
American Gold and
Design 10/09/84 1,200,725
American Style Force 04/21/87 1,437,373
Animal Pals 01/21/86 1,379,252
Any Moment 04/12/84 1,830,833
Any Moment 07/30/91 1,652,757
Baby Beepers 09/02/93 1,909,342
Beepers 09/02/93 1,893,663
Big Al 11/17/87 1,465,577
Bragabouts 05/12/87 1,439,259
Bronx Garage 02/04/87 1,430,312
Brooklyn Export Co. 02/25/86 1,384,402
Crepe Suzette 03/05/91 1,765,289
Dobie and Design 04/04/89 1,533,189
Flip Overs 05/09/89 1,538,267
Get Togethers 12/19/89 1,572,004
13
<PAGE>
<PAGE>
Title Registration Date Registration No.
- ----- ----------------- ----------------
Have (Universal
Prohibition Sign)
Fear 12/15/89 1,569,586
Have a Heart 02/11/86 1,382,447
Hey Kids 07/04/89 1,546,515
Hook & Ladder 02/11/86 1,382,446
Hot Pursuit and Design 09/29/81 1,171,402
Kid America and Design 07/16/85 1,349,497
Nu Art 07/02/85 1,346,311
Outburst 04/10/90 1,531,024
Starting Gate 02/17/87 1,429,345
Style Force 08/28/86 1,415,075
Supertex 2000 12/01/87 1,467,461
Sweet Knits 12/21/83 1,813,000
Sweet Knits 09/29/92 1,721,121
Tortoni 02/11/86 1,382,448
U.S. Style Force 08/19/86 1,405,910
14
<PAGE>
<PAGE>
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
None
15
<PAGE>
<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
16
<PAGE>
<PAGE>
Schedule C to Security Agreement
LICENSES
Licensor Trade Name/Term of License
- -------- --------------------------
17
<PAGE>
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Andover Togs, Inc., a Delaware corporation (herein referred to as
"Assignor"), owns the letters patent, and/or applications for letters patent, of
the United States, more particularly described on Schedule 1-A annexed hereto as
part hereof (the "Patents");
WHEREAS, Assignor is obligated to The CIT Group/Commercial Services, Inc.,
a Delaware corporation, as agent (referred to herein as the "Assignee") for (i)
the lender (the "Lender") named in the Amended and Restated Financing and
Security Agreement, dated of even date herewith, among the Assignor, the Lender
and the Assignee (the "Financing Agreement"), and (ii) itself as issuer of the
Letters of Credit, and Assignor has entered into an Amended and Restated
Security Agreement and Mortgage-Trademarks and Patents dated the date hereof
(the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee, and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security interest in, and mortgage on, the Collateral to secure
the prompt payment, performance and observance of the Obligations.
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New York
10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed
by its officer thereunto duly authorized as of the ____ day of May, 1997.
ANDOVER TOGS, INC.
By
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
2
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
3
<PAGE>
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Andover Togs, Inc., a Delaware corporation (herein referred to as
"Assignor"), has adopted, used and is using the trademarks listed on the annexed
Schedule 2-A, which trademarks are registered in the United States Patent and
Trademark Office or applications therefore have been filed (the "Trademarks");
WHEREAS, Assignor is obligated to the CIT Group/Commercial Services, Inc.,
a Delaware corporation, as agent (referred to herein as the "Assignee") for (i)
the lender (the "Lender") named in the Amended and Restated Financing and
Security Agreement, dated of even date herewith, among the Assignor, the Lender
and the Assignee (the "Financing Agreement"), and (ii) itself as issuer of the
Letters of Credit, and Assignor has entered into an Amended and Restated
Security Agreement and Mortgage-Trademarks and Patents dated the date hereof
(the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Trademarks, together with the goodwill of
the business symbolized by the Trademarks and the applications and registrations
thereof, and all proceeds thereof, including, without limitation, any and all
causes of action which may exist by reason of infringement thereof (the
"Collateral"), to secure the payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security
<PAGE>
<PAGE>
interest in, and mortgage on, the Collateral to secure the prompt payment,
performance and observance of the Obligations.
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New York
10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly executed
by its officer thereunto duly authorized as of the ____ day of May, 1997.
ANDOVER TOGS, INC.
By
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
2
<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
American Expressions 09/15/87 1,457,541
American Gold and
Design 10/09/84 1,200,725
American Style Force 04/21/87 1,437,373
Animal Pals 01/21/86 1,379,252
Any Moment 04/12/84 1,830,833
Any Moment 07/30/91 1,652,757
Baby Beepers 09/02/93 1,909,342
Beepers 09/02/93 1,893,663
Big Al 11/17/87 1,465,577
Bragabouts 05/12/87 1,439,259
Bronx Garage 02/04/87 1,430,312
Brooklyn Export Co. 02/25/86 1,384,402
Crepe Suzette 03/05/91 1,765,289
Dobie and Design 04/04/89 1,533,189
Flip Overs 05/09/89 1,538,267
Get Togethers 12/19/89 1,572,004
<PAGE>
<PAGE>
Title Registration Date Registration No.
- ----- ----------------- ----------------
Have (Universal
Prohibition Sign)
Fear 12/15/89 1,569,586
Have a Heart 02/11/86 1,382,447
Hey Kids 07/04/89 1,546,515
Hook & Ladder 02/11/86 1,382,446
Hot Pursuit and Design 09/29/81 1,171,402
Kid America and Design 07/16/85 1,349,497
Nu Art 07/02/85 1,346,311
Outburst 04/10/90 1,531,024
Starting Gate 02/17/87 1,429,345
Style Force 08/28/86 1,415,075
Supertex 2000 12/01/87 1,467,461
Sweet Knits 12/21/83 1,813,000
Sweet Knits 09/29/92 1,721,121
Tortoni 02/11/86 1,382,448
U.S. Style Force 08/19/86 1,405,910
2
<PAGE>
<PAGE>
II. Pending Applications
Trademark Filing Date
- --------- -----------
Application No.
---------------
None
3
<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Andover Togs, Inc. a Delaware
corporation (hereinafter called "Assignor"), hereby appoints and constitutes The
CIT Group/Commercial Services, Inc., a Delaware corporation, as agent (referred
to herein as the "Assignee") for (i) the lender (the "Lender") named in the
Amended and Restated Financing and Security Agreement, dated of even date
herewith, among the Assignor, the Lender and the Assignee (the "Financing
Agreement"), and (ii) itself as issuer of the Letters of Credit (hereinafter
called "Assignee"), its true and lawful attorney, with full power of
substitution, and with full power and authority to perform the following acts on
behalf of Assignor:
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
letters patent of the United States or any other country or political
subdivision thereof, and all registrations, recordings, reissues,
continuations, continuations-in-part and extensions thereof, and all
pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or advisable
to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
<PAGE>
<PAGE>
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals thereof, and
all pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or advisable
to effect such purpose;
3. To execute any and all documents, statements, certificates or
other papers necessary or advisable in order to obtain the purposes
described above as Assignee may in its sole discretion determine.
This power of attorney is made pursuant to an Amended and Restated Security
Agreement and Mortgage - Trademarks and Patents, dated the date hereof, between
Assignor and Assignee and takes effect solely for the purposes of paragraph 3
thereof and is subject to the conditions thereof and may not be revoked until
the payment in full of all "Obligations" as defined in such Security Agreement
and Mortgage.
Dated: May __, 1997
[Corporate Seal] ANDOVER TOGS, INC.
By
-------------------------------------
Name:
-------------------------------
Title:
-------------------------------
2
<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of May, 1997, before me personally appeared William Cohen,
to me known, who, being by me duly sworn, did depose and say that he resides at
15 Middle Lane, East Hampton, N.Y., and that he is President of Andover Togs,
Inc., the Delaware corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was affixed pursuant to
authority of the Board of Directors of said corporation, and that he signed his
name thereto pursuant to such authority.
- ---------------------------
Notary Public
3
<PAGE>
<PAGE>
AMENDED AND RESTATED
SECURITY AGREEMENT AND MORTGAGE - TRADEMARKS AND PATENTS
AMENDED AND RESTATED AGREEMENT made as of this 12th day of May, 1997
between Tortoni Manufacturing Corp., a Delaware corporation (the "Debtor"),
having an office at 1333 Broadway, New York, New York, and The CIT
Group/Commercial Services, Inc., a Delaware corporation ("CIT") having an office
at 1211 Avenue of the Americas, New York, New York 10036, as agent (referred to
herein as the "Secured Party") for (i) the lender (the "Lender") named in the
Amended and Restated Financing and Security Agreement, dated of even date
herewith, among Andover Togs, Inc. (the "Borrower"), the Lenders and the Secured
Party (the "Financing Agreement"), and (ii) for itself as facilitator of the
issuance of the Letters of Credit.
WHEREAS, Debtor and certain affiliates filed a voluntary petition for
relief under chapter 11, title 11, of the United States Code (the "Bankruptcy
Code") with the United States Bankruptcy Court for the Southern District of New
York (the "Court").
WHEREAS, the Debtor has heretofore executed and delivered to Lender that
certain Security Agreement and Mortgage- Trademarks and Patents (the "Original
Security Agreement") under which Debtor has granted, to CIT, liens on and
security interests in the properties, rights, interests, and privileges therein
described.
WHEREAS, the Debtor and CIT have heretofore entered into that certain
Replacement DIP Financing and Security Agreement dated as of September 19, 1996
(as amended, the "Original Financing Agreement").
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs, Inc.
("Plan of Reorganization") and under chapter 11 of the Bankruptcy Code, the
Debtor will reorganize its businesses and operations, which Plan of
Reorganization was confirmed by order of the Court entered on April 10, 1997.
<PAGE>
<PAGE>
WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Debtor and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to renew,
modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that the Debtor confirm and
assure by its execution and delivery of this Amended and Restated Security
Agreement and Mortgage-Trademarks and Patents that the Collateral (as
hereinafter defined) is and remains collateral security for the Obligations (as
such term is defined in the Financing Agreement).
A. Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof.
B. Debtor is the owner and holder of the patents listed on Schedule B
hereto.
C. The Secured Party and the Lender have agreed to extend Loans and
certain other financial accommodations including, without limitation, assisting
in the issuance of Letters of Credit to the Borrower pursuant to, and subject to
the terms and conditions of, the Financing Agreement. The obligation of the
Lender under the Financing Agreement to extend such Loans and to assist in the
issuance of the Letters of Credit is conditioned on the execution and delivery
by the Debtor of a security agreement in the form hereof to secure the
Obligations (such Obligations to include, without limitation, the due and
punctual payment and performance of (a) the principal of and interest on the
Loans, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (b) Indebtedness at any time and from
time to time under
2
<PAGE>
<PAGE>
the Letters of Credit, (c) all obligations of the Borrower at any time and from
time to time under this security agreement and (d) all obligations of the
Borrower at any time and from time to time under the Financing Agreement and the
other Loan Documents.
NOW, THEREFORE, IT IS AGREED that, for and in consideration of the Loans
and other financial accommodations to be made under the Financing Agreement, and
other good and valuable consideration, the receipt of which is hereby
acknowledged, and as collateral security for the full and prompt payment and
performance of all Obligations, as hereinafter defined, Debtor does hereby
mortgage to and pledge with the Secured Party, and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations listed on Schedule B hereto;
and (iii) any and all proceeds of the foregoing, including, without limitation,
any claims by Debtor against third parties for infringement of the Trademarks or
the Patents (collectively, the "Collateral").
1. Terms defined in the Financing Agreement and not otherwise defined
herein, shall have the meaning set forth in the Financing Agreement. As used in
this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or any
other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or
divisionals thereof and all licenses thereof.
3
<PAGE>
<PAGE>
"Trademarks" shall mean (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof, or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Debtor, including, but not limited to, those described in Schedule A
annexed hereto and made a part hereof, and (ii) all reissues, extensions or
renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents, including,
without limitation, assignments for security in form suitable for filing with
the United States Patent and Trademark Office, substantially in the forms of
Exhibits 1 and 2 hereof, respectively, requested by the Secured Party at any
time to evidence, perfect, maintain, record and enforce the Secured Party's
interest in the Collateral or otherwise in furtherance of the provisions of this
Agreement, and Debtor hereby authorizes the Secured Party to execute and file
one or more financing statements (and similar documents) or copies thereof or of
this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior written
notice of Debtor, shall consent, or (ii) Debtor shall not have used a Trademark
within the previous twelve months, Debtor (either itself or through licensees)
will continue to maintain the Trademarks on each and every trademark class of
4
<PAGE>
<PAGE>
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain the Trademarks in full force free
from any claim of abandonment for nonuse and Debtor will not (and will not
permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents shown
on Schedule B hereto and the registrations thereof are valid and subsisting and
in full force and effect. None of the Patents has been abandoned or dedicated,
and, except to the extent that the Secured Party, upon prior written notice by
Debtor, shall consent, Debtor will not do any act, or omit to do any act,
whereby the Patents may become abandoned or dedicated and shall notify the
Secured Party immediately if it knows of any reason or has reason to know that
any application or registration may become abandoned or dedicated.
(e) Debtor will promptly pay the Secured Party for any and all sums,
costs, and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or in enforcing the Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Obligations shall be part of the Obligations and be
payable on demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured
5
<PAGE>
<PAGE>
Party may request to evidence the Secured Party's interest in such Patent or
Trademark and the goodwill and general intangibles of Debtor relating thereto or
represented thereby, and Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations are
paid in full.
(g) Debtor has the right and power to make the assignment and to grant the
security interest herein granted; and the Collateral is not now, and at all
times hereafter will not be, subject to any liens, mortgages, assignments,
security interests or encumbrances of any nature whatsoever, except in favor of
the Secured Party, and to the best knowledge of Debtor none of the Collateral is
subject to any claim.
(h) Except to the extent that Secured Party, upon prior written notice
from Debtor, shall consent, Debtor will not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, and nothing in this Agreement shall be deemed a consent
by the Secured Party to any such action except as expressly permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or subsidiary
thereof owns any Patents or Trademarks or has any Patents or Trademarks
registered in, or the subject of pending applications in, the United States
Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, to maintain each application and registration of the Trademarks and
Patents, including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings (except to the extent
6
<PAGE>
<PAGE>
that dedication, abandonment or invalidation is permitted under paragraphs 2(c)
and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the use
of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do any
act required of Debtor hereunder or requested by Secured Party to preserve,
defend, protect, maintain, record or enforce Debtor's obligations contained
herein, the Obligations, the Collateral, or the right, title and interest
granted Secured Party herein, and which Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to Debtor and shall be
payable on demand together with interest at the highest rate then payable on the
Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary thereof,
learns of any use by any person of any term or design likely to cause confusion
with any Trademark, it shall promptly notify Secured Party of such use and, if
requested by Secured Party, shall join with Secured Party, at its expense, in
such action as Secured Party, in its reasonable discretion, may deem advisable
for the protection of Secured Party's interest in and to such Trademarks.
7
<PAGE>
<PAGE>
(n) All licenses of its Trademarks and Patents which Debtor has granted to
third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all other
rights and remedies of the Secured Party, whether under law, the Financing
Agreement or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of it,
either with or without special or other conditions or stipulations, with power
to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which the Secured Party shall, in its sole discretion, deem
appropriate or proper; and (e) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
pursuant to subparagraph 3(d) hereof, the Secured Party may, at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 4 hereof (such authority becoming effective on the occurrence or
continuation as
8
<PAGE>
<PAGE>
hereinabove provided of an Event of Default), execute and deliver on behalf of
Debtor, one or more instruments of assignment of the Patents or Trademarks (or
any application or registration thereof), in form suitable for filing, recording
or registration in any country. Debtor agrees to pay when due all reasonable
costs incurred in any such transfer of the Patents or Trademarks, including any
taxes, fees and reasonable attorneys' fees, and all such costs shall be added to
the Obligations. The Secured Party may apply the proceeds actually received from
any such license, assignment, sale or other disposition to the reasonable costs
and expenses thereof, including, without limitation, reasonable attorneys' fees
and all legal, travel and other expenses which may be incurred by the Secured
Party, and then to the Obligations, in such order as to principal or interest
as the Secured Party may desire; and Debtor shall remain liable and will pay the
Secured Party on demand any deficiency remaining, together with interest thereon
at a rate equal to the highest rate then payable on the Obligations and the
balance of any expenses unpaid. Nothing herein contained shall be construed as
requiring the Secured Party to take any such action at any time. In the event of
any such license, assignment, sale or other disposition of the Collateral, or
any of it, after the occurrence or continuation as hereinabove provided of an
Event of Default, Debtor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing or in connection with the
Trademarks or Patents, and its customer lists and other records relating to the
Trademarks or Patents and to the distribution of said products, to the Secured
Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the Secured Party to be held as cash collateral to the extent of
the undrawn amount, if any, of outstanding Letters of Credit;
SECOND, to the payment of all reasonable costs and expenses incurred by
the Secured Party in connection with such sale or otherwise in connection with
this Agreement or any of the Obligations, including, but not limited to, all
court costs and the reasonable fees and expenses of its agents and legal
counsel,
9
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<PAGE>
the repayment of all advances made by the Secured Party hereunder on behalf of
the Debtor and any other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder;
THIRD, pro rata to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lender(s) in accordance
with the amounts of the Loans made by them pursuant to the Financing Agreement);
FOURTH, pro rata to the payment in full of all Obligations (other than
those referred to above) owed to the Lender(s) (pro rata as among the Lender(s)
in accordance with the amount of Obligations owing to them); and
FIFTH, to the Debtor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs
3(d) and (e) hereof and Debtor hereby releases the Secured Party from any
claims, causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Secured Party under the
powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Agreement and executed by the
party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED
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<PAGE>
IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Debtor hereby submits to the nonexclusive jurisdiction of the Supreme Court of
the State of New York and the federal courts of the United States of America
located in such State in any action or proceeding arising under this Agreement.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
6. The Debtor hereby confirms and assures that the terms of the Original
Security Agreement are hereby superseded and restated in their entirety by this
Agreement without thereby cancelling, releasing or discharging the security
interests created thereby.
11
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<PAGE>
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
TORTONI MANUFACTURING CORP.
By /s/ William L. Cohen
-------------------------------------
Name: William L. Cohen
-------------------------------
Title: President
-------------------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC.
By /s/ John Hendrickson
-------------------------------------
Name: John Hendrickson
-------------------------------
Title: Vice President
-------------------------------
12
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<PAGE>
Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
13
<PAGE>
<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
14
<PAGE>
<PAGE>
Schedule C to Security Agreement
LICENSES
15
<PAGE>
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Tortoni Manufacturing Corp., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to The CIT Group/Commercial Services,
Inc., a Delaware corporation, as agent (referred to herein as the "Assignee")
for (i) the lender (the "Lender") named in the Amended and Restated Financing
and Security Agreement, dated of even date herewith, among Andover Togs, Inc.,
the Lender and the Assignee (the "Financing Agreement"), and (ii) itself as
issuer of the Letters of Credit, and Assignor has entered into an Amended and
Restated Security Agreement and Mortgage-Trademarks and Patents dated the date
hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee,
and granted to Assignee a security interest in, and mortgage on, all right,
title and interest of Assignor in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security interest in, and mortgage on, the Collateral to secure
the prompt payment, performance and observance of the Obligations.
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New York
10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
TORTONI MANUFACTURING CORP.
By:
--------------------------
Name:
---------------------
Title:
--------------------
2
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
3
<PAGE>
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Tortoni Manufacturing Corp., a Delaware corporation (herein
referred to as "Assignor"), has adopted, used and is using the trademarks listed
on the annexed Schedule 2-A, which trademarks are registered in the United
States Patent and Trademark Office or applications therefore have been filed
(the "Trademarks");
WHEREAS, Assignor is obligated to the CIT Group/Commercial Services, Inc.,
a Delaware corporation, as agent (referred to herein as the "Assignee") for (i)
the lender (the "Lender") named in the Amended and Restated Financing and
Security Agreement, dated of even date herewith, among Andover Togs, Inc., the
Lender and the Assignee (the "Financing Agreement"), and (ii) itself as issuer
of the Letters of Credit, and Assignor has entered into an Amended and Restated
Security Agreement and Mortgage-Trademarks and Patents dated the date hereof
(the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Trademarks, together with the goodwill of
the business symbolized by the Trademarks and the applications and registrations
thereof, and all proceeds thereof, including, without limitation, any and all
causes of action which may exist by reason of infringement thereof (the
"Collateral"), to secure the payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security
<PAGE>
<PAGE>
interest in, and mortgage on, the Collateral to secure the prompt payment,
performance and observance of the Obligations.
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New York
10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
TORTONI MANUFACTURING CORP.
By
----------------------------
Name:
-----------------------
Title:
----------------------
2
<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Trademark Reg. Date Reg. No.
- --------- --------- --------
II. Pending Applications
Trademark Filing Date Application No.
- --------- ----------- ---------------
<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Tortoni Manufacturing Corp., a
Delaware corporation (hereinafter called "Assignor"), hereby appoints and
constitutes The CIT Group/Commercial Services, Inc., a Delaware corporation, as
agent (referred to herein as the "Assignee") for (i) the lender (the "Lender")
named in the Amended and Restated Security Agreement, dated of even date
herewith, among Andover Togs, Inc., the Lender and the Assignee (the "Financing
Agreement"), and (ii) itself as issuer of the Letters of Credit (hereinafter
called "Assignee"), its true and lawful attorney, with full power of
substitution, and with full power and authority to perform the following acts on
behalf of Assignor:
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
letters patent of the United States or any other country or political
subdivision thereof, and all registrations, recordings, reissues,
continuations, continuations-in-part and extensions thereof, and all
pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or
advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
<PAGE>
<PAGE>
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals thereof, and
all pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or
advisable to effect such purpose;
3. To execute any and all documents, statements, certificates or
other papers necessary or advisable in order to obtain the purposes
described above as Assignee may in its sole discretion determine.
This power of attorney is made pursuant to an Amended and Restated
Security Agreement and Mortgage - Trademarks and Patents, dated the date hereof,
between Assignor and Assignee and takes effect solely for the purposes of
paragraph 3 thereof and is subject to the conditions thereof and may not be
revoked until the payment in full of all "Obligations" as defined in such
Security Agreement and Mortgage.
Dated: May __, 1997
[Corporate Seal]
TORTONI MANUFACTURING CORP.
By
------------------------------------
Name:
-------------------------------
Title:
------------------------------
2
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of May, 1997, before me personally appeared
____________________, to me known, who, being by me duly sworn, did depose and
say that he resides at ____________________ ____________________________________
and that he is _____________ of ____________________, the _______________
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was affixed pursuant to authority of the Board of
Directors of said corporation, and that he signed his name thereto pursuant to
such authority.
---------------------------
Notary Public
3
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<PAGE>
AMENDED AND RESTATED
SECURITY AGREEMENT AND MORTGAGE - TRADEMARKS AND PATENTS
AMENDED AND RESTATED AGREEMENT made as of this 12th day of May, 1997
between Springdale Fashions, Inc., a Delaware corporation (the "Debtor"), having
an office at 1333 Broadway, New York, New York, and The CIT Group/Commercial
Services, Inc., a Delaware corporation ("CIT") having an office at 1211 Avenue
of the Americas, New York, New York 10036, as agent (referred to herein as the
"Secured Party") for (i) the lender (the "Lender") named in the Amended and
Restated Financing and Security Agreement, dated of even date herewith, among
Andover Togs, Inc. (the "Borrower"), the Lenders and the Secured Party (the
"Financing Agreement"), and (ii) for itself as facilitator of the issuance of
the Letters of Credit.
WHEREAS, Debtor and certain affiliates filed a voluntary petition
for relief under chapter 11, title 11, of the United States Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the Southern
District of New York (the "Court").
WHEREAS, the Debtor has heretofore executed and delivered to Lender
that certain Security Agreement and Mortgage-Trademarks and Patents (the
"Original Security Agreement") under which Debtor has granted, to CIT, liens on
and security interests in the properties, rights, interests, and privileges
therein described.
WHEREAS, the Debtor and CIT have heretofore entered into that
certain Replacement DIP Financing and Security Agreement dated as of September
19, 1996 (as amended, the "Original Financing Agreement").
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs,
Inc. ("Plan of Reorganization") and under chapter 11 of the Bankruptcy Code, the
Debtor will reorganize its businesses and operations, which Plan of
Reorganization was confirmed by order of the Court entered on April 10, 1997.
<PAGE>
<PAGE>
WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Debtor and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to
renew, modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that the Debtor confirm and
assure by its execution and delivery of this Amended and Restated Security
Agreement and Mortgage-Trademarks and Patents that the Collateral (as
hereinafter defined) is and remains collateral security for the Obligations (as
such term is defined in the Financing Agreement).
A. Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof.
B. Debtor is the owner and holder of the patents listed on Schedule
B hereto.
C. The Secured Party and the Lender have agreed to extend Loans and
certain other financial accommodations including, without limitation, assisting
in the issuance of Letters of Credit to the Borrower pursuant to, and subject to
the terms and conditions of, the Financing Agreement. The obligation of the
Lender under the Financing Agreement to extend such Loans and to assist in the
issuance of the Letters of Credit is conditioned on the execution and delivery
by the Debtor of a security agreement in the form hereof to secure the
Obligations (such Obligations to include, without limitation, the due and
punctual payment and performance of (a) the principal of and interest on the
Loans, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (b) Indebtedness at any time and from
time to time under
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<PAGE>
the Letters of Credit, (c) all obligations of the Borrower at any time and from
time to time under this security agreement and (d) all obligations of the
Borrower at any time and from time to time under the Financing Agreement and the
other Loan Documents.
NOW, THEREFORE, IT IS AGREED that, for and in consideration of the
Loans and other financial accommodations to be made under the Financing
Agreement, and other good and valuable consideration, the receipt of which is
hereby acknowledged, and as collateral security for the full and prompt payment
and performance of all Obligations, as hereinafter defined, Debtor does hereby
mortgage to and pledge with the Secured Party, and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations listed on Schedule B hereto;
and (iii) any and all proceeds of the foregoing, including, without limitation,
any claims by Debtor against third parties for infringement of the Trademarks or
the Patents (collectively, the "Collateral").
1. Terms defined in the Financing Agreement and not otherwise
defined herein, shall have the meaning set forth in the Financing Agreement. As
used in this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or
any other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or
divisionals thereof and all licenses thereof.
3
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<PAGE>
"Trademarks" shall mean (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof, or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Debtor, including, but not limited to, those described in Schedule A
annexed hereto and made a part hereof, and (ii) all reissues, extensions or
renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as
follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibits 1 and 2 hereof, respectively, requested by the Secured Party
at any time to evidence, perfect, maintain, record and enforce the Secured
Party's interest in the Collateral or otherwise in furtherance of the provisions
of this Agreement, and Debtor hereby authorizes the Secured Party to execute and
file one or more financing statements (and similar documents) or copies thereof
or of this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior
written notice of Debtor, shall consent, or (ii) Debtor shall not have used a
Trademark within the previous twelve months, Debtor (either itself or through
licensees) will continue to maintain the Trademarks on each and every trademark
class of
4
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<PAGE>
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain the Trademarks in full force free
from any claim of abandonment for nonuse and Debtor will not (and will not
permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents
shown on Schedule B hereto and the registrations thereof are valid and
subsisting and in full force and effect. None of the Patents has been abandoned
or dedicated, and, except to the extent that the Secured Party, upon prior
written notice by Debtor, shall consent, Debtor will not do any act, or omit to
do any act, whereby the Patents may become abandoned or dedicated and shall
notify the Secured Party immediately if it knows of any reason or has reason to
know that any application or registration may become abandoned or dedicated.
(e) Debtor will promptly pay the Secured Party for any and all sums,
costs, and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or in enforcing the Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Obligations shall be part of the Obligations and be
payable on demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured
5
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<PAGE>
Party may request to evidence the Secured Party's interest in such Patent or
Trademark and the goodwill and general intangibles of Debtor relating thereto or
represented thereby, and Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations are
paid in full.
(g) Debtor has the right and power to make the assignment and to
grant the security interest herein granted; and the Collateral is not now, and
at all times hereafter will not be, subject to any liens, mortgages,
assignments, security interests or encumbrances of any nature whatsoever, except
in favor of the Secured Party, and to the best knowledge of Debtor none of the
Collateral is subject to any claim.
(h) Except to the extent that Secured Party, upon prior written
notice from Debtor, shall consent, Debtor will not assign, sell, mortgage,
lease, transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, and nothing in this Agreement shall be deemed a consent
by the Secured Party to any such action except as expressly permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or
subsidiary thereof owns any Patents or Trademarks or has any Patents or
Trademarks registered in, or the subject of pending applications in, the United
States Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before
the United States Patent and Trademark Office or any similar office or agency of
the United States, any State thereof, any other country or any political
subdivision thereof, to maintain each application and registration of the
Trademarks and Patents, including, without limitation, filing of renewals,
affidavits of use, affidavits of incontestability and opposition, interference
and cancellation proceedings (except to the extent
6
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<PAGE>
that dedication, abandonment or invalidation is permitted under paragraphs 2(c)
and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the
use of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do
any act required of Debtor hereunder or requested by Secured Party to preserve,
defend, protect, maintain, record or enforce Debtor's obligations contained
herein, the Obligations, the Collateral, or the right, title and interest
granted Secured Party herein, and which Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to Debtor and shall be
payable on demand together with interest at the highest rate then payable on the
Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary
thereof, learns of any use by any person of any term or design likely to cause
confusion with any Trademark, it shall promptly notify Secured Party of such use
and, if requested by Secured Party, shall join with Secured Party, at its
expense, in such action as Secured Party, in its reasonable discretion, may deem
advisable for the protection of Secured Party's interest in and to such
Trademarks.
7
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<PAGE>
(n) All licenses of its Trademarks and Patents which Debtor has
granted to third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all
other rights and remedies of the Secured Party, whether under law, the Financing
Agreement or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of it,
either with or without special or other conditions or stipulations, with power
to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which the Secured Party shall, in its sole discretion, deem
appropriate or proper; and (e) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
pursuant to subparagraph 3(d) hereof, the Secured Party may, at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 4 hereof (such authority becoming effective on the occurrence or
continuation as
8
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<PAGE>
hereinabove provided of an Event of Default), execute and deliver on behalf of
Debtor, one or more instruments of assignment of the Patents or Trademarks (or
any application or registration thereof), in form suitable for filing, recording
or registration in any country. Debtor agrees to pay when due all reasonable
costs incurred in any such transfer of the Patents or Trademarks, including any
taxes, fees and reasonable attorneys' fees, and all such costs shall be added to
the Obligations. The Secured Party may apply the proceeds actually received from
any such license, assignment, sale or other disposition to the reasonable costs
and expenses thereof, including, without limitation, reasonable attorneys' fees
and all legal, travel and other expenses which may be incurred by the Secured
Party, and then to the Obligations, in such order as to principal or interest
as the Secured Party may desire; and Debtor shall remain liable and will pay the
Secured Party on demand any deficiency remaining, together with interest thereon
at a rate equal to the highest rate then payable on the Obligations and the
balance of any expenses unpaid. Nothing herein contained shall be construed as
requiring the Secured Party to take any such action at any time. In the event of
any such license, assignment, sale or other disposition of the Collateral, or
any of it, after the occurrence or continuation as hereinabove provided of an
Event of Default, Debtor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing or in connection with the
Trademarks or Patents, and its customer lists and other records relating to the
Trademarks or Patents and to the distribution of said products, to the Secured
Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the Secured Party to be held as cash collateral to the
extent of the undrawn amount, if any, of outstanding Letters of Credit;
SECOND, to the payment of all reasonable costs and expenses incurred
by the Secured Party in connection with such sale or otherwise in connection
with this Agreement or any of the Obligations, including, but not limited to,
all court costs and the reasonable fees and expenses of its agents and legal
counsel,
9
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<PAGE>
the repayment of all advances made by the Secured Party hereunder on behalf of
the Debtor and any other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder;
THIRD, pro rata to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lender(s) in accordance
with the amounts of the Loans made by them pursuant to the Financing Agreement);
FOURTH, pro rata to the payment in full of all Obligations (other
than those referred to above) owed to the Lender(s) (pro rata as among the
Lender(s) in accordance with the amount of Obligations owing to them); and
FIFTH, to the Debtor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs
3(d) and (e) hereof and Debtor hereby releases the Secured Party from any
claims, causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Secured Party under the
powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except
by a written instrument expressly referring to this Agreement and executed by
the party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED
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<PAGE>
IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Debtor hereby submits to the nonexclusive jurisdiction of the Supreme Court of
the State of New York and the federal courts of the United States of America
located in such State in any action or proceeding arising under this Agreement.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
6. The Debtor hereby confirms and assures that the terms of the
Original Security Agreement are hereby superseded and restated in their entirety
by this Agreement without thereby cancelling, releasing or discharging the
security interests created thereby.
11
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<PAGE>
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
SPRINGDALE FASHIONS, INC.
By /s/ Alan Kanis
----------------------------------
Name: Alan Kanis
-----------------------------
Title: CFO
----------------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC.
By /s/ John Hendrickson
----------------------------------
Name: John Hendrickson
-----------------------------
Title: Vice President
----------------------------
12
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<PAGE>
Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
13
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<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
14
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<PAGE>
Schedule C to Security Agreement
LICENSES
15
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<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Springdale Fashions, Inc., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed here to as part hereof (the "Patents");
WHEREAS, Assignor is obligated to The CIT Group/Commercial
Services, Inc., a Delaware corporation, as agent (referred to herein as the
"Assignee") for (i) the lender (the "Lender") named in the Amended and Restated
Financing and Security Agreement, dated of even date herewith, among Andover
Togs, Inc., the Lender and the Assignee (the "Financing Agreement"), and (ii)
itself as issuer of the Letters of Credit, and Assignor has entered into an
Amended and Restated Security Agreement and Mortgage-Trademarks and Patents
dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the Collateral made and granted hereby are more fully set forth
in the Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New
York 10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
SPRINGDALE FASHIONS, INC.
By:
-------------------------------
Name:
--------------------------
Title:
-------------------------
2
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
3
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<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Springdale Fashions, Inc., a Delaware corporation (herein
referred to as "Assignor"), has adopted, used and is using the trademarks listed
on the annexed Schedule 2-A, which trademarks are registered in the United
States Patent and Trademark Office or applications therefore have been filed
(the "Trademarks");
WHEREAS, Assignor is obligated to the CIT Group/Commercial Services,
Inc., a Delaware corporation, as agent (referred to herein as the "Assignee")
for (i) the lender (the "Lender") named in the Amended and Restated Financing
and Security Agreement, dated of even date herewith, among Andover Togs, Inc.,
the Lender and the Assignee (the "Financing Agreement"), and (ii) itself as
issuer of the Letters of Credit, and Assignor has entered into an Amended and
Restated Security Agreement and Mortgage-Trademarks and Patents dated the date
hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security
<PAGE>
<PAGE>
interest in, and mortgage on, the Collateral to secure the prompt payment,
performance and observance of the Obligations.
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the Collateral made and granted hereby are more fully set forth
in the Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New
York 10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
SPRINGDALE FASHIONS, INC.
By
------------------------------
Name:
-------------------------
Title:
------------------------
2
<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Trademark Reg. Date Reg. No.
- --------- --------- --------
II. Pending Applications
Trademark Filing Date Application No.
- --------- ----------- ---------------
<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Springdale Fashions, Inc., a
Delaware corporation (hereinafter called "Assignor"), hereby appoints and
constitutes The CIT Group/Commercial Services, Inc., a Delaware corporation, as
agent (referred to herein as the "Assignee") for (i) the lender (the "Lender")
named in the Amended and Restated Financing and Security Agreement, dated of
even date herewith, among Andover Togs, Inc., the Lender and the Assignee (the
"Financing Agreement"), and (ii) itself as issuer of the Letters of Credit
(hereinafter called "Assignee"), its true and lawful attorney, with full power
of substitution, and with full power and authority to perform the following acts
on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any letters patent of the United States or any other country
or political subdivision thereof, and all registrations, recordings,
reissues, continuations, continuations-in-part and extensions
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment
or other papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any
<PAGE>
<PAGE>
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment
or other papers necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates
or other papers necessary or advisable in order to obtain the
purposes described above as Assignee may in its sole discretion
determine.
This power of attorney is made pursuant to an Amended and Restated
Security Agreement and Mortgage - Trademarks and Patents, dated the date hereof,
between Assignor and Assignee and takes effect solely for the purposes of
paragraph 3 thereof and is subject to the conditions thereof and may not be
revoked until the payment in full of all "Obligations" as defined in such
Security Agreement and Mortgage.
Dated: May __, 1997
[Corporate Seal] SPRINGDALE FASHIONS, INC.
By
-----------------------------
Name:
------------------------
Title:
-----------------------
2
<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of May, 1997, before me personally appeared William
Cohen, to me known, who, being by me duly sworn, did depose and say that he
resides at 15 Middle Lane, East Hampton, N.Y. and that he is President of
Springdale Fashions, Inc., the Delaware corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was
affixed pursuant to authority of the Board of Directors of said corporation, and
that he signed his name thereto pursuant to such authority.
---------------------------
Notary Public
3
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<PAGE>
AMENDED AND RESTATED
SECURITY AGREEMENT AND MORTGAGE - TRADEMARKS AND PATENTS
AMENDED AND RESTATED AGREEMENT made as of this __th day of May, 1997
between Stonehenge Financial Corp., a New York corporation (the "Debtor"),
having an office at 1333 Broadway, New York, New York, and The CIT
Group/Commercial Services, Inc., a Delaware corporation ("CIT") having an office
at 1211 Avenue of the Americas, New York, New York 10036, as agent (referred to
herein as the "Secured Party") for (i) the lender (the "Lender") named in the
Amended and Restated Financing and Security Agreement, dated of even date
herewith, among Andover Togs, Inc. (the "Borrower"), the Lenders and the Secured
Party (the "Financing Agreement"), and (ii) for itself as facilitator of the
issuance of the Letters of Credit.
WHEREAS, Debtor and certain affiliates filed a voluntary petition
for relief under chapter 11, title 11, of the United States Code (the
"Bankruptcy Code") with the United States Bankruptcy Court for the Southern
District of New York (the "Court").
WHEREAS, the Debtor has heretofore executed and delivered to Lender
that certain Security Agreement and Mortgage-Trademarks and Patents (the
"Original Security Agreement") under which Debtor has granted, to CIT, liens on
and security interests in the properties, rights, interests, and privileges
therein described.
WHEREAS, the Debtor and CIT have heretofore entered into that
certain Replacement DIP Financing and Security Agreement dated as of September
19, 1996 (as amended, the "Original Financing Agreement").
WHEREAS, pursuant to the Plan of Reorganization of Andover Togs,
Inc. ("Plan of Reorganization") and under chapter 11 of the Bankruptcy Code, the
Debtor will reorganize its businesses and operations, which Plan of
Reorganization was confirmed by order of the Court entered on April 10, 1997.
<PAGE>
<PAGE>
WHEREAS, in conjunction with the consummation of the Plan of
Reorganization, the Debtor and CIT have entered into that certain Amended and
Restated Financing and Security Agreement (as amended, modified or supplemented
from time to time, the "Financing Agreement") dated as of the date hereof,
amending and restating, in its entirety, the Original Financing Agreement.
WHEREAS, pursuant to the Financing Agreement, CIT has agreed to
renew, modify and extend the loan facilities provided in the Original Financing
Agreement (the maximum amount of the loans has been lowered as specified in the
Financing Agreement) subject to the conditions and provisions set out in the
Financing Agreement.
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Financing Agreement that the Debtor confirm and
assure by its execution and delivery of this Amended and Restated Security
Agreement and Mortgage-Trademarks and Patents that the Collateral (as
hereinafter defined) is and remains collateral security for the Obligations (as
such term is defined in the Financing Agreement).
A. Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof.
B. Debtor is the owner and holder of the patents listed on Schedule
B hereto.
C. The Secured Party and the Lender have agreed to extend Loans and
certain other financial accommodations including, without limitation, assisting
in the issuance of Letters of Credit to the Borrower pursuant to, and subject to
the terms and conditions of, the Financing Agreement. The obligation of the
Lender under the Financing Agreement to extend such Loans and to assist in the
issuance of the Letters of Credit is conditioned on the execution and delivery
by the Debtor of a security agreement in the form hereof to secure the
Obligations (such Obligations to include, without limitation, the due and
punctual payment and performance of (a) the principal of and interest on the
Loans, when and as due, whether at maturity, by acceleration, upon one or more
dates set for prepayment or otherwise, (b) Indebtedness at any time and from
time to time under
2
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<PAGE>
the Letters of Credit, (c) all obligations of the Borrower at any time and from
time to time under this security agreement and (d) all obligations of the
Borrower at any time and from time to time under the Financing Agreement and the
other Loan Documents.
NOW, THEREFORE, IT IS AGREED that, for and in consideration of the
Loans and other financial accommodations to be made under the Financing
Agreement, and other good and valuable consideration, the receipt of which is
hereby acknowledged, and as collateral security for the full and prompt payment
and performance of all Obligations, as hereinafter defined, Debtor does hereby
mortgage to and pledge with the Secured Party, and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations listed on Schedule B hereto;
and (iii) any and all proceeds of the foregoing, including, without limitation,
any claims by Debtor against third parties for infringement of the Trademarks or
the Patents (collectively, the "Collateral").
1. Terms defined in the Financing Agreement and not otherwise
defined herein, shall have the meaning set forth in the Financing Agreement. As
used in this Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or
any other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or
divisionals thereof and all licenses thereof.
3
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<PAGE>
"Trademarks" shall mean (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof, or any other country
or any political subdivision thereof, all whether now owned or hereafter
acquired by Debtor, including, but not limited to, those described in Schedule A
annexed hereto and made a part hereof, and (ii) all reissues, extensions or
renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as
follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibits 1 and 2 hereof, respectively, requested by the Secured Party
at any time to evidence, perfect, maintain, record and enforce the Secured
Party's interest in the Collateral or otherwise in furtherance of the provisions
of this Agreement, and Debtor hereby authorizes the Secured Party to execute and
file one or more financing statements (and similar documents) or copies thereof
or of this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior
written notice of Debtor, shall consent, or (ii) Debtor shall not have used a
Trademark within the previous twelve months, Debtor (either itself or through
licensees) will continue to maintain the Trademarks on each and every trademark
class of
4
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<PAGE>
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain the Trademarks in full force free
from any claim of abandonment for nonuse and Debtor will not (and will not
permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents
shown on Schedule B hereto and the registrations thereof are valid and
subsisting and in full force and effect. None of the Patents has been abandoned
or dedicated, and, except to the extent that the Secured Party, upon prior
written notice by Debtor, shall consent, Debtor will not do any act, or omit to
do any act, whereby the Patents may become abandoned or dedicated and shall
notify the Secured Party immediately if it knows of any reason or has reason to
know that any application or registration may become abandoned or dedicated.
(e) Debtor will promptly pay the Secured Party for any and all sums,
costs, and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or in enforcing the Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Obligations shall be part of the Obligations and be
payable on demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured
5
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<PAGE>
Party may request to evidence the Secured Party's interest in such Patent or
Trademark and the goodwill and general intangibles of Debtor relating thereto or
represented thereby, and Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations are
paid in full.
(g) Debtor has the right and power to make the assignment and to
grant the security interest herein granted; and the Collateral is not now, and
at all times hereafter will not be, subject to any liens, mortgages,
assignments, security interests or encumbrances of any nature whatsoever, except
in favor of the Secured Party, and to the best knowledge of Debtor none of the
Collateral is subject to any claim.
(h) Except to the extent that Secured Party, upon prior written
notice from Debtor, shall consent, Debtor will not assign, sell, mortgage,
lease, transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, and nothing in this Agreement shall be deemed a consent
by the Secured Party to any such action except as expressly permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or
subsidiary thereof owns any Patents or Trademarks or has any Patents or
Trademarks registered in, or the subject of pending applications in, the United
States Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before
the United States Patent and Trademark Office or any similar office or agency of
the United States, any State thereof, any other country or any political
subdivision thereof, to maintain each application and registration of the
Trademarks and Patents, including, without limitation, filing of renewals,
affidavits of use, affidavits of incontestability and opposition, interference
and cancellation proceedings (except to the extent
6
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<PAGE>
that dedication, abandonment or invalidation is permitted under paragraphs 2(c)
and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the
use of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do
any act required of Debtor hereunder or requested by Secured Party to preserve,
defend, protect, maintain, record or enforce Debtor's obligations contained
herein, the Obligations, the Collateral, or the right, title and interest
granted Secured Party herein, and which Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to Debtor and shall be
payable on demand together with interest at the highest rate then payable on the
Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary
thereof, learns of any use by any person of any term or design likely to cause
confusion with any Trademark, it shall promptly notify Secured Party of such use
and, if requested by Secured Party, shall join with Secured Party, at its
expense, in such action as Secured Party, in its reasonable discretion, may deem
advisable for the protection of Secured Party's interest in and to such
Trademarks.
7
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(n) All licenses of its Trademarks and Patents which Debtor has
granted to third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all
other rights and remedies of the Secured Party, whether under law, the Financing
Agreement or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of it,
either with or without special or other conditions or stipulations, with power
to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which the Secured Party shall, in its sole discretion, deem
appropriate or proper; and (e) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
pursuant to subparagraph 3(d) hereof, the Secured Party may, at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 4 hereof (such authority becoming effective on the occurrence or
continuation as
8
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<PAGE>
hereinabove provided of an Event of Default), execute and deliver on behalf of
Debtor, one or more instruments of assignment of the Patents or Trademarks (or
any application or registration thereof), in form suitable for filing, recording
or registration in any country. Debtor agrees to pay when due all reasonable
costs incurred in any such transfer of the Patents or Trademarks, including any
taxes, fees and reasonable attorneys' fees, and all such costs shall be added to
the Obligations. The Secured Party may apply the proceeds actually received from
any such license, assignment, sale or other disposition to the reasonable costs
and expenses thereof, including, without limitation, reasonable attorneys' fees
and all legal, travel and other expenses which may be incurred by the Secured
Party, and then to the Obligations, in such order as to principal or interest
as the Secured Party may desire; and Debtor shall remain liable and will pay the
Secured Party on demand any deficiency remaining, together with interest thereon
at a rate equal to the highest rate then payable on the Obligations and the
balance of any expenses unpaid. Nothing herein contained shall be construed as
requiring the Secured Party to take any such action at any time. In the event of
any such license, assignment, sale or other disposition of the Collateral, or
any of it, after the occurrence or continuation as hereinabove provided of an
Event of Default, Debtor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing or in connection with the
Trademarks or Patents, and its customer lists and other records relating to the
Trademarks or Patents and to the distribution of said products, to the Secured
Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the Secured Party to be held as cash collateral to the
extent of the undrawn amount, if any, of outstanding Letters of Credit;
SECOND, to the payment of all reasonable costs and expenses incurred
by the Secured Party in connection with such sale or otherwise in connection
with this Agreement or any of the Obligations, including, but not limited to,
all court costs and the reasonable fees and expenses of its agents and legal
counsel,
9
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<PAGE>
the repayment of all advances made by the Secured Party hereunder on behalf of
the Debtor and any other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder;
THIRD, pro rata to the payment in full of principal and interest in
respect of any Loans outstanding (pro rata as among the Lender(s) in accordance
with the amounts of the Loans made by them pursuant to the Financing Agreement);
FOURTH, pro rata to the payment in full of all Obligations (other
than those referred to above) owed to the Lender(s) (pro rata as among the
Lender(s) in accordance with the amount of Obligations owing to them); and
FIFTH, to the Debtor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs
3(d) and (e) hereof and Debtor hereby releases the Secured Party from any
claims, causes of action and demands at any time arising out of or with respect
to any actions taken or omitted to be taken by the Secured Party under the
powers of attorney granted herein, other than actions taken or omitted to be
taken through the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except
by a written instrument expressly referring to this Agreement and executed by
the party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED
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<PAGE>
IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE STATE OF
NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Debtor hereby submits to the nonexclusive jurisdiction of the Supreme Court of
the State of New York and the federal courts of the United States of America
located in such State in any action or proceeding arising under this Agreement.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
6. The Debtor hereby confirms and assures that the terms of the
Original Security Agreement are hereby superseded and restated in their entirety
by this Agreement without thereby cancelling, releasing or discharging the
security interests created thereby.
11
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<PAGE>
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
STONEHENGE FINANCIAL CORP.
By /s/ Alan Kanis
---------------------------------
Name: Alan Kanis
----------------------------
Title: CFO
----------------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC.
By /s/ John Hendrickson
---------------------------------
Name: John Hendrickson
----------------------------
Title: Vice President
----------------------------
12
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<PAGE>
Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
13
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<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
14
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<PAGE>
Schedule C to Security Agreement
LICENSES
15
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<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Stonehenge Financial Corp., a New York corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to The CIT Group/Commercial
Services, Inc., a Delaware corporation, as agent (referred to herein as the
"Assignee") for (i) the lender (the "Lender") named in the Amended and Restated
Financing and Security Agreement, dated of even date herewith, among Andover
Togs, Inc., the Lender and the Assignee (the "Financing Agreement"), and (ii)
itself as issuer of the Letters of Credit, and Assignor has entered into an
Amended and Restated Security Agreement and Mortgage-Trademarks and Patents
dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the Collateral made and granted hereby are more fully set forth
in the Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New
York 10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
STONEHENGE FINANCIAL CORP.
By:
------------------------------
Name:
----------------------------
Title:
----------------------------
2
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
3
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<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Stonehenge Financial Corp., a New York corporation (herein
referred to as "Assignor"), has adopted, used and is using the trademarks listed
on the annexed Schedule 2-A, which trademarks are registered in the United
States Patent and Trademark Office or applications therefore have been filed
(the "Trademarks");
WHEREAS, Assignor is obligated to the CIT Group/Commercial Services,
Inc., a Delaware corporation, as agent (referred to herein as the "Assignee")
for (i) the lender (the "Lender") named in the Amended and Restated Financing
and Security Agreement, dated of even date herewith, among Andover Togs, Inc.,
the Lender and the Assignee (the "Financing Agreement"), and (ii) itself as
issuer of the Letters of Credit, and Assignor has entered into an Amended and
Restated Security Agreement and Mortgage-Trademarks and Patents dated the date
hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security
<PAGE>
<PAGE>
interest in, and mortgage on, the Collateral to secure the prompt payment,
performance and observance of the Obligations.
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the Collateral made and granted hereby are more fully set forth
in the Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Assignee's address is 1211 Avenue of the Americas, New York, New
York 10036.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
STONEHENGE FINANCIAL CORP.
By
---------------------------------
Name:
----------------------------
Title:
----------------------------
2
<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Trademark Reg. Date Reg. No.
- --------- --------- --------
II. Pending Applications
Trademark Filing Date Application No.
- --------- ----------- ---------------
<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Stonehenge Financial Corp., a
New York corporation (hereinafter called "Assignor"), hereby appoints and
constitutes The CIT Group/Commercial Services, Inc., a Delaware corporation, as
agent (referred to herein as the "Assignee") for (i) the lender (the "Lender")
named in the Amended and Restated Financing and Security Agreement, dated of
even date herewith, among Andover Togs, Inc., the Lender and the Assignee (the
"Financing Agreement"), and (ii) itself as issuer of the Letters of Credit
(hereinafter called "Assignee"), its true and lawful attorney, with full power
of substitution, and with full power and authority to perform the following acts
on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any letters patent of the United States or any other country
or political subdivision thereof, and all registrations, recordings,
reissues, continuations, continuations-in-part and extensions
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment
or other papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any
<PAGE>
<PAGE>
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment
or other papers necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates
or other papers necessary or advisable in order to obtain the
purposes described above as Assignee may in its sole discretion
determine.
This power of attorney is made pursuant to an Amended and Restated
Security Agreement and Mortgage - Trademarks and Patents, dated the date hereof,
between Assignor and Assignee and takes effect solely for the purposes of
paragraph 3 thereof and is subject to the conditions thereof and may not be
revoked until the payment in full of all "Obligations" as defined in such
Security Agreement and Mortgage.
Dated: May __, 1997
[Corporate Seal] STONEHENGE FINANCIAL CORP.
By
---------------------------------
Name:
----------------------------
Title:
----------------------------
2
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this __ day of May, 1997, before me personally appeared William
Cohen, to me known, who, being by me duly sworn, did depose and say that he
resides at 15 Middle Lane, East Hampton, N.Y. and that he is President of
Stonehenge Financial Corp., the New York corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was
affixed pursuant to authority of the Board of Directors of said corporation, and
that he signed his name thereto pursuant to such authority.
---------------------------
Notary Public
3
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<PAGE>
INTERCREDITOR AGREEMENT
May 12, 1997
THE CIT GROUP/COMMERCIAL SERVICES,
INC., individually and as Agent
under the Amended and Restated
Financing and Security Agreement
referred to below
1211 Avenue of the Americas
New York, New York 10036
Dear Sirs:
In order to induce you to extend or to continue to extend credit,
from time to time, to ANDOVER TOGS, INC. ("Andover"), such extensions of credit
to be guaranteed by SPRINGDALE FASHIONS, INC., TORTONI MANUFACTURING CORP. and
STONEHENGE FINANCIAL CORP., (collectively with Andover, the "Debtor"), pursuant
to the Amended and Restated Financing and Security Agreement dated May ___, 1997
(as amended, restated, modified and supplemented, the "Senior Loan Agreement")
by and among THE CIT GROUP/COMMERCIAL SERVICES, INC. ("CITCS"), as a lender and
as agent (in such capacity, the "Agent"), certain lenders (including "CITCS",
each a "Senior Lender" and collectively, the "Senior Lenders") and Andover, and
all other instruments, agreements and documents now or hereafter entered into by
any Debtor in favor of the Agent and/or any Senior Lender in connection with the
Senior Loan Agreement (together with the Senior Loan Agreement, each a "Senior
Loan Document" and collectively, the "Senior Loan Documents") (all such credit
and extensions thereof, and all indebtedness, obligations and liabilities of
every nature of any Debtor to the Agent and/or any Senior Lender pursuant to any
of the Senior Loan Documents, whether now existing or hereafter arising,
together with all extensions, renewals or modifications of any thereof and of
any part of any thereof, and all interest thereon and fees and expenses payable
with respect thereto (including, without
<PAGE>
<PAGE>
limitation, interest accruing after the commencement of a bankruptcy proceeding
against any Debtor whether or not a claim therefor may be made in such
proceeding), being hereinafter collectively called the "Senior Claims"), the
undersigned (hereinafter referred to as the "undersigned") hereby represents to
and agrees with you as follows:
1. The Collateral Trustee, under and as defined in the Note
Agreement (as hereinafter defined), hereby subordinates the payment of the
Junior Claims (as defined below) to the prior payment in full in cash of the
Senior Claims. As used in this Agreement, "Junior Claims" means the principal of
and interest on all obligations, indebtedness and liabilities of any Debtor to
the undersigned (including, without limitation, the obligations, indebtedness
and liabilities described on Schedule A hereto), together with all extensions
and renewals thereof or of any part of any thereof but excluding (i) all fees
payable to, and reasonable costs and expenses incurred by the undersigned in
accordance with the terms of the Note Agreement, including, but not limited to,
the fees and disbursements of counsel to the undersigned (collectively the "Note
Agreement Fees") but expressly including the Note Agreement Fees, after an Event
of Default as defined in the Note Agreement, in excess of $50,000, and (ii) all
reasonable costs and expenses incurred by the Committee (as defined in the Note
Agreement) in accordance with the terms of the Note Agreement, including, but
not limited to, the fees and disbursements of counsel and accountants to the
Committee. "Note Agreement" means the Note and Collateral Trust Agreement, dated
the date hereof, between M.J. Sherman & Associates, Inc., as Collateral Trustee,
and the Debtor.
2. Until the Senior Claims shall be paid in full in cash and the
Senior Loan Documents shall be terminated, neither any Class 4 Creditor nor the
undersigned will (x) take, demand or receive, and no Debtor will make, give or
permit, directly or indirectly, by set-off, redemption, purchase or in any other
manner, any payment on or security (other than a secondary lien on the
Collateral) for the whole or any part of the Junior Claims or (y) take any
action to enforce or collect amounts owing under the Junior Claims, take any
action with respect to the Collateral, accelerate the scheduled maturities of
any amounts owing under any of the Junior Claims or act as a petitioning
2
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<PAGE>
creditor in a bankruptcy proceeding filed against any Debtor, except that the
Debtor may make, and the undersigned may receive, quarterly payments of accrued
interest and scheduled principal payments (including but not limited to the
payment of Excess Cash Flow Payments as provided in the Class 4 Note due March
31, 2002 as defined in the Note Agreement (the "Class 4 Note")) on the Junior
Claims, so long as no event of default shall have occurred and then be
continuing under any of the Senior Loan Documents and the undersigned shall not
have received notice thereof from you. Notwithstanding the immediately preceding
sentence, after (and not at any time before) a period of 180 days ("Blockage
Period") following the receipt by CITCS from the undersigned of notice that an
event of default based on a failure to pay principal or interest on the Junior
Claims has occurred and is continuing under the Junior Claims, the undersigned
may take any action to enforce or collect amounts owing under the Junior Claims,
the undersigned may accelerate the scheduled maturities of any amounts owing
under any of the Junior Claims, or any Class 4 Creditor (as defined in the Note
Agreement) may act as a petitioning creditor in any bankruptcy proceeding filed
against any Debtor. There shall be no more than one Blockage Period in any
twelve month period following the date of this Agreement.
3. Upon any liquidation, dissolution or other winding up of any
Debtor or its business or any sale, receivership, insolvency, reorganization or
bankruptcy proceedings, assignment for the benefit of creditors, arrangement or
the commencement of any proceeding by or against any Debtor for any relief under
any bankruptcy, reorganization or insolvency law or laws, Federal or state, or
any other law, Federal or state, relating to the relief of debtors, readjustment
of indebtedness, reorganization, composition, or extension, or in the event of
the occurrence and during the continuation of any event of default under the
Senior Loan Documents of which the Debtor and the undersigned have received
notice from you, then and in any such event, any payment or distribution of any
kind or character, whether in cash, property or securities which, but for the
subordination provisions contained herein, would otherwise be payable or
deliverable to the undersigned upon or in respect of the Junior Claims, shall
instead be paid over or delivered to you for application as a payment or
prepayment on account of the Senior Claims, and the undersigned shall not
receive any such payment or
3
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<PAGE>
distribution or any benefit therefrom unless and until the Senior Claims shall
have been fully paid and satisfied in cash. In the event that, notwithstanding
the foregoing, any Debtor shall offer any payment with respect to the Junior
Claims, the undersigned will direct that the same be made or delivered to you,
and in the event of any moneys coming into the hands of the undersigned on
account of any Junior Claim from any source whatsoever, the undersigned will
receive the same solely as your agent and will immediately turn the same, in the
form received, except for the endorsement of the undersigned where appropriate,
over to you for application on account of the Senior Claims, and until so turned
over, the undersigned will hold the same in trust for you. If the undersigned
shall fail to endorse any such instrument for the payment of money payable to
the undersigned or on the undersigned's order, which has been turned over to
you, you are hereby irrevocably constituted and appointed attorney-in-fact for
the undersigned with full power to make any such endorsement, and with full
power of substitution. All actions taken by such attorney-in-fact are hereby
ratified and approved.
4. The undersigned irrevocably authorizes and empowers you under the
circumstances set forth in paragraph 3 of this Agreement, to demand, sue for,
collect and receive every such payment or distribution referred to in such
paragraph and give acquittance therefor, and file claims and proofs of claim in
any statutory or non-statutory proceeding, vote such claims in any such
proceeding and take such other actions, in your name, in any Senior Lender's
name or in the name of the undersigned or otherwise, as you may deem necessary
or advisable for the enforcement of the provisions of this Agreement. The
undersigned hereby agrees, under the circumstances set forth in paragraph 3,
duly and promptly to take such action as may be requested at any time and from
time to time by you to collect the Junior Claims for your account and to file
appropriate proofs of claim in respect thereof, and to execute and deliver such
powers of attorney, assignments or other instruments as you may request in order
to enable you to enforce any and all claims upon or in respect of the Junior
Claims and to collect and receive any and all payments or distributions which
may be payable or deliverable at any time upon or in respect of the Junior
Claims. Any and all moneys so collected or received by you shall be retained
indefeasibly by you for application to the payment in full of the
4
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<PAGE>
Senior Claims then outstanding; provided, however, that upon the indefeasible
payment to you in cash of moneys collected or received on account of Junior
Claims and on account of Senior Claims aggregating an amount equivalent to all
the matured and unmatured Senior Claims, you shall pay over to the undersigned
the excess, if any, of all moneys so received or collected on the Junior Claims
and on the Senior Claims and assign and deliver to the undersigned any and all
instruments and documents evidencing any remaining Senior Claims, without any
representations or warranties of any nature or type whatsoever in respect
thereof (endorsed to the undersigned without recourse in the case of negotiable
instruments). If you receive oral or written notice of any claim or demand,
whether reasonable or unreasonable, adverse to the rights or interests, as
hereinabove set forth, of the undersigned in and to either the Junior Claims or
the Senior Claims, or any moneys held by you in respect thereof, you shall be
entitled to retain any and all such moneys, and documents and instruments
evidencing such Junior Claims and Senior Claims without incurring any liability
or debt to the undersigned, until the adjudication or final settlement of the
rights of such claimant against the undersigned, and the undersigned hereby
agrees to indemnify and save you and each Senior Lender harmless from any and
all liability and expenses incurred in connection with the assertion of such
claims or demands.
5. Without notice to or consent by the undersigned, (a) any demand
for payment of the Senior Claims or any of them may be rescinded in whole or in
part and any of the Senior Claims may be continued, and the Senior Claims, or
the liability of any Debtor or any other party upon or for any part thereof, or
any collateral security or guaranty therefor or right of offset with respect
thereto, or any obligation or liability of any Debtor or any other party under
any of the Senior Claims may, from time to time, in whole or in part, be
renewed, extended, modified, accelerated, compromised, waived, surrendered, or
released or (b) the instruments evidencing the Senior Claims or any loan
agreements, collateral security documents, guaranties or other documents in
connection therewith may be amended, modified, supplemented or terminated, in
whole or in part, as you may deem advisable from time to time, and any
collateral security at any time held for the payment of the Senior Claims may be
sold, exchanged, waived, surrendered or released, in each case all
5
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<PAGE>
without notice to or further assent by the undersigned, which will remain bound
under this Agreement, and all without impairing, abridging, releasing or
affecting the subordination provided for herein, notwithstanding any such
renewal, extension, modification, acceleration, compromise, amendment,
supplement, termination, sale, exchange, waiver, surrender or release. The
undersigned waives any and all notice of the creation, renewal, extension or
accrual of any of the Senior Claims and notice of or proof of reliance by the
Agent and/or any Senior Lender upon this Agreement, and the Senior Claims shall
conclusively be deemed to have been created, contracted or incurred in reliance
upon this Agreement, and all dealings between any Debtor and you shall be deemed
to have been consummated in reliance upon this Agreement.
6. At your request, the undersigned hereby further agrees (i) to
make notations on the undersigned's books beside all accounts or on other
statements evidencing or recording any Junior Claim to the effect that such
Junior Claim is subject to the provisions of this Agreement, (ii) to give you,
upon request from time to time, access to the undersigned's books with respect
to such accounts and the right to make copies of such books, and (iii) to
furnish you, upon request from time to time, with statements of such accounts
between the undersigned and any Debtor.
7. The undersigned hereby represents to you that (i) the undersigned
has not heretofore assigned, transferred, created a security interest in, or
otherwise encumbered such Junior Claims, and (ii) the Junior Claims are not
represented by any instruments or documents other than as described on Schedule
A annexed hereto. The undersigned agrees with you that any Junior Claim now or
hereafter existing will not be represented by any instruments or documents other
than those that have been caused to indicate that they are subject to this
Agreement.
8. Upon (i) the payment in full in cash of all Senior Claims and
(ii) the termination of all agreements under which you are obligated to extend
credit, make advances, loans or other financial accommodations to any Debtor,
this Agreement shall automatically terminate, except that this Agreement shall
continue in full force and effect as to all Junior Claims and all Senior Claims
outstanding at the date of such termination, until
6
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<PAGE>
such Senior Claims have been fully and irrevocably paid in cash and discharged.
9. In the event of a breach by any Debtor or the undersigned in the
observance and due fulfillment of any of the terms and obligations of this
Agreement, you may, if such breach is not cured or waived within ten (10) days
from the written notice thereof to the undersigned and the Debtor, declare the
Senior Claims to be due and payable, and thereupon the same shall become and
shall be immediately due and payable.
10. Any notice by either party to the other shall be effective only
if in writing and directed to the recipient's address set forth below the
signature line hereto, or to such other address as either party may notify the
other in writing.
11. No delay on your part in exercising any right or rights
hereunder or in failing to exercise the same shall operate as a waiver of such
right or rights; and no notice to or demand on any Debtor or the undersigned
shall be deemed a waiver of any obligation or duty of any Debtor or the
undersigned or of your right to take further action without notice; nor in any
event shall any modification, alteration or waiver of any of the provisions
hereof be effective unless in writing and signed by the parties hereto and then
only in the specific instance for which given.
12. The undersigned waives trial by jury in any litigation arising
out of or relating to this Agreement.
13. Subject to the payment in full of all Senior Claims in cash, the
undersigned shall be subrogated to your rights to receive payments or
distributions of cash, property or securities of any Debtor applicable to the
Senior Claims until the principal of and interest on the Junior Claims shall be
paid in full; and, for the purposes of such subrogation, no payments or
distributions of any cash, property or securities to which the undersigned would
be entitled, except for the provisions of this Agreement, and no payment over
pursuant to the provisions of this Agreement to or for your benefit by the
undersigned, shall, as between any Debtor, its creditors other than you and the
undersigned, be deemed to be a payment by any Debtor to or on
7
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<PAGE>
account of the Senior Claims. It is understood that the provisions of this
Agreement are intended solely for the purpose of defining the relative rights of
the undersigned, on the one hand, and you, on the other hand.
14. This Agreement and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with the internal
laws of the State of New York applicable to contracts executed and to be
performed in such State without regard to the conflict of law principles of such
State.
15. By your acceptance of this Agreement set forth below, you hereby
consent to the granting by the Debtor to the undersigned of liens on and
security interests in all of the Debtor's assets and property on and in which
you have been, or may hereafter be granted a lien and security interest
(collectively, the "Collateral") as security for the payment of the Junior
Claims, provided that the Collateral shall not secure any other obligations of
the Debtor to the undersigned. Your security interest in the Collateral shall be
deemed to have a priority senior to any security interest of the undersigned in
such Collateral or any other of the Debtor's assets on and in which you may
hereafter be granted an interest. Your priority in respect of the Collateral
shall be irrespective of the time, order or method of attachment or perfection
of security interests, or the time or order of the filing of financing
statements, or the giving of or failure to give notice of purchase money
security interests. The undersigned further acknowledges that the indebtedness
of Debtor under the Senior Claims is revolving in nature and that the amount
thereof which may be outstanding at any time or from time to time may be
increased or reduced and subsequently reborrowed. The terms of the Senior Claims
may be modified, extended or amended from time to time, and the amount thereof
may be increased or reduced, all without notice to or consent by the undersigned
and without affecting the provisions of this Agreement. Until such time as all
Senior Claims shall have been paid in full and the Senior Loan Documents
referred to above shall have been terminated, the undersigned agrees that it
will not commence or continue any default, foreclosure or liquidation
proceedings or remedies in respect of any of the Collateral. In the event any
Collateral,
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or any collections or other proceeds thereof (other than payments on the Class 4
Note expressly permitted to be made under Section 2 hereof), shall be received
by the undersigned at any time for any reason, such Collateral and proceeds
shall be held in trust for the benefit of, and promptly remitted to, you. If the
undersigned shall desire to assign or transfer any mortgages or security
agreements between the undersigned and any Debtor relating to the Collateral, or
the benefits thereof or the obligations secured thereby, to any other person,
the undersigned shall notify you thereof and shall advise such person of this
Agreement. On or prior to the date of such assignment or transfer, the
undersigned shall obtain an undertaking from such person to be bound hereby in
form and substance satisfactory to you.
16. Each reference herein to you or to the undersigned shall be
deemed to include, except where inconsistent with the context, your and the
undersigned's respective legal representatives, successors and assigns.
9
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17. This Agreement shall not inure to the benefit of any other
creditor of the Debtor.
M.J. Sherman & Associates, Inc.,
as Collateral Trustee on Behalf
of Class 4 Creditors
By: /s/ Oleg Ostrovsky
---------------------------------
Name: Oleg Ostrovsky
Title: Vice President
Address: 333 E. 68th St.
NY, NY 10021
Accepted:
THE CIT GROUP/COMMERCIAL SERVICES,
INC., individually and as Agent
under the Amended and Restated
Financing and Security Agreement
By: /s/ John Hendrickson
---------------------------------
Name: John Hendrickson
Title: Vice President
Address: 1211 Avenue of the Americas
New York, New York 10036
10
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SCHEDULE A
JUNIOR CLAIMS
Junior Claims mean any obligations, indebtedness and liabilities at
any time owed by any Debtor and secured by Collateral Documents as defined in
the Note Agreement, including, but not limited to, the Class 4 Note, expenses,
charges and other sums owing pursuant to the Class 4 Note, the Note Agreement,
and all related documents, agreements and instruments evidencing or creating the
Junior Claims or the mortgages or security interests in the Collateral granted
to secure the Junior Claims, but excluding (i) the Note Agreement Fees but
expressly including the Note Agreement Fees, after an Event of Default as
defined in the Note Agreement, in excess of $50,000, and (ii) all costs and
expenses incurred by the Committee (as defined in the Note Agreement) in
accordance with the terms of the Note Agreement, including, but not limited to,
the fees and disbursements of counsel and accountants to the Committee.
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DEBTOR ACKNOWLEDGMENT
The undersigned, the Debtor referred to in the within Intercreditor
Agreement (herein called the "Agreement"), hereby jointly and severally accepts
notice of the execution and delivery thereof and of the terms and provisions
thereof, and, in consideration of the extension of credit to it by the holders
of the Senior Claims as therein described, agrees to refrain from doing any act
or thing which would cause a violation by the signer of the Agreement or of any
of the signer's obligations thereunder.
Dated: May 12, 1997
ANDOVER TOGS, INC.
By: /s/ William L. Cohen
---------------------------
Name: William L. Cohen
Title: President
STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
---------------------------
Name: William L. Cohen
Title: President
TORTONI MANUFACTURING CORP.
By: /s/ William L. Cohen
---------------------------
Name: William L. Cohen
Title: President
SPRINGDALE FASHIONS, INC.
By: /s/ William L. Cohen
---------------------------
Name: William L. Cohen
Title: President
12
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<PAGE>
CLASS 4 NOTE
New York, New York
May 12, 1997
FOR VALUE RECEIVED, the undersigned, ANDOVER TOGS, INC., a Delaware
corporation, (the "Maker") hereby promises to pay to the order of the Collateral
Trustee under and as defined in the Plan referred to below (the "Payee";
capitalized terms used and not otherwise defined herein having herein their
respective meanings as set forth in the Plan), for the benefit of the Class 4
Creditors (as defined in the Note Agreement), at the office of the Payee located
at 333 East 68th Street, New York, New York 10021, or at such other place(s) as
may be designated in writing by the holder hereof (the "Holder"), a principal
amount equal, at all times, to the amount, by which (x) the sum of all Allowed
General Unsecured Claims allowed from time to time at any time exceeds (y) the
aggregate amount of Class 4 Cash paid to the holders of such Allowed General
Unsecured Claims (such excess, the "Note Portion"), which Note Portion is in the
aggregate principal amount as of the date hereof as set forth on Schedule A
attached hereto, in lawful money of the United States, in twenty (20)
consecutive quarterly installments (or earlier as hereinafter provided)
commencing June 30, 1997 and on the last day of each calendar quarter
thereafter, of which the first nineteen (19) installments shall each be in the
amount of one fortieth (1/40th) of the Note Portion of such Allowed General
Unsecured Claims, and the last and twentieth (20th) installment of which shall
be in the amount of the entire unpaid balance hereof, if any, which last and
20th installment shall be due and payable on March 31, 2002.
The Maker further promises to pay interest to the order of the Payee at
said office or place(s), in like money, on the unpaid principal amount of this
Class 4 Note (this "Note") quarterly in arrears on the last day of each calendar
quarter commencing June 30, 1997 at a rate of six percent (6%) per annum from
the date hereof until paid in full.
In addition to the quarterly installments of principal and interest
payable hereunder, the Maker further promises to pay to the order of the Payee
on the last day of March of each year, commencing on the last day of March,
1998, an amount equal to fifty percent (50%) of the Maker's Excess Cash Flow, if
any, for the immediately preceding fiscal year of the Maker, each such payment
(each an "Excess Cash Flow Payment" and collectively, the "Excess Cash Flow
Payments") to be applied to the payment of the unpaid principal balance of this
Note in the inverse order of the maturity of the quarterly principal
installments hereof.
At such time as a Disputed Claim becomes, in whole or in part, an Allowed
General Unsecured Claim (the "Allowance Date"), then, after the Allowance Date,
in addition to the pro rata share of the quarterly installments of principal and
interest and of the Excess Cash Flow
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Payments, if any, due and payable hereunder, the Maker further promises to pay
to the Payee with respect to such Allowed General Unsecured Claim, on the
quarterly Distribution Date next following the Allowance Date, an amount equal
to the aggregate amount of all principal and interest which would have been due
and payable hereunder with respect to such Allowed General Unsecured Claim from
and after the Effective Date through and including the Allowance Date if such
Allowed General Unsecured Claim had been an Allowed General Unsecured Claim on
the Effective Date.
This Note has been issued pursuant to the Joint Plan of Reorganization,
dated January 30, 1997, of the Maker and its subsidiaries, Springdale Fashions,
Inc., Tortoni Manufacturing Corp. and Stonehenge Financial Corp. (each a
"Subsidiary" and collectively, the "Subsidiaries") under chapter 11 of the
United States Bankruptcy Code, confirmed by order of the United States
Bankruptcy Court for the Southern District of New York (Case Nos. 96 B 41437
(TLB) through 96 B 41440 (TLB), inclusive) (as amended, supplemented or
modified, the "Plan").
The rights of each holder of an Allowed General Unsecured Claim to receive
its ratable share of payments of the Note Portion of Allowed General Unsecured
Claims pursuant to this Note shall be evidenced by a certificate of beneficial
interest in this Note in this Note in a principal amount equal to the amount by
which such holder's Allowed General Unsecured Claim exceeds the Class 4 Cash
received by such holder.
This Note is secured by a second priority lien upon and security interest
in certain of the assets of the Maker and its subsidiaries which secure the Exit
Financing Facility, as set forth in the Class 4 Security Agreement of even date
herewith, and is subject to the terms of the Intercreditor Agreement, dated on
or about the date hereof, between CIT and the Payee (the "Intercreditor
Agreement").
If any payment on this Note becomes due and payable on a day other than a
Business Day, the maturity thereof shall be extended to the next succeeding
Business Day, and with respect to payment of principal, interest thereon shall
be payable at the then applicable rate during any such extension.
Upon the occurrence of any of the following events (each an "Event of
Default"):
(a) the Maker fails to pay when due any principal or interest
payable hereunder or any of the other Obligations, and such
failure shall continue unremedied for more than four (4)
Business Days;
(b) any representation or warranty of the Maker contained herein
or of the Maker or any Subsidiary contained in any other Class
4 Document (as defined in the Note Agreement) shall prove to
have been false in any
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material respect when made, unless the fact resulting in such
breach of representation or warranty is capable of cure and is
cured within ten (10) days of the occurrence of an Event of
Default arising from such breach;
(c) breach by the Maker of any covenant contained in this Note or
by the Maker or any Subsidiary contained in any other Class 4
Document (other than the covenants referred to in
sub-paragraph (a) above) or any written agreement entered into
in connection with this Note between the Maker or any
Subsidiary and the Payee, or delivered by the Maker or any
Subsidiary to the Payee in connection herewith, if such breach
shall not have been remedied within thirty (30) days after the
occurrence of an Event of Default arising from such breach;
(d) for any reason (other than as a result of an act or failure to
act on the part of the Payee relating to the continuation of
perfection of the security interest of the Payee in the
Collateral) any Class 4 Document shall cease to be in full
force and effect or any security interest intended or
purported to be created thereby with respect to any part of
the Collateral shall cease to be or is not valid and perfected
(to the extent such security interest can be perfected by
filing), or if, for any reason, any such security interest or
obligations shall not have the priority contemplated by the
Class 4 Documents and the Intercreditor Agreement, or the
Maker or any Subsidiary shall assert any of the foregoing;
(e) the occurrence of an "Event of Default" under and as defined
in the Amended and Restated Financing and Security Agreement,
dated on or about the date hereof, by and among CIT, as Agent,
and as a Lender, and Andover Togs, Inc., as Borrower, as the
same may now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated, or replaced (the
"Financing Agreement"), which Event of Default shall not have
been cured or waived by the appropriate Lenders under and in
accordance with the terms of the Financing Agreement;
(f) an involuntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect shall be
commenced against the Maker of any Subsidiary and the petition
shall not be dismissed within thirty (30) days after the
commencement of the case, or a court having jurisdiction in
the premises shall enter a decree or order for relief in
respect of the Maker or any Subsidiary in an involuntary case,
under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, or any other similar relief
shall be granted under any applicable federal or state law, or
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<PAGE>
a decree or order of a court having jurisdiction in the
premises for the appointment of a receiver, liquidator,
trustee, custodian or other officer having similar powers over
the Maker or any Subsidiary or over all or a substantial part
of the property of the Maker or any Subsidiary shall be
appointed or a warrant of attachment, execution or similar
process against any substantial part of the property of the
Maker or any Subsidiary shall be issued and any such event
shall not be stayed, dismissed, bonded or discharged within
thirty (30) days of entry, appointment or issuance; or
(g) the Maker or any Subsidiary shall have an order for relief
entered with respect to it or commence a voluntary case under
any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or shall consent to the entry of an
order in an involuntary case, or to the conversion of an
involuntary case to a voluntary case, under any such law, or
shall consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial
part of its property; or the Maker or any Subsidiary shall
make an assignment for the benefit of creditors or shall admit
in writing its inability generally to pay its debts as such
debts become due; or the Board of Directors of the Maker or
any Subsidiary (or any Committee thereof) shall adopt any
resolution or otherwise authorize any action to approve any of
the foregoing;
then, and in any such event, in addition to all the rights and remedies of the
Payee under the Collateral Documents (as defined in the Note Agreement),
applicable law and otherwise, the Payee, may, subject to the provisions of the
Note Agreement and the Intercreditor Agreement, declare the unpaid principal
balance of this Note together with all interest accrued thereon, and all other
Obligations of the Maker to the Payee, to be due and payable, whereupon the
unpaid balance hereof, together with all interest accrued thereon, and all such
other Obligations, shall forthwith become due and payable, together with
interest accruing thereafter at the then applicable rate as stated above, until
the indebtedness evidenced by this Note is paid in full; provided, however, that
if the Event of Default is one of the events listed in subparagraph (f) or (g)
of this paragraph, then, upon the occurrence thereof, all Obligations shall
automatically and immediately become due and payable without demand or notice of
any kind, which are expressly waived by Maker.
If this Note is not paid when due and if it is placed with an attorney for
collection, the Maker agrees to pay all costs of collection, including
reasonable attorneys' fees which shall be added to the amount due under this
Note.
The Maker waives presentment, notice of dishonor, protest and any other
notice or formality with respect to this Note. The Holder may extend the time of
payment of this Note,
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postpone the enforcement hereof, grant any other indulgences, add or release any
party primarily or secondarily liable hereon and/or permit substitutions,
exchanges or releases of Collateral, in whole or in part, and the Holder may do
any or all of the foregoing without affecting or diminishing the Holder's right
of recourse against the Maker, which right is expressly reserved.
The Holder shall not be required to look to any collateral security for
this Note and may proceed against the Maker in such manner as it deems
desirable. No right or remedy of the Holder hereunder is to be deemed waived or
affected by any failure or delay to exercise the same.
IN THE EVENT OF ANY LITIGATION WITH RESPECT TO THIS NOTE, THE MAKER WAIVES
(TO THE EXTENT PERMITTED BY LAW) THE RIGHT TO A TRIAL BY JURY, ALL RIGHTS OF
SETOFF AND RIGHTS TO INTERPOSE COUNTERCLAIMS AND CROSS-CLAIMS (UNLESS SUCH
SETOFF, COUNTERCLAIM OR CROSS-CLAIM COULD NOT, BY REASON OF ANY APPLICABLE
FEDERAL OR STATE PROCEDURAL LAWS, BE INTERPOSED, PLEADED OR ALLEGED IN ANY OTHER
ACTION) AND THE DEFENSES OF FORUM NON CONVENIENS AND IMPROPER VENUE AS TO ANY
ACTION OR PROCEEDING BROUGHT IN ANY FEDERAL OR NEW YORK STATE COURT SITTING IN
THE CITY OF NEW YORK.
THE MAKER HEREBY IRREVOCABLY CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF
THE STATE OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN THE CITY OF NEW YORK
IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE. IN ANY SUCH ACTION OR PROCEEDING, THE MAKER WAIVES (TO THE EXTENT
PERMITTED BY LAW) PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS
AND AGREES THAT THE SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL.
THE MAKER HEREBY WAIVES (TO THE EXTENT PERMITTED BY LAW) THE DEFENSES OF FORUM
NON CONVENIENS AND IMPROPER VENUE.
The execution and delivery of this Note has been authorized by the Board
of Directors of the Maker and by any necessary note or consent of the
stockholders of the Maker.
This Note may not be modified or amended except by an agreement in writing
signed by the party to be charged.
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This Note shall be governed by, and interpreted in accordance with, the
laws of the State of New York and shall be binding upon the successors and
assigns of the Maker and inure to the benefit of the Payee and its successors,
endorsees and assigns.
ATTEST: ANDOVER TOGS, INC.
By: /s/ William L. Cohen
-----------------------
/s/ Pamela E. Flaherty Title: President
- --------------------------
Assistant Secretary
By:
-----------------------
Title:
--------------------
[Corporate Seal]
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Schedule A
Original Principal
Date Amount
---- ------------------
5-12-97 (Effective Date) $3,317,532.06
<PAGE>
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================================================================================
NOTE AND COLLATERAL TRUST AGREEMENT
dated as of May 12, 1997
between
ANDOVER TOGS, INC.
AND ITS SUBSIDIARIES PARTIES HERETO,
each as a Collateral Grantor,
and
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
================================================================================
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<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1. DEFINITIONS..................................................... 3
SECTION 1.1 Certain Defined Terms................................... 3
SECTION 1.2 Certain References...................................... 7
ARTICLE 2. ACCEPTANCE OF TRUST; EXECUTION AND DELIVERY
OF CLASS 4 NOTE, COLLATERAL DOCUMENTS AND
INTERCREDITOR AGREEMENT; DISBURSEMENT........................... 7
SECTION 2.1 Acceptance of Trust..................................... 7
SECTION 2.2 Execution, Delivery and Receipt of Class 4 Note and
Collateral Documents.................................... 7
SECTION 2.3 Execution and Delivery of Intercreditor Agreement....... 8
SECTION 2.4 Disbursement of Payment Under Class 4 Note. ............ 8
SECTION 2.5 Registration of Transfer of Certificates of
Beneficial Interest, etc................................ 8
ARTICLE 3. DEFAULT NOTICE; REMEDIES........................................ 8
SECTION 3.1 Payment Default Notice.................................. 8
SECTION 3.2 Other Default Notice.................................... 9
SECTION 3.3 Action Upon Receipt of Other Default Notice............. 10
SECTION 3.4 Cancellation of Other Default Notice.................... 10
SECTION 3.5 Rescission of Acceleration.............................. 10
SECTION 3.6 Automatic Waiver of Certain Other Defaults.............. 10
SECTION 3.7 Effect of Article 3..................................... 11
SECTION 3.8 Remedies Generally...................................... 11
SECTION 3.9 Right to Initiate Judicial Proceedings, Etc............. 12
SECTION 3.10 Appointment of a Receiver.............................. 12
SECTION 3.11 Exercise of Powers..................................... 12
SECTION 3.12 Remedies Not Exclusive................................. 13
SECTION 3.13 Limitation on Collateral Trustee's Duties in
Respect of Collateral.................................. 14
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TABLE OF CONTENTS
PAGE
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SECTION 3.14 Limitation by Law...................................... 14
SECTION 3.15 Rights of Class 4 Creditors............................ 14
ARTICLE 4. DIRECTION BY COMMITTEE.......................................... 14
SECTION 4.1 Direction by Committee.................................. 14
ARTICLE 5. PROCEEDS ACCOUNT................................................ 16
SECTION 5.1 The Proceeds Account.................................... 16
SECTION 5.2 Control of Proceeds Account............................. 16
ARTICLE 6. APPLICATION OF PROCEEDS......................................... 16
SECTION 6.1 Application of Proceeds................................. 16
SECTION 6.2 Distribution of Proceeds................................ 17
ARTICLE 7. THE COLLATERAL TRUSTEE.......................................... 17
SECTION 7.1 Exculpatory Provisions.................................. 17
SECTION 7.2 Delegation of Duties.................................... 18
SECTION 7.3 Reliance by Collateral Trustee.......................... 18
SECTION 7.4 Limitations on Duties of the Collateral Trustee........ 19
SECTION 7.5 Moneys to Be Held in Trust.............................. 19
SECTION 7.6 Resignation and Removal of Collateral Trustee........... 19
SECTION 7.7 Merger of the Collateral Trustee........................ 21
SECTION 7.8 Trustee Appointed Attorney-in-Fact...................... 21
SECTION 7.9 Reasonable Care......................................... 21
ARTICLE 8. AGREEMENTS WITH THE COLLATERAL TRUSTEE.......................... 21
SECTION 8.1 Information as to Class 4 Creditors..................... 21
SECTION 8.2 Compensation and Expenses............................... 22
SECTION 8.3 Stamp and Other Similar Taxes........................... 22
SECTION 8.4 Filing Fees, Excise Taxes, Etc.......................... 23
SECTION 8.5 Indemnification......................................... 23
SECTION 8.6 Further Assurances...................................... 24
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TABLE OF CONTENTS
PAGE
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ARTICLE 9. POSSESSION AND USE OF COLLATERAL; PARTIAL
RELEASE......................................................... 25
SECTION 9.1 Use Prior to Payment Default Notice or Other Default
Notice.................................................. 25
SECTION 9.2 Releases................................................ 26
ARTICLE 10. MISCELLANEOUS................................................. 27
SECTION 10.1 Amendment or Waiver.................................... 27
SECTION 10.2 Notices................................................ 27
SECTION 10.3 Headings............................................... 28
SECTION 10.4 Severability........................................... 28
SECTION 10.5 Claims Against Collateral Trustee...................... 28
SECTION 10.6 Binding Effect; Third Party Beneficiaries.............. 29
SECTION 10.7 Governing Law.......................................... 29
SECTION 10.8 Termination............................................ 29
SECTION 10.9 Counterparts........................................... 29
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LIST OF EXHIBITS
Exhibit A -- Form of Payment Default Notice
Exhibit B -- Form of Payment Default Waiver by Collateral Trustee
Exhibit C -- Form of Other Default Notice
Exhibit D -- Form of Other Default Waiver by Collateral Trustee
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NOTE AND COLLATERAL TRUST AGREEMENT
NOTE AND COLLATERAL TRUST AGREEMENT (this "Agreement"), dated as of May
12, 1997, among ANDOVER TOGS, INC., a Delaware corporation with an office at
1333 Broadway, New York, New York 10018 (the "Company"), each of the
subsidiaries of the Company listed on the signature pages hereof, each with an
office at c/o Andover Togs, Inc., 1333 Broadway, New York, New York 10018 (each
a "Subsidiary" and, collectively, the "Subsidiaries"; and together with the
Company, the "Collateral Grantors") and M.J. SHERMAN & ASSOCIATES, INC., a New
York corporation with an office at 333 East 68th Street, New York, New York
10021, as collateral trustee (the "Collateral Trustee").
W I T N E S S E T H:
WHEREAS, the Collateral Grantors' joint plan of reorganization was
confirmed by the United States Bankruptcy Court for the Southern District of New
York on April 10, 1997 (the "Plan");
WHEREAS, pursuant to and in accordance with the Plan, the Company has
executed and delivered to the Collateral Trustee, for the benefit of the Class 4
Creditors (as defined in Section 1.1 hereof), the Company's Class 4 Note,
substantially in the form of Exhibit G attached to the Disclosure Statement (as
defined in the Plan), due March 31, 2002 (the "Class 4 Note") to evidence, and
pursuant to which the Company shall pay to the Class 4 Creditors, the aggregate
amount of all Allowed Class 4 Claims (as defined in Section 1.1 hereof) that are
not paid to the Class 4 Creditors from Class 4 Cash (as defined in the Plan)
upon consummation of the Plan;
WHEREAS, the rights of each holder of an Allowed Class 4 Claim to receive
its ratable share of payments due under the Class 4 Note are evidenced by a
certificate of beneficial interest ("Certificate of Beneficial Interest") in a
principal amount equal to the amount by which such holder's Allowed Class 4
Claim exceeds the Class 4 Cash paid to such holder;
1
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WHEREAS, each of the Subsidiaries has guaranteed payment of the Class 4
Note pursuant to guaranties dated the date hereof executed in favor of and
delivered to the Collateral Trustee (collectively, the "Guaranties");
WHEREAS, pursuant to and in accordance with the Plan, as security for the
prompt payment and performance of the Class 4 Note, the Guaranties and the other
Obligations (as defined in Section 1.1 hereof), the Collateral Grantors have
agreed to grant to the Collateral Trustee, for the benefit of all Class 4
Creditors, pursuant to the Collateral Documents (as defined in Section 1.1
hereof), liens upon and security interests in certain of the Collateral
Grantors' assets and property subject and subordinate to the liens of the Agent;
WHEREAS, the rights and remedies of the Collateral Trustee in respect of
the Collateral are subject in all respects to the Intercreditor Agreement (as
defined in Section 1.1 hereof);
WHEREAS, this Agreement is intended to establish a trust under which (i)
the Class 4 Note, (ii) each Quarterly Installment (as defined in Section 1.1
hereof), (iii) the Collateral Documents and (iv) all cash and non-cash proceeds
of the Collateral (collectively, the "Proceeds") and the Proceeds Account (as
defined in Section 5.1 hereof) will be held by the Collateral Trustee in trust
for, and for the benefit of, the Class 4 Creditors; and
WHEREAS, this Agreement is further intended to set forth the terms and
conditions upon which the Collateral Trust Estate (as defined in Section 1.1.
hereof) will be administered by the Collateral Trustee, the respective rights
and remedies of the Collateral Trustee and the Committee (as defined in Section
1.1 hereof), on behalf of the Class 4 Creditors, with respect to the Collateral
Trust Estate and certain other related matters;
DECLARATION OF TRUST:
NOW, THEREFORE, in accordance with the Plan, in order to secure the prompt
payment and performance of the Class 4 Note, the Guaranties and the other
Obligations and in consideration of the premises and mutual agreements set forth
herein, each Collateral Grantor hereby confirms that it has granted, or is about
to grant, to the Collateral Trustee a lien upon and security interest in and to
the Collateral and the Collateral Trustee does hereby declare that it holds as
trustee in trust under this Agreement all of the right, title and interest in,
to and under the Collateral Trust Estate and each Collateral Grantor does hereby
consent thereto.
2
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TO HAVE AND TO HOLD the Collateral Trust Estate unto the Collateral
Trustee and its successors in trust under this Agreement and its assigns and the
assigns of its successors in trust forever or until terminated in accordance
with the terms hereof.
IN TRUST NEVERTHELESS, under and subject to the terms and conditions set
forth herein for the benefit of the Class 4 Creditors and for the enforcement of
the payment of the Class 4 Note, the Guaranties and the other Obligations, and
for the performance of and compliance with the covenants and conditions of this
Agreement, the Class 4 Security Agreement and the other Collateral Documents.
ARTICLE 1.
DEFINITIONS
SECTION 1.1 Certain Defined Terms. The following terms shall have the
following meanings as used herein (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Agent" has the meaning set forth in the definition of "Intercreditor
Agreement" set forth below.
"Allowed Class 4 Claims" has the meaning set forth in the Plan.
"Authorized Officer" means the Chairman, the President, any Vice
President, the Secretary or the Treasurer of a corporation or any other officer
designated as an "Authorized Officer" by the Board of Directors of such
corporation.
"Bankruptcy Code" means Title 11 of the United States Code, 11 U.S.C.
`SS'`SS' 101 et seq., as amended.
"Business Day" means a day other than a Saturday, Sunday or other day on
which banks in New York City or the city in which the Collateral Trustee
maintains its principal office are required or authorized by law to close.
"Certificate of Beneficial Interest" has the meaning set forth in the
recitals to this Agreement.
"Class 4 Cash" has the meaning set forth in the Plan.
"Class 4 Creditor" means any holder of an Allowed Class 4 Claim, and, from
and after the transfer and assignment of any Allowed Class 4 Claim, means any
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transferee of such Allowed Class 4 Claim holding a Certificate of Beneficial
Interest evidencing such Allowed Class 4 Claim.
"Class 4 Documents" means, collectively, this Agreement, the Class 4 Note,
the Guaranties and the Collateral Documents.
"Class 4 Note" has the meaning set forth in the recitals to this Agreement
and shall further mean such Note as it may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
"Class 4 Security Agreement" means the security agreement, dated on or
about the date hereof, executed by the Company and the other Collateral
Grantors, each as debtor, in favor of the Collateral Trustee, as secured party,
in substantially the form of Exhibit H to the Disclosure Statement, as the same
may hereafter be amended, modified, supplemented, renewed, restated or replaced.
"Class 4 Security Agreement and Mortgage - Trademarks and Patents" means
each Class 4 Security Agreement and Mortgage - Trademarks and Patents, dated the
date hereof, executed by each of the Company and the other Collateral Grantors,
each as debtor, with the Collateral Trustee, as secured party, as the same may
hereafter be amended, modified, supplemented, renewed, restated and replaced.
"Collateral" means all property and assets, now existing or hereafter
acquired, and all cash and noncash proceeds thereof, in respect of which any
lien, mortgage, security interest or other encumbrance in favor of the
Collateral Trustee is granted or created under the terms of any Collateral
Document, including, without limitation, the Collateral described in the Class 4
Security Agreement.
"Collateral Documents" means, collectively, the Class 4 Security
Agreement, the Class 4 Security Agreements and Mortgages - Trademarks and
Patents, all UCC-1 financing statements now or hereafter executed by the Company
and the other Collateral Grantors, respectively, each as debtor, in favor of the
Collateral Trustee, as secured party, and all other documents, instruments and
agreements now or hereafter executed with or in favor of the Collateral Trustee
as security for the Obligations, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
"Collateral Grantors" has the meaning set forth in the recitals to this
Agreement.
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"Collateral Trustee" has the meaning set forth in the recitals to this
Agreement.
"Collateral Trust Estate" means the right, title and interest of the
Collateral Trustee in and to the Class 4 Note, the Guaranties and the Collateral
Documents and the Collateral referred to therein, and the Proceeds thereof.
"Committee" means the Post-Effective Date Trade Committee, as such term is
defined in the Reorganization Plan.
"Company" has the meaning set forth in the recitals to this Agreement.
"Event of Default" means any Event of Default under, and as defined in,
the Class 4 Note and in any of the Collateral Documents.
"Financing Agreement" means the Amended and Restated Financing and
Security Agreement between the Company and The CIT Group/Commercial Services,
Inc., as Agent for itself and the other Lenders from time to time party thereto,
dated on or about the date hereof, as the same may be amended, modified,
extended, supplemented, renewed, restated or replaced.
"Guaranties" shall have the meaning set forth in the recitals to this
Agreement, as the same may hereafter be amended, modified or supplemented.
"Intercreditor Agreement" means the Intercreditor Agreement entered into
on or about the date hereof between the Collateral Trustee and The CIT
Group/Commercial Services, Inc., as agent ("Agent") for the Lenders party to the
Financing Agreement, a copy of which Intercreditor Agreement is appended to the
Disclosure Statement as Exhibit J thereto, as the same may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
"Obligations" means, at any time, all obligations, liabilities or
indebtedness, whether matured or unmatured, of the Collateral Grantors, or any
of them, arising out of or evidenced by the Class 4 Note, the Guaranties or any
of the Collateral Documents, whether for principal, accrued and unpaid interest,
accrued and unpaid expenses, including, without limitation, the fees and
disbursements of the Collateral Trustee and the disbursements of the Committee
due and payable pursuant to this Agreement, the fees and disbursements of
respective counsel to the Collateral Trustee and to the Committee due and
payable pursuant to this Agreement and any indemnities.
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"Other Default" means the occurrence of any Event of Default other than a
Payment Default.
"Other Default Notice" has the meaning set forth in Section 3.2 hereof.
"Other Default Waiver" has the meaning set forth in Section 3.2 hereof.
"Payment Default" means an Event of Default arising as a result of the
failure of the Collateral Grantors to pay one or more installments of principal
and/or interest due under the Class 4 Note.
"Payment Default Notice" means a written notice delivered in accordance
with Section 3.1 hereof by the Company to the Collateral Trustee and to the
Committee, with a copy thereof delivered simultaneously to each Class 4
Creditor, substantially in the form of Exhibit A attached hereto, stating that
the Collateral Grantors will not pay the Quarterly Installment identified in
such notice and that, as a result thereof, a Payment Default shall occur or has
occurred (as applicable) in respect of such Quarterly Installment.
"Payment Default Trigger Date" means the date on which a Payment Default
occurs that has not been waived by the Collateral Trustee in accordance with
Section 3.1 hereof.
"Payment Default Waiver" has the meaning set forth in Section 3.1 hereof.
"Plan" has the meaning set forth in the recitals to this Agreement.
"Proceeds" has the meaning set forth in the recitals to this Agreement.
"Proceeds Account" has the meaning set forth in Section 5.1 hereof.
"Pro Rata Share" has the meaning set forth in the Plan.
"Quarterly Installment" means any quarterly installment of principal and
interest due and payable pursuant to the Class 4 Note and shall include any
Excess Cash Flow due and payable pursuant to, and as such term is defined in,
the Class 4 Note.
"Required Creditors" means, at any time, Class 4 Creditors whose then
existing Pro Rata Share of all then unpaid Allowed Class 4 Claims shall, in the
aggregate, be equal to at least fifty-one (51%) percent thereof.
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"Senior Security Document" means, collectively, the Financing Agreement
and all other documents, instruments and agreements now or hereafter executed
with or in favor of the "Agent" under the Financing Agreement as security for
the "Obligations" (as such quoted terms are defined in the Financing Agreement),
as the same now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
"Subsidiary" has the meaning set forth in the recitals to this Agreement.
SECTION 1.2 Certain References. The words "hereof", "herein" and
"hereunder" and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement and section, schedule and exhibit references are to this Agreement
unless otherwise specified.
ARTICLE 2.
ACCEPTANCE OF TRUST; EXECUTION AND DELIVERY
OF CLASS 4 NOTE, COLLATERAL DOCUMENTS AND
INTERCREDITOR AGREEMENT; DISBURSEMENT
SECTION 2.1 Acceptance of Trust. The Collateral Trustee, for itself and
its successors, hereby accepts the trust created by this Agreement upon the
terms and conditions hereof. Further, the Collateral Trustee, for itself and its
successors, does hereby declare that it will hold all of the estate, right,
title and interest in the Collateral Trust Estate upon the trusts herein set
forth and for the benefit of the Class 4 Creditors.
SECTION 2.2 Execution, Delivery and Receipt of Class 4 Note and Collateral
Documents. On the date hereof, the Company and the Subsidiaries have executed
and delivered the Class 4 Note and the Guaranties, respectively, to the
Collateral Trustee, for the benefit of the Class 4 Creditors, and, on or before
the date hereof, the Collateral Grantors have executed and delivered the
Collateral Documents to the Collateral Trustee for the benefit of the Class 4
Creditors together with related UCC-1 financing statements required by the
Collateral Trustee as of this date. The Collateral Trustee hereby acknowledges
receipt of the executed original Class 4 Note, executed originals of the
Guaranties, fully executed originals of each of the Collateral Documents and all
of such executed original financing statements, and agrees to hold the Class 4
Note, the Guaranties and the Collateral Documents in trust for the benefit of
the Class 4 Creditors upon the terms and conditions set forth in this Agreement
and subject to the terms of the Intercreditor Agreement.
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SECTION 2.3 Execution and Delivery of Intercreditor Agreement. On or
before the date hereof, in accordance with the provisions of the Plan, the
Collateral Trustee and the Agent have entered into and executed the
Intercreditor Agreement in the form approved, and as directed, by the Committee.
SECTION 2.4 Disbursement of Payment Under Class 4 Note. The Collateral
Trustee shall deposit into the Proceeds Account each Quarterly Installment paid
to the Collateral Trustee and, as and when a Quarterly Installment has been
collected in good funds in the Proceeds Account, the Collateral Trustee shall
disburse directly to each Class 4 Creditor, at such Class 4 Creditor's principal
office address provided to the Collateral Trustee pursuant to Section 8.1 of
this Agreement or at such other more current address of which the Collateral
Trustee shall become aware, such Class 4 Creditor's Pro Rata Share of such
Quarterly Installment as evidenced by the Certificate of Beneficial Interest in
the name of such Class 4 Creditor.
SECTION 2.5 Registration of Transfer of Certificates of Beneficial
Interest, etc. Certificates of Beneficial Interest shall be subject to the terms
of transfer set forth in the Certificates of Beneficial Interest. The Collateral
Trustee shall register the transfer of the Certificates of Beneficial Interest
and shall maintain a register of the holders of Certificates of Beneficial
Interest and their respective addresses and shall upon request of the Company
provide to the Company a list of holders of Certificates of Beneficial Interest
no more frequently than quarterly in advance of any date for payment of a
Quarterly Installment.
ARTICLE 3.
DEFAULT NOTICE; REMEDIES
SECTION 3.1 Payment Default Notice.
(a) As soon as the Company knows that it will not pay a Quarterly
Installment, or any part thereof, the Company shall deliver a Payment Default
Notice to the Collateral Trustee, the Committee, and each Class 4 Creditor, and
in any event, shall so deliver such Payment Default Notice no later than the due
date of such Quarterly Installment. Failure of the Company to deliver a Payment
Default Notice with respect to a Quarterly Installment on or before the date on
which such Quarterly Installment is due and payable under the Class 4 Note shall
not in any manner limit, impair or affect the Payment Default that occurs with
respect to such unpaid Quarterly Installment including, without limitation, the
rights and remedies of the Collateral Trustee in respect of such
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Payment Default. Provided that the Collateral Trustee has not waived any other
Payment Default within one (1) year prior to the due date for such Quarterly
Installment in respect of which such Payment Default Notice is required to be
delivered pursuant to this Section 3.1(a) then, at the request of the Company,
and upon the affirmative vote of and at the written direction from the Committee
to the Collateral Trustee, the Collateral Trustee shall deliver to the Company a
written waiver of such Payment Default ("Payment Default Waiver"), substantially
in the form of Exhibit B attached hereto, not later than thirty (30) days after
the earlier of (x) the Collateral Trustee's receipt of such Payment Default
Notice and (y) occurrence of such Payment Default, except that, such waiver
shall not be delivered if before the expiration of such thirty-day period the
Required Creditors direct that the Committee shall not waive such Payment
Default. Notwithstanding anything to the contrary contained in the Plan, the
Class 4 Note, or any other Class 4 Document, any such unpaid Quarterly
Installment with respect to which the Collateral Trustee has, in accordance with
this Section 3.1(a), delivered to the Company a Payment Default Waiver shall be
due and payable, without notice or demand of any kind or nature, simultaneously
with the next succeeding Quarterly Installment due and payable under the Class 4
Note. Notwithstanding the foregoing, the Required Creditors may, at any time
before the Collateral Trustee takes any irrevocable action to exercise any
remedy in respect of the Collateral, direct the Committee to direct the
Collateral Trustee to deliver to the Company a written waiver of any Payment
Default for such period of time and payable on such date(s) as the Required
Creditors agree.
(b) The Collateral Trustee shall, from and after the Payment Default
Trigger Date, exercise such of its rights and remedies under the Class 4
Documents and applicable law, and at such time or times, as the Committee shall
direct the Collateral Trustee or, in the absence of such direction from the
Committee in any particular circumstances, as the Collateral Trustee shall deem
necessary or appropriate in its sole discretion, to collect the then unpaid
Obligations.
(c) The Collateral Trustee shall, within thirty (30) days of the
occurrence of (i) a Payment Default, (ii) receipt of a direction to waive a
Payment Default by the Committee, (iii) a Payment Default Trigger Date, (iv)
receipt of an Other Default Notice, (v) a cancellation by the Committee of an
Other Default Notice, (vi) a rescission of an acceleration of the Class 4 Note
and (vii) any material modification or amendment of any Class 4 Document
permitted by Section 10 of this Agreement, give written notice thereof to all
Class 4 Creditors.
SECTION 3.2 Other Default Notice. If an Other Default shall have occurred
and be continuing after any notice required under any Class 4 Document and the
expiration of any cure period with respect thereto, the Committee shall have the
right to deliver to the Collateral Trustee at any time thereafter, in its
discretion, either (a) an
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irrevocable written notice (the "Other Default Notice"), substantially in the
form attached hereto as Exhibit C, stating that an Other Default has occurred,
describing such Other Default in reasonable detail and directing the Collateral
Trustee to take such action as is therein requested by the Committee with
respect to the Class 4 Note, the Guaranties and/or the Collateral Documents
(which action(s) may include, without limitation, subject to the terms and
conditions of the Intercreditor Agreement, the institution of any remedies
provided by any of the Class 4 Documents, or by applicable law) for the purpose
of collecting the unpaid Obligations on behalf of the Class 4 Creditors, or (b)
an irrevocable written authorization and direction to the Collateral Trustee
authorizing and directing the Collateral Trustee to deliver to the Collateral
Grantors a written waiver of such Other Default ("Other Default Waiver"),
substantially in the form attached hereto as Exhibit D.
SECTION 3.3 Action Upon Receipt of Other Default Notice. Upon receipt of
an Other Default Notice, the Collateral Trustee shall (or at such later time as
shall be the first time when such action is permitted to be taken pursuant to
the Intercreditor Agreement or the Class 4 Documents, as applicable) promptly
commence such action as is requested by the Committee in the Other Default
Notice. An Other Default Notice, once delivered, shall remain in effect unless
and until it is cancelled as provided in Section 3.4 hereof.
SECTION 3.4 Cancellation of Other Default Notice. The Committee, in its
absolute discretion, shall be entitled to cancel an Other Default Notice, by
delivering a written notice of cancellation thereof to the Collateral Trustee
before the Collateral Trustee takes any irrevocable action to exercise any
remedy in respect of the Collateral. The Collateral Trustee shall immediately
furnish the Company with a copy of such cancellation of an Other Default Notice.
SECTION 3.5 Rescission of Acceleration. The Required Creditors may direct
the Committee to direct the Collateral Trustee to rescind an acceleration of the
Class 4 Note and/or any other Obligations if the rescission would not conflict
with any judgment or decree of a court of competent jurisdiction and if all
existing Events of Default have been cured or waived, except nonpayment of
principal or interest that has become due solely because of the acceleration.
SECTION 3.6 Automatic Waiver of Certain Other Defaults. In the event that
the Lenders (as defined in the Financing Agreement) shall waive any Default or
Event of Default (as defined under the Financing Agreement or any Senior
Security Document) other than a payment default which has occurred and is
continuing under the Financing Agreement or any Senior Security Document, any
default or event of default under the Class 4 Note or any Collateral Document of
the same kind or nature shall be automatically waived under the Class 4 Note or
Collateral Document without any act by
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the Committee, the Required Creditors or the Collateral Trustee. The Company
shall give the Collateral Trustee prompt notice of any such waiver by the
Lenders.
SECTION 3.7 Effect of Article 3. This Article 3 does not enlarge or
otherwise modify the rights that the Collateral Trustee holds for the benefit of
the Class 4 Creditors with respect to the Collateral Grantors, the Class 4 Note
or the Collateral under the Collateral Documents, or by law, and does not confer
any additional such rights, but is intended to provide a mechanism as between
the Class 4 Creditors and the Collateral Trustee for the enforcement of such
rights. Without limiting the generality of the foregoing, nothing in this
Article 3 shall permit the Collateral Trustee to exercise any remedy with
respect to the Collateral under any Collateral Document or otherwise except as
specifically provided under such Collateral Document and subject to the
Intercreditor Agreement.
SECTION 3.8 Remedies Generally.
(a) Each Collateral Grantor hereby waives notice, presentment, demand or
protest (to the extent permitted by applicable law and except as otherwise
expressly provided in any Class 4 Collateral Document) in connection with the
Class 4 Documents.
(b) Each Collateral Grantor hereby irrevocably constitutes and appoints
the Collateral Trustee and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full power and
authority in the name of such Collateral Grantor or its own name, from time to
time in the Collateral Trustee's discretion, upon the occurrence and during the
continuance of any Event of Default, for the purpose of effectuating the terms
of the Class 4 Documents, to take any and all appropriate action and to execute
any and all documents and instruments which may be necessary or desirable to
accomplish the purposes hereof and thereof and, without limiting the generality
of the foregoing, hereby gives the Collateral Trustee the power and right on
behalf of such Collateral Grantor, without notice to or assent by such
Collateral Grantor, to do (to the extent permitted under the Intercreditor
Agreement and any applicable Collateral Document) the following:
(i) to ask for, demand, sue for, collect, receive, and give
acquittance for any and all moneys due or to become due upon or by virtue hereof
and thereof,
(ii) to receive, take endorse, assign and deliver any and all
checks, notes, drafts, acceptances, documents and other negotiable and
non-negotiable instruments and chattel paper taken or received by the Collateral
Trustee in connection herewith and therewith,
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(iii) to commence, file, prosecute, defend, settle, compromise or
adjust any claim, suit, action or proceeding with respect hereto and thereto or
in connection herewith and therewith,
(iv) to sell, transfer, assign or otherwise deal in or with the
Collateral or any part thereof as fully and effectually as if the Collateral
Trustee were the absolute owner thereof,
(v) to make demands, give consents and releases, and to exercise any
other rights contemplated or permitted by the Collateral Documents, and
(vi) to do, at its option and at the expense and for the account of
the Collateral Grantors, at any time any from time to time, all acts and things
which the Collateral Trustee deems necessary to protect or preserve the
Collateral or the Collateral Trust Estate and to realize upon the Collateral.
SECTION 3.9 Right to Initiate Judicial Proceedings, Etc. Upon the
occurrence of and during the continuance of any Event of Default, subject to the
other provisions of this Article 3 and further subject to the Intercreditor
Agreement, (a) the Collateral Trustee shall have the right and power to
institute and maintain such suits and proceedings as it or the Committee may
deem appropriate to protect and enforce the rights vested in the Collateral
Trustee by each Class 4 Document and (b) the Collateral Trustee may either,
after entry or without entry, proceed by suit or suits at law or in equity to
enforce such rights and to foreclose upon the Collateral and to sell all or,
from time to time, any of the Collateral Trust Estate under the judgment or
decree of a court of competent jurisdiction, provided that, nothing in this
Agreement, including, without limitation, in Section 3.1 hereof, shall be
construed to impose a duty on the Collateral Trustee to take any discretionary
action without first receiving direction from the Committee with respect to the
same.
SECTION 3.10 Appointment of a Receiver. If a receiver of the Collateral
Trust Estate shall be appointed in judicial proceedings, the Collateral Trustee
may be appointed as such receiver. Notwithstanding the appointment of a
receiver, the Collateral Trustee shall be entitled to retain possession and
control of all cash Proceeds held by or on deposit with it or its agents
pursuant to any provision of this Agreement or any Collateral Document.
SECTION 3.11 Exercise of Powers. All of the powers, remedies and rights of
the Collateral Trustee as set forth in this Agreement may be exercised by the
Collateral Trustee in respect of the Class 4 Documents as though set forth at
length therein and all
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the powers, remedies and rights of the Collateral Trustee as set forth in any
Collateral Document may be exercised from time to time as herein and therein
specified.
SECTION 3.12 Remedies Not Exclusive.
(a) No remedy conferred upon or reserved to the Collateral Trustee herein
or in the other Class 4 Documents is intended to be a limitation exclusive of
any other remedy or remedies, but every such remedy shall be cumulative and
shall be in addition to every other remedy conferred in the Class 4 Documents or
now or hereafter existing at law or in equity.
(b) No delay or omission of the Collateral Trustee to exercise any right,
remedy or power accruing upon any Event of Default shall impair any such right,
remedy or power or shall be construed to be a waiver of any such Event of
Default or any acquiescence therein; and every right, power and remedy given to
the Collateral Trustee by any Class 4 Document may be exercised from time to
time in accordance with this Agreement, subject to the Intercreditor Agreement,
as often as may be deemed expedient by the Collateral Trustee.
(c) In case the Collateral Trustee shall have proceeded to enforce any
right, remedy or power under any Class 4 Document and the proceeding for the
enforcement thereof shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Collateral Trustee, then and in
every such case each Collateral Grantor, the Collateral Trustee and the Class 4
Creditors shall, subject to any determination in such proceeding, severally and
respectively be restored to their former positions and rights hereunder and
under such Class 4 Document with respect to the Collateral Trust Estate and in
all other respects and thereafter all rights, remedies and powers of the
Collateral Trustee shall continue as though no such proceeding had been taken.
(d) Each Collateral Grantor expressly agrees that (i) the Collateral
Trustee is the payee and holder of the Class 4 Note solely for the purposes of
receipt of the Quarterly Installments paid thereunder and disbursement thereof
in accordance with Section 2.4 and enforcement of the Class 4 Note after the
occurrence of an Event of Default (subject to and in accordance with the terms
of this Agreement) in one or more suits or proceedings against the Collateral
Grantors, or any of them, for the benefit of the Class 4 Creditors, and (ii)
notwithstanding anything to the contrary contained in the Plan, any such suit or
proceeding instituted by the Collateral Trustee shall be brought in its name as
Collateral Trustee and any recovery or judgment shall be held as part of the
Collateral Trust Estate.
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SECTION 3.13 Limitation on Collateral Trustee's Duties in Respect of
Collateral. Beyond the duties set forth in this Agreement and the Collateral
Documents, the Collateral Trustee shall not have any duty to the Collateral
Grantors or the Committee as to any Collateral in the Collateral Trustee's
possession or control or in the possession or control of any of its agents or
nominees or any income thereon or as to the preservation of rights against prior
parties or any other rights pertaining thereto, except that the Collateral
Trustee shall be liable for its failure to exercise ordinary care in the
handling of moneys and securities actually received by it.
SECTION 3.14 Limitation by Law. All rights, remedies and powers provided
by this Article 3 may be exercised only to the extent that the exercise thereof
does not violate any applicable provision of law, and all the provisions of this
Article 3 are intended to be subject to all applicable mandatory provisions of
law which may be controlling and to be limited to the extent necessary so that
they will not render this Agreement invalid, unenforceable in whole or in part
or not entitled to be recorded, registered, or filed under the provisions of any
applicable law.
SECTION 3.15 Rights of Class 4 Creditors. Subject to the terms of this
Agreement, including, without limitation, any waiver by the Collateral Trustee
pursuant to Section 3.1 of this Agreement, from and after the date on which a
Class 4 Creditor has received the amount of Class 4 Cash and Certificates of
Beneficial Interest which such Class 4 Creditor is entitled to receive pursuant
to the Plan, the sole rights of such Class 4 Creditor with respect to its Class
4 Claim, subject to the terms of the Intercreditor Agreement, shall be (a) to
receive payments on account of its Certificates of Beneficial Interest, (b) to
join in filing an involuntary petition under the Bankruptcy Code against the
Collateral Grantors, or any of them, (c) to assert any claim it may have as a
secured creditor in any future case under the Bankruptcy Code in which any of
the Collateral Grantors is a debtor, and (d) to give such consents or directions
as may be given by the Required Creditors under the express terms of this
Agreement, including but not limited to Sections 3.1, 3.5 and 10.1.
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ARTICLE 4.
DIRECTION BY COMMITTEE
SECTION 4.1 Direction by Committee.
(a) Subject to Section 3.12 and the Intercreditor Agreement, if an Other
Default shall have occurred and be continuing and the Collateral Trustee shall
have received an Other Default Notice with respect thereto:
(i) in addition to taking such action as is required by Section 3.3,
the Collateral Trustee shall take such other action as is necessary and
appropriate for the performance of and compliance with the covenants and
conditions of this Agreement as the Committee shall request in writing; and
(ii) the Collateral Trustee shall follow the written direction of
the Committee with respect to the time, method and place of taking any action
required by the preceding paragraph (i) or, if no such direction is provided,
then the Collateral Trustee may take such action in the manner it deems
necessary and appropriate for the performance of and compliance with the
covenants and conditions of this Agreement.
(b) Nothing in this Section 4.1 shall impair the right of the Collateral
Trustee to take or omit to take, in its discretion, any action deemed proper by
the Collateral Trustee and which action or omission is not inconsistent with the
direction of the Committee in case of an Other Default, provided, however, the
Collateral Trustee shall not be under any obligation to take any action pursuant
to any Class 4 Document without first being provided adequate security and
indemnity by the Collateral Grantors against the costs, expenses and liabilities
which may be incurred by it in complying with such direction (except any cost,
expense or liability caused by its own gross negligence or willful misconduct or
its failure to exercise ordinary care in the handling of moneys and securities
actually received by it), including such reasonable advances for such cost and
expenses as may be requested by the Collateral Trustee. If any Collateral
Grantor fails or refuses to provide such security, indemnity or advances, any
Class 4 Creditor(s) may, but shall have no obligation (subject to the Collateral
Trustee's rights hereunder) to, furnish such security or indemnity or to make
such advances.
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ARTICLE 5.
PROCEEDS ACCOUNT
SECTION 5.1 The Proceeds Account. Subject to the terms of the
Intercreditor Agreement, from and after the execution of this Agreement, and
until the earlier of (a) termination of this Agreement, or (b) the date on which
all of the Collateral has been liquidated and the Proceeds thereof have been
fully distributed in accordance with the terms of this Agreement, the Collateral
Trustee shall establish and maintain a bank account at a commercial bank located
in New York City of recognized standing having capital and surplus in excess of
U.S. $100,000,000, which bank account shall be entitled the "Andover Togs Class
4 Account" (the "Proceeds Account"). In addition to the deposit into and
disbursement from the Proceeds Account of each Quarterly Installment paid to the
Collateral Trustee for the benefit of the Class 4 Creditors, as provided for in
Section 2.4, all Proceeds shall be promptly deposited by the Collateral Trustee
in the Proceeds Account, held by the Collateral Trustee as part of the
Collateral Trust Estate and distributed by the Collateral Trustee as soon as
practicable thereafter in accordance with Section 6.1 and the other provisions
of this Agreement.
SECTION 5.2 Control of Proceeds Account. The Proceeds Account shall be
subject to the exclusive dominion and control of the Collateral Trustee.
ARTICLE 6.
APPLICATION OF PROCEEDS
SECTION 6.1 Application of Proceeds. All Proceeds at any time collected by
the Collateral Trustee upon any sale or other disposition of any Collateral,
together with all other moneys received by the Collateral Trustee under the
Collateral Documents and at any time on deposit in the Proceeds Account, shall
be applied as follows:
FIRST: To the payment of (i) compensation payable to the Collateral
Trustee for services hereunder in accordance with the terms of this
Agreement, and (ii) all reasonable costs, expenses and liabilities
incurred by the Collateral Trustee in connection with the administration
of, or exercise or enforcement of rights, duties and remedies under, the
Class 4 Documents (as applicable), including, without limitation, all
reasonable costs and expenses of the sale and/or other disposition of the
Collateral and all
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reasonable costs and expenses and liabilities incurred and all advances
made by the Collateral Trustee in connection therewith and the reasonable
fees and disbursements of counsel to the Collateral Trustee;
SECOND: To the payment of all reasonable costs, expenses and
liabilities incurred by the Committee in connection with the exercise of
its rights, duties or remedies under this Agreement, including, without
limitation, the reasonable fees and disbursements of counsel and the
accountants to the Committee;
THIRD: To the ratable payment of the claims of each Class 4 Creditor
then outstanding in accordance with their Pro Rata Shares of the Class 4
Note as evidenced by Certificates of Beneficial Interest; and
FOURTH: To the Collateral Grantor owning such Collateral, or as a
court of competent jurisdiction may direct.
SECTION 6.2 Distribution of Proceeds. All distributions of Proceeds
required to be made to the Class 4 Creditors pursuant to Section 6.1 Third shall
be made directly to each Class 4 Creditor at the respective addresses for each
of the Class 4 Creditors provided to the Collateral Trustee pursuant to Section
8.1 of this Agreement or in connection with the transfer of any Certificate of
Beneficial Interest or at such other more current address of which the
Collateral Trustee shall become aware.
ARTICLE 7.
THE COLLATERAL TRUSTEE
SECTION 7.1 Exculpatory Provisions.
(a) The Collateral Trustee shall not be responsible in any manner
whatsoever for the correctness of any recitals, statements, representations or
warranties contained in any of the Class 4 Documents, all of which are made
solely by the Collateral Grantors. The Collateral Trustee makes no
representations as to the value or condition of the Collateral Trust Estate or
any part thereof, or as to the title of any Collateral Grantor thereto, or as to
the security afforded by the Collateral Documents or as to the validity,
execution (except its own execution, where applicable), enforceability, legality
or sufficiency of the Plan, the Allowed Class 4 Claims, any Class 4 Document, or
any of the Obligations, and the Collateral Trustee shall incur no liability or
responsibility in respect
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of any such matters. The Collateral Trustee shall not be responsible for
insuring the Collateral Trust Estate or for the payment of taxes, charges,
assessments or liens upon the Collateral Trust Estate or otherwise as to the
maintenance of the Collateral Trust Estate, except that in the event that the
Collateral Trustee enters into possession of a part or all of the Collateral
Trust Estate, the Collateral Trustee shall preserve the part in its possession.
(b) The Collateral Trustee shall not be required to ascertain or inquire
as to the performance by the Collateral Grantors of any of the covenants or
agreements contained in the Reorganization Plan or in any Class 4 Document.
(c) The Collateral Trustee shall not be personally liable for any action
taken or omitted to be taken by the Collateral Trustee in accordance with any
Class 4 Document or the Intercreditor Agreement, except for its own gross
negligence or willful misconduct and its failure to exercise ordinary care in
the handling of moneys and securities actually received by it.
SECTION 7.2 Delegation of Duties. The Collateral Trustee may execute any
of the trusts or powers hereof and perform any duty under any Class 4 Documents
either directly or by or through agents or attorneys-in-fact (which shall not
include officers and employees of any of the Collateral Grantors or any
affiliate of any of the Collateral Grantors). The Collateral Trustee shall not
be responsible for the negligence or misconduct of any agents or
attorneys-in-fact reasonably selected by it in good faith.
SECTION 7.3 Reliance by Collateral Trustee.
(a) Whenever in the administration of the trusts of this Agreement the
Collateral Trustee shall deem it necessary or desirable that a matter be proved
or established in connection with the taking, suffering or omitting any action
by the Collateral Trustee under any of the Class 4 Documents, unless otherwise
provided herein or therein, such matter (unless other evidence in respect
thereof be herein or therein specifically prescribed) may be deemed to be
conclusively proved or established by a certificate of an Authorized Officer of
any Collateral Grantor delivered to the Collateral Trustee, and such certificate
shall constitute a full warranty to the Collateral Trustee for any action taken,
suffered or omitted in reliance thereon unless the Collateral Trustee shall have
actual knowledge of any inaccuracy therein.
(b) The Collateral Trustee may consult with independent counsel (excluding
any employee of the Collateral Trustee, any Collateral Guarantor or any
affiliate of any Collateral Guarantor), and any opinion of such counsel shall be
full and complete authorization and protection for the Collateral Trustee in
respect of an action taken,
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suffered or omitted by it hereunder or under any of the Class 4 Documents in
accordance with such opinion unless the Collateral Trustee has actual knowledge
or a reason to question the validity or accuracy of such opinion or of any
assumption expressed therein as the basis for such opinion. The Collateral
Trustee shall have the right at any time to seek instructions concerning the
administration of the Collateral Trust Estate from any court of competent
jurisdiction.
(c) The Collateral Trustee may rely, and shall be fully protected in
acting, upon any resolution, statement, certificate, instrument, opinion,
report, notice, request, consent, order, bond, or other paper or document which
it reasonably believes to be genuine and to have been signed or presented by the
proper party or parties or, in the case of cables, telecopies and telexes, to
have been sent by the proper party or parties. In the absence of gross
negligence or willful misconduct, the Collateral Trustee may conclusively rely,
as to the truth of the statements and the correctness of the opinions expression
therein, upon any certificates or opinions furnished to the Collateral Trustee
that conform to the requirements of this Agreement or any Collateral Document.
SECTION 7.4 Limitations on Duties of the Collateral Trustee.
(a) The Collateral Trustee undertakes to perform only the duties expressly
set forth herein and in the other Class 4 Documents.
(b) The Collateral Trustee may exercise the rights and powers granted to
it by the Class 4 Documents, but only pursuant to the terms thereof.
(c) The Collateral Trustee shall make available for inspection and copying
by the Committee, at the Committee's cost and expense, each certificate or other
paper at any time and from time to time furnished to the Collateral Trustee by
any Collateral Grantor, or by any other person, under or in respect of any Class
4 Document or any of the Collateral Trust Estate.
SECTION 7.5 Moneys to Be Held in Trust. All moneys received by the
Collateral Trustee under or pursuant to any provision of this Agreement or any
Collateral Document shall be held in trust for the purposes for which they were
paid or are held and the Collateral Trustee shall exercise ordinary care in the
handling of any such moneys actually received by it.
SECTION 7.6 Resignation and Removal of Collateral Trustee.
(a) The Collateral Trustee may at any time, by giving 30 days prior
written notice to the Collateral Grantors and the Committee, resign and be
discharged of
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the responsibilities hereby created, such resignation to become effective upon
the appointment of a successor trustee by the Committee, and the acceptance of
such appointment by such successor trustee. The Collateral Trustee may be
removed at any time (with or without cause) and a successor trustee appointed by
the affirmative vote of the Committee, provided that the Collateral Trustee
shall be entitled to its fees and reasonable expenses to the date of removal. If
no successor trustee shall be appointed and approved within 30 days form the
date of the giving of the aforesaid notice of resignation or within 30 days from
the date of such vote for removal, the Collateral Trustee shall, or any Class 4
Creditor may, apply to any court of competent jurisdiction to appoint a
successor trustee to act until such time, if any, as a successor trustee shall
have been appointed as above provided. Any successor trustee so appointed by
such court shall immediately and without further act be superseded by any
successor trustee approved by the Committee as above provided.
(b) If at any time the Collateral Trustee shall become incapable of
acting, or if at any time a vacancy shall occur in the office of the Collateral
Trustee for any other cause, a successor trustee shall be appointed by the
affirmative vote of the Committee, and the powers, duties, authority and title
of the predecessor trustee terminated and cancelled without procuring the
resignation of such predecessor trustee, and without any other formality (except
as may be required by applicable law) than the appointment and designation of a
successor trustee in writing, duly acknowledged, delivered to the predecessor
trustee and each Collateral Grantor and filed for record in each public office,
if any, in which this Agreement is required to be filed.
(c) The appointment and designation referred to in Section 7.6(b) shall,
after any required filing, be full evidence of the right and authority to make
the same and this Agreement shall vest in such successor trustee, without any
further act, deed or conveyance, all of the right, title and interest of its
predecessor in and to the Collateral Trust Estate, and upon such filing for
record the successor trustee shall become fully vested with all the estates,
properties, rights, powers, trusts, duties, authority and title of its
predecessor; but such predecessor shall, nevertheless, on the written request of
the Committee, any Collateral Grantor or the successor trustee, execute and
deliver an instrument transferring to such successor all the estates,
properties, rights, powers, trust, duties, authority and title vested in the
predecessor trustee. Any and all such deeds, conveyances and other instruments
in writing shall, on request of such successor trustee, be executed,
acknowledged and delivered by the Collateral Grantors.
(d) Any required filing for record of the instrument appointing a
successor trustee as hereinabove provided shall be at the expense of the
Company. The resignation of any trustee and the instrument or instruments
removing any trustee, together with all other instruments, deeds and conveyances
provided for in this Article 7
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shall, if permitted by law, be forthwith recorded, registered and filed by and
at the expense of the Company, wherever this Agreement is recorded, registered
and filed.
SECTION 7.7 Merger of the Collateral Trustee. Any corporation into which
the Collateral Trustee may be merged, or with which it may be consolidated, or
any corporation resulting from any merger or consolidation to which the
Collateral Trustee shall be a party, shall be the Collateral Trustee under this
Agreement without the execution or filing of any paper or any further act on the
part of the parties hereto.
SECTION 7.8 Trustee Appointed Attorney-in-Fact. Each Collateral Grantor
hereby constitutes and appoints the Collateral Trustee and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full power and authority in the name of such Collateral
Grantor or its own name and in the place and stead of such Collateral Grantor,
to take, subject to the other provisions of this Agreement and the Intercreditor
Agreement, any action and to execute any instrument such attorney-in-fact may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, endorse and collect all instruments
made payable to any Collateral Grantor representing any payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same. The foregoing appointment shall be irrevocable for so
long as any of the Obligations remain unpaid.
SECTION 7.9 Reasonable Care. The Collateral Trustee shall be deemed to
have exercised reasonable care in the custody and preservation of the Class 4
Note and the Collateral in its possession if the Class 4 Note and the Collateral
is accorded treatment substantially equal to that which the Collateral Trustee
accords its own property and ordinary care is exercised by the Collateral
Trustee in handling any moneys or securities actually received by it, it being
understood that the Collateral Trustee shall not have any responsibility for
taking any necessary steps to preserve rights against any parties with respect
to the Class 4 Note or any Collateral, except as expressly provided for by or in
accordance with this Agreement.
ARTICLE 8.
AGREEMENTS WITH THE COLLATERAL TRUSTEE
SECTION 8.1 Information as to Class 4 Creditors. The Company agrees that
it shall promptly deliver, or cause to be delivered, to the Collateral Trustee
and/or the Committee from time to time upon the request of the Collateral
Trustee or the Committee, but not more than once each calendar quarter, a list
setting forth (a) the then aggregate
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unpaid principal amount of the Allowed Class 4 Claims, (b) the names and
addresses of all Class 4 Creditors of which the Company is then aware and the
unpaid amount of each such Class 4 Creditor's claim and (c) such other
information regarding the Class 4 Creditors necessary for the purposes of this
Agreement as the Collateral Trustee or the Committee may reasonably request.
Unless otherwise specified herein and unless the Collateral Trustee shall have
actual knowledge to the contrary, the Collateral Trustee may for all purposes
hereunder and under the Collateral Documents rely on such information provided
to it by the Company.
SECTION 8.2 Compensation and Expenses. The Collateral Grantors agree,
jointly and severally, to pay to the Collateral Trustee and any successor
trustee appointed hereunder, (a) compensation for the services of the Collateral
Trustee hereunder and under the Collateral Documents and for administering the
Collateral Trust Estate, (i) prior to the occurrence of an Event of Default, at
the annual rate of $10,000, payable in advance upon execution hereof and on each
anniversary hereof while this Agreement remains in effect, and (ii) from and
after the occurrence of an Event of Default, upon demand, at the Collateral
Trustee's standard hourly rates for such services, from time to time and (b)
upon demand, all the costs and expenses from time to time incurred by the
Collateral Trustee and the Committee (including, without limitation, the
reasonable fees and disbursements of such counsel as the Collateral Trustee or
the Committee elects from time to time to retain), (x) arising in connection
with the preparation, execution, delivery, modification and termination of the
Class 4 Documents or the enforcement of any of the provisions thereof or (y)
incurred or required to be advanced by the Collateral Trustee or by the
Committee in connection with the administration of the Collateral Trust Estate,
the sale or other disposition of Collateral and the preservation, protection or
defense of the Collateral Trustee's or the Committee's rights under this
Agreement and in and to the Collateral and the Collateral Trust Estate.
Notwithstanding anything to the contrary contained in this Agreement, the
premiums paid for the indemnity bond maintained by the Collateral Trustee in
connection with the disbursements to the Class 4 Creditors (A) pursuant to
Section 2.4 shall be paid for by the Collateral Trustee and (B) pursuant to
Section 6.1 as a result of liquidation of Collateral following the occurrence of
an Event of Default shall constitute an expense of liquidation for which the
Collateral Trustee shall be reimbursed pursuant to clause (b) above. As security
for such payment, the Collateral Trustee and the Committee shall each have a
prior lien upon all Collateral and other property and funds held or collected by
the Collateral Trustee as part of the Collateral Trust Estate. The Collateral
Grantors' obligations under this Section 8.2 shall survive the termination of
the other provisions of this Agreement.
SECTION 8.3 Stamp and Other Similar Taxes. The Collateral Grantors agree,
jointly and severally, to indemnify and hold harmless the Collateral Trustee and
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each Class 4 Creditor from any present or future claim for liability for any
stamp or other similar tax and any penalties or interest with respect thereto,
which may be assessed, levied or collected by any jurisdiction in connection
with this Agreement, the Class 4 Note, any Collateral Document, the Collateral
Trust Estate or any Collateral. The obligations of the Collateral Grantors under
this Section 8.3 shall survive the termination of the other provisions of this
Agreement.
SECTION 8.4 Filing Fees, Excise Taxes, Etc. The Collateral Grantors agree,
jointly and severally, to promptly pay or to reimburse the Collateral Trustee
for any and all amounts in respect of all search, filing, recording and
registration fees, taxes, excise taxes and other similar imposts which may be
payable or determined to be payable in respect of the execution, delivery,
performance and enforcement of each Class 4 Document. The obligations of the
Collateral Grantors under this Section 8.4 shall survive the termination of the
other provisions of this Agreement.
SECTION 8.5 Indemnification.
(a) The Collateral Grantors agree, jointly and severally, to pay,
indemnify, and hold harmless the Collateral Trustee and each of the agents
thereof from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgment, suits, costs, expenses or disbursements of any
kind of nature whatsoever with respect to the execution, delivery, enforcement,
performance and administration of this Agreement and the Collateral Trust
Estate, unless arising from the gross negligence or willful misconduct of the
Collateral Trustee or such agents as are seeking indemnification or the failure
of the Collateral Trustee or any such agents to exercise ordinary care in the
handling of moneys and securities actually received by the Collateral Trustee or
any such agent. As security for such payment, the Collateral Trustee shall have
a prior lien upon all Collateral and other property and funds held or collected
by the Collateral Trustee as part of the Collateral Trust Estate.
(b) In any suit, proceeding or action brought by the Collateral Trustee
under or with respect to any Collateral Document or the Collateral for any sum
owing thereunder, or to enforce any provisions thereof, the Collateral Grantors
will, jointly and severally, save, indemnify and hold harmless the Collateral
Trustee from and against all expense, loss or damage suffered by reason of any
defense, set-off, counterclaim, recoupment or reduction of liability whatsoever
of the obligee thereunder (unless such expense, loss or damage is cause by the
gross negligence or willful misconduct of the Collateral Trustee or the failure
of the Collateral Trustee to exercise ordinary care in the handling of moneys
and securities actually received by the Collateral Trustee), arising out of a
breach by any Collateral Grantor of any obligation thereunder or arising out of
any other agreement, indebtedness or liability at any time owing to or in favor
of such obligee
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or its successors from the Collateral Grantors, or any of them, and all such
obligations of each Collateral Grantor shall be and remain enforceable against
and only against the Collateral Grantors and shall not be enforceable against
the Collateral Trustee or any Class 4 Creditor. The agreements in this Section
8.5 shall survive the termination of the other provisions of this Agreement.
SECTION 8.6 Further Assurances.
(a) Each of the Collateral Grantors and the Collateral Trustee agree that
each will promptly correct any defect or error that may be discovered in any
Class 4 Document to which it is a party or in the execution, acknowledgment or
recordation thereof, as applicable.
(b) Each Collateral Grantor agrees that it shall from time to time, at its
own expense, promptly upon request by the Collateral Trustee, also do, execute,
acknowledge, deliver, record, re-record, file, re-file, register and re-register
any and all further acts, financing statements and continuations thereof,
notices of assignment, transfers, certificates, assurances and other instruments
as the Collateral Trustee may reasonably require form time to time in order (i)
to carry out more effectively the purposes of this Agreement, (ii) to subject to
the liens and security interest created by any of the Collateral Documents any
of the properties, right or interests of the Collateral Grantors covered or now
or hereafter intended to be covered by any of the Collateral Documents, (iii) to
perfect and maintain the validity, effectiveness and priority of any of the
Collateral Documents and the liens and security interests intended to be created
thereby, (iv) to better assure, convey, grant, assign, transfer, preserve,
protect and confirm unto the Collateral Trustee the rights granted or now or
hereafter intended to be granted to the Collateral Trustee under any Collateral
Document or under any other instrument executed in connection with any
Collateral Document to which it is or may become a party, and (v) to enable the
Collateral Trustee to exercise and enforce its rights and remedies under each
Collateral Document with respect to any Collateral. Without limiting the
generality of the foregoing, each Collateral Grantor will take any such action
required to be taken by it pursuant to any Collateral Document.
(c) Each Collateral Grantor hereby authorizes the Collateral Trustee to
file one or more financing or continuation statements, and amendments thereto,
relative to all or part of the Collateral without the signature of such
Collateral Grantor where permitted by law. A carbon, photographic or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
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(d) Each Collateral Grantor shall furnish to the Collateral Trustee from
time to time such reports and schedules with respect to the Collateral as the
Collateral Trustee may reasonably request.
ARTICLE 9.
POSSESSION AND USE OF COLLATERAL; PARTIAL RELEASE
SECTION 9.1 Use Prior to Payment Default Notice or Other Default Notice.
So long as no Payment Default Notice or Other Default Notice is in effect, the
Collateral Grantors shall have the right: (i) to remain in possession and retain
exclusive control of the Collateral (other than Collateral a security interest
in which is perfected by possession under the UCC) with power freely and without
hinderance on the part of the Collateral Trustee or the Committee to operate,
manage, develop, use and enjoy the Collateral and to receive the rents, issues,
tolls, profits, royalties, revenues and other income thereof, and (ii) to sell
or otherwise dispose of, free and clear of any lien and security interest
created by any Collateral Document, any Collateral (including, without
limitation, any Collateral in the Proceeds Account) to the extent consistent
with Section 9.2. The Collateral Trustee shall have no duty to monitor the
exercise by the Collateral Grantors of their rights under this Section.
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SECTION 9.2 Releases.
(a) So long as no Payment Default Notice or Other Default Notice is in
effect, Collateral shall be released from the security interest created by the
Collateral Documents at any time or from time to time in connection with the
sale in the ordinary course of the Collateral Grantors' businesses or a
non-ordinary course sale permitted by the Agent under the Financing Agreement.
No provision of this Agreement is intended or shall be construed to prohibit the
collection of accounts receivable by any Collateral Grantor so long as no
Payment Default Notice or Other Default Notice is in effect. No such permitted
sales or other dispositions or other permitted releases of Collateral shall
require any written or oral release or consent of the Collateral Trustee.
Nevertheless, in connection with any release of Collateral under the Collateral
Documents, any Collateral Grantor may request that the Collateral Trustee, at
such Collateral Grantor's sole cost and expense, execute and deliver to such
Collateral Grantor or any purchaser of such Collateral a written release,
disclaimer or quitclaim of the Collateral Trustee's interest in such Collateral
(including without limitation any partial release statements filed pursuant to
the UCC), and such purchaser shall be entitled to rely conclusively on such
release, disclaimer or quitclaim. Such request shall be in writing and signed by
the chief financial officer, the chief accounting officer, the Treasurer or any
Vice President of the Collateral Grantor, shall describe the property to be
released in reasonable detail and shall state that such release is permitted
under the terms hereof.
(b) If any Collateral which is being released pursuant hereto is in the
possession of the Collateral Trustee or any agent or nominee thereof, the
Collateral Trustee or such agent or nominee shall release such Collateral to the
relevant Collateral Grantor in connection with such sale or disposition upon a
written request signed by the chief financial officer or the chief accounting
officer of such Collateral Grantor, which request shall describe the property to
be released in reasonable detail and shall state that such release is permitted
under the terms hereof. So long as no Payment Default Notice or Other Default
Notice is in effect, if requested by a Collateral Grantor, the Collateral
Trustee nonetheless shall provide such documents as the Collateral Grantor shall
reasonably request to confirm the provisions of this Section.
(c) The notices, statements, directions and certificates requested under
or required by this Section shall be full authority for and direction to the
Collateral Trustee to execute and deliver the releases, disclaimers, quitclaims
and other instruments referred to in this Section, and the Collateral Trustee
shall promptly do so. The Collateral Trustee in so doing shall have no liability
to any person.
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ARTICLE 10.
MISCELLANEOUS
SECTION 10.1 Amendment or Waiver.
(a) None of the terms and conditions of any of the Class 4 Documents may
be changed, waived, modified, supplemented or varied in any manner whatsoever
unless in writing duly signed by the Collateral Trustee with the consent of the
Committee. Notwithstanding the foregoing, no such change, waiver, modification,
supplement or variance shall be effective without the consent of the Required
Creditors that seeks to:
(i) waive any Payment Default, except as expressly otherwise
provided for in Section 3.1(a), or waive any Other Default, except as expressly
otherwise provided for in Section 3.2(a); or
(ii) amend, modify or waive any provision of this Section 10.1; or
(iii) amend, modify or waive any provision of the definition of
"Required Creditors". Any such amendment, waiver or modification effected in
accordance with this Section 10.1(a) shall be binding upon the Collateral
Grantors, the Committee, the Class 4 Creditors and the Collateral Trustee and
their respective successors and assigns.
(b) Notwithstanding the provisions of Section 10.1(a), the Collateral
Trustee and any Collateral Grantor may, at any time and from time to time,
without the consent of the Committee, the Required Creditors or the other
Collateral Grantors, enter into one or more agreements supplemental hereto or to
any Collateral Document, in form satisfactory to the Collateral Trustee, (i) to
add to the covenants of such Collateral Grantor, for the benefit of the Class 4
Creditors, or to surrender any right or power herein conferred upon such
Collateral Grantor, or (ii) to mortgage, pledge or grant a security interest in
favor of the Collateral Trustee as additional security for the Obligations any
property or assets which are required to be mortgaged or pledged, or in which a
security interest in required to be granted, to the Collateral Trustee pursuant
to any Collateral Document or otherwise; provided, however, that no such
supplemental agreement pursuant to clause (i) above shall bind any Collateral
Grantor not a party thereto.
SECTION 10.2 Notices. All notices, requests, demands and other
communications provided for or permitted hereunder shall, unless otherwise
stated herein, be in writing (including telecopy communications) and shall be
deemed properly delivered
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or made when sent by registered or certified mail, return receipt requested,
telecopier or hand delivery:
(a) If to any Collateral Grantor, to its address at c/o Andover Togs,
Inc., 1333 Broadway, New York, New York 10018, Attention: William Cohen,
Chairman, or at such other address as shall be designated by such Collateral
Grantor in a written notice to the Collateral Trustee;
(b) If to the Collateral Trustee, to its address at 333 East 68th Street,
New York, New York 10021, or at such other address as shall be designated by it
in a written notice to each Collateral Grantor;
(c) If to any Class 4 Creditor, to it at the address specified from time
to time in the list provided by the Company to the Collateral Trustee pursuant
to Section 8.1; and
(d) If to the Committee, to it c/o West Point Stevens, 507 West 10th
Street, West Point, Georgia 31833, Attention: Mr. Craig J. Berlin, Corporate
Credit Director, or at such other address designated by it in a written notice
to the Collateral Trustee, with a copy contemporaneously to Otterbourg,
Steindler, Houston & Rosen, P.C., 230 Park Avenue, New York, New York 10169,
Attention: Glenn B. Rice, Esq., counsel to the Committee, or at such other
address as shall be designated by such firm in a written notice to the Company
and the Collateral Trustee.
All such notices, requests, demands and communications shall be deemed to
have been duly given or made, (i) when delivered by hand, (ii) five Business
Days after being deposited in the U.S. mail, postage prepared, or (iii) when
telecopied with receipt acknowledged; provided, however, that any notice,
request, demand or other communication to the Collateral Trustee shall not be
effective until received.
SECTION 10.3 Headings. Section, subsection and other headings used in this
Agreement are for convenience of reference only and shall not affect the
construction of this Agreement.
SECTION 10.4 Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall not invalidate the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 10.5 Claims Against Collateral Trustee. This Agreement is made for
the benefit of the Class 4 Creditors, and the Committee may from time to time
enforce
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the rights of the Class 4 Creditors as explicit beneficiaries hereunder. Any
claims or causes of action which the Class 4 Creditors or any Collateral Grantor
shall have against the Collateral Trustee shall survive the termination of this
Agreement and the release of the Collateral Trust Estate hereunder.
SECTION 10.6 Binding Effect; Third Party Beneficiaries. This Agreement
shall be binding upon and inure to the benefit of each of the parties hereto and
shall further inure to the benefit of the Class 4 Creditors and their respective
successors and assigns. Nothing in any Class 4 Document is intended or shall be
construed to give any other person any right, remedy or claim under, to or in
respect of any Class 4 Document, the Collateral or the Collateral Trust Estate
or any part thereof.
SECTION 10.7 Governing Law. This Agreement and the rights and obligations
of the parties shall be construed in accordance with and governed by the laws of
the State of New York without regard to the conflicts of law principles of such
State.
SECTION 10.8 Termination. This Agreement shall terminate upon the earlier
of (a) the sale or other disposition of all of the Collateral and the final
disposition of all Proceeds and any other property subject to this Agreement and
(b) indefeasible payment in full of the Obligations. Upon payment in full of the
Obligations, the Collateral Trustee shall, at the sole cost and expense of the
Collateral Grantors, execute and deliver such UCC-3 and similar termination
statements and other documents of release and satisfaction of liens as the
Collateral Grantors may request to release the liens granted under the
Collateral Documents.
SECTION 10.9 Counterparts. This Agreement may be executed in several
counterparts, each of which when executed shall be an original and all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be duly executed by their respective officers thereunto
duly authorized as of the day and year first above written.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK --
SIGNATURES FOLLOW]
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ANDOVER TOGS, INC.
By: /s/ William L. Cohen
-----------------------------
Title: President
SPRINGDALE FASHIONS, INC.
By: /s/ William L. Cohen
-----------------------------
Title: President
TORTONI MANUFACTURING CORP.
By: /s/ William L. Cohen
-----------------------------
Title: President
STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
-----------------------------
Title: President
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
By: /s/ Oleg Ostrovsky
-----------------------------
Title: Vice President
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EXHIBIT A
FORM OF PAYMENT DEFAULT NOTICE
ANDOVER TOGS, INC.
1333 Broadway
New York, New York 10018
[DATE]
M.J. Sherman & Associates, Inc.,
as Collateral Trustee
333 East 68th Street
New York, New York 10021
West Point Stevens, Chairperson
Post Effective Trade Committee
507 West 10th Street
West Point, Georgia 31833
Attention: Mr. Craig J. Berlin, Corporate Credit Director
Re: Payment Default Notice
Gentlemen:
Reference is made to the Note and Collateral Trust Agreement dated
as of May __, 1997, among Andover Togs, Inc., a Delaware corporation (the
"Company"), each of the Subsidiaries (as defined therein) and M.J. Sherman &
Associates, Inc., as Collateral Trustee thereunder (the "Trust Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Trust Agreement.
Notice is hereby given in accordance with Section 3.1(a) of the
Trust Agreement that the Company will not pay the Quarterly Installment due and
payable under the Class 4 Note on [insert applicable date] and that, as a result
of such non-payment, a Payment Default shall occur [has occurred] in respect of
such Quarterly Installment.
ANDOVER TOGS, INC.
By:
--------------------------------
Title:
-------------------------------
cc: Each Class 4 Creditor
Otterbourg, Steindler, Houston & Rosen, P.C.
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EXHIBIT B
FORM OF PAYMENT DEFAULT WAIVER
M.J. SHERMAN & ASSOCIATES, INC.
333 East 68th Street
New York, New York 10021
[DATE]
Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Attention: William Cohen, Chairman
Re: Payment Default Waiver
Gentlemen:
Reference is made to the Note and Collateral Trust Agreement dated
as of May __, 1997, among Andover Togs, Inc., a Delaware corporation (the
"Company"), each of the Subsidiaries (as defined therein) and M.J. Sherman &
Associates, Inc., as Collateral Trustee thereunder (the "Trust Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Trust Agreement.
Reference is further made to the Payment Default Notice, dated
_______, heretofore delivered by the Company to the Collateral Trustee and to
the Committee (the "Subject Payment Default Notice").
Notice is hereby given in accordance with Section 3.1(a) of the
Trust Agreement that, upon the affirmative vote and at the written direction of
the Committee, the Collateral Trustee hereby waives the Payment Default
described in the Subject Payment Default Notice.
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
By:
----------------------------
Title:
-------------------------
cc: Chairperson, Post-Effective Date Trade Committee
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EXHIBIT C
FORM OF OTHER DEFAULT NOTICE
[COMMITTEE CHAIRPERSON LETTERHEAD]
[DATE]
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
333 East 68th Street
New York, New York 10021
Re: Notice of Other Default under
Note and Collateral Trust Agreement
Gentlemen:
Reference is made to the Note and Collateral Trust Agreement dated
as of May __, 1997, among Andover Togs, Inc., a Delaware corporation (the
"Company"), each of the Subsidiaries (as defined therein) and M.J. Sherman &
Associates, Inc., as Collateral Trustee thereunder (the "Trust Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Trust Agreement.
Notice is hereby given pursuant to Section 3.2 of the Trust
Agreement that an Other Default has occurred, as a result of [specify the Event
of Default that has occurred].
In connection with the occurrence of such Other Default, the
Committee hereby directs the Collateral Trustee to exercise the following rights
and remedies with respect to [the Class 4 Note, the Guaranties and/or the
Collateral Documents] [specify applicable documents under which Collateral
Trustee is directed to take action] for the purpose of collecting the unpaid
Obligations on behalf of the Class 4 Creditors: [Specify rights and remedies to
be exercised by the Collateral Trustee].
[_____________], Chairperson of
POST-EFFECTIVE DATE TRADE COMMITTEE
By:
-------------------------------
Title:
-----------------------------
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EXHIBIT D
FORM OF OTHER DEFAULT WAIVER
M.J. SHERMAN ASSOCIATES, INC.,
as Collateral Trustee
333 East 68th Street
New York, New York 10021
[DATE]
ANDOVER TOGS, INC.
1333 Broadway
New York, New York 10018
Re: Waiver of Other Default Notice
Reference is made to the Note and Collateral Trust Agreement dated
as of May __, 1997, among Andover Togs, Inc., a Delaware corporation (the
"Company"), each of the Subsidiaries (as defined therein) and M.J. Sherman &
Associates, Inc., as Collateral Trustee thereunder (the "Trust Agreement").
Capitalized terms used herein and not otherwise defined herein shall have the
meanings ascribed thereto in the Trust Agreement.
On or about ___________ [specify date], an Other Default occurred
and is continuing under the Collateral Trust Agreement, as a result of the
occurrence of [specify the Other Default that has occurred] (the "Subject Other
Default").
Notice is hereby given pursuant to Section 3.2(b) of the Trust
Agreement that, upon the authorization and direction of the Committee, the
Subject Other Default is hereby waived.
Very truly yours,
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
By:
---------------------------------
Title:
------------------------------
cc: Chairperson, Post-Effective Date Trade Committee
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CLASS 4 SECURITY AGREEMENT
CLASS 4 SECURITY AGREEMENT (this "Agreement"), dated as of May 12, 1997,
made by ANDOVER TOGS, INC., a Delaware corporation (the "Company") and its
subsidiaries, SPRINGDALE FASHIONS, INC., a Delaware corporation, TORTONI
MANUFACTURING CORP., a Delaware corporation, and STONEHENGE FINANCIAL CORP., a
New York corporation (each a "Subsidiary", and together with the Company,
individually and collectively, the "Grantor") in favor of M.J. SHERMAN &
ASSOCIATES, INC., as Collateral Trustee (as defined in the Plan described below)
for the benefit of the holders of Allowed General Unsecured Claims (as defined
in the Plan) all of whom hold interests in the Class 4 Note (as defined in the
Plan).
W I T N E S S E T H:
WHEREAS, pursuant to and in accordance with the terms of the Grantors'
Joint Plan of Reorganization, dated January 30, 1997, confirmed by order of the
United States Bankruptcy Court for the Southern District of New York (as
amended, supplemented or modified from time to time, the "Plan"), the Company
has executed and delivered to the Collateral Trustee, for the benefit of the
holders of Allowed General Unsecured Claims, the Class 4 Note;
WHEREAS, each Subsidiary has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of Allowed General Unsecured
Claims, a guaranty of payment of the Class 4 Note (collectively, the "Subsidiary
Guarantees");
WHEREAS, pursuant to and in accordance with the terms of the Plan, the
Grantor has agreed to grant to the Collateral Trustee, for the benefit of the
holders of Allowed General Unsecured Claims, as security for the Class 4 Note,
the Subsidiary Guarantees and the other Obligations (as hereinafter defined), a
second priority security interest in all personal property of the Grantor
constituting Collateral (as hereinafter defined);
WHEREAS, the Grantor and the Collateral Trustee have entered into a Note
and Collateral Trust Agreement, dated as of the date hereof, as the same may be
amended, supplemented or otherwise modified from time to time (the "Note
Agreement"), pursuant to which the Collateral Trustee will (a) act as paying
agent for the Maker under the Note and (b) administer the Collateral for the
benefit of the holders of Allowed General Unsecured Claims;
WHEREAS, pursuant to the terms of the Amended and Restated Financing and
Security Agreement, dated on or about the date hereof, by and among The CIT
Group/Commercial Services, Inc. ("CIT"), as Agent for itself and the other
Lenders now or hereafter party thereto (in such capacity, and including any
successor Agent thereunder, the "Agent"), and Andover Togs, Inc., as Borrower,
as the same may now exist or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced (the "Financing Agreement"), the Grantor
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has agreed to grant to the Agent, for the benefit of the Lenders (as defined in
the Financing Agreement), as security for the Obligations (as defined in the
Financing Agreement), a first priority security interest in the Collateral; and
WHEREAS, this Agreement is subject to the terms of the Intercreditor
Agreement, dated on or about the date hereof, between CIT and the Collateral
Trustee (as amended, supplemented or modified from time to time, the
"Intercreditor Agreement");
NOW THEREFORE, in consideration of the premises, and for other good and
valuable consideration, the receipt and insufficiency of which is hereby
acknowledged, the Grantor hereby agrees with the Collateral Trustee, for the
benefit of the holders of Allowed General Unsecured Claims, as follows:
SECTION 1. Definitions. All terms used in this Agreement which are defined
in the Note Agreement or in Article 9 of the Uniform Commercial Code currently
in effect in the State of New York (the "Code") and which are not otherwise
defined herein shall have the same meanings herein as set forth therein. In the
event of any inconsistencies in such definitions, the provisions of the Code
shall control.
SECTION 2. Grant of Security Interest. As security for the payment in full
of all of the Obligations, the Grantor hereby pledges and assigns to the
Collateral Trustee and grants to the Collateral Trustee, for the benefit of the
holders of Allowed General Unsecured Claims, a continuing general lien upon and
second priority, perfected security interest in, subject only to the security
interest of the Agent therein, all of the following, wherever located and
whether presently in existence or hereafter acquired or created, however
acquired or created and which is owned by the Grantor or in which the Grantor
has any interest, wherever held by the Grantor or others for its account
(collectively, the "Collateral"):
(a) all of the Grantor's right, title and interest in and to all
equipment (including Grantor's screen print machinery at such time as the
existing lienor with respect thereto is paid in full), vehicles, furniture,
fixtures and machinery wherever located and whether now or hereafter existing
and whether now owned or hereafter acquired, together with all substitutions,
replacements, accessions and additions thereto, and all tools, parts,
accessories and attachments used in connection therewith (hereinafter
collectively referred to as the "Equipment");
(b) all of the Grantor's right, title and interest in and to all
inventory of any kind wherever located and whether now or hereafter existing and
whether now owned or hereafter acquired (including, without limitation, all
types of inventory, merchandise, goods, tangible personal property and other
assets that are held by the Grantor for sale, lease or other disposition in the
ordinary course of the Grantor's business or to be furnished under a contract
for services, whether such inventory, merchandise, goods, tangible personal
property and other assets are raw,
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in process or finished, and materials used or consumed in the business of the
Grantor, and goods returned to or repossessed by the Grantor and goods in which
the Grantor has an interest in mass or in joint or other interest or right of
any kind including consigned goods and goods being possessed), and all
accessions thereto and products thereof and all packing and shipping materials
(hereinafter collectively referred to as the "Inventory");
(c) all of the Grantor's right, title and interest in and to,
whether now or hereafter existing, (i) all present and future accounts, contract
rights, chattel paper, documents and instruments (as such terms are defined in
the Code); (ii) all moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, the Collateral
Trustee from or for the Grantor, whether for safekeeping, pledge, custody,
transmission, collection or otherwise; (iii) all of the Grantor's right, title
and interest, and all of the Grantor's rights, remedies, security and liens, in,
to and in respect of any credit insurance, accounts (including, without
limitation, rights of stoppage in transit, replevin, repossession, reclamation
and other rights and remedies of an unpaid vendor, lienor or secured party),
guaranties or other contracts of suretyship with respect to accounts and
deposits or other security for the obligation of any account debtor; (iv) all
rights relating to the sale or other transfer of property to, or the
construction, renovation or other improvement of property by or for the Grantor;
(v) all rights now or hereafter existing in and to all security agreements,
leases and other contracts now or hereafter existing and securing or otherwise
relating to any accounts, contract rights, chattel paper, instruments,
documents, or other rights or obligations; and (vi) all of the Grantor's right,
title and interest in, to and in respect of all goods relating to, or which by
sale have resulted in, accounts, including, without limitation, all goods
described in invoices or other documents or instruments with respect to, or
otherwise representing or evidencing, any accounts, and all returned, reclaimed
or repossessed goods (any and all such accounts, contract rights, chattel paper,
instruments, documents, and rights and obligations being hereinafter referred to
as the "Accounts");
(d) (i) all of the Grantor's right, title and interest in and to all
general intangibles; (ii) all rights, interest, choses in action, causes of
action, claims and all other intangible property of every kind and nature, in
each instance whether now owned or hereafter acquired by the Grantor, including,
without limitation, all corporate and other business records, all loans,
royalties, and all other forms of obligations receivable whatsoever (other than
Accounts); (iii) all trademarks, trademark applications, trademark licenses,
patents, patent applications, patent licenses, trade secrets, licenses,
copyrights, goodwill, inventions, designs, registrations, permits, franchises
and licenses; (iv) all computer programs, software, printouts and other computer
materials, customer lists, credit files, correspondence, and advertising
materials; (v) all customer and supplier contracts, sale orders, rights under
license and franchise agreements, and other contracts and contract rights; (vi)
all interests in partnership and joint ventures, including all moneys due from
time to time in respect thereof; (vii) all federal, state and local tax refunds
and federal, state and local tax refund claims; (viii) all right, title and
interest under
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leases, subleases, licenses and concessions and other agreements relating to
personal property, including all moneys due from time to time in respect
thereof; (ix) all payments due or made to the Grantor in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of any property
by any governmental authority or any other party; (x) all deposit accounts
(general or special) with any bank or other financial institution; (xi) all
credits with and other claims against third parties (including carriers and
shippers) (other than Accounts); (xii) all rights to indemnification; (xiii) all
reversionary interests in pension and profit sharing plans and reversionary,
beneficial and residual interests in trusts; (xiv) all proceeds of insurance
(except key man life insurance), including credit insurance, of which the
Grantor is the beneficiary; (xv) all letters of credit, guaranties, liens,
security interests and other security held by or granted to such Grantor; and
(xvi) all other intangible property, whether or not similar to the foregoing, in
each instance, however and wherever and whenever arising and whether now owned
or hereafter acquired (all of the foregoing described in this Subsection (d)
hereinafter collectively referred to as "General Intangibles");
(e) the books and records of the Grantor relating to any of the
foregoing Collateral, including, without limitation, all customer contracts,
sale orders, minute books, ledgers, records, computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence and advertising materials, in each case indicating, summarizing
or evidencing any of the Collateral; and
(f) all cash and non-cash proceeds of any and all of the foregoing
Collateral and, to the extent not otherwise included, all payments under
insurance (whether or not the Collateral Trustee is the loss payee thereof)
(except key man life insurance) and any indemnity, warranty or guaranty, payable
by reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral;
in each case, howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest hereby created
in the Collateral constitutes continuing collateral security for payment and
performance of all of the Obligations. As used in this Agreement, "Obligations"
means, at any time, whether or not due and payable at such time, all
obligations, liabilities and indebtedness, whether matured or unmatured, of the
Grantor arising out of or evidenced by the Class 4 Note, the Subsidiary
Guarantees, any Collateral Document or the Note Agreement, whether as principal,
interest, or expenses, including, without limitation, the reasonable fees and
disbursements of the Collateral Trustee and the reasonable disbursements of the
Committee payable pursuant to this Agreement, and the reasonable fees and
disbursements of the respective counsel to the Collateral Trustee and the
Committee and of the accountants to the Committee, payable pursuant to the Note
Agreement or this Agreement.
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SECTION 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) The Company (i) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
as set forth on the first page hereof, and (ii) has all requisite power and
authority to execute, deliver and perform this Agreement and the Class 4 Note.
(b) Each Subsidiary has the requisite power and authority to
execute, deliver and perform this Agreement and its Subsidiary Guaranty.
(c) The execution, delivery and performance by the Company of this
Agreement and the Class 4 Note and by each Subsidiary of this Agreement and of
its Subsidiary Guaranty (i) have been duly authorized by all necessary corporate
action, (ii) do not and will not contravene its charter or by-laws, any other
applicable law or any contractual restriction binding on or affecting the
Grantor or any of its properties, and (iii) do not and will not result in or
require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of its properties other than as set
forth in this Agreement.
(d) This Agreement and the Class 4 Note are legal, valid and binding
obligations of the Company and this Agreement and the Subsidiary Guarantees are
legal, valid and binding obligations of the respective Subsidiaries, enforceable
against the Company and the Subsidiaries, respectively, in accordance with their
respective terms, subject as to enforcement to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally and limitations imposed by federal
or state law or equitable principles upon the specific enforceability of any of
the remedies, covenants or other provisions hereof and thereof.
(e) All Equipment and Inventory now existing is, and all Equipment
and Inventory hereafter existing will be, unless consented to in writing by the
Collateral Trustee, located at the address(es) specified therefor in Schedule I
hereto. The Grantor's chief place of business and chief executive office, the
place where the Grantor keeps its records concerning Accounts and General
Intangibles and all originals of all chattel paper which constitutes Accounts
are located at the address(es) specified therefor in such Schedule I. None of
the Accounts or General Intangibles is evidenced by a promissory note or other
instrument. Set forth as Schedule II hereto is a complete and correct list of
each trade name used by the Grantor.
(f) [INTENTIONALLY LEFT BLANK]
(g) The Grantor is and will be at all times the owner of the
Collateral free and clear of any lien, security interest or other charge or
encumbrance, except for (i) the security
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interest created by this Agreement, (ii) the security interest in favor of the
Agent and (iii) the security interests and other encumbrances described in
Schedule III hereto. No effective financing agreement or other instrument
similar in effect covering all or any part of the Collateral is on file in any
recording or filing office, except (i) such as may have been filed in favor of
the Collateral Trustee relating to this Agreement, (ii) such as may have been
filed in favor of the Agent and (iii) such as may have been filed to perfect or
protect any security interest or encumbrance described in Schedule III hereto.
(h) The exercise by the Collateral Trustee of any of its rights and
remedies hereunder will not contravene any law or any contractual restrictions
binding on or affecting the Grantor or any of its properties and will not result
in or require the creation of any lien, security interest or other charge or
encumbrance upon or with respect to any of the Grantor's properties other than
as set forth in this Agreement and the Intercreditor Agreement.
(i) Except with respect to any authorization or approval required
under the laws of another country as to Tortoni, no authorization or approval or
other action by, and no notice to or filing with, any governmental authority or
regulatory body is required for (i) the due execution, delivery and performance
by the Grantor of this Agreement or the Class 4 Note, (ii) the grant by the
Grantor, or the perfection, of the security interest purported to be created
hereby in the Collateral, or (iii) the exercise by the Collateral Trustee of any
of its rights and remedies hereunder, except for the filing of the financing
statements required to be filed to perfect the security interest created by this
Agreement, all of which financing statements have been duly filed and are in
full force and effect.
(j) There is no pending or, to the best of Grantor's knowledge,
threatened action, suit, proceeding or claim before any court or other
governmental authority or any arbitrator, or any order, judgment or award by any
court or other governmental authority or arbitrator, that may adversely affect
the grant by the Grantor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or the exercise by the Collateral
Trustee of any of its rights and remedies hereunder.
(k) This Agreement creates a valid second priority security interest
in the Collateral in favor of the Collateral Trustee, for the benefit of the
holders of Allowed General Unsecured Claims, as security for the Obligations.
The filing of the financing statements required to perfect the security interest
created by this Agreement has been made and results in the perfection of such
security interest in that portion of the Collateral in which a security interest
may be perfected by filing financing statements. Such security interest is, or
in the case of Collateral in which the Grantor obtains rights after the date
hereof and in which a security interest may be perfected by filing financing
statements, will be, a perfected, second priority security interest, subject
only to the security interest of the Agent and the other encumbrances described
in Schedule III hereto.
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SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding, unless the Collateral Trustee shall
otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Collateral Trustee may reasonably request in order (i) to perfect and
protect the security interest created hereby; (ii) after the occurrence and
during the continuance of an Event of Default (as hereinafter defined), to
enable the Collateral Trustee to exercise and enforce it rights and remedies
hereunder in respect of the Collateral, subject to the terms of the
Intercreditor Agreement or (iii) to otherwise effect the purpose of this
Agreement, including, without limitation, (A) marking conspicuously each chattel
paper included in the Accounts and General Intangibles and, at the request of
the Collateral Trustee, each of its records pertaining to the Collateral with a
legend, in form and substance reasonably satisfactory to the Collateral Trustee,
indicating that such chattel paper or Collateral is subject to the security
interest created hereby, (B) if the Financing Agreement has terminated, if any
Account or General Intangible shall be evidenced by a promissory note or other
instrument or chattel paper, delivering and pledging to the Collateral Trustee
hereunder such note, instrument or chattel paper duly endorsed and accompanied
by executed instruments of transfer or assignment, all in form and substance
satisfactory to the Collateral Trustee, (C) executing and filing such financing
or continuation statements, or amendments thereto, as may be necessary or
desirable or that the Collateral Trustee may reasonably request in order to
perfect and preserve the security interest purported to be created hereby, and
(D) furnishing to the Collateral Trustee from time to time statements and
schedules further identifying and describing the Collateral and such other
reports in connection with the Collateral as the Collateral Trustee may
reasonably request, all in reasonable detail.
(b) Location of Equipment and Inventory. The Grantor will keep the
Equipment and Inventory (other than Inventory sold in the ordinary course of
business) at the location(s) specified therefor in Schedule I hereto, or, upon
not less than 30 Business Days' prior written notice to the Collateral Trustee
accompanied by a new Schedule I hereto indicating each new location of the
Equipment and Inventory, at such other location as the Grantor may elect,
provided that the Collateral Trustee's rights in such Equipment and Inventory,
including, without limitation, the existence, perfection and priority of the
security interest created hereby in such Equipment and Inventory, are not
materially adversely affected thereby.
(c) Condition of Equipment. The Grantor will cause Equipment
necessary for the operation of its business to be maintained and preserved in
good repair and working order, ordinary wear and tear excepted, and will
forthwith, or in the case of any loss or damage to any Equipment as quickly as
practicable after the occurrence thereof, make or cause to be made all repairs,
replacement, and other improvements in connection therewith which are necessary
or desirable or that the Collateral Trustee may reasonably request to such end.
The Grantor will
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promptly furnish to the Collateral Trustee a statement regarding any loss or
damage in excess of $100,000 to any Equipment.
(d) Taxes. The Grantor will pay promptly when due all property and
other taxes, assessments and governmental charges or levies imposed upon, and
all claims (including claims for labor, materials and supplies) against any
Collateral, except to the extent the validity thereof is being contested in good
faith by proper proceedings which stay the imposition of any penalty, fine or
lien resulting from the non-payment thereof and with respect to which adequate
reserves have been set aside for the payment thereof.
(e) Insurance.
(i) The Grantor will, at it own expense, maintain insurance
(including, without limitation, comprehensive general liability
insurance and all risk insurance insuring against loss by fire,
explosion, theft and such other casualties as may be satisfactory to
the Collateral Trustee) with respect to the Equipment and Inventory
in such amounts, against such risks, in such form and with such
insurers, as is currently in effect. Subject to the terms of the
Intercreditor Agreement, each policy for liability insurance shall
provide for all losses to be paid on behalf of the Collateral
Trustee and the Grantor as their respective interests may appear,
and each policy for property damage shall provide for all losses to
be paid directly to the Collateral Trustee upon the occurrence and
during the continuance of an Event of Default. In addition, subject
to the terms of the Intercreditor Agreement, each such policy or
property damage insurance shall provide for all losses to be paid
directly to the Collateral Trustee and shall (A) include the
Collateral Trustee as an insured party thereunder (without any
representation or warranty by or obligation upon the Collateral
Trustee) as its interest may appear, (B) contain the agreement by
the insurer that any loss pursuant to clause (iii) of this Section
5(e) shall be payable to the Collateral Trustee notwithstanding any
action, inaction or breach of representation or warranty by the
Grantor, (C) provide that there shall be no recourse against the
Collateral Trustee for payment of premiums or other amounts with
respect thereto, and (D) provide that at least 30 days' prior
written notice of cancellation or of lapse shall be given to the
Collateral Trustee by the insurer. The Grantor will, if so requested
by the Collateral Trustee, deliver to the Collateral Trustee
duplicate policies of all liability and property damage insurance
and, as often as the Collateral Trustee may reasonably request, a
report of a reputable insurance broker with respect to such
insurance. Subject to the terms of the Intercreditor Agreement, the
Grantor will also, after the occurrence and during the continuance
of an Event of Default, at the request of the Collateral Trustee,
duly execute and deliver instruments of assignment of such insurance
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policies and cause the respective insurer to acknowledge notice of
such assignment.
(ii) Reimbursement under any liability insurance maintained by
the Grantor pursuant to this Section 5(e) may be paid directly to
the party who shall have incurred liability covered by such
insurance. In the case of any loss involving damage to Equipment or
Inventory as to which clause (iii) of this Section 5(e) is not
applicable, the Grantor will make or cause to be made the necessary
repairs to or replacements to such Equipment and Inventory, and any
proceeds of insurance maintained by the Grantor pursuant to this
Section 5(e) shall be paid to the Grantor as reimbursement for the
costs of such repair or replacements.
(iii) Subject to the terms of the Intercreditor Agreement,
upon the occurrence and during the continuance of an Event of
Default, or the actual or constructive total loss (in excess of
$100,000 per occurrence) of any Equipment or Inventory, all
insurance payments in respect of such Equipment and Inventory and
all other Collateral shall be paid to the Collateral Trustee and
applied as specified in Section 7(b) hereof.
(f) Provisions Concerning the Accounts and General Intangibles.
(i) The Grantor will (A) give the Collateral Trustee at least
30 days' prior written notice of any change in the Grantor's name,
identity or corporate structure, (B) keep its chief place of
business and chief executive office and all originals of all chattel
paper which constitutes Accounts or General Intangibles at the
locations specified therefor in Schedule I hereof, and (C) keep
adequate records concerning the Accounts and General Intangible and
such chattel paper and, after reasonable notice, permit
representatives of the Collateral Trustee to inspect and make
abstracts from such records and chattel paper at any time during
normal business hours.
(ii) The Grantor will, except as otherwise provided in this
subsection (f), continue to collect at its own expense, all amounts
due or to become due under the Accounts and General Intangibles. In
connection with such collections, the Grantor may (and, subject to
the Intercreditor Agreement, at the Collateral Trustee's direction,
will) take such action as the Grantor or the Collateral Trustee may
deem necessary or advisable to enforce collection or performance of
the Accounts and General Intangibles; provided, however, the
Collateral Trustee shall, subject to the terms of the Intercreditor
Agreement, have the right at any time, upon the occurrence and
during the continuance of an Event of Default, to notify the account
debtors or obligors under any Account or General Intangible of the
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assignment of such Account or General Intangible to the Collateral
Trustee and to direct such account debtors or obligors to make
payment of all amounts due or to become due to the Grantor hereunder
directly to the Collateral Trustee and, upon such notification and
at the expense of the Grantor and to the extent permitted by law, to
enforce collection of any such Account or General Intangible and to
adjust, settle or compromise the amount or payment thereof, in the
same manner and to the same extent as the Grantor might have done.
In addition, upon the occurrence and during the continuance of an
Event of Default, the Collateral Trustee shall have the right,
subject to the terms of the Intercreditor Agreement to notify the
United States Postal Service authorities to change the address for
delivery of mail addressed to the Grantor at such address as the
Collateral Trustee may designate and to do all other acts and things
necessary to carry out this Agreement. Subject to the terms of the
Intercreditor Agreement, after an Event of Default, (A) all amounts
and proceeds (including instruments) received by the Grantor in
respect of the Accounts and General Intangibles shall be received in
trust for the benefit of the Collateral Trustee hereunder, shall be
segregated from other funds of the Grantor and shall be forthwith
paid over to the Collateral Trustee in the same form as so received
(with any necessary indorsement) to be held as cash collateral and
either (1) released to the Grantor so long as no Event of Default,
or an event which, with the giving of notice or lapse of time or
both, would constitute an Event of Default shall have occurred and
be continuing or (2) if any Event of Default shall be continuing,
applied as specified in Section 7(b) hereof, and (B) the Grantor
will not adjust, settle or compromise the amount or payment of any
Account or General Intangible or release wholly or partly any
account debtor or obligor thereof or allow any credit or discount
thereon without the express written consent of the Collateral
Trustee.
(g) Transfers and Other Liens. The Grantor will not (i) sell,
transfer or assign (by operation of law or otherwise), lease, exchange or
otherwise dispose of any of the Collateral except for (A) sales or disposal of
Inventory in the ordinary course of business and (B) sale and disposition of
obsolete equipment in the ordinary course of business so long as the amount
thereof sold in any fiscal year by the Grantor shall not have a fair market
value in excess of $100,000, or (ii) create or suffer to exist any lien,
security interest or other charge or encumbrance upon or with respect to any of
the Collateral, except for (A) the security interest created hereby, (B) the
security interest in favor of the Agent and (C) the security interests and other
encumbrances described in or permitted under Schedule III hereto.
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<PAGE>
SECTION 6. Additional Provisions Concerning the Collateral.
(a) So long as any of the Obligations remain outstanding the Grantor
hereby authorizes the Collateral Trustee to file, without the signature of the
Grantor where permitted by law, one or more financing or continuation
statements, and amendments thereto, relating to the Collateral.
(b) Subject to the Intercreditor Agreement, the Grantor hereby
irrevocably appoints the Collateral Trustee the Grantor's attorney-in-act and
proxy, with full authority in the place and stead of the Grantor and in the name
of the Grantor or otherwise, from time to time in the Collateral Trustee's
discretion, to take any action and to execute any instrument which the
Collateral Trustee may reasonably deem necessary or advisable to accomplish the
purpose of this Agreement (subject to the rights of the Grantor under Section
5(f) hereof), including, without limitation: (A) to receive, take, endorse,
sign, assign and deliver, all in the name of the Collateral Trustee or the
Grantor, any and all checks, notes, drafts, and other documents or instruments
relating to the Collateral (but in all instances before an Event of Default in
the name of the Grantor and not the Collateral Trustee); (B) to obtain and
adjust insurance required to be paid to the Collateral Trustee pursuant to
Section 5(e) hereof, and to receive, indorse and collect any drafts or other
instruments, document and chattel paper in connection therewith; and (C) in
addition to the foregoing and without limitation, upon the occurrence of an
Event of Default, (1) to receive, indorse and collect any notes, drafts or other
instruments, documents and chattel paper relating to the Collateral; (ii) to
ask, demand, collect, sue for, recover, compound, receive and give acquittance
and receipts for moneys due and to become due under or in respect of any
Collateral; (iii) to receive, indorse, and collect any drafts or other
instruments, documents and chattel paper in connection with clause (B), (C)(i)
or (C)(ii) of this Subsection (b); and (iv) to file any claim or take any action
or institute any proceedings which the Collateral Trustee may deem necessary or
desirable for the collection of any Collateral or otherwise to enforce the
rights of the Collateral Trustee with respect to any Collateral, including,
without limitation, the right, in the name of the Collateral Trustee for the
benefit of the holders of the Allowed General Unsecured Claims or the Grantor,
to file claims under any insurance policy, to receive, receipt and give
acquittance for any payments that may be payable thereunder, and to execute any
and all endorsements, receipts, release, assignment, reassignment or other
documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies.
(c) If the Grantor fails to perform any agreement contained herein,
the Collateral Trustee may itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of the Collateral Trustee
incurred in connection therewith shall be payable by the Grantor pursuant to
Section 8 hereof.
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<PAGE>
(d) The powers conferred on the Collateral Trustee hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Collateral Trustee shall have no duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against prior parties
or any other rights pertaining to any Collateral.
SECTION 7. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
(a) Subject to the terms of the Intercreditor Agreement and the Note
Agreement, the Collateral Trustee may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all of the rights and remedies of a secured party on default under the
Code (whether or not the Code applies to the affected Collateral), and may also
(i) require the Grantor to, and the Grantor hereby agrees that it will at its
expense and upon request of the Collateral Trustee forthwith, assemble all or
part of the Collateral as directed by the Collateral Trustee and make it
available to the Collateral Trustee at a place to be designated by the
Collateral Trustee which is reasonably convenient to both parties, and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at a public or private sale, at any of the
Collateral Trustee's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Collateral Trustee may reasonably deem commercially reasonable. The Grantor
agrees that, to the extent notice of sale shall be required by law, at least 10
days' notice to the Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification. The Collateral Trustee shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Collateral
Trustee may adjourn any public or private sale from time to time by announcement
at the time and place fixed therefor, and such sale may, without further notice,
be made at the time and place to which it was so adjourned. The Grantor hereby
waives any claims against the Collateral Trustee and the holders of Allowed
General Unsecured Claims arising by reason of the fact that the price at which
the Collateral may have been sold at a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Obligations, even if the Collateral Trustee accepts the first
offer received and does not offer the Collateral to more than one offeree,
provided that such sale has been conducted in a commercially reasonable manner.
(b) Subject to the terms of the Intercreditor Agreement and the Note
Agreement, any cash held by the Collateral Trustee as Collateral and all cash
proceeds received by the Collateral Trustee in respect of any sale of,
collection from, or other realization upon, all or any part of the Collateral
may, in the discretion of the Collateral Trustee, be held by the Collateral
Trustee as collateral for, and/or then or at any time thereafter applied (after
payment of any
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<PAGE>
amounts payable to the Collateral Trustee pursuant to Section 8 hereof) in whole
or in part by the Collateral Trustee against, all or any part of the Obligations
in the order provided for in Section 6 of the Note Agreement.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Trustee
is legally entitled, the Grantor shall be liable for the deficiency, together
with interest thereon at the rate specified in the Class 4 Note or such other
rate as shall be fixed by applicable law, together with the costs of collection
and the reasonable fees and expenses of any attorneys employed by the Collateral
Trustee to collect such deficiency.
SECTION 8. Indemnity and Expenses.
(a) The Grantor agrees to indemnify the Collateral Trustee from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely and directly
from the Collateral Trustee's gross negligence or willful misconduct.
(b) The Grantor will, upon demand, pay to the Collateral Trustee the
amount of any and all reasonable costs and expenses, including the reasonable
fees and disbursements of the Collateral Trustee's counsel and of any experts
and agents, which the Collateral Trustee may reasonably incur in connection with
(i) as applicable, the administration, amendment, waiver or other modification
or termination of the Class 4 Note, any of the Guaranties, this Agreement, the
other Collateral Documents, or the Note Agreement; (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral; (iii) the exercise or enforcement of any of
the rights of the Collateral Trustee hereunder; or (iv) the failure by the
Grantor to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications provided for
hereunder shall be in writing and shall be mailed, telecopied or delivered:
If to the Grantor, to each of: Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman
Springdale Fashions, Inc.
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
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<PAGE>
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman
Tortoni Manufacturing Corp.
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman
Stonehenge Financial Corp.
c/o Andover Togs, Inc.
1333 Broadway
New York, New York 10018
Telecopy Number: (212) 244-0205
Attn: William Cohen, Chairman
with a copy to
Norman N. Kinel, Esq.
Whitman Breed Abbott & Morgan
200 Park Avenue
New York, New York 10166
Telecopy Number: (212) 351-3131
and to Donald D. Shack, Esq.
Shack & Siegel, P.C.
530 Fifth Avenue
New York, New York 10036
Telecopy Number: (212) 730-1964;
If to the Collateral Trustee: to it at its address specified in the Note
Agreement; or as to any such party at such other address as shall be designated
by such party in a written notice to the other parties complying as to delivery
with the terms of this Section 9. All such notices and other communications
shall be effective (i) if mailed, when received or three Business Days after
mailing, whichever occurs first, (ii) if telecopied, when received, or (iii) if
hand delivered, upon delivery.
SECTION 10. Security Interest Absolute. All rights and the security
interest of the Collateral Trustee hereunder and all obligations of the Grantor
hereunder shall be absolute and unconditional irrespective of (i) any lack of
validity or enforceability of the Class 4 Note or
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<PAGE>
any other agreement or instrument relating thereto; (ii) any change in the time,
manner or place of payment of, or in any other term in respect of, all or any of
the Obligations, or any other amendment or waiver of or consent to any departure
from the Class 4 Note or any other agreement or instrument relating thereto;
(iii) any increase in, addition to, exchange or release of, or non-perfection of
any lien on or security interest in, any other collateral, or any release or
amendment or waiver of or consent to departure from any guaranty, for all or any
of the Obligations; or (iv) the absence of any action on the part of the
Collateral Trustee to obtain payment or performance of the Obligations from the
Grantor or any other party.
SECTION 11. Miscellaneous.
(a) Amendments. No amendment of any provision of this Agreement
shall be effective unless it is in writing and signed by the Grantor and the
Collateral Trustee, and no waiver of any provision of this Agreement shall be
effective unless it is in writing and signed by the Collateral Trustee, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(b) Waivers; Cumulative Rights; Etc. No failure on the part of the
Collateral Trustee to exercise, and no delay in exercising, any right hereunder
or under any other Collateral Document or the Class 4 Note shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Collateral Trustee provided herein and in
the Class 4 Note are cumulative and are in addition to, and not exclusive of,
any rights or remedies provided by law. The rights of the Collateral Trustee
under this Agreement and the Class 4 Note are not conditional or contingent on
any attempt by the Collateral Trustee to exercise any of its rights against any
other person.
(c) Captions; Separability. The captions of the various Sections,
Subsections and paragraphs of this Agreement have been inserted only for the
purposes of convenience; such captions are not a part of this Agreement and
shall not be deemed in any manner to modify, explain, enlarge or restrict any of
the provisions of this Agreement. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining portions hereof or thereof or affecting the validity
or enforceability of such provision in any other jurisdiction.
(d) Continuing Security Interest; Assignments. This Agreement shall
create a continuing security interest in the Collateral and shall (i) remain in
full force and effect until the payment in full of the Obligations and (ii) be
binding on the Grantor and its successors and assigns and shall inure, together
with all rights and remedies of the Collateral Trustee hereunder, to the benefit
of the Collateral Trustee and its successors, transferees and assigns.
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<PAGE>
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO
THE CONFLICT OF LAW PRINCIPLES THEREOF.
(f) WAIVER OF JURY TRIAL AND SETOFF; CONSENT TO JURISDICTION; ETC.
(1) In any litigation in any court with respect to, in connection with, or
arising out of this Agreement, the Collateral, the Class 4 Note or any of the
Subsidiaries Guaranties or any instrument or document delivered pursuant to this
Agreement, or the validity, protection, interpretation, collection or
enforcement hereof or thereof, or any other claim or dispute howsoever arising,
between the Grantor on the one hand and the Collateral Trustee on the other
hand, the Grantor, to the fullest extent it may effectively do so, (i) waives
the right to interpose any setoff, recoupment, counterclaim or cross-claim in
connection with any such litigation, irrespective of the nature of such setoff,
recoupment, counterclaim or cross-claim, unless such setoff, recoupment,
counterclaim or cross-claim could not, by reason of any applicable Federal or
State procedural laws, be interposed, pleaded or alleged in any other action and
(ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND ANY RIGHT
IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL, EXEMPLARY,
PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO,
ACTUAL DAMAGES. THE GRANTOR AGREES THAT THIS SECTION 11(f) IS A SPECIFIC AND
MATERIAL ASPECT OF THIS AGREEMENT AND ACKNOWLEDGES THAT THE COLLATERAL TRUSTEE
ON BEHALF OF THE HOLDERS OF ALLOWED GENERAL UNSECURED CLAIMS WOULD NOT ENTER
INTO THIS AGREEMENT IF THIS SECTION 11(f) WERE NOT PART OF THIS AGREEMENT.
(2) The Grantor hereby irrevocably consents to the
non-exclusive jurisdiction of the courts of the State of New York and of any
Federal Court located in the City of New York in connection with any action or
proceeding arising out of or relating to this Agreement, the Collateral, the
Class 4 Note, any of the Subsidiary Guaranties or any instrument or document
delivered pursuant to this Agreement. In any such litigation, the Grantor
waives, to the fullest extent it may effectively do so, personal service of any
summons, complaint or other process and agrees that the service thereof may be
made by certified or registered mail directed to the Grantor at its address for
notice determined in accordance with Section 9 hereof. The Grantor hereby
waives, to the fullest extent it may effectively do so, the defenses of forum
non conveniens and improper venue.
(g) Admissibility of Security Agreement. The Grantor agrees that any
copy of this Agreement signed by the Grantor and transmitted by telecopier for
delivery to the Collateral Trustee shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence.
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<PAGE>
(h) Binding Nature. This Agreement shall be binding upon and inure
to the benefit of the successors, assigns or other legal representatives of the
Grantor, and shall, together with the rights and remedies of the Collateral
Trustee hereunder, be binding upon and inure to the benefit of the Collateral
Trustee and the holders of Allowed General Unsecured Claims and each of their
respective successors, assigns or other legal representatives.
(i) Counterparts. This Agreement may be executed by the parties
hereto individually or in any combination, in one or more counterparts, each of
which shall be an original and all of which shall together constitute one and
the same agreement.
(j) Schedules. The Collateral Trustee is authorized to annex hereto
any schedules referred to herein.
(k) Acknowledgment of Receipt. The Grantor acknowledges receipt of a
copy of this Agreement.
(l) Intercreditor Agreement. This Agreement is subject to the terms
of the Intercreditor Agreement.
(m) Release and Termination. Upon the date on which the Obligations
shall have been paid in full, the liens and security interests granted hereby
shall terminate and all rights to the Collateral shall revert to the Grantor.
Upon any such termination, the Collateral Trustee will, at the Grantor's
expense, execute and deliver to the Grantor such documents prepared by the
Grantor and delivered to the Collateral Trustee as the Grantor shall reasonably
request to evidence such termination.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be executed
and delivered by its officer thereunto duly authorized, as of the date first
above written.
ANDOVER TOGS, INC.
By: /s/ William L. Cohen
------------------------
Title: President
SPRINGDALE FASHIONS, INC.
By: /s/ William L. Cohen
------------------------
Title: President
[SIGNATURES CONTINUED ON NEXT PAGE]
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<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
TORTONI MANUFACTURING CORP.
By: /s/ William L. Cohen
------------------------
Title: President
STONEHENGE FINANCIAL
By: /s/ William L. Cohen
------------------------
Title: President
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<PAGE>
SCHEDULE I
Collateral Information
Chief Place of Business and Chief Executive Offices:
Borrower and Stonehenge: 1333 Broadway
New York, NY 10018
Tortoni: Zona Franca II
La Romana, Dominican Republic
Springdale:
Chief Place of Business: 605 East Railroad Street
Clinton, NC 28328
Executive Offices: Main Street
Pisgah, AL 35765
Locations of Equipment and Inventory for Borrower and each Guarantor:
1333 Broadway Borrower and Stonehenge
New York, NY 10018
Main Street Borrower
Pisgah, AL 35765
Highway 117 Borrower
Stevenson, AL 35772
102 North Cedar Hill Drive Borrower
Scottsboro, AL 35768
605 East Railroad Street Borrower and Springdale
Clinton, NC 28328
Zona Franca II Borrower and Tortoni
La Romana, Dominican Republic
Plus goods in transit.
Locations of Inventory with Third Party Contractors for Borrower:
Almark Mills, Inc. Borrower
281 Industrial Park Blvd.
Dawson, CA 31742-0031
<PAGE>
<PAGE>
American Childrenswear, Inc. Borrower
14025 N.W. 60th Avenue
Miami Lakes, FL 33014
Locations of Books and Records Concerning Accounts and Collateral of Borrower
and Guarantors:
1333 Broadway Borrower and Springdale and Stonehenge
New York, NY 10018
Main Street Borrower
Pisgah, AL 35765
Zona Franca II Borrower and Tortoni
La Romana, Dominican Republic
<PAGE>
<PAGE>
SCHEDULE II
TO
CLASS 4 SECURITY AGREEMENT
Trade Names
Corporation Name
----------- ----
Andover Togs, Inc.
Stonehenge Financial Corp.
Springdale Fashions, Inc.
Tortoni Manufacturing Corp.
<PAGE>
<PAGE>
SCHEDULE III
Security Interests and Liens
1. Equipment financing with The First National Bank of Scottsboro pursuant
to secured note dated the Effective Date in the principal amount of
$205,090.
2. Equipment financing with Piedmont Sewing Machine.
3. Miscellaneous equipment financing or capitalized leases.
<PAGE>
<PAGE>
GUARANTY
GUARANTY dated as of May 12, 1997, by Springdale Fashions, Inc., a
Delaware corporation (the "Guarantor"), in favor of M.J. Sherman & Associates,
Inc., as Collateral Trustee (as defined in the Plan described below) for the
benefit of the holders of Allowed General Unsecured Claims (as defined in the
Plan). Capitalized terms used herein and not otherwise defined herein shall have
the meanings attributed thereto in the Note Agreement (as defined in the Plan).
Pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor, and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Andover Togs, Inc. has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, the Class 4 Note (as defined in the Plan).
Pursuant to and in accordance with the terms of the Plan, the
undersigned (the "Guarantor") has agreed to guaranty the payment when due to the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, of all of the Obligations (such Obligations to include,
without limitation, the due and punctual payment of (a) the obligation of the
Company to pay the principal of and interest on the Class 4 Note, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (b) all other Obligations of the Company at any
time and from time to time under any of the other Class 4 Documents).
Accordingly, in consideration of the premises and in accordance with
the Plan, the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Company and the other Collateral Grantors
(the foregoing being herein referred to as the "Guaranteed Obligations");
provided, however, that anything to the contrary notwithstanding, the maximum
liability of the Guarantor hereunder shall not exceed an amount equal to the
largest amount that would not render the Guarantor's obligations hereunder
subject to avoidance under Section 548 of the United States Bankruptcy Code or
any equivalent provision of the law of any state.
<PAGE>
<PAGE>
Section 2. Waiver. The Guarantor hereby absolutely, unconditionally
and irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment, demand of payment, protest, notice of dishonor or
nonpayment and any other notice with respect to the Guaranteed Obligations,
(iii) any requirement that the Collateral Trustee protect, secure, perfect or
insure any security interest or Lien or any property subject thereto or exhaust
any right or take any action against the Company, any other Collateral Grantor,
or any other person or any Collateral, and (iv) any other action, event or
precondition to the enforcement of this Guaranty or the performance by the
Guarantor of the obligations hereunder.
Section 3. Guaranty Absolute. (a) The Guarantor guarantees that, to
the fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in accordance with their terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Collateral Trustee with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Class 4 Note, or any other Class 4 Document or any other
agreement or instrument relating thereto, or of all or any part of the
Guaranteed Obligations or of any security therefor shall affect, impair or be a
defense to this Guaranty.
(c) This Guaranty is one of payment and performance and not
collection and the obligations of the Guarantor under this Guaranty are
independent of the Obligations of the Company and the other Collateral Grantors,
and a separate action or actions may be brought and prosecuted against the
Guarantor to enforce this Guaranty, irrespective of whether any action is
brought against the Company or any other Collateral Grantor or whether the
Company or any other Collateral Grantor is joined in any such action or actions.
(d) The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Class 4 Note or any other Class 4 Document, including any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to the Company or otherwise;
(ii) any sale, exchange, release, surrender, realization upon
any property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or
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any of the Guaranteed Obligations, and/or any offset thereagainst, or
failure to perfect, or continue the perfection of, any Lien in any such
property, or delay in the perfection of any such Lien, or any amendment or
waiver of or consent to departure from any other guaranty for all or any
of the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against the
Company, any other Collateral Grantor or others (including the Guarantor);
(iv) any settlement or compromise of any security for any
Obligation, or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and any subordination
of the payment of all or any part thereof to the payment of any Obligation
(whether due or not) of the Company to creditors of the Company other than
the Guarantor;
(v) any manner of application of Collateral, or proceeds
thereof, to all or any of the Guaranteed Obligations, or any manner of
sale or other disposition of any Collateral for all or any of the
Guaranteed Obligations or any other assets of the Company or any other
Collateral Grantor;
(vi) any change, restructuring or termination of the existence
of the Company or any of its subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or a
discharge of, this Guaranty and/or obligations of the Guarantor hereunder,
or a defense to, or discharge of, the Company or any other person or party
relating to this Guaranty or the obligations of the Guarantor hereunder or
otherwise with respect to the Allowed Class 4 Claims.
(e) The Collateral Trustee may at any time and from time to time
(whether or not after revocation or termination of this Guaranty) without the
consent of, or notice (except as shall be required by applicable statute and
cannot be waived) to, the Guarantor, and without incurring responsibility to the
Guarantor or impairing or releasing the obligations of the Guarantor hereunder,
apply any sums by whomsoever paid or howsoever realized to any Guaranteed
Obligation regardless of what Guaranteed Obligations remain unpaid.
(f) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if claim is ever made upon the Collateral Trustee or any
holder of an Allowed Class 4 Claim for repayment or recovery of any amount or
amounts received by the Collateral Trustee or such holder of an Allowed Class 4
Claim in payment or on account of any of the Guaranteed Obligations and the
Collateral Trustee or such holder of an Allowed Class 4 Claim repays all or part
of said amount by reason of any judgment, decree or order of any
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<PAGE>
court or administrative body having jurisdiction over the Collateral Trustee or
such holder of an Allowed Class 4 Claim or the respective property of each, or
any settlement or compromise of any such claim effected by the Collateral
Trustee or such holder of an Allowed Class 4 Claim with any such claimant
(including the Company), then and in such event the Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon the
Guarantor, notwithstanding any revocation hereof or the cancellation of any
Class 4 Document or other instrument evidencing any Obligation, and the
Guarantor shall be and remain liable to the Collateral Trustee and/or such
holder of an Allowed Class 4 Claim hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by the Collateral Trustee or any holder of an Allowed Class 4 Claim.
Section 4. Continuing Guaranty. This Guaranty is a continuing one
and shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Collateral Trustee and its successors, transferees and
assigns. All obligations to which this Guaranty applies or may apply under the
terms hereof shall be conclusively presumed to have been created in reliance
hereon.
Section 5. Representations, Warranties and Covenants. The Guarantor
hereby represents, warrants and covenants to and with the Collateral Trustee
that:
(a) The Guarantor has the corporate power to execute and deliver
this Guaranty and to incur and perform its obligations hereunder;
(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of this Guaranty and to
incur and perform its obligations hereunder;
(c) Other than the entry by the Bankruptcy Court of the Final Order
(as defined in the Plan) confirming the Plan, no consent, approval,
authorization or other action by, and no notice to or of, or declaration
or filing with, any governmental or other public body, or any other
Person, is required for the due authorization, execution, delivery and
performance by the Guarantor of this Guaranty or the consummation of the
transactions contemplated hereby;
(d) The execution, delivery and performance by the Guarantor of this
Guaranty do not and will not violate or otherwise conflict with any term
or provision of any material agreement, instrument, judgment, decree,
order or any statute, rule or governmental regulation applicable to the
Guarantor or result in the creation of any security interest in or Lien
upon any of its properties or assets pursuant thereto;
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(e) This Guaranty has been duly authorized, executed and delivered
by the Guarantor and constitutes the legal, valid and binding obligation
of the Guarantor, and is enforceable against the Guarantor in accordance
with its terms, except as enforcement thereof may be subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law); and
(f) No proceeding referred to in paragraph (f) or (g) of the
definition of "Event of Default" set forth in the Class 4 Note is pending
against the Guarantor and no other event referred to in such paragraphs
has occurred and is continuing, and the property of the Guarantor is not
subject to any assignment for the benefit of creditors.
Section 6. Expenses. The Guarantor will upon demand reimburse the
Collateral Trustee for any sums, costs, and expenses which the Collateral
Trustee may reasonably pay or incur pursuant to the provisions of this Guaranty
or in negotiating, executing, perfecting, defending, protecting or enforcing
this Guaranty or in enforcing payment of the Guaranteed Obligations or otherwise
in connection with the provisions hereof, including court costs, collection
charges, travel expenses, and reasonable attorneys' fees, together with interest
thereon as specified in Section 12 hereof. The Guarantor shall not be required
to pay any such sums if such sums have been paid by the Company under the Note
Agreement.
Section 7. Terms. (a) All terms defined in the UCC and used herein
shall have the meanings as defined in the UCC, unless the context otherwise
requires.
(b) The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guaranty unless the
context shall otherwise require.
Section 8. Amendments and Modification. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring to
this Guaranty and to such provision, and executed by the party to be charged.
Section 9. Subrogation. The Guarantor will not exercise any rights
which it may acquire by way of subrogation hereunder, by any payment made by it
hereunder or otherwise, until the Class 4 Note is paid in full and all of the
Obligations and all other expenses to be paid by the Guarantor pursuant hereto
shall have been satisfied in full. If any
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amount shall be paid to the Guarantor on account of such subrogation rights at
any time when all of the Obligations and all such other expenses shall not have
been paid in full, such amount shall be held in trust for the benefit of the
Collateral Trustee, shall be segregated from the other funds of the Guarantor
and shall forthwith be paid over to the Collateral Trustee to be applied in
whole or in part by the Collateral Trustee against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of the Note Agreement.
Section 10. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Collateral
Trustee may, subject to the provisions of the Note Agreement, without notice to
or demand upon the Company or the Guarantor, declare any Guaranteed Obligations
immediately due and payable, and shall be entitled to enforce the obligations of
the Guarantor hereunder.
(b) Upon such declaration by the Collateral Trustee, the Collateral
Trustee is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Collateral Trustee to or for the credit or
the account of the Guarantor against any and all of the obligations of the
Guarantor now or hereafter existing under this Guaranty, whether or not the
Collateral Trustee shall have made any demand under this Guaranty and although
such obligations may be contingent and unmatured. The Collateral Trustee agrees
promptly to notify the Guarantor after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Collateral Trustee under this
Section 10 are in addition to other rights and remedies (including other rights
of set-off) which the Collateral Trustee may have.
Section 11. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether by
the Company or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Collateral Trustee or any holder of an Allowed Class 4
Claim shall have commenced to run, toll the running of such statute of
limitations and, if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
Section 12. Interest. All amounts payable from time to time by the
Guarantor pursuant to Section 6 hereunder shall bear interest at the applicable
rate of interest set forth in the Class 4 Note.
Section 13. Rights and Remedies Not Waived. No act, omission or
delay by the Collateral Trustee shall constitute a waiver of its rights and
remedies hereunder or
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otherwise. No single or partial waiver by the Collateral Trustee of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 14. Admissibility of Guaranty. The Guarantor agrees that any
copy of this Guaranty signed by the Guarantor and transmitted by telecopier for
delivery to the Collateral Trustee shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence.
Section 15. Notices. All notices, requests and demands to or upon
the Collateral Trustee or the Guarantor under this Agreement shall be in writing
and given as provided in the Note Agreement.
Section 16. Counterparts. This Guaranty may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original
and all of which shall together constitute one and the same agreement.
Section 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL;
ETC. (a) In any litigation in any court with respect to, in connection with, or
arising out of this Guaranty or any instrument or document delivered pursuant to
this Guaranty, or the validity, protection, interpretation, collection or
enforcement thereof, or any other claim or dispute howsoever arising, between
the Guarantor on the one hand and the Collateral Trustee or any holder of an
Allowed Class 4 Claim on the other hand, the Guarantor, to the fullest extent it
may effectively do so, (i) waives the right to interpose any setoff, recoupment,
counterclaim or cross-claim in connection with any such litigation, irrespective
of the nature of such setoff, recoupment, counterclaim or cross-claim, unless
such setoff, recoupment, counterclaim or cross-claim could not, by reason of any
applicable Federal or State procedural laws, be interposed, pleaded or alleged
in any other action and (ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH
LITIGATION AND ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION
ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER
THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE GUARANTOR AGREES THAT THIS SECTION
17(a) IS A SPECIFIC AND MATERIAL ASPECT OF THIS GUARANTY.
(b) The Guarantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Guaranty or any document or instrument
delivered pursuant to this Guaranty. In any such litigation, the Guarantor
waives, to the fullest extent it may effectively do so, personal
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service of any summons, complaint or other process and agrees that the service
thereof may be made by certified or registered mail directed to the Guarantor at
its address for notice determined in accordance with Section 15 hereof. The
Guarantor hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.
(c) The Guarantor hereby waives presentment, notice of dishonor and
protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
Section 18. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. Captions; Separability. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Guaranty.
(b) If any term of this Guaranty shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
Section 20. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guaranty and each of the Class 4 Documents.
IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guaranty to be duly executed in the State of New York as of the date first above
set forth.
SPRINGDALE FASHIONS, INC.
By: /s/ William L. Cohen
---------------------------------
Title: President
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GUARANTY
GUARANTY dated as of May 12, 1997, by Stonehenge Financial Corp., a
New York corporation (the "Guarantor"), in favor of M.J. Sherman & Associates,
Inc., as Collateral Trustee (as defined in the Plan described below) for the
benefit of the holders of Allowed General Unsecured Claims (as defined in the
Plan). Capitalized terms used herein and not otherwise defined herein shall have
the meanings attributed thereto in the Note Agreement (as defined in the Plan).
Pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor, and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Andover Togs, Inc. has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, the Class 4 Note (as defined in the Plan).
Pursuant to and in accordance with the terms of the Plan, the
undersigned (the "Guarantor") has agreed to guaranty the payment when due to the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, of all of the Obligations (such Obligations to include,
without limitation, the due and punctual payment of (a) the obligation of the
Company to pay the principal of and interest on the Class 4 Note, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (b) all other Obligations of the Company at any
time and from time to time under any of the other Class 4 Documents).
Accordingly, in consideration of the premises and in accordance with
the Plan, the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Company and the other Collateral Grantors
(the foregoing being herein referred to as the "Guaranteed Obligations");
provided, however, that anything to the contrary notwithstanding, the maximum
liability of the Guarantor hereunder shall not exceed an amount equal to the
largest amount that would not render the Guarantor's obligations hereunder
subject to avoidance under Section 548 of the United States Bankruptcy Code or
any equivalent provision of the law of any state.
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Section 2. Waiver. The Guarantor hereby absolutely, unconditionally
and irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment, demand of payment, protest, notice of dishonor or
nonpayment and any other notice with respect to the Guaranteed Obligations,
(iii) any requirement that the Collateral Trustee protect, secure, perfect or
insure any security interest or Lien or any property subject thereto or exhaust
any right or take any action against the Company, any other Collateral Grantor,
or any other person or any Collateral, and (iv) any other action, event or
precondition to the enforcement of this Guaranty or the performance by the
Guarantor of the obligations hereunder.
Section 3. Guaranty Absolute. (a) The Guarantor guarantees that, to
the fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in accordance with their terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Collateral Trustee with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Class 4 Note, or any other Class 4 Document or any other
agreement or instrument relating thereto, or of all or any part of the
Guaranteed Obligations or of any security therefor shall affect, impair or be a
defense to this Guaranty.
(c) This Guaranty is one of payment and performance and not
collection and the obligations of the Guarantor under this Guaranty are
independent of the Obligations of the Company and the other Collateral Grantors,
and a separate action or actions may be brought and prosecuted against the
Guarantor to enforce this Guaranty, irrespective of whether any action is
brought against the Company or any other Collateral Grantor or whether the
Company or any other Collateral Grantor is joined in any such action or actions.
(d) The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Class 4 Note or any other Class 4 Document, including any
increase in the Guaranteed Obligations resulting from the extension of
additional credit to the Company or otherwise;
(ii) any sale, exchange, release, surrender, realization upon any
property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or
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any of the Guaranteed Obligations, and/or any offset thereagainst, or
failure to perfect, or continue the perfection of, any Lien in any such
property, or delay in the perfection of any such Lien, or any amendment or
waiver of or consent to departure from any other guaranty for all or any
of the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against the
Company, any other Collateral Grantor or others (including the Guarantor);
(iv) any settlement or compromise of any security for any
Obligation, or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and any subordination
of the payment of all or any part thereof to the payment of any Obligation
(whether due or not) of the Company to creditors of the Company other than
the Guarantor;
(v) any manner of application of Collateral, or proceeds thereof, to
all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Guaranteed Obligations
or any other assets of the Company or any other Collateral Grantor;
(vi) any change, restructuring or termination of the existence of
the Company or any of its subsidiaries; or
(vii) any other agreements or circumstance of any nature whatsoever
which might otherwise constitute a defense available to, or a discharge
of, this Guaranty and/or obligations of the Guarantor hereunder, or a
defense to, or discharge of, the Company or any other person or party
relating to this Guaranty or the obligations of the Guarantor hereunder or
otherwise with respect to the Allowed Class 4 Claims.
(e) The Collateral Trustee may at any time and from time to time
(whether or not after revocation or termination of this Guaranty) without the
consent of, or notice (except as shall be required by applicable statute and
cannot be waived) to, the Guarantor, and without incurring responsibility to the
Guarantor or impairing or releasing the obligations of the Guarantor hereunder,
apply any sums by whomsoever paid or howsoever realized to any Guaranteed
Obligation regardless of what Guaranteed Obligations remain unpaid.
(f) This Guaranty shall continue to be effective or be reinstated,
as the case may be, if claim is ever made upon the Collateral Trustee or any
holder of an Allowed Class 4 Claim for repayment or recovery of any amount or
amounts received by the Collateral Trustee or such holder of an Allowed Class 4
Claim in payment or on account of any of the Guaranteed Obligations and the
Collateral Trustee or such holder of an Allowed Class 4 Claim repays all or part
of said amount by reason of any judgment, decree or order of any
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court or administrative body having jurisdiction over the Collateral Trustee or
such holder of an Allowed Class 4 Claim or the respective property of each, or
any settlement or compromise of any such claim effected by the Collateral
Trustee or such holder of an Allowed Class 4 Claim with any such claimant
(including the Company), then and in such event the Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon the
Guarantor, notwithstanding any revocation hereof or the cancellation of any
Class 4 Document or other instrument evidencing any Obligation, and the
Guarantor shall be and remain liable to the Collateral Trustee and/or such
holder of an Allowed Class 4 Claim hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by the Collateral Trustee or any holder of an Allowed Class 4 Claim.
Section 4. Continuing Guaranty. This Guaranty is a continuing one
and shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Collateral Trustee and its successors, transferees and
assigns. All obligations to which this Guaranty applies or may apply under the
terms hereof shall be conclusively presumed to have been created in reliance
hereon.
Section 5. Representations, Warranties and Covenants. The Guarantor
hereby represents, warrants and covenants to and with the Collateral Trustee
that:
(a) The Guarantor has the corporate power to execute and deliver
this Guaranty and to incur and perform its obligations hereunder;
(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of this Guaranty and to
incur and perform its obligations hereunder;
(c) Other than the entry by the Bankruptcy Court of the Final Order
(as defined in the Plan) confirming the Plan, no consent, approval,
authorization or other action by, and no notice to or of, or declaration
or filing with, any governmental or other public body, or any other
Person, is required for the due authorization, execution, delivery and
performance by the Guarantor of this Guaranty or the consummation of the
transactions contemplated hereby;
(d) The execution, delivery and performance by the Guarantor of this
Guaranty do not and will not violate or otherwise conflict with any term
or provision of any material agreement, instrument, judgment, decree,
order or any statute, rule or governmental regulation applicable to the
Guarantor or result in the creation of any security interest in or Lien
upon any of its properties or assets pursuant thereto;
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(e) This Guaranty has been duly authorized, executed and delivered
by the Guarantor and constitutes the legal, valid and binding obligation
of the Guarantor, and is enforceable against the Guarantor in accordance
with its terms, except as enforcement thereof may be subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a
proceeding in equity or at law); and
(f) No proceeding referred to in paragraph (f) or (g) of the
definition of "Event of Default" set forth in the Class 4 Note is pending
against the Guarantor and no other event referred to in such paragraphs
has occurred and is continuing, and the property of the Guarantor is not
subject to any assignment for the benefit of creditors.
Section 6. Expenses. The Guarantor will upon demand reimburse the
Collateral Trustee for any sums, costs, and expenses which the Collateral
Trustee may reasonably pay or incur pursuant to the provisions of this Guaranty
or in negotiating, executing, perfecting, defending, protecting or enforcing
this Guaranty or in enforcing payment of the Guaranteed Obligations or otherwise
in connection with the provisions hereof, including court costs, collection
charges, travel expenses, and reasonable attorneys' fees, together with interest
thereon as specified in Section 12 hereof. The Guarantor shall not be required
to pay any such sums if such sums have been paid by the Company under the Note
Agreement.
Section 7. Terms. (a) All terms defined in the UCC and used herein
shall have the meanings as defined in the UCC, unless the context otherwise
requires.
(b) The words "include," "includes" and "including" shall be deemed
to be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be
deemed to be references to Sections and subsections of this Guaranty unless the
context shall otherwise require.
Section 8. Amendments and Modification. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring to
this Guaranty and to such provision, and executed by the party to be charged.
Section 9. Subrogation. The Guarantor will not exercise any rights
which it may acquire by way of subrogation hereunder, by any payment made by it
hereunder or otherwise, until the Class 4 Note is paid in full and all of the
Obligations and all other expenses to be paid by the Guarantor pursuant hereto
shall have been satisfied in full. If any
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amount shall be paid to the Guarantor on account of such subrogation rights at
any time when all of the Obligations and all such other expenses shall not have
been paid in full, such amount shall be held in trust for the benefit of the
Collateral Trustee, shall be segregated from the other funds of the Guarantor
and shall forthwith be paid over to the Collateral Trustee to be applied in
whole or in part by the Collateral Trustee against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of the Note Agreement.
Section 10. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Collateral
Trustee may, subject to the provisions of the Note Agreement, without notice to
or demand upon the Company or the Guarantor, declare any Guaranteed Obligations
immediately due and payable, and shall be entitled to enforce the obligations of
the Guarantor hereunder.
(b) Upon such declaration by the Collateral Trustee, the Collateral
Trustee is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Collateral Trustee to or for the credit or
the account of the Guarantor against any and all of the obligations of the
Guarantor now or hereafter existing under this Guaranty, whether or not the
Collateral Trustee shall have made any demand under this Guaranty and although
such obligations may be contingent and unmatured. The Collateral Trustee agrees
promptly to notify the Guarantor after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Collateral Trustee under this
Section 10 are in addition to other rights and remedies (including other rights
of set-off) which the Collateral Trustee may have.
Section 11. Statute of Limitations. Any acknowledgment or new
promise, whether by payment of principal or interest or otherwise and whether by
the Company or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Collateral Trustee or any holder of an Allowed Class 4
Claim shall have commenced to run, toll the running of such statute of
limitations and, if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
Section 12. Interest. All amounts payable from time to time by the
Guarantor pursuant to Section 6 hereunder shall bear interest at the applicable
rate of interest set forth in the Class 4 Note.
Section 13. Rights and Remedies Not Waived. No act, omission or
delay by the Collateral Trustee shall constitute a waiver of its rights and
remedies hereunder or
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otherwise. No single or partial waiver by the Collateral Trustee of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 14. Admissibility of Guaranty. The Guarantor agrees that any
copy of this Guaranty signed by the Guarantor and transmitted by telecopier for
delivery to the Collateral Trustee shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence.
Section 15. Notices. All notices, requests and demands to or upon
the Collateral Trustee or the Guarantor under this Agreement shall be in writing
and given as provided in the Note Agreement.
Section 16. Counterparts. This Guaranty may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original
and all of which shall together constitute one and the same agreement.
Section 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. (a)
In any litigation in any court with respect to, in connection with, or arising
out of this Guaranty or any instrument or document delivered pursuant to this
Guaranty, or the validity, protection, interpretation, collection or enforcement
thereof, or any other claim or dispute howsoever arising, between the Guarantor
on the one hand and the Collateral Trustee or any holder of an Allowed Class 4
Claim on the other hand, the Guarantor, to the fullest extent it may effectively
do so, (i) waives the right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such litigation, irrespective of the nature
of such setoff, recoupment, counterclaim or cross-claim, unless such setoff,
recoupment, counterclaim or cross-claim could not, by reason of any applicable
Federal or State procedural laws, be interposed, pleaded or alleged in any other
action and (ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE GUARANTOR AGREES THAT THIS SECTION 17(a) IS A
SPECIFIC AND MATERIAL ASPECT OF THIS GUARANTY.
(b) The Guarantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Guaranty or any document or instrument
delivered pursuant to this Guaranty. In any such litigation, the Guarantor
waives, to the fullest extent it may effectively do so, personal
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service of any summons, complaint or other process and agrees that the service
thereof may be made by certified or registered mail directed to the Guarantor at
its address for notice determined in accordance with Section 15 hereof. The
Guarantor hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.
(c) The Guarantor hereby waives presentment, notice of dishonor and
protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
Section 18. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. Captions; Separability. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Guaranty.
(b) If any term of this Guaranty shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
Section 20. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guaranty and each of the Class 4 Documents.
IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guaranty to be duly executed in the State of New York as of the date first above
set forth.
STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
--------------------------
Title: President
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GUARANTY
GUARANTY dated as of May 12, 1997, by Tortoni Manufacturing Corp., a
Delaware corporation (the "Guarantor"), in favor of M.J. Sherman & Associates,
Inc., as Collateral Trustee (as defined in the Plan described below) for the
benefit of the holders of Allowed General Unsecured Claims (as defined in the
Plan). Capitalized terms used herein and not otherwise defined herein shall have
the meanings attributed thereto in the Note Agreement (as defined in the Plan).
Pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor, and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Andover Togs, Inc. has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, the Class 4 Note (as defined in the Plan).
Pursuant to and in accordance with the terms of the Plan, the
undersigned (the "Guarantor") has agreed to guaranty the payment when due to the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, of all of the Obligations (such Obligations to include,
without limitation, the due and punctual payment of (a) the obligation of the
Company to pay the principal of and interest on the Class 4 Note, when and as
due, whether at maturity, by acceleration, upon one or more dates set for
prepayment or otherwise, and (b) all other Obligations of the Company at any
time and from time to time under any of the other Class 4 Documents).
Accordingly, in consideration of the premises and in accordance with
the Plan, the Guarantor hereby agrees as follows:
Section 1. Guaranty. The Guarantor hereby irrevocably and
unconditionally guarantees the punctual payment when due, whether at stated
maturity, by acceleration or otherwise, and the punctual performance, of all
present and future Obligations of the Company and the other Collateral Grantors
(the foregoing being herein referred to as the "Guaranteed Obligations");
provided, however, that anything to the contrary notwithstanding, the maximum
liability of the Guarantor hereunder shall not exceed an amount equal to the
largest amount that would not render the Guarantor's obligations hereunder
subject to avoidance under Section 548 of the United States Bankruptcy Code or
any equivalent provision of the law of any state.
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Section 2. Waiver. The Guarantor hereby absolutely, unconditionally
and irrevocably waives, to the fullest extent permitted by law, (i) promptness,
diligence, notice of acceptance and any other notice with respect to this
Guaranty, (ii) presentment, demand of payment, protest, notice of dishonor or
nonpayment and any other notice with respect to the Guaranteed Obligations,
(iii) any requirement that the Collateral Trustee protect, secure, perfect or
insure any security interest or Lien or any property subject thereto or exhaust
any right or take any action against the Company, any other Collateral Grantor,
or any other person or any Collateral, and (iv) any other action, event or
precondition to the enforcement of this Guaranty or the performance by the
Guarantor of the obligations hereunder.
Section 3. Guaranty Absolute. (a) The Guarantor guarantees that, to
the fullest extent permitted by law, the Guaranteed Obligations will be paid or
performed strictly in accordance with their terms, regardless of any law,
regulation or order now or hereafter in effect in any jurisdiction affecting any
of such terms or the rights of the Collateral Trustee with respect thereto.
(b) No invalidity, irregularity, voidability, voidness or
unenforceability of the Class 4 Note, or any other Class 4 Document or any other
agreement or instrument relating thereto, or of all or any part of the
Guaranteed Obligations or of any security therefor shall affect, impair or be a
defense to this Guaranty.
(c) This Guaranty is one of payment and performance and not collection
and the obligations of the Guarantor under this Guaranty are independent of the
Obligations of the Company and the other Collateral Grantors, and a separate
action or actions may be brought and prosecuted against the Guarantor to enforce
this Guaranty, irrespective of whether any action is brought against the Company
or any other Collateral Grantor or whether the Company or any other Collateral
Grantor is joined in any such action or actions.
(d) The liability of the Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:
(i) any change in the manner, place or terms of payment or
performance, and/or any change or extension of the time of payment or
performance of, renewal or alteration of, any Obligation, any security
therefor, or any liability incurred directly or indirectly in respect
thereof, or any other amendment or waiver of or any consent to departure
from the Class 4 Note or any other Class 4 Document, including any increase
in the Guaranteed Obligations resulting from the extension of additional
credit to the Company or otherwise;
(ii) any sale, exchange, release, surrender, realization upon any
property by whomsoever at any time pledged or mortgaged to secure, or
howsoever securing, all or
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any of the Guaranteed Obligations, and/or any offset thereagainst, or
failure to perfect, or continue the perfection of, any Lien in any such
property, or delay in the perfection of any such Lien, or any amendment or
waiver of or consent to departure from any other guaranty for all or any of
the Guaranteed Obligations;
(iii) any exercise or failure to exercise any rights against the
Company, any other Collateral Grantor or others (including the Guarantor);
(iv) any settlement or compromise of any security for any
Obligation, or any liability (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and any subordination
of the payment of all or any part thereof to the payment of any Obligation
(whether due or not) of the Company to creditors of the Company other than
the Guarantor;
(v) any manner of application of Collateral, or proceeds thereof,
to all or any of the Guaranteed Obligations, or any manner of sale or other
disposition of any Collateral for all or any of the Guaranteed Obligations
or any other assets of the Company or any other Collateral Grantor;
(vi) any change, restructuring or termination of the existence of
the Company or any of its subsidiaries; or
(vii) any other agreements or circumstance of any nature
whatsoever which might otherwise constitute a defense available to, or a
discharge of, this Guaranty and/or obligations of the Guarantor hereunder,
or a defense to, or discharge of, the Company or any other person or party
relating to this Guaranty or the obligations of the Guarantor hereunder or
otherwise with respect to the Allowed Class 4 Claims.
(e) The Collateral Trustee may at any time and from time to time
(whether or not after revocation or termination of this Guaranty) without the
consent of, or notice (except as shall be required by applicable statute and
cannot be waived) to, the Guarantor, and without incurring responsibility to the
Guarantor or impairing or releasing the obligations of the Guarantor hereunder,
apply any sums by whomsoever paid or howsoever realized to any Guaranteed
Obligation regardless of what Guaranteed Obligations remain unpaid.
(f) This Guaranty shall continue to be effective or be reinstated, as
the case may be, if claim is ever made upon the Collateral Trustee or any holder
of an Allowed Class 4 Claim for repayment or recovery of any amount or amounts
received by the Collateral Trustee or such holder of an Allowed Class 4 Claim in
payment or on account of any of the Guaranteed Obligations and the Collateral
Trustee or such holder of an Allowed Class 4 Claim repays all or part of said
amount by reason of any judgment, decree or order of any
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court or administrative body having jurisdiction over the Collateral Trustee or
such holder of an Allowed Class 4 Claim or the respective property of each, or
any settlement or compromise of any such claim effected by the Collateral
Trustee or such holder of an Allowed Class 4 Claim with any such claimant
(including the Company), then and in such event the Guarantor agrees that any
such judgment, decree, order, settlement or compromise shall be binding upon the
Guarantor, notwithstanding any revocation hereof or the cancellation of any
Class 4 Document or other instrument evidencing any Obligation, and the
Guarantor shall be and remain liable to the Collateral Trustee and/or such
holder of an Allowed Class 4 Claim hereunder for the amount so repaid or
recovered to the same extent as if such amount had never originally been
received by the Collateral Trustee or any holder of an Allowed Class 4 Claim.
Section 4. Continuing Guaranty. This Guaranty is a continuing one and
shall (i) remain in full force and effect until the indefeasible payment and
satisfaction in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Collateral Trustee and its successors, transferees and
assigns. All obligations to which this Guaranty applies or may apply under the
terms hereof shall be conclusively presumed to have been created in reliance
hereon.
Section 5. Representations, Warranties and Covenants. The Guarantor
hereby represents, warrants and covenants to and with the Collateral Trustee
that:
(a) The Guarantor has the corporate power to execute and deliver this
Guaranty and to incur and perform its obligations hereunder;
(b) The Guarantor has duly taken all necessary corporate action to
authorize the execution, delivery and performance of this Guaranty and to
incur and perform its obligations hereunder;
(c) Other than the entry by the Bankruptcy Court of the Final Order
(as defined in the Plan) confirming the Plan, no consent, approval,
authorization or other action by, and no notice to or of, or declaration or
filing with, any governmental or other public body, or any other Person, is
required for the due authorization, execution, delivery and performance by
the Guarantor of this Guaranty or the consummation of the transactions
contemplated hereby;
(d) The execution, delivery and performance by the Guarantor of this
Guaranty do not and will not violate or otherwise conflict with any term or
provision of any material agreement, instrument, judgment, decree, order or
any statute, rule or governmental regulation applicable to the Guarantor or
result in the creation of any security interest in or Lien upon any of its
properties or assets pursuant thereto;
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(e) This Guaranty has been duly authorized, executed and delivered by
the Guarantor and constitutes the legal, valid and binding obligation of
the Guarantor, and is enforceable against the Guarantor in accordance with
its terms, except as enforcement thereof may be subject to the effect of
any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors' rights generally, and general principles
of equity (regardless of whether such enforcement is sought in a proceeding
in equity or at law); and
(f) No proceeding referred to in paragraph (f) or (g) of the
definition of "Event of Default" set forth in the Class 4 Note is pending
against the Guarantor and no other event referred to in such paragraphs has
occurred and is continuing, and the property of the Guarantor is not
subject to any assignment for the benefit of creditors.
Section 6. Expenses. The Guarantor will upon demand reimburse the
Collateral Trustee for any sums, costs, and expenses which the Collateral
Trustee may reasonably pay or incur pursuant to the provisions of this Guaranty
or in negotiating, executing, perfecting, defending, protecting or enforcing
this Guaranty or in enforcing payment of the Guaranteed Obligations or otherwise
in connection with the provisions hereof, including court costs, collection
charges, travel expenses, and reasonable attorneys' fees, together with interest
thereon as specified in Section 12 hereof. The Guarantor shall not be required
to pay any such sums if such sums have been paid by the Company under the Note
Agreement.
Section 7. Terms. (a) All terms defined in the UCC and used herein
shall have the meanings as defined in the UCC, unless the context otherwise
requires.
(b) The words "include," "includes" and "including" shall be deemed to
be followed by the phrase "without limitation".
(c) All references herein to Sections and subsections shall be deemed
to be references to Sections and subsections of this Guaranty unless the context
shall otherwise require.
Section 8. Amendments and Modification. No provision hereof shall be
modified, altered or limited except by written instrument expressly referring to
this Guaranty and to such provision, and executed by the party to be charged.
Section 9. Subrogation. The Guarantor will not exercise any rights
which it may acquire by way of subrogation hereunder, by any payment made by it
hereunder or otherwise, until the Class 4 Note is paid in full and all of the
Obligations and all other expenses to be paid by the Guarantor pursuant hereto
shall have been satisfied in full. If any
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amount shall be paid to the Guarantor on account of such subrogation rights at
any time when all of the Obligations and all such other expenses shall not have
been paid in full, such amount shall be held in trust for the benefit of the
Collateral Trustee, shall be segregated from the other funds of the Guarantor
and shall forthwith be paid over to the Collateral Trustee to be applied in
whole or in part by the Collateral Trustee against the Obligations, whether
matured or unmatured, and all such other expenses in accordance with the terms
of the Note Agreement.
Section 10. Remedies Upon Default; Right of Set-Off. (a) Upon the
occurrence and during the continuance of any Event of Default, the Collateral
Trustee may, subject to the provisions of the Note Agreement, without notice to
or demand upon the Company or the Guarantor, declare any Guaranteed Obligations
immediately due and payable, and shall be entitled to enforce the obligations of
the Guarantor hereunder.
(b) Upon such declaration by the Collateral Trustee, the Collateral
Trustee is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by the Collateral Trustee to or for the credit or
the account of the Guarantor against any and all of the obligations of the
Guarantor now or hereafter existing under this Guaranty, whether or not the
Collateral Trustee shall have made any demand under this Guaranty and although
such obligations may be contingent and unmatured. The Collateral Trustee agrees
promptly to notify the Guarantor after any such set-off and application,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Collateral Trustee under this
Section 10 are in addition to other rights and remedies (including other rights
of set-off) which the Collateral Trustee may have.
Section 11. Statute of Limitations. Any acknowledgment or new promise,
whether by payment of principal or interest or otherwise and whether by the
Company or others (including the Guarantor), with respect to any of the
Guaranteed Obligations shall, if the statute of limitations in favor of the
Guarantor against the Collateral Trustee or any holder of an Allowed Class 4
Claim shall have commenced to run, toll the running of such statute of
limitations and, if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
Section 12. Interest. All amounts payable from time to time by the
Guarantor pursuant to Section 6 hereunder shall bear interest at the applicable
rate of interest set forth in the Class 4 Note.
Section 13. Rights and Remedies Not Waived. No act, omission or delay
by the Collateral Trustee shall constitute a waiver of its rights and remedies
hereunder or
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otherwise. No single or partial waiver by the Collateral Trustee of any default
hereunder or right or remedy which it may have shall operate as a waiver of any
other default, right or remedy or of the same default, right or remedy on a
future occasion.
Section 14. Admissibility of Guaranty. The Guarantor agrees that any
copy of this Guaranty signed by the Guarantor and transmitted by telecopier for
delivery to the Collateral Trustee shall be admissible in evidence as the
original itself in any judicial or administrative proceeding, whether or not the
original is in existence.
Section 15. Notices. All notices, requests and demands to or upon the
Collateral Trustee or the Guarantor under this Agreement shall be in writing and
given as provided in the Note Agreement.
Section 16. Counterparts. This Guaranty may be executed in any number
of counterparts and by the different parties hereto on separate counterparts,
each of which when so executed and delivered shall be an original and all of
which shall together constitute one and the same agreement.
Section 17. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL; ETC. (a) In
any litigation in any court with respect to, in connection with, or arising out
of this Guaranty or any instrument or document delivered pursuant to this
Guaranty, or the validity, protection, interpretation, collection or enforcement
thereof, or any other claim or dispute howsoever arising, between the Guarantor
on the one hand and the Collateral Trustee or any holder of an Allowed Class 4
Claim on the other hand, the Guarantor, to the fullest extent it may effectively
do so, (i) waives the right to interpose any setoff, recoupment, counterclaim or
cross-claim in connection with any such litigation, irrespective of the nature
of such setoff, recoupment, counterclaim or cross-claim, unless such setoff,
recoupment, counterclaim or cross-claim could not, by reason of any applicable
Federal or State procedural laws, be interposed, pleaded or alleged in any other
action and (ii) WAIVES TRIAL BY JURY IN CONNECTION WITH ANY SUCH LITIGATION AND
ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH LITIGATION ANY SPECIAL,
EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY DAMAGES OTHER THAN, OR IN
ADDITION TO, ACTUAL DAMAGES. THE GUARANTOR AGREES THAT THIS SECTION 17(a) IS A
SPECIFIC AND MATERIAL ASPECT OF THIS GUARANTY.
(b) The Guarantor hereby irrevocably consents to the non-exclusive
jurisdiction of the courts of the State of New York and of any Federal Court
located in the City of New York in connection with any action or proceeding
arising out of or relating to this Guaranty or any document or instrument
delivered pursuant to this Guaranty. In any such litigation, the Guarantor
waives, to the fullest extent it may effectively do so, personal
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service of any summons, complaint or other process and agrees that the service
thereof may be made by certified or registered mail directed to the Guarantor at
its address for notice determined in accordance with Section 15 hereof. The
Guarantor hereby waives, to the fullest extent it may effectively do so, the
defenses of forum non conveniens and improper venue.
(c) The Guarantor hereby waives presentment, notice of dishonor and
protests of all instruments included in or evidencing any of the Guaranteed
Obligations, and any and all other notices and demands whatsoever (except as
expressly provided herein).
Section 18. GOVERNING LAW. THIS GUARANTY AND THE GUARANTEED
OBLIGATIONS SHALL BE GOVERNED IN ALL RESPECTS BY THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS EXECUTED AND TO BE PERFORMED IN SUCH STATE, WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
Section 19. Captions; Separability. (a) The captions of the Sections
and subsections of this Guaranty have been inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Guaranty.
(b) If any term of this Guaranty shall be held to be invalid, illegal
or unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
Section 20. Acknowledgment of Receipt. The Guarantor acknowledges
receipt of a copy of this Guaranty and each of the Class 4 Documents.
IN WITNESS WHEREOF, the Guarantor has duly executed or caused this
Guaranty to be duly executed in the State of New York as of the date first above
set forth.
TORTONI MANUFACTURING CORP.
By: /s/ William L. Cohen
------------------------------
Title: President
--------------------------
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CLASS 4 SECURITY AGREEMENT AND MORTGAGE
- TRADEMARKS AND PATENTS
AGREEMENT (this "Agreement"), dated as of May 12, 1997, between Springdale
Fashions, Inc., a Delaware corporation ("Debtor"), having an office at 1333
Broadway, New York, New York 10018 and M.J. SHERMAN & ASSOCIATES, INC., as
Collateral Trustee (as defined in the Plan described below and referred to
herein as "Secured Party") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan).
W I T N E S S E T H:
WHEREAS, Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof;
WHEREAS, Debtor is the owner and holder of the patents described in Schedule
B annexed hereto and made a part hereof;
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor, and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Andover Togs, Inc. has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, the Class 4 Note (as defined in the Plan);
WHEREAS, Debtor has executed in favor of and delivered to the Collateral
Trustee, for the benefit of the holders of Allowed General Unsecured Claims, a
guaranty of payment of the Class 4 Note (the "Guaranty");
WHEREAS, pursuant to and in accordance with the terms of the Plan, the Debtor
has agreed to grant to the Collateral Trustee, for the benefit of the holders of
the Allowed General Unsecured Claims, as security for the Guaranty and the other
Obligations (as hereinafter defined), a second priority security interest in all
personal property of the Debtor constituting Collateral (as hereinafter
defined); and
WHEREAS, Debtor (together with Andover Togs, Inc., and the other Debtors),
and the Collateral Trustee have entered into a Note and Collateral Trust
Agreement, dated as of the date hereof, (as amended, supplemented or modified
from time to time, the "Note Agreement") pursuant to which the Collateral
Trustee
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administer the Collateral for the benefit of the holders of Allowed General
Unsecured Claims;
NOW THEREFORE, IT IS AGREED that in consideration of the premises, and for
other good and valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, as collateral security for the full and prompt payment and
performance of the Guaranty and the other Obligations, Debtor does hereby
mortgage to and pledge with the Secured Party and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations described in Schedule B
hereto; and (iii) any and all proceeds of the foregoing, including without
limitation, any claims by Debtor against third parties for infringement of the
Trademarks or the Patents (collectively, the "Collateral");
1. Terms defined in the Note Agreement and not otherwise defined herein,
shall have the meaning set forth in the Note Agreement. As used in this
Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or any
other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or divisions
thereof and all licenses thereof.
"Trademarks" shall mean (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the
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United States Patent and Trademark Office or in any similar office or agency of
the United States, any State thereof, or any other country or any political
subdivision thereof, all whether now owned or hereafter acquired by Debtor,
including, but not limited to, those described in Schedule A annexed hereto and
made a part hereof, and (ii) all reissues, extensions or renewals thereof and
all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents, including,
without limitation, assignments for security in form suitable for filing with
the United States Patent and Trademark Office, substantially in the forms of
Exhibits 1 and 2 hereof, respectively, requested by the Secured Party at any
time to evidence, perfect, maintain, record and enforce the Secured Party's
interest in the Collateral or otherwise in furtherance of the provisions of this
Agreement, and Debtor hereby authorizes the Secured Party to execute and file
one or more financing statements (and similar documents) or copies thereof or of
this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior written
notice of Debtor, shall consent, or (ii) Debtor shall not have used a Trademark
within the previous twelve months, Debtor (either itself or through licensees)
will continue to maintain the Trademarks on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain the Trademarks in full force free
from any claim of abandonment for nonuse and Debtor will not (and will not
permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents shown
on Schedule B hereto and the registrations thereof are valid and subsisting and
in full force and effect. None of the Patents has been abandoned or dedicated,
and, except to the extent that the Secured Party, upon prior written notice by
Debtor, shall consent, Debtor will not do any act, or omit to do any act,
whereby the Patents may become abandoned or dedicated
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and shall notify the Secured Party immediately if it knows of any reason or has
reason to know that any application or registration may become abandoned or
dedicated.
(e) Debtor will promptly pay the Secured Party for any and all sums,
costs, and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or in enforcing the Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Obligations shall be part of the Obligations and be
payable on demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured Party may request to evidence the Secured Party's interest in
such Patent or Trademark and the goodwill and general intangibles of Debtor
relating thereto or represented thereby, and Debtor hereby constitutes the
Secured Party its attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full.
(g) Debtor has the right and power to make the assignment and to grant the
security interest herein granted; and, except for the prior security interest of
the Agent herein, the Collateral is not now, and at all times hereafter will not
be, subject to any liens, mortgages, assignments, security interests or
encumbrances of any nature whatsoever, except in favor of the Secured Party, and
to the best knowledge of Debtor none of the Collateral is subject to any claim.
(h) Except to the extent that Secured Party, upon prior written notice
from Debtor, shall consent, Debtor will not
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assign, sell, mortgage, lease, transfer, pledge, hypothecate, grant a security
interest in or lien upon, encumber, grant an exclusive or non-exclusive license,
or otherwise dispose of any of the Collateral, except to the Agent, and nothing
in this Agreement shall be deemed a consent by the Secured Party to any such
action except as expressly permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or subsidiary
thereof owns any Patents or Trademarks or has any Patents or Trademarks
registered in, or the subject of pending applications in, the United States
Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, to maintain each application and registration of the Trademarks and
Patents, including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings (except to the extent that dedication, abandonment or invalidation
is permitted under paragraphs 2(c) and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the use
of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do any
act required of Debtor hereunder or requested by Secured Party to preserve,
defend, protect, maintain, record or enforce Debtor's obligations contained
herein, the Obligations,
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<PAGE>
<PAGE>
the Collateral, or the right, title and interest granted Secured Party herein,
and which Debtor fails to do or pay, and any such payment shall be deemed an
advance by Secured Party to Debtor and shall be payable on demand together with
interest at the highest rate then payable on the Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary thereof,
learns of any use by any person of any term or design likely to cause confusion
with any Trademark, it shall promptly notify Secured Party of such use and, if
requested by Secured Party, shall join with Secured Party, at its expense, in
such action as Secured Party, in its reasonable discretion, may deem advisable
for the protection of Secured Party's interest in and to such Trademarks.
(n) All licenses of its Trademarks and Patents which Debtor has granted to
third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all other
rights and remedies of the Secured Party, whether under law, the Class 4
Documents or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of it,
either with or without special or other conditions or stipulations, with power
to buy the Collateral or any part of it,
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<PAGE>
<PAGE>
and with power also to execute assurances, and do all other acts and things for
completing the assignment, sale or disposition which the Secured Party shall, in
its sole discretion, deem appropriate or proper; and (e) in addition to the
foregoing, in order to implement the assignment, sale or other disposal of any
of the Collateral pursuant to subparagraph 3(d) hereof, the Secured Party may,
at any time, pursuant to the authority granted in the Powers of Attorney
described in paragraph 4 hereof (such authority becoming effective on the
occurrence or continuation as hereinabove provided of an Event of Default),
execute and deliver on behalf of Debtor, one or more instruments of assignment
of the Patents or Trademarks (or any application or registration thereof), in
form suitable for filing, recording or registration in any country. Debtor
agrees to pay when due all reasonable costs incurred in any such transfer of the
Patents or Trademarks, including any taxes, fees and reasonable attorneys' fees,
and all such costs shall be added to the Obligations. The Secured Party may
apply the proceeds actually received from any such license, assignment, sale or
other disposition to the reasonable costs and expenses thereof, including,
without limitation, reasonable attorneys' fees and all legal, travel and other
expenses which may be incurred by the Secured Party, and then to the
Obligations, in such order as to principal or interest as the Secured Party may
desire; and Debtor shall remain liable and will pay the Secured Party on demand
any deficiency remaining, together with interest thereon at a rate equal to the
highest rate then payable on the Obligations and the balance of any expenses
unpaid. Nothing herein contained shall be construed as requiring the Secured
Party to take any such action at any time. In the event of any such license,
assignment, sale or other disposition of the Collateral, or any of it, after the
occurrence or continuation as hereinabove provided of an Event of Default,
Debtor shall supply its know-how and expertise relating to the manufacture and
sale of the products bearing or in connection with the Trademarks or Patents,
and its customer lists and other records relating to the Trademarks or Patents
and to the distribution of said products, to the Secured Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the payment of all reasonable costs and expenses incurred by the
Secured Party in connection with such sale or otherwise in connection with this
Agreement or any of the Obligations, including, but not limited to, all court
costs and the reasonable fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Secured Party hereunder
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<PAGE>
<PAGE>
on behalf of the Debtor and any other reasonable costs or expenses incurred in
connection with the exercise of any right or remedy hereunder;
SECOND, to the payment in full of unpaid interest on the Class 4 Note;
THIRD, to the payment in full of unpaid principal on the Class 4 Note;
FOURTH, to the payment in full of all Obligations (other than those
referred to above) owed to the Collateral Trustee; and
FIFTH, to the Debtor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs 3(d)
and (e) hereof and Debtor hereby releases the Secured Party from any claims,
causes of action and demands at any time arising out of or with respect to any
actions taken or omitted to be taken by the Secured Party under the powers of
attorney granted herein, other than actions taken or omitted to be taken through
the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Agreement and executed by the
party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. Debtor hereby submits to the nonexclusive jurisdiction of the Supreme
Court of the State of New York and the federal courts of the United States of
America located in such State in any action or proceeding arising under this
Agreement. If any term of this Agreement shall be held to
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<PAGE>
<PAGE>
be invalid, illegal or unenforceable, the validity of all other terms hereof
shall in no way be affected thereby.
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
SPRINGDALE FASHIONS, INC.,
By: /s/ William L. Cohen
-----------------------------
Title: President
--------------------------
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
By: /s/ Oleg Ostrovsky
-----------------------------
Title: V P
--------------------------
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<PAGE>
<PAGE>
Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
NONE
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
NONE
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<PAGE>
<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
NONE
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
NONE
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<PAGE>
<PAGE>
Schedule C to Security Agreement
LICENSES
NONE
- 12 -
<PAGE>
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Springdale Fashions, Inc., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc., as
Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended the "Plan")
Assignor has entered into a Security Agreement and Mortgage-Trademarks and
Patents dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee, and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security interest in, and mortgage on, the Collateral to secure
the prompt payment, performance and observance of the Obligations.
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<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York 10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
SPRINGDALE FASHIONS, INC.
By:
----------------------------------
Title:
-------------------------------
- 2 -
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
NONE
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
NONE
- 3 -
<PAGE>
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Springdale Fashions, Inc., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc., as
Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Assignor has entered into a Security Agreement and Mortgage-Trademarks
and Patents dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee, and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Trademarks, together with the goodwill of
the business symbolized by the Trademarks and the applications therefor and
registrations thereof, and all proceeds thereof, including, without limitation,
any and all causes of action which may exist by reason of infringement thereof
(the "Collateral"), to secure the prompt payment, performance and observance of
the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security interest in, and mortgage on, the Collateral to secure
the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the goodwill of the business symbolized by the Trademarks and the
applications and reregistrations thereof. Collateral made and granted hereby are
more fully set forth in the Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York 10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
SPRINGDALE FASHIONS, INC.
By:
-------------------------
Title:
----------------------
- 2 -
<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Trademark Reg. Date Reg. No.
- --------- --------- --------
NONE
II. Pending Applications
Trademark Filing Date Application No.
- --------- ----------- ---------------
NONE
- 1 -
<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Springdale Fashions, Inc., a Delaware
corporation (hereinafter called "Assignor"), hereby appoints and constitutes
M.J. Sherman & Associates, Inc., as Collateral Trustee (as defined in the Plan
described below and referred to herein as the "Assignee") for the benefit of the
holders of Allowed General Unsecured Claims (as defined in the Plan), its true
and lawful attorney, with full power of substitution, and with full power and
authority to perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
letters patent of the United States or any other country or political
subdivision thereof, and all registrations, recordings, reissues,
continuations, continuations-in-part and extensions thereof, and all
pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or
advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals thereof, and
all pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
- 1 -
<PAGE>
<PAGE>
formality with respect to, the foregoing, to execute and deliver any and
all agreements, documents, instruments of assignment or other papers
necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates or
other papers necessary or advisable in order to obtain the purposes
described above as Assignee may in its sole discretion determine.
This power of attorney is made pursuant to a Security Agreement and
Mortgage - Trademarks and Patents, dated the date hereof, between Assignor and
Assignee (the "Agreement") and takes effect solely for the purposes of paragraph
3 thereof and is subject to the conditions thereof and may not be revoked until
the payment in full of all "Obligations" as defined in such Security Agreement
and Mortgage.
Assignor and Assignee entered into the Agreement pursuant to and in
accordance with the terms of the Joint Plan of Reorganization of Andover Togs,
Inc., Debtor, Springdale Fashions, Inc., Debtor, Tortoni Manufacturing Corp.,
Debtor and Stonehenge Financial Corp., Debtor, which was confirmed by the United
States Bankruptcy Court for the Southern District of New York on April 10, 1997
(as from time to time amended the "Plan").
Dated: May __, 1997
[Corporate Seal] SPRINGDALE FASHIONS, INC.
By:
-------------------------
Title:
----------------------
- 2 -
<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of May, 1997, before me personally appeared William
Cohen, to me known, who, being by me duly sworn, did depose and say that he
resides at 15 Middle Lane, East Hampton, N.Y. and that he is President of
Springdale Fashions, Inc., the Delaware corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was
affixed pursuant to authority of the Board of Directors of said corporation, and
that he signed his name thereto pursuant to such authority.
/s/ Jenette A. Barrow
---------------------------
Notary Public
- 3 -
<PAGE>
<PAGE>
CLASS 4 SECURITY AGREEMENT AND MORTGAGE
- TRADEMARKS AND PATENTS
AGREEMENT (this "Agreement"), dated as of May 12, 1997, between Andover
Togs, Inc., a Delaware corporation ("Debtor"), having an office at 1333
Broadway, New York, New York 10018 and M.J. SHERMAN & ASSOCIATES, INC., as
Collateral Trustee (as defined in the Plan described below and referred to
herein as "Secured Party") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan).
W I T N E S S E T H:
WHEREAS, Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof;
WHEREAS, Debtor is the owner and holder of the patents described in Schedule
B annexed hereto and made a part hereof;
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor, and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Andover Togs, Inc. has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, the Class 4 Note (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Plan, the Debtor
has agreed to grant to the Collateral Trustee, for the benefit of the holders of
the Allowed General Unsecured Claims, as security for the Class 4 Note and the
other Obligations (as hereinafter defined), a second priority security interest
in all personal property of the Debtor constituting Collateral (as hereinafter
defined); and
WHEREAS, Debtor (together with the other Debtors), and the Collateral Trustee
have entered into a Note and Collateral Trust Agreement, dated as of the date
hereof, (as amended, supplemented or modified from time to time, the "Note
Agreement") pursuant to which the Collateral Trustee administer the Collateral
for the benefit of the holders of Allowed General Unsecured Claims;
<PAGE>
<PAGE>
NOW THEREFORE, IT IS AGREED that in consideration of the premises, and for
other good and valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, as collateral security for the full and prompt payment and
performance of the Class 4 Note and the other Obligations, Debtor does hereby
mortgage to and pledge with the Secured Party and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations described in Schedule B
hereto; and (iii) any and all proceeds of the foregoing, including without
limitation, any claims by Debtor against third parties for infringement of the
Trademarks or the Patents (collectively, the "Collateral");
1. Terms defined in the Note Agreement and not otherwise defined herein,
shall have the meaning set forth in the Note Agreement. As used in this
Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or any
other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or divisions
thereof and all licenses thereof.
"Trademarks" shall mean (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including, without limitation, applications, registrations and
recordings in the United States Patent and Trademark Office or in any similar
office or agency of the United States, any State thereof, or any other country
or any political subdivision thereof, all whether
- 2 -
<PAGE>
<PAGE>
now owned or hereafter acquired by Debtor, including, but not limited to, those
described in Schedule A annexed hereto and made a part hereof, and (ii) all
reissues, extensions or renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents, including,
without limitation, assignments for security in form suitable for filing with
the United States Patent and Trademark Office, substantially in the forms of
Exhibits 1 and 2 hereof, respectively, requested by the Secured Party at any
time to evidence, perfect, maintain, record and enforce the Secured Party's
interest in the Collateral or otherwise in furtherance of the provisions of this
Agreement, and Debtor hereby authorizes the Secured Party to execute and file
one or more financing statements (and similar documents) or copies thereof or of
this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior written
notice of Debtor, shall consent, or (ii) Debtor shall not have used a Trademark
within the previous twelve months, Debtor (either itself or through licensees)
will continue to maintain the Trademarks on each and every trademark class of
goods applicable to its current line as reflected in its current catalogs,
brochures and price lists in order to maintain the Trademarks in full force free
from any claim of abandonment for nonuse and Debtor will not (and will not
permit any licensee thereof to) do any act or knowingly omit to do any act
whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents shown
on Schedule B hereto and the registrations thereof are valid and subsisting and
in full force and effect. None of the Patents has been abandoned or dedicated,
and, except to the extent that the Secured Party, upon prior written notice by
Debtor, shall consent, Debtor will not do any act, or omit to do any act,
whereby the Patents may become abandoned or dedicated and shall notify the
Secured Party immediately if it knows of any reason or has reason to know that
any application or registration may become abandoned or dedicated.
- 3 -
<PAGE>
<PAGE>
(e) Debtor will promptly pay the Secured Party for any and all sums,
costs, and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or in enforcing the Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Obligations shall be part of the Obligations and be
payable on demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured Party may request to evidence the Secured Party's interest in
such Patent or Trademark and the goodwill and general intangibles of Debtor
relating thereto or represented thereby, and Debtor hereby constitutes the
Secured Party its attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full.
(g) Debtor has the right and power to make the assignment and to grant the
security interest herein granted; and, except for the prior security interest of
the Agent herein, the Collateral is not now, and at all times hereafter will not
be, subject to any liens, mortgages, assignments, security interests or
encumbrances of any nature whatsoever, except in favor of the Secured Party, and
to the best knowledge of Debtor none of the Collateral is subject to any claim.
(h) Except to the extent that Secured Party, upon prior written notice
from Debtor, shall consent, Debtor will not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, except to the Agent, and nothing in this
- 4 -
<PAGE>
<PAGE>
Agreement shall be deemed a consent by the Secured Party to any such action
except as expressly permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or subsidiary
thereof owns any Patents or Trademarks or has any Patents or Trademarks
registered in, or the subject of pending applications in, the United States
Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, to maintain each application and registration of the Trademarks and
Patents, including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings (except to the extent that dedication, abandonment or invalidation
is permitted under paragraphs 2(c) and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the use
of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do any
act required of Debtor hereunder or requested by Secured Party to preserve,
defend, protect, maintain, record or enforce Debtor's obligations contained
herein, the Obligations, the Collateral, or the right, title and interest
granted Secured Party herein, and which Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to Debtor and
- 5 -
<PAGE>
<PAGE>
shall be payable on demand together with interest at the highest rate then
payable on the Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary thereof,
learns of any use by any person of any term or design likely to cause confusion
with any Trademark, it shall promptly notify Secured Party of such use and, if
requested by Secured Party, shall join with Secured Party, at its expense, in
such action as Secured Party, in its reasonable discretion, may deem advisable
for the protection of Secured Party's interest in and to such Trademarks.
(n) All licenses of its Trademarks and Patents which Debtor has granted to
third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all other
rights and remedies of the Secured Party, whether under law, the Class 4
Documents or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of it,
either with or without special or other conditions or stipulations, with power
to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which the Secured Party shall, in its sole discretion, deem
- 6 -
<PAGE>
<PAGE>
appropriate or proper; and (e) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
pursuant to subparagraph 3(d) hereof, the Secured Party may, at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 4 hereof (such authority becoming effective on the occurrence or
continuation as hereinabove provided of an Event of Default), execute and
deliver on behalf of Debtor, one or more instruments of assignment of the
Patents or Trademarks (or any application or registration thereof), in form
suitable for filing, recording or registration in any country. Debtor agrees to
pay when due all reasonable costs incurred in any such transfer of the Patents
or Trademarks, including any taxes, fees and reasonable attorneys' fees, and all
such costs shall be added to the Obligations. The Secured Party may apply the
proceeds actually received from any such license, assignment, sale or other
disposition to the reasonable costs and expenses thereof, including, without
limitation, reasonable attorneys' fees and all legal, travel and other expenses
which may be incurred by the Secured Party, and then to the Obligations, in such
order as to principal or interest as the Secured Party may desire; and Debtor
shall remain liable and will pay the Secured Party on demand any deficiency
remaining, together with interest thereon at a rate equal to the highest rate
then payable on the Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring the Secured Party to take any
such action at any time. In the event of any such license, assignment, sale or
other disposition of the Collateral, or any of it, after the occurrence or
continuation as hereinabove provided of an Event of Default, Debtor shall supply
its know-how and expertise relating to the manufacture and sale of the products
bearing or in connection with the Trademarks or Patents, and its customer lists
and other records relating to the Trademarks or Patents and to the distribution
of said products, to the Secured Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the payment of all reasonable costs and expenses incurred by the
Secured Party in connection with such sale or otherwise in connection with this
Agreement or any of the Obligations, including, but not limited to, all court
costs and the reasonable fees and expenses of its agents and legal counsel, the
repayment of all advances made by the Secured Party hereunder on behalf of the
Debtor and any other reasonable costs or expenses incurred in connection with
the exercise of any right or remedy hereunder;
- 7 -
<PAGE>
<PAGE>
SECOND, to the payment in full of unpaid interest on the Class 4 Note;
THIRD, to the payment in full of unpaid principal on the Class 4 Note;
FOURTH, to the payment in full of all Obligations (other than those
referred to above) owed to the Collateral Trustee; and
FIFTH, to the Debtor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs 3(d)
and (e) hereof and Debtor hereby releases the Secured Party from any claims,
causes of action and demands at any time arising out of or with respect to any
actions taken or omitted to be taken by the Secured Party under the powers of
attorney granted herein, other than actions taken or omitted to be taken through
the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except by a
written instrument expressly referring to this Agreement and executed by the
party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. Debtor hereby submits to the nonexclusive jurisdiction of the Supreme
Court of the State of New York and the federal courts of the United States of
America located in such State in any action or proceeding arising under this
Agreement. If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
- 8 -
<PAGE>
<PAGE>
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
ANDOVER TOGS, INC.,
By: /s/ William L. Cohen
------------------------------
Title: President
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
By: /s/ Oleg Ostrovsky
------------------------------
Title: V P
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<PAGE>
<PAGE>
Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
American Expressions 09/15/87 1,457,541
American Gold and
Design 10/09/84 1,200,725
American Style Force 04/21/87 1,437,373
Animal Pals 01/21/86 1,379,252
Any Moment 04/12/84 1,830,833
Any Moment 07/30/91 1,652,757
Baby Beepers 09/02/93 1,909,342
Beepers 09/02/93 1,893,663
Big Al 11/17/87 1,465,577
Bragabouts 05/12/87 1,439,259
Bronx Garage 02/04/87 1,430,312
Brooklyn Export Co. 02/25/86 1,384,402
Crepe Suzette 03/05/91 1,765,289
Dobie and Design 04/04/89 1,533,189
Flip Overs 05/09/89 1,538,267
Get Togethers 12/19/89 1,572,004
<PAGE>
<PAGE>
Title Registration Date Registration No.
- ----- ----------------- ----------------
Have (Universal
Prohibition Sign)
Fear 12/15/89 1,569,586
Have a Heart 02/11/86 1,382,447
Hey Kids 07/04/89 1,546,515
Hook & Ladder 02/11/86 1,382,446
Hot Pursuit and Design 09/29/81 1,171,402
Kid America and Design 07/16/85 1,349,497
Nu Art 07/02/85 1,346,311
Outburst 04/10/90 1,531,024
Starting Gate 02/17/87 1,429,345
Style Force 08/28/86 1,415,075
Supertex 2000 12/01/87 1,467,461
Sweet Knits 12/21/83 1,813,000
Sweet Knits 09/29/92 1,721,121
Tortoni 02/11/86 1,382,448
U.S. Style Force 08/19/86 1,405,910
2
<PAGE>
<PAGE>
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
None
3
<PAGE>
<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
NONE.
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
NONE.
4
<PAGE>
<PAGE>
Schedule C to Security Agreement
LICENSES
NONE.
5
<PAGE>
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Andover Togs, Inc., a Delaware corporation (herein referred to as
"Assignor"), owns the letters patent, and/or applications for letters patent, of
the United States, more particularly described on Schedule 1-A annexed hereto as
part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc., as
Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended the "Plan")
Assignor has entered into a Security Agreement and Mortgage-Trademarks and
Patents dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee, and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security interest in, and mortgage on, the Collateral to secure
the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York 10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
ANDOVER TOGS, INC.
By:
--------------------------------
Title:
-----------------------------
- 2 -
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
- 3 -
<PAGE>
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Andover Togs, Inc., a Delaware corporation (herein referred to as
"Assignor"), owns the letters patent, and/or applications for letters patent, of
the United States, more particularly described on Schedule 1-A annexed hereto as
part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc., as
Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Assignor has entered into a Security Agreement and Mortgage-Trademarks
and Patents dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee, and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Trademarks, together with the goodwill of
the business symbolized by the Trademarks and the applications therefor and
registrations thereof, and all proceeds thereof, including, without limitation,
any and all causes of action which may exist by reason of infringement thereof
(the "Collateral"), to secure the prompt payment, performance and observance of
the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security interest in, and mortgage on, the Collateral to secure
the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the goodwill of the business symbolized by the Trademarks and the
applications and reregistrations thereof. Collateral made and granted hereby are
more fully set forth in the Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York 10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
ANDOVER TOGS, INC.
By:
-----------------------------
Title:
---------------------------
- 2 -
<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Trademark Reg. Date Reg. No.
- --------- --------- --------
II. Pending Applications
Trademark Filing Date Application No.
- --------- ----------- ---------------
- 1 -
<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Springdale Fashions, Inc., a Delaware
corporation (hereinafter called "Assignor"), hereby appoints and constitutes
M.J. Sherman & Associates, Inc., as Collateral Trustee (as defined in the Plan
described below and referred to herein as the "Assignee") for the benefit of the
holders of Allowed General Unsecured Claims (as defined in the Plan), its true
and lawful attorney, with full power of substitution, and with full power and
authority to perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
letters patent of the United States or any other country or political
subdivision thereof, and all registrations, recordings, reissues,
continuations, continuations-in-part and extensions thereof, and all
pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other formality with
respect to, the foregoing, to execute and deliver any and all agreements,
documents, instruments of assignment or other papers necessary or
advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or otherwise
disposing of all right, title and interest of Assignor in and to any
trademarks, trade names, trade styles and service marks, and all
registrations, recordings, reissues, extensions and renewals thereof, and
all pending applications therefor, and for the purpose of the recording,
registering and filing of, or accomplishing any other
- 1 -
<PAGE>
<PAGE>
formality with respect to, the foregoing, to execute and deliver any and
all agreements, documents, instruments of assignment or other papers
necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates or
other papers necessary or advisable in order to obtain the purposes
described above as Assignee may in its sole discretion determine.
This power of attorney is made pursuant to a Security Agreement and
Mortgage - Trademarks and Patents, dated the date hereof, between Assignor and
Assignee (the "Agreement") and takes effect solely for the purposes of paragraph
3 thereof and is subject to the conditions thereof and may not be revoked until
the payment in full of all "Obligations" as defined in such Security Agreement
and Mortgage.
Assignor and Assignee entered into the Agreement pursuant to and in
accordance with the terms of the Joint Plan of Reorganization of Andover Togs,
Inc., Debtor, Springdale Fashions, Inc., Debtor, Tortoni Manufacturing Corp.,
Debtor and Stonehenge Financial Corp., Debtor, which was confirmed by the United
States Bankruptcy Court for the Southern District of New York on April 10, 1997
(as from time to time amended the "Plan").
Dated: May __, 1997
[Corporate Seal] ANDOVER TOGS, INC.
By:
-----------------------------
Title:
--------------------------
- 2 -
<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of May, 1997, before me personally appeared William
Cohen, to me known, who, being by me duly sworn, did depose and say that he
resides at 15 Middle Lane, East Hampton, N.Y. and that he is President of
Andover Togs, Inc., the Delaware corporation described in and which executed the
foregoing instrument; that he knows the seal of said corporation; that the seal
affixed to said instrument is such corporate seal; that it was affixed pursuant
to authority of the Board of Directors of said corporation, and that he signed
his name thereto pursuant to such authority.
---------------------------
Notary Public
- 3 -
<PAGE>
<PAGE>
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Andover Togs, Inc., a Delaware corporation (herein referred to as
"Assignor"), owns the letters patent, and/or applications for letters patent, of
the United States, more particularly described on Schedule 1-A annexed hereto as
part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc., as
Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended the "Plan")
Assignor has entered into a Security Agreement and Mortgage-Trademarks and
Patents dated the date hereof (the "Agreement") in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to Assignee, and
granted to Assignee a security interest in, and mortgage on, all right, title
and interest of Assignor in and to the Patents, together with any reissue,
continuation, continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of action which may
exist by reason of infringement thereof for the full term of the Patents (the
"Collateral"), to secure the prompt payment, performance and observance of the
Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, Assignor does hereby further assign unto Assignee and grant
to Assignee a security interest in, and mortgage on, the Collateral to secure
the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights and
remedies of Assignee with respect to the assignment of, security interest in and
mortgage on the Collateral made and granted hereby are more fully set forth in
the Agreement, the terms and provisions of which are hereby incorporated herein
by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York 10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the 12th day of May,
1997.
ANDOVER TOGS, INC.
By: /s/ William L. Cohen
--------------------------------
Title: President
-----------------------------
- 2 -
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
NONE
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
NONE
1
<PAGE>
<PAGE>
CLASS 4 SECURITY AGREEMENT AND MORTGAGE
- TRADEMARKS AND PATENTS
AGREEMENT (this "Agreement"), dated as of May 12, 1997, between
Stonehenge Financial Corp. a New York corporation ("Debtor"), having an office
at 1333 Broadway, New York, New York 10018 and M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as "Secured Party") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan).
W I T N E S S E T H:
WHEREAS, Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof;
WHEREAS, Debtor is the owner and holder of the patents described in
Schedule B annexed hereto and made a part hereof;
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor, and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Andover Togs, Inc. has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, the Class 4 Note (as defined in the Plan);
WHEREAS, Debtor has executed in favor of and delivered to the Collateral
Trustee, for the benefit of the holders of Allowed General Unsecured Claims, a
guaranty of payment of the Class 4 Note (the "Guaranty");
WHEREAS, pursuant to and in accordance with the terms of the Plan, the
Debtor has agreed to grant to the Collateral Trustee, for the benefit of the
holders of the Allowed General Unsecured Claims, as security for the Guaranty
and the other Obligations (as hereinafter defined), a second priority security
interest in all personal property of the Debtor constituting Collateral (as
hereinafter defined); and
WHEREAS, Debtor (together with Andover Togs, Inc., and the other Debtors),
and the Collateral Trustee have entered into a Note and Collateral Trust
Agreement, dated as of the date hereof, (as amended, supplemented or modified
from time to time, the
<PAGE>
<PAGE>
"Note Agreement") pursuant to which the Collateral Trustee administer the
Collateral for the benefit of the holders of Allowed General Unsecured Claims;
NOW THEREFORE, IT IS AGREED that in consideration of the premises, and for
other good and valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, as collateral security for the full and prompt payment and
performance of the Guaranty and the other Obligations, Debtor does hereby
mortgage to and pledge with the Secured Party and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations described in Schedule B
hereto; and (iii) any and all proceeds of the foregoing, including without
limitation, any claims by Debtor against third parties for infringement of the
Trademarks or the Patents (collectively, the "Collateral");
1. Terms defined in the Note Agreement and not otherwise defined
herein, shall have the meaning set forth in the Note Agreement. As used in this
Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or
any other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or divisions
thereof and all licenses thereof.
"Trademarks" shall mean (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all right,
title and interest therein and thereto, and all registrations and recordings
thereof, including, without
- 2 -
<PAGE>
<PAGE>
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any State thereof, or any other country or any political subdivision
thereof, all whether now owned or hereafter acquired by Debtor, including, but
not limited to, those described in Schedule A annexed hereto and made a part
hereof, and (ii) all reissues, extensions or renewals thereof and all licenses
thereof.
2. Debtor hereby represents, warrants, covenants and agrees as
follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibits 1 and 2 hereof, respectively, requested by the Secured Party
at any time to evidence, perfect, maintain, record and enforce the Secured
Party's interest in the Collateral or otherwise in furtherance of the provisions
of this Agreement, and Debtor hereby authorizes the Secured Party to execute and
file one or more financing statements (and similar documents) or copies thereof
or of this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior
written notice of Debtor, shall consent, or (ii) Debtor shall not have used a
Trademark within the previous twelve months, Debtor (either itself or through
licensees) will continue to maintain the Trademarks on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain the Trademarks in full
force free from any claim of abandonment for nonuse and Debtor will not (and
will not permit any licensee thereof to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents
shown on Schedule B hereto and the registrations thereof are valid and
subsisting and in full force and effect. None of the Patents has been abandoned
or dedicated, and, except to the extent that the Secured Party, upon prior
written notice by Debtor, shall consent, Debtor will not do any act, or omit to
- 3 -
<PAGE>
<PAGE>
do any act, whereby the Patents may become abandoned or dedicated and shall
notify the Secured Party immediately if it knows of any reason or has reason to
know that any application or registration may become abandoned or dedicated.
(e) Debtor will promptly pay the Secured Party for any and all sums,
costs, and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or in enforcing the Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Obligations shall be part of the Obligations and be
payable on demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured Party may request to evidence the Secured Party's interest in
such Patent or Trademark and the goodwill and general intangibles of Debtor
relating thereto or represented thereby, and Debtor hereby constitutes the
Secured Party its attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full.
(g) Debtor has the right and power to make the assignment and to
grant the security interest herein granted; and, except for the prior security
interest of the Agent herein, the Collateral is not now, and at all times
hereafter will not be, subject to any liens, mortgages, assignments, security
interests or encumbrances of any nature whatsoever, except in favor of the
Secured Party, and to the best knowledge of Debtor none of the Collateral is
subject to any claim.
- 4 -
<PAGE>
<PAGE>
(h) Except to the extent that Secured Party, upon prior written
notice from Debtor, shall consent, Debtor will not assign, sell, mortgage,
lease, transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, except to the Agent, and nothing in this Agreement shall
be deemed a consent by the Secured Party to any such action except as expressly
permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or
subsidiary thereof owns any Patents or Trademarks or has any Patents or
Trademarks registered in, or the subject of pending applications in, the United
States Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before
the United States Patent and Trademark Office or any similar office or agency of
the United States, any State thereof, any other country or any political
subdivision thereof, to maintain each application and registration of the
Trademarks and Patents, including, without limitation, filing of renewals,
affidavits of use, affidavits of incontestability and opposition, interference
and cancellation proceedings (except to the extent that dedication, abandonment
or invalidation is permitted under paragraphs 2(c) and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the
use of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do
any act required of Debtor hereunder or requested by
- 5 -
<PAGE>
<PAGE>
Secured Party to preserve, defend, protect, maintain, record or enforce Debtor's
obligations contained herein, the Obligations, the Collateral, or the right,
title and interest granted Secured Party herein, and which Debtor fails to do or
pay, and any such payment shall be deemed an advance by Secured Party to Debtor
and shall be payable on demand together with interest at the highest rate then
payable on the Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary
thereof, learns of any use by any person of any term or design likely to cause
confusion with any Trademark, it shall promptly notify Secured Party of such use
and, if requested by Secured Party, shall join with Secured Party, at its
expense, in such action as Secured Party, in its reasonable discretion, may deem
advisable for the protection of Secured Party's interest in and to such
Trademarks.
(n) All licenses of its Trademarks and Patents which Debtor has
granted to third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all
other rights and remedies of the Secured Party, whether under law, the Class 4
Documents or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of
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<PAGE>
<PAGE>
it, either with or without special or other conditions or stipulations, with
power to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which the Secured Party shall, in its sole discretion, deem
appropriate or proper; and (e) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
pursuant to subparagraph 3(d) hereof, the Secured Party may, at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 4 hereof (such authority becoming effective on the occurrence or
continuation as hereinabove provided of an Event of Default), execute and
deliver on behalf of Debtor, one or more instruments of assignment of the
Patents or Trademarks (or any application or registration thereof), in form
suitable for filing, recording or registration in any country. Debtor agrees to
pay when due all reasonable costs incurred in any such transfer of the Patents
or Trademarks, including any taxes, fees and reasonable attorneys' fees, and all
such costs shall be added to the Obligations. The Secured Party may apply the
proceeds actually received from any such license, assignment, sale or other
disposition to the reasonable costs and expenses thereof, including, without
limitation, reasonable attorneys' fees and all legal, travel and other expenses
which may be incurred by the Secured Party, and then to the Obligations, in such
order as to principal or interest as the Secured Party may desire; and Debtor
shall remain liable and will pay the Secured Party on demand any deficiency
remaining, together with interest thereon at a rate equal to the highest rate
then payable on the Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring the Secured Party to take any
such action at any time. In the event of any such license, assignment, sale or
other disposition of the Collateral, or any of it, after the occurrence or
continuation as hereinabove provided of an Event of Default, Debtor shall supply
its know-how and expertise relating to the manufacture and sale of the products
bearing or in connection with the Trademarks or Patents, and its customer lists
and other records relating to the Trademarks or Patents and to the distribution
of said products, to the Secured Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Secured Party in connection with such sale or otherwise in connection
with this Agreement or any of the Obligations, including, but not limited to,
all court costs and
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<PAGE>
<PAGE>
the reasonable fees and expenses of its agents and legal counsel, the repayment
of all advances made by the Secured Party hereunder on behalf of the Debtor and
any other reasonable costs or expenses incurred in connection with the exercise
of any right or remedy hereunder;
SECOND, to the payment in full of unpaid interest on the Class 4
Note;
THIRD, to the payment in full of unpaid principal on the Class 4
Note;
FOURTH, to the payment in full of all Obligations (other than those
referred to above) owed to the Collateral Trustee; and
FIFTH, to the Debtor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs 3(d)
and (e) hereof and Debtor hereby releases the Secured Party from any claims,
causes of action and demands at any time arising out of or with respect to any
actions taken or omitted to be taken by the Secured Party under the powers of
attorney granted herein, other than actions taken or omitted to be taken through
the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except
by a written instrument expressly referring to this Agreement and executed by
the party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. Debtor hereby submits to the nonexclusive jurisdiction of the Supreme
Court of the State of New York and the federal courts of the United States of
America
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<PAGE>
<PAGE>
located in such State in any action or proceeding arising under this Agreement.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
--------------------------------
Title: President
-----------------------------
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
By: /s/ Oleg Ostrovsky
--------------------------------
Title: VP
-----------------------------
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<PAGE>
<PAGE>
Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
NONE
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
NONE
- 10 -
<PAGE>
<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
NONE
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
NONE
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<PAGE>
<PAGE>
Schedule C to Security Agreement
LICENSES
NONE
- 12 -
<PAGE>
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Stonehenge Financial Corp., a New York corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint
Plan of Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc.,
Debtor, Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp.,
Debtor, which was confirmed by the United States Bankruptcy Court for the
Southern District of New York on April 10, 1997 (as from time to time amended
the "Plan") Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in favor
of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the Collateral made and granted hereby are more fully set forth
in the Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York
10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
STONEHENGE FINANCIAL CORP.
By:
-----------------------------
Title:
--------------------------
- 2 -
<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
- 3 -
<PAGE>
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Stonehenge Financial Corp., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint
Plan of Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc.,
Debtor, Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp.,
Debtor, which was confirmed by the United States Bankruptcy Court for the
Southern District of New York on April 10, 1997 (as from time to time amended,
the "Plan"), Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in favor
of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
therefor and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the prompt payment,
performance and observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the goodwill of the business symbolized by the Trademarks and
the applications and reregistrations thereof. Collateral made and granted hereby
are more fully set forth in the Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York
10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
STONEHENGE FINANCIAL CORP.
By:
-----------------------------
Title:
--------------------------
- 2 -
<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Trademark Reg. Date Reg. No.
- --------- --------- --------
II. Pending Applications
Trademark Filing Date Application No.
- --------- ----------- ---------------
- 1 -
<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Stonehenge Financial Corp., a
Delaware corporation (hereinafter called "Assignor"), hereby appoints and
constitutes M.J. Sherman & Associates, Inc., as Collateral Trustee (as defined
in the Plan described below and referred to herein as the "Assignee") for the
benefit of the holders of Allowed General Unsecured Claims (as defined in the
Plan), its true and lawful attorney, with full power of substitution, and with
full power and authority to perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any letters patent of the United States or any other country
or political subdivision thereof, and all registrations, recordings,
reissues, continuations, continuations-in-part and extensions
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment
or other papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any trademarks, trade names, trade styles and service marks,
and all registrations, recordings, reissues, extensions and renewals
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other
- 1 -
<PAGE>
<PAGE>
formality with respect to, the foregoing, to execute and deliver any
and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates
or other papers necessary or advisable in order to obtain the
purposes described above as Assignee may in its sole discretion
determine.
This power of attorney is made pursuant to a Security Agreement and
Mortgage - Trademarks and Patents, dated the date hereof, between Assignor and
Assignee (the "Agreement") and takes effect solely for the purposes of paragraph
3 thereof and is subject to the conditions thereof and may not be revoked until
the payment in full of all "Obligations" as defined in such Security Agreement
and Mortgage.
Assignor and Assignee entered into the Agreement pursuant to and in
accordance with the terms of the Joint Plan of Reorganization of Andover Togs,
Inc., Debtor, Springdale Fashions, Inc., Debtor, Tortoni Manufacturing Corp.,
Debtor and Stonehenge Financial Corp., Debtor, which was confirmed by the United
States Bankruptcy Court for the Southern District of New York on April 10, 1997
(as from time to time amended the "Plan").
Dated: May __, 1997
[Corporate Seal] STONEHENGE FINANCIAL CORP.
By:
-----------------------------
Title:
--------------------------
- 2 -
<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of May, 1997, before me personally appeared William
Cohen, to me known, who, being by me duly sworn, did depose and say that he
resides at 15 Middle Lane, East Hampton, N.Y. and that he is President of
Stonehenge Financial Corp., the New York corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was
affixed pursuant to authority of the Board of Directors of said corporation, and
that he signed his name thereto pursuant to such authority.
---------------------------
Notary Public
- 3 -
<PAGE>
<PAGE>
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Stonehenge Financial Corp., a New York corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint
Plan of Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc.,
Debtor, Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp.,
Debtor, which was confirmed by the United States Bankruptcy Court for the
Southern District of New York on April 10, 1997 (as from time to time amended
the "Plan") Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in favor
of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the Collateral made and granted hereby are more fully set forth
in the Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York
10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the 12th day of May,
1997.
STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
-----------------------------
Title: President
--------------------------
- 2 -
<PAGE>
<PAGE>
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Stonehenge Financial Corp., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint
Plan of Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc.,
Debtor, Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp.,
Debtor, which was confirmed by the United States Bankruptcy Court for the
Southern District of New York on April 10, 1997 (as from time to time amended,
the "Plan"), Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in favor
of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
therefor and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the prompt payment,
performance and observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
- 1 -
<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the goodwill of the business symbolized by the Trademarks and
the applications and reregistrations thereof. Collateral made and granted hereby
are more fully set forth in the Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York
10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the 12th day of May,
1997.
STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
-----------------------------
Title: President
--------------------------
- 2 -
<PAGE>
<PAGE>
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Stonehenge Financial Corp., a
Delaware corporation (hereinafter called "Assignor"), hereby appoints and
constitutes M.J. Sherman & Associates, Inc., as Collateral Trustee (as defined
in the Plan described below and referred to herein as the "Assignee") for the
benefit of the holders of Allowed General Unsecured Claims (as defined in the
Plan), its true and lawful attorney, with full power of substitution, and with
full power and authority to perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any letters patent of the United States or any other country
or political subdivision thereof, and all registrations, recordings,
reissues, continuations, continuations-in-part and extensions
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment
or other papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any trademarks, trade names, trade styles and service marks,
and all registrations, recordings, reissues, extensions and renewals
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other
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<PAGE>
formality with respect to, the foregoing, to execute and deliver any
and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates
or other papers necessary or advisable in order to obtain the
purposes described above as Assignee may in its sole discretion
determine.
This power of attorney is made pursuant to a Security Agreement and
Mortgage - Trademarks and Patents, dated the date hereof, between Assignor and
Assignee (the "Agreement") and takes effect solely for the purposes of paragraph
3 thereof and is subject to the conditions thereof and may not be revoked until
the payment in full of all "Obligations" as defined in such Security Agreement
and Mortgage.
Assignor and Assignee entered into the Agreement pursuant to and in
accordance with the terms of the Joint Plan of Reorganization of Andover Togs,
Inc., Debtor, Springdale Fashions, Inc., Debtor, Tortoni Manufacturing Corp.,
Debtor and Stonehenge Financial Corp., Debtor, which was confirmed by the United
States Bankruptcy Court for the Southern District of New York on April 10, 1997
(as from time to time amended the "Plan").
Dated: May 12, 1997
[Corporate Seal] STONEHENGE FINANCIAL CORP.
By: /s/ William L. Cohen
-----------------------------
Title: President
--------------------------
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<PAGE>
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 12th day of May, 1997, before me personally appeared William
Cohen, to me known, who, being by me duly sworn, did depose and say that he
resides at 15 Middle Lane, East Hampton, N.Y. and that he is President of
Stonehenge Financial Corp., the New York corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was
affixed pursuant to authority of the Board of Directors of said corporation, and
that he signed his name thereto pursuant to such authority.
/s/ [SIGNATURE]
---------------------------
Notary Public
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<PAGE>
<PAGE>
CLASS 4 SECURITY AGREEMENT AND MORTGAGE
- TRADEMARKS AND PATENTS
AGREEMENT (this "Agreement"), dated as of May 12, 1997, between
Tortoni Manufacturing Corp., a Delaware corporation ("Debtor"), having an office
at 1333 Broadway, New York, New York 10018 and M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as "Secured Party") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan).
W I T N E S S E T H:
WHEREAS, Debtor has adopted the terms and designs described in Schedule A
annexed hereto and made a part hereof;
WHEREAS, Debtor is the owner and holder of the patents described in
Schedule B annexed hereto and made a part hereof;
WHEREAS, pursuant to and in accordance with the terms of the Joint Plan of
Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc., Debtor,
Tortoni Manufacturing Corp., Debtor, and Stonehenge Financial Corp., Debtor,
which was confirmed by the United States Bankruptcy Court for the Southern
District of New York on April 10, 1997 (as from time to time amended, the
"Plan"), Andover Togs, Inc. has executed and delivered in favor of the
Collateral Trustee, for the benefit of the holders of the Allowed General
Unsecured Claims, the Class 4 Note (as defined in the Plan);
WHEREAS, Debtor has executed in favor of and delivered to the Collateral
Trustee, for the benefit of the holders of Allowed General Unsecured Claims, a
guaranty of payment of the Class 4 Note (the "Guaranty");
WHEREAS, pursuant to and in accordance with the terms of the Plan, the
Debtor has agreed to grant to the Collateral Trustee, for the benefit of the
holders of the Allowed General Unsecured Claims, as security for the Guaranty
and the other Obligations (as hereinafter defined), a second priority security
interest in all personal property of the Debtor constituting Collateral (as
hereinafter defined); and
WHEREAS, Debtor (together with Andover Togs, Inc., and the other Debtors),
and the Collateral Trustee have entered into a
<PAGE>
<PAGE>
Note and Collateral Trust Agreement, dated as of the date hereof, (as amended,
supplemented or modified from time to time, the "Note Agreement") pursuant to
which the Collateral Trustee administer the Collateral for the benefit of the
holders of Allowed General Unsecured Claims;
NOW THEREFORE, IT IS AGREED that in consideration of the premises, and for
other good and valuable consideration, the sufficiency and receipt of which is
hereby acknowledged, as collateral security for the full and prompt payment and
performance of the Guaranty and the other Obligations, Debtor does hereby
mortgage to and pledge with the Secured Party and grant to the Secured Party a
security interest in, all of its right, title and interest in and to (i) each of
the Trademarks (as hereinafter defined), and the goodwill of the business
symbolized by each of the Trademarks, all customer lists and other records of
Debtor relating to the distribution of products bearing the Trademarks and each
of the registrations described in Schedule A; (ii) each of the Patents (as
hereinafter defined) and each of the registrations described in Schedule B
hereto; and (iii) any and all proceeds of the foregoing, including without
limitation, any claims by Debtor against third parties for infringement of the
Trademarks or the Patents (collectively, the "Collateral");
1. Terms defined in the Note Agreement and not otherwise defined
herein, shall have the meaning set forth in the Note Agreement. As used in this
Agreement, unless the context otherwise requires:
"Patents" shall mean (i) all letters patent of the United States or
any other country, all right, title and interest therein and thereto, and all
registrations and recordings thereof, including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof, all
whether now owned or hereafter acquired by Debtor, including, but not limited
to, those described in Schedule B annexed hereto and made a part hereof, and
(ii) all reissues, continuations, continuations-in-part, extensions or divisions
thereof and all licenses thereof.
"Trademarks" shall mean (i) all trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other sources of business identifiers, and the goodwill
associated therewith, now existing or hereafter adopted or acquired, all
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<PAGE>
<PAGE>
right, title and interest therein and thereto, and all registrations and
recordings thereof, including, without limitation, applications, registrations
and recordings in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any State thereof, or any other
country or any political subdivision thereof, all whether now owned or hereafter
acquired by Debtor, including, but not limited to, those described in Schedule A
annexed hereto and made a part hereof, and (ii) all reissues, extensions or
renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as
follows:
(a) Debtor has the sole, full and clear title to the registered U.S.
Trademarks for the goods and services covered by the registrations thereof and
such registrations are valid and subsisting and in full force and effect.
(b) Debtor will perform all acts and execute all documents,
including, without limitation, assignments for security in form suitable for
filing with the United States Patent and Trademark Office, substantially in the
forms of Exhibits 1 and 2 hereof, respectively, requested by the Secured Party
at any time to evidence, perfect, maintain, record and enforce the Secured
Party's interest in the Collateral or otherwise in furtherance of the provisions
of this Agreement, and Debtor hereby authorizes the Secured Party to execute and
file one or more financing statements (and similar documents) or copies thereof
or of this Security Agreement with respect to the Collateral signed only by the
Secured Party.
(c) Except to the extent that (i) the Secured Party, upon prior
written notice of Debtor, shall consent, or (ii) Debtor shall not have used a
Trademark within the previous twelve months, Debtor (either itself or through
licensees) will continue to maintain the Trademarks on each and every trademark
class of goods applicable to its current line as reflected in its current
catalogs, brochures and price lists in order to maintain the Trademarks in full
force free from any claim of abandonment for nonuse and Debtor will not (and
will not permit any licensee thereof to) do any act or knowingly omit to do any
act whereby any Trademark may become invalidated.
(d) Debtor has the sole, full and clear title to each of the Patents
shown on Schedule B hereto and the registrations thereof are valid and
subsisting and in full force and effect. None of the Patents has been abandoned
or dedicated, and, except
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<PAGE>
to the extent that the Secured Party, upon prior written notice by Debtor, shall
consent, Debtor will not do any act, or omit to do any act, whereby the Patents
may become abandoned or dedicated and shall notify the Secured Party immediately
if it knows of any reason or has reason to know that any application or
registration may become abandoned or dedicated.
(e) Debtor will promptly pay the Secured Party for any and all sums,
costs, and expenses which the Secured Party may pay or incur pursuant to the
provisions of this Agreement or in enforcing the Obligations, the Collateral or
the security interest granted hereunder, including, but not limited to, all
filing or recording fees, court costs, collection charges, travel, and
reasonable attorneys' fees, all of which together with interest at the highest
rate then payable on the Obligations shall be part of the Obligations and be
payable on demand.
(f) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee, (i) file an application for the registration of
any Patent or Trademark with the United States Patent and Trademark Office or
any similar office or agency of the United States, any State thereof, any other
country or any political subdivision thereof or (ii) file any assignment of any
patent or trademark, which Debtor may acquire from a third party, with the
United States Patent and Trademark Office or any similar office or agency of the
United States, any State thereof, any other country or any political subdivision
thereof, unless Debtor shall, on or prior to the date of such filing, notify the
Secured Party thereof, and, upon request of the Secured Party, execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Secured Party may request to evidence the Secured Party's interest in
such Patent or Trademark and the goodwill and general intangibles of Debtor
relating thereto or represented thereby, and Debtor hereby constitutes the
Secured Party its attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified and
confirmed; such power being coupled with an interest is irrevocable until the
Obligations are paid in full.
(g) Debtor has the right and power to make the assignment and to
grant the security interest herein granted; and, except for the prior security
interest of the Agent herein, the Collateral is not now, and at all times
hereafter will not be, subject to any liens, mortgages, assignments, security
interests or encumbrances of any nature whatsoever, except in favor of the
Secured Party, and to the best knowledge of Debtor none of the Collateral is
subject to any claim.
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<PAGE>
<PAGE>
(h) Except to the extent that Secured Party, upon prior written
notice from Debtor, shall consent, Debtor will not assign, sell, mortgage,
lease, transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, except to the Agent, and nothing in this Agreement shall
be deemed a consent by the Secured Party to any such action except as expressly
permitted herein.
(i) As of the date hereof neither Debtor nor any affiliate or
subsidiary thereof owns any Patents or Trademarks or has any Patents or
Trademarks registered in, or the subject of pending applications in, the United
States Patent and Trademark Office or any similar office or agency of the United
States, any State thereof, any other country or any political subdivision
thereof, other than those described in Schedules A and B hereto.
(j) Debtor will take all necessary steps in any proceeding before
the United States Patent and Trademark Office or any similar office or agency of
the United States, any State thereof, any other country or any political
subdivision thereof, to maintain each application and registration of the
Trademarks and Patents, including, without limitation, filing of renewals,
affidavits of use, affidavits of incontestability and opposition, interference
and cancellation proceedings (except to the extent that dedication, abandonment
or invalidation is permitted under paragraphs 2(c) and 2(d) hereof).
(k) Debtor assumes all responsibility and liability arising from the
use of the Trademarks, and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labeling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor, and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(l) Secured Party may, in its sole discretion, pay any amount or do
any act required of Debtor hereunder or requested by
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<PAGE>
<PAGE>
Secured Party to preserve, defend, protect, maintain, record or enforce Debtor's
obligations contained herein, the Obligations, the Collateral, or the right,
title and interest granted Secured Party herein, and which Debtor fails to do or
pay, and any such payment shall be deemed an advance by Secured Party to Debtor
and shall be payable on demand together with interest at the highest rate then
payable on the Obligations.
(m) Debtor agrees that if it, or any affiliate or subsidiary
thereof, learns of any use by any person of any term or design likely to cause
confusion with any Trademark, it shall promptly notify Secured Party of such use
and, if requested by Secured Party, shall join with Secured Party, at its
expense, in such action as Secured Party, in its reasonable discretion, may deem
advisable for the protection of Secured Party's interest in and to such
Trademarks.
(n) All licenses of its Trademarks and Patents which Debtor has
granted to third parties are set forth in Schedule C hereto.
3. Upon the occurrence of an Event of Default, in addition to all
other rights and remedies of the Secured Party, whether under law, the Class 4
Documents or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Patents or the Trademarks or any mark similar thereto for any
purpose; (b) the Secured Party may, at any time and from time to time, upon 10
days' prior notice to Debtor, license, whether general, special or otherwise,
and whether on an exclusive or nonexclusive basis, any of the Patents or
Trademarks, throughout the world for such term or terms, on such conditions, and
in such manner, as the Secured Party shall in its sole discretion determine; (c)
the Secured Party may (without assuming any obligations or liability
thereunder), at any time, enforce (and shall have the exclusive right to
enforce) against any licensee or sublicensee all rights and remedies of Debtor
in, to and under any one or more license agreements with respect to the
Collateral, and take or refrain from taking any action under any thereof, and
Debtor hereby releases the Secured Party from, and agrees to hold the Secured
Party free and harmless from and against any claims arising out of, any action
taken or omitted to be taken with respect to any such license agreement; (d) the
Secured Party may, at any time and from time to time, upon 10 days' prior notice
to Debtor, assign, sell, or otherwise dispose of, the Collateral or any of
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<PAGE>
it, either with or without special or other conditions or stipulations, with
power to buy the Collateral or any part of it, and with power also to execute
assurances, and do all other acts and things for completing the assignment, sale
or disposition which the Secured Party shall, in its sole discretion, deem
appropriate or proper; and (e) in addition to the foregoing, in order to
implement the assignment, sale or other disposal of any of the Collateral
pursuant to subparagraph 3(d) hereof, the Secured Party may, at any time,
pursuant to the authority granted in the Powers of Attorney described in
paragraph 4 hereof (such authority becoming effective on the occurrence or
continuation as hereinabove provided of an Event of Default), execute and
deliver on behalf of Debtor, one or more instruments of assignment of the
Patents or Trademarks (or any application or registration thereof), in form
suitable for filing, recording or registration in any country. Debtor agrees to
pay when due all reasonable costs incurred in any such transfer of the Patents
or Trademarks, including any taxes, fees and reasonable attorneys' fees, and all
such costs shall be added to the Obligations. The Secured Party may apply the
proceeds actually received from any such license, assignment, sale or other
disposition to the reasonable costs and expenses thereof, including, without
limitation, reasonable attorneys' fees and all legal, travel and other expenses
which may be incurred by the Secured Party, and then to the Obligations, in such
order as to principal or interest as the Secured Party may desire; and Debtor
shall remain liable and will pay the Secured Party on demand any deficiency
remaining, together with interest thereon at a rate equal to the highest rate
then payable on the Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring the Secured Party to take any
such action at any time. In the event of any such license, assignment, sale or
other disposition of the Collateral, or any of it, after the occurrence or
continuation as hereinabove provided of an Event of Default, Debtor shall supply
its know-how and expertise relating to the manufacture and sale of the products
bearing or in connection with the Trademarks or Patents, and its customer lists
and other records relating to the Trademarks or Patents and to the distribution
of said products, to the Secured Party or its designee.
The proceeds of any sale of Collateral, as well as any Collateral
consisting of cash, shall be applied by the Secured Party as follows:
FIRST, to the payment of all reasonable costs and expenses incurred
by the Secured Party in connection with such sale or otherwise in connection
with this Agreement or any of the Obligations, including, but not limited to,
all court costs and
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<PAGE>
the reasonable fees and expenses of its agents and legal counsel, the repayment
of all advances made by the Secured Party hereunder on behalf of the Debtor and
any other reasonable costs or expenses incurred in connection with the exercise
of any right or remedy hereunder;
SECOND, to the payment in full of unpaid interest on the Class 4
Note;
THIRD, to the payment in full of unpaid principal on the Class 4
Note;
FOURTH, to the payment in full of all Obligations (other than those
referred to above) owed to the Collateral Trustee; and
FIFTH, to the Debtor, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 3 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks and Patents pursuant to paragraphs 3(d)
and (e) hereof and Debtor hereby releases the Secured Party from any claims,
causes of action and demands at any time arising out of or with respect to any
actions taken or omitted to be taken by the Secured Party under the powers of
attorney granted herein, other than actions taken or omitted to be taken through
the gross negligence or willful misconduct of the Secured Party.
5. No provision hereof shall be modified, altered or limited except
by a written instrument expressly referring to this Agreement and executed by
the party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. THIS AGREEMENT, THE OBLIGATIONS AND THE COLLATERAL SHALL BE
GOVERNED IN ALL RESPECTS BY THE LAWS OF THE UNITED STATES AND THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF. Debtor hereby submits to the nonexclusive jurisdiction of the Supreme
Court of the State of New York and the federal courts of the United States of
America
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<PAGE>
located in such State in any action or proceeding arising under this Agreement.
If any term of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby.
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
TORTONI MANUFACTURING CORP.
By: /s/ William L. Cohen
--------------------------------------
Title: President
-----------------------------------
M.J. SHERMAN & ASSOCIATES, INC.,
as Collateral Trustee
By: /s/ Oleg Ostrovsky
--------------------------------------
Title: VP
-----------------------------------
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<PAGE>
Schedule A to Security Agreement
TRADEMARKS
I. Registrations
Title Registration Date Registration No.
- ----- ----------------- ----------------
NONE
II. Pending Applications
Title Filing Date Application No.
- ----- ----------- ---------------
NONE
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<PAGE>
Schedule B to Security Agreement
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
NONE
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
NONE
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<PAGE>
Schedule C to Security Agreement
LICENSES
NONE
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<PAGE>
<PAGE>
Exhibit 1 to
Security Agreement
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Tortoni Manufacturing Corp., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint
Plan of Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc.,
Debtor, Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp.,
Debtor, which was confirmed by the United States Bankruptcy Court for the
Southern District of New York on April 10, 1997 (as from time to time amended
the "Plan") Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in favor
of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Patents, together with any
reissue, continuation, continuation-in-part or extension thereof, and all
proceeds thereof, including, without limitation, any and all causes of action
which may exist by reason of infringement thereof for the full term of the
Patents (the "Collateral"), to secure the prompt payment, performance and
observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
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<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the Collateral made and granted hereby are more fully set forth
in the Agreement, the terms and provisions of which are hereby incorporated
herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York
10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
TORTONI MANUFACTURING CORP.
By:
--------------------------------
Title:
-----------------------------
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<PAGE>
<PAGE>
SCHEDULE 1-A TO ASSIGNMENT FOR SECURITY
PATENTS
I. Registrations
Title Date Issued Patent No.
- ----- ----------- ----------
II. Pending Applications
Title Date Filed Application No.
- ----- ---------- ---------------
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<PAGE>
<PAGE>
Exhibit 2 to
Security Agreement
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Tortoni Manufacturing Corp., a Delaware corporation (herein
referred to as "Assignor"), owns the letters patent, and/or applications for
letters patent, of the United States, more particularly described on Schedule
1-A annexed hereto as part hereof (the "Patents");
WHEREAS, Assignor is obligated to M.J. Sherman & Associates, Inc.,
as Collateral Trustee (as defined in the Plan described below and referred to
herein as the "Assignee") for the benefit of the holders of Allowed General
Unsecured Claims (as defined in the Plan);
WHEREAS, pursuant to and in accordance with the terms of the Joint
Plan of Reorganization of Andover Togs, Inc., Debtor, Springdale Fashions, Inc.,
Debtor, Tortoni Manufacturing Corp., Debtor and Stonehenge Financial Corp.,
Debtor, which was confirmed by the United States Bankruptcy Court for the
Southern District of New York on April 10, 1997 (as from time to time amended,
the "Plan"), Assignor has entered into a Security Agreement and
Mortgage-Trademarks and Patents dated the date hereof (the "Agreement") in favor
of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has assigned to
Assignee, and granted to Assignee a security interest in, and mortgage on, all
right, title and interest of Assignor in and to the Trademarks, together with
the goodwill of the business symbolized by the Trademarks and the applications
therefor and registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the prompt payment,
performance and observance of the Obligations, as defined in the Agreement;
NOW, THEREFORE, for good and valuable consideration, receipt of
which is hereby acknowledged, Assignor does hereby further assign unto Assignee
and grant to Assignee a security interest in, and mortgage on, the Collateral to
secure the prompt payment, performance and observance of the Obligations.
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<PAGE>
<PAGE>
Assignor does hereby further acknowledge and affirm that the rights
and remedies of Assignee with respect to the assignment of, security interest in
and mortgage on the goodwill of the business symbolized by the Trademarks and
the applications and reregistrations thereof. Collateral made and granted hereby
are more fully set forth in the Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
Assignee's address is 333 East 68th Street, New York, New York
10021.
IN WITNESS WHEREOF, Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of the ____ day of May,
1997.
TORTONI MANUFACTURING CORP.
By:
--------------------------------
Title:
-----------------------------
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<PAGE>
<PAGE>
SCHEDULE 2-A TO ASSIGNMENT FOR SECURITY
TRADEMARKS
I. Registrations
Trademark Reg. Date Reg. No.
- --------- --------- --------
II. Pending Applications
Trademark Filing Date Application No.
- --------- ----------- ---------------
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<PAGE>
<PAGE>
Exhibit 3 to
Security Agreement
SPECIAL POWER OF ATTORNEY
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
KNOW ALL MEN BY THESE PRESENTS, THAT Tortoni Manufacturing Corp., a
Delaware corporation (hereinafter called "Assignor"), hereby appoints and
constitutes M.J. Sherman & Associates, Inc., as Collateral Trustee (as defined
in the Plan described below and referred to herein as the "Assignee") for the
benefit of the holders of Allowed General Unsecured Claims (as defined in the
Plan), its true and lawful attorney, with full power of substitution, and with
full power and authority to perform the following acts on behalf of Assignor:
1. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any letters patent of the United States or any other country
or political subdivision thereof, and all registrations, recordings,
reissues, continuations, continuations-in-part and extensions
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other formality with respect to, the foregoing, to execute and
deliver any and all agreements, documents, instruments of assignment
or other papers necessary or advisable to effect such purpose;
2. For the purpose of assigning, selling, licensing or
otherwise disposing of all right, title and interest of Assignor in
and to any trademarks, trade names, trade styles and service marks,
and all registrations, recordings, reissues, extensions and renewals
thereof, and all pending applications therefor, and for the purpose
of the recording, registering and filing of, or accomplishing any
other
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formality with respect to, the foregoing, to execute and deliver any
and all agreements, documents, instruments of assignment or other
papers necessary or advisable to effect such purpose;
3. To execute any and all documents, statements, certificates
or other papers necessary or advisable in order to obtain the
purposes described above as Assignee may in its sole discretion
determine.
This power of attorney is made pursuant to a Security Agreement and
Mortgage - Trademarks and Patents, dated the date hereof, between Assignor and
Assignee (the "Agreement") and takes effect solely for the purposes of paragraph
3 thereof and is subject to the conditions thereof and may not be revoked until
the payment in full of all "Obligations" as defined in such Security Agreement
and Mortgage.
Assignor and Assignee entered into the Agreement pursuant to and in
accordance with the terms of the Joint Plan of Reorganization of Andover Togs,
Inc., Debtor, Springdale Fashions, Inc., Debtor, Tortoni Manufacturing Corp.,
Debtor and Stonehenge Financial Corp., Debtor, which was confirmed by the United
States Bankruptcy Court for the Southern District of New York on April 10, 1997
(as from time to time amended the "Plan").
Dated: May __, 1997
[Corporate Seal] TORTONI MANUFACTURING CORP.
By:
--------------------------------
Title:
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ____ day of May, 1997, before me personally appeared William
Cohen, to me known, who, being by me duly sworn, did depose and say that he
resides at 15 Middle Lane, East Hampton, N.Y. and that he is President of
Tortoni Manufacturing Corp., the Delaware corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was
affixed pursuant to authority of the Board of Directors of said corporation, and
that he signed his name thereto pursuant to such authority.
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Notary Public
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Contact: William L. Cohen
Chairman, President and
Chief Executive Officer
(212) 244-0700
FOR IMMEDIATE RELEASE
ANDOVER TOGS EMERGES FROM CHAPTER 11
NEW YORK, NEW YORK, May 13, 1997 - ANDOVER TOGS, INC. (OTC) announced
today that the Joint Plan of Reorganization filed on January 30, 1997 has become
effective as of May 12, 1997.
Under the Plan, the Company will pay 100% of all allowed claims.
The Company announced that it has entered into a financing agreement with
the CIT Group/Commercial Services, Inc. for a $10,500,000 credit facility.
William L. Cohen, Andover's CEO, was delighted that the Company has
successfully emerged from bankruptcy. He observed that since March 19, 1996, the
date of its Chapter 11 filing, the Company has consolidated its operations and
substantially reduced its overhead.
Andover Togs, Inc. designs, manufactures and distributes children's wear.
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