FORM 10-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal period ended January 27, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the transition period ------------ to---------------
Commission File number 0-16309
FAMILY BARGAIN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 51-0299573
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
315 East 62nd Street
New York, New York 10021
(Address of Principal Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (212) 980-9670
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of each class Name of each exchange on which registered
Common Stock, $.01 par value Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
(Title of Class)
Series A 9 1/2% Cumulative Convertible Preferred Stock, $.01 par value
(Title of Class)
Preferred Stock Purchase Rights
(Title of Class)
Redeemable Class D Common Stock Purchase Warrants
(Title of Class)
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of regulation S-K is not contained herein, and will not be contained, to
be best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by a court. YES X NO
--- ---
At April 22, 1996 the aggregate market value of the voting stock of the
Registrant held by non-affiliates was approximately $5,784,170.
At April 22, 1996 the Registrant had outstanding 4,111,635 shares of
Common Stock, $.01 par value per share.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a) Documents filed as part of this report:
The following is an index of the financial statements and exhibits
included in this report or incorporated herein by reference.
1) Financial Statements; the financial statements filed as part of this report
are listed in the index to financial statements on page 26.
2) Financial Statement Schedules; Financial Statement Schedules II, VIII
and X filed as part of this report are listed in the index to financial
statements on page 26.
3) Exhibits:
EXHIBIT
NO. DESCRIPTION
2.1 Joint Plan of Reorganization Under Chapter 11 of the United States
Bankruptcy Code of FBS Holdings, Inc. and General Textiles, d/b/a Family
Bargain Centers ("Family Bargain")included in First Amended Disclosure
Statement(2-Exhibit 2.1)
2.3 Stock Purchase Agreement, dated June 10, 1993, by and between
Diversified Retail Services, Inc. ("Retail") and MKI Holding Corp.
(4-Exhibit 2)
3.1 Restated Certificate of Incorporation of the Registrant (1-Exhibit 3.1)
3.2 Amendments to the Restated Certificate of Incorporation of the
Registrant (6-Exhibit 3.2)
3.3 Amended and Restated By-Laws of the Registrant (6-Exhibit 3.4)
4.1 Form of Certificate of Designation of Series A 9% Cumulative
Preferred Stock (6-Exhibit 4.1)
4.2 Special Series A 9% Cumulative Convertible Preferred Stock
(6-Exhibit 4.3)
4.3 Specimen Common Stock Certificate (1-Exhibit 4.2)
4.4 Specimen Class C Redeemable Common Stock Purchase Warrant
Certificate (1-Exhibit 4.3)
4.5 Specimen Class D Redeemable Common Stock Purchase Warrant
Certificate (1-Exhibit 4.4)
4.6 Certificate of Designations of the Series C Convertible Preferred Stock
(6-Exhibit 4.8(a))
4.7 Certificate of Correction of the Certificate of Designations of the
Series C Convertible Preferred Stock (6-Exhibit 4.8(b))
4.8 Certificate of Designations of the Series D Convertible Preferred Stock
(6-Exhibit 4.9(a))
4.9 Certificate of Correction of the Certificate of Designations of the
Series D Convertible Preferred Stock (6-Exhibit 4.9(b))
4.10 Indenture, dated as of May 1993, between General Textiles and IBJ
Schroder Bank & Trust Company (included in Exhibit 2.1 above)
4.11 General Textiles Subordinated Notes Due 2003 (included in Exhibit
2.1 above)
4.12 Subordinated Reorganization Note Agreement, dated as of May 28,
1993, among General Textiles, Berkeley Atlantic Income Limited, Govett
American Endeavor Fund Limited and London Pacific Life & Annuity
Company (included in Exhibit 2.1 above)
4.13 Junior Subordinated Reorganization Note Agreement, dated as of
May 1993, among General Textiles, Berkeley Atlantic Income Limited,
Govett American Endeavor Fund Limited and London Pacific Life &
Annuity Company (included in Exhibit 2.1 above)
4.14 Rights Agreement dated as of November 27, 1995 between the
Registrant and Corporate Stock Transfer, Inc. (8-Exhibit 1)
4.15 Certificate of Designations of the Series A Junior Participating
Preferred Stock (included in Exhibit 4.14 above)
10.1 Agreement, dated March 31, 1994, among Registrant, Bastian
Holdings, Inc., Kabushi Investments Limited and Michael A. Gibbs
(6-Exhibit 10.1)
10.2 Agreement, dated as of March 16, 1994, among Registrant, DRS
Apparel, Inc., L'Ancresse Holdings, Ltd., Kabushi Investments Ltd. and
Bastian Holdings, Inc. (6-Exhibit 10.2)
10.3(a) Stock Purchase Agreement, dated as of December 13, 1991,
between the Hanover Partnership and the Registrant, incorporated by
reference to Exhibit 1 of the Statement on Schedule 13D, filed on January
13,1992 by Bastian Holdings, Kabushi et al. with respect to the Common
Stock of the Registrant (the "Bastian Holdings 13D")
10.3(b) Assignment, dated as of January 2, 1992, by the Hanover
Partnership in favor of Bastian Holdings and Kabushi, incorpo rated by
reference to Exhibit 5 to the Bastian Holdings 13D
10.3(c) Amendment, dated as of March 8, 1992, between the Hanover
Partnership and the Registrant, incorporated by reference to Exhibit 1to
Amendment No. 1 to the Bastian Holdings 13D, filed on March 18, 1992
10.3(d) Amendment No. 2 to Stock Purchase Agreement, dated as of
April 20, 1992, among the Hanover Partnership, Bastian Holdings,
Kabushi, Michael A. Gibbs and the Registrant (3-Exhibit 10.5(d))
10.3(e) Amendment No. 3 to Stock Purchase Agreement, dated June 30,
1992, among the Hanover Partnership, Bastian Holdings, Kabushi,Michael
A. Gibbs and the Registrant (1-Exhibit 10.5(e))
10.3(f) Assignment, dated as of January 3, 1992, by the Registrant in favor
of DRE (1-Exhibit 10.5(f))
10.4(a) Employment Agreement, dated as of April 24, 1992, among the
Registrant, C-B/Murray and Benson A. Selzer (1-Exhibit 10.6(a))
10.4(b) Amendment to Employment Agreement, dated as of June 16,
1992, among the Registrant, C-B/Murray, Mandel-Kahn and Benson A.
Selzer (1-Exhibit 10.6(b))
10.5(a) Employment Agreement, dated as of April 24, 1992, among the
Registrant, C-B/Murray and Joseph Eiger (1-Exhibit 10.7(a))
10.5(b) Amendment to Employment Agreement, dated as of June 16,
1992, among the Registrant, C-B/Murray, Mandel-Kahn and Joseph Eiger
(1-Exhibit 10.7(b))
10.6 Consulting Agreement, dated January 1, 1996, between Joel Mandel
and General Textiles
10.7 Employment Agreement, dated as of August 1, 1995, between
General Textiles and William Mowbray
10.8 Employment Agreement, dated as of August 21, 1995, between
General Textiles and Kevin P. Frabotta
10.8(a) Advisory Agreement dated as of November 1, 1995 between the
Registrant and H. Jurgen Schlichting
10.9(a) Management Agreement, dated May 28, 1993, among DRS
Apparel, Inc., General Textiles and Transnational Capital Ventures, Inc.
(6-Exhibit 10.9 (a))
10.9(b) Assignment (of Management Agreement), dated January 28, 1994,
among DRS Apparel, Inc., General Textiles and Transnational Capital
Ventures, Inc. (6-Exhibit 10.9(b))
10.10(a) Amended and Restated Loan and Security Agreement, dated as
of October 14, 1993, between General Textiles and Guilford Investments,
Inc. (6-Exhibit 10.10(a))
10.10(b) First Amendment to Amended and Restated Loan and Security
Agreement (6-Exhibit 10.10(b))
10.11 Option Agreement, dated January 28, 1994, between Registrant and
Guilford Investments, Inc. (6-Exhibit 10.11)
10.12 Agreement, dated January 28, 1994, between Registrant and
Guilford Investments, Inc. (6-Exhibit 10.12)
10.13 Federal Income Tax Allocation Agreement, dated May 28, 1993,
between Registrant and General Textiles (6-Exhibit 10.13)
10.14 Amended and Restated Loan and Security Agreement, dated as of
October 14, 1993 between Westinghouse Electric Corporation and General
Textiles (6-Exhibit 10.14)
10.15 Loan and Security Agreement, dated as of October 14, 1993,
between General Textiles and Greyhound Financial Capital Corporation
(6-Exhibit 10.15)
10.15 (a) Amendment No. 1 to Loan and Security Agreement, dated as of
July 14, between General Textiles and Greyhound Financial Capital
Corporation (7-10.15(3))
10.15 (b) Amendment No. 5 to Loan and Security Agreement, dated as of
April 18, 1996 between General Textiles and Finova Capital Corporation
10.16 Second Amended and Restated Senior Secured Term Note
(6-Exhibit 10.16)
10.17 Amended and Restated Revolving Credit Note, dated October 14,
1993 from General Textiles in favor of Westinghouse Electric Corporation
(6-Exhibit 10.17)
10.18 Intercreditor, Standstill and Subordination Agreement, dated as of
October 14, 1993, among Greyhound Financial Capital Corporation,
Westinghouse Electric Corporation, Guilford Investments Inc. and General
Textiles (6-Exhibit 10.18)
10.19 Stock Pledge Agreement, dated as of October 14, 1993, between
DRS Apparel, Inc. and Greyhound Financial Corporation (6-Exhibit 10.19)
10.20 Purchase and Sale Agreement, dated as of December 28, 1993,
between Guilford Investments, Inc. and Westinghouse Electric Corporation
(6-Exhibit 10.20)
10.21 Assignment and Assumption Agreement, dated December 29, 1993,
between Guilford Investments, Inc. and Westinghouse Electric Corporation
(6-Exhibit 10.21)
10.22(a) Stock Option Agreement, dated September 20,1991, among
Transnational Capital Ventures, Inc. ("TCV"), the Selzer Group, Inc.
("TSG") and the stockholders of Mandel-Kahn (3-Exhibit 10.14(a))
10.22(b) Consent, dated as of December 11, 1991, among TCV, TSG and
the stockholders of Mandel-Kahn (3-Exhibit 10.14(b))
10.22(c) First Amendment to Stock Option Agreement, effective as of
January 7,1992, among TCV, TSG and the stockholders of Mandel Kahn
(3-Exhibit 10.14(c))
10.22(d) Assignment of Contract, dated June 15, 1992, from TCV and
TSG to MKI Acquisition (5-Exhibit 4)
10.22(e) Amendment No. 2 to Stock Option Agreement, dated as of June
16, 1992, among TCV, TSG, Mandel-Kahn and thestockholders of
Mandel-Kahn (5-Exhibit 5)
10.22(f) Notice of Exercise, dated June 16, 1992, from MKI Acquisition
to the stockholders of Mandel-Kahn (5-Exhibit 6)
10.23 Stock Purchase Agreement, dated June 10, 1993, between
Registrant and MKI Holding Corp. (6-Exhibit 10.23)
10.24 Agreement and Plan of Merger, dated as of February 25, 1993,
among Batra, Inc., L'Ancresse Holdings, Ltd., Kabushi Investments, Ltd.,
Bastian Holdings, Inc., Registrant and DRS Apparel, Inc. (6-Exhibit 10.24)
10.25(a) Agreement, dated April 10, 1992, by and among Myrtle Services
(Overseas) Limited, Harold Chaffe and DRE (3-Exhibit 10.16(a))
10.25(b) Pledge Agreement, dated April 10, 1992, between DRE and the
Trustees of the Erin Settlement (3-Exhibit 10.16(b))
10.25(c) Promissory Note, dated April 10, 1992, by DRE to the Trustees
of the Erin Settlement (3-Exhibit 10.16(c))
10.25(d) Amendment to Pledge Agreement, dated as of July 22, 1992,
between DRE and the Trustees of the Erin Settlement (1-Exh ibit 10.16(d))
10.26(a) Sale Agreement, dated as of March 1, 1993, between DRE and
the Trustees (2-Exhibit 10.23(a))
10.26(b) Pledge Agreement, dated as of March 1, 1993, between DRE and
the Trustees (2-Exhibit 10.23(b))
10.27(a) Stock Purchase Agreement, dated as of August 29, 1995, among
the Registrant, certain shareholders of Capin Mercantile Corporation and
Sellers Agent ("F2U Sellers") (8-Exhibit 10.1)
10.27(b) Amendment to Stock Purchase Agreement, dated November 10,
1995, between the Registrant and F2U Sellers (8-Exhibit 10.2) 10.30(a)
Loan and Security Agreement dated November 13, 1995 between Factory
2-U and Finova
10.30(b) Amendment No. 1 to Loan and Security Agreement, dated April
18, 1996, between Factory 2-U and Finova
21 List of subsidiaries
23.1 Consent of KPMG Peat Marwick LLP
- ----------------------------------------------------------
(1) Incorporated by reference to the Registrant's Registration Statement
on Form S-1, No. 33-47645 filed with the Commission on September 16,
1992.
(2) Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended April 30, 1993.
(3) Incorporated by reference to the Registrant's Form 10-K for the fiscal
year ended December 31, 1991.
(4) Incorporated by reference to the Registrant's Form 8-K filed with the
Commission on June 23, 1993.
(5) Incorporated by reference to the Registrant's Form 8-K filed with the
Commission in July 1992.
(6) Incorporated by reference to the Registrant's Registration Statement
on Form S-1, No. 33-77488 filed with the Commission on April 7, 1994.
(7) Incorporated by reference to General Textiles' Registration Statement
on Form S-4, No. 33-92176 filed with the Commission on May 11, 1995.
(8) Incorporated by reference to the Registrant's Form 8-K and 8-K/A
dated November 28, 1995.
(9) Incorporated by reference to the Registrant's Form 8-K dated
November 27, 1995.
(b) Reports on Form 8-K. The Registrant filed a Form 8-K and Form
8-K/A dated November 28, 1995 reporting the acquisition of Capin
Mercantile Corporation (renamed Factory 2-U, Inc.) including financial
statements of Factory 2-U as of and for the years ended December 31,
1994, December 31, 1993 and December 31, 1992, and pro forma financial
statements. In addition, a Form 8-K dated November 27, 1995 was filed
by the Registrant reporting the adoption of a Shareholders Rights Plan.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, hereunto duly authorized.
FAMILY BARGAIN CORPORATION
By: /s/ William W. Mowbray
William W. Mowbray
Chief Financial Officer and Director
(Chief Financial and
Accounting Officer)
May 14, 1996
EXHIBIT 10.6
CONSULTING AGREEMENT
The Consulting Agreement is made and entered into as January 1, 1996 by
and between GENERAL TEXTILES, a California corporation (the
Company) and JOEL MANDEL for himself and his successors
(Consultant).
W I T N E S S E T H:
WHEREAS, the Company has agreed to retain the Consultant as
providedin this Agreement; and
WHEREAS, the Consultant agreed to render the consulting services
herein provided and to be bound by the provisions set forth herein;
NOW, THEREFORE, for and in consideration of the premises and
intending to be legally bound, the parties agree as follows:
1. Engagement and Scope of Service.
The Company hereby engages Consultant, and Consultant hereby accepts
this engagement from the Company as a consultant to the Company to
provide consulting services to the Company and agrees to perform the
reasonable duties requested of him in such capacity in good faith and with
reasonable diligence; such requested duties being those reasonable duties
which are, from time to time, established and designated and
communicated in writing to Consultant by the President of the Company,
during the term of this Agreement.
2. Place of Engagement.
The required duties of Consultant under this Agreement shall principally
and primarily be performed by Consultant at 5214 North Braeswood,
Houston, Texas, 77096, in Houston, Harris County, Texas, and incidentally
and secondarily shall be performed by Consultant at such other placeor
places to which the Company may, from time to time, reasonably request
Consultant to travel in connection with the duties of Consultant under this
Agreement.
3. Time to be Devoted to Business.
The Company shall notify the Consultant of the Company s desire to
have the Consultant render services under this Agreement, two business
days in advance of the day such services are desired by the Company
(subject to delay because of health, reasonable vacation or out of town
travel of Consultant). Consultant shall give his reasonable efforts and
endeavors to the discharge of his duties and responsibilities hereunder, at
or reasonably near the time required by the Company.
Consultant s expenditure of reasonable amounts of time for personal,
outside business, charitable and professional activities shall not be deemed
a breach of this Agreement provided that such activities do not materially
interfere with the services required to be rendered by Consultant to the
Company hereunder. The making of personal investments and the conduct
of private business affairs shall not be prohibited hereunder.
4. Term of Engagement.
The term of engagement of Consultant by the Company shall commence
on the date hereof, and shall terminate on the fifth anniversary of such date
unless sooner terminated in accordance with Section 6, below.
5. Compensation.
The Company agrees to pay or cause to be paid to Consultant, for all of
Consultant s services hereunder, and Consultant agrees to accept in full
compensation therefore, the following:
A. Base Compensation. Consultant s compensation shall be
$125,000 for each of the first three years, $187,500 for the fourth and fifth
year during the term hereof. Such base compensation shall be paid monthly
in arrears. Payment shall be made to Consultant s counsel, Wynne &
Maney, 2730 Texas Commerce Tower, Houston, Texas 77002.
B. Additional Compensation. As additional compensation for the
services of Consultant, the Company shall deliver or cause to be delivered
to Consultant 60,000 shares of the Series A 9 1/2% Cumulative
Convertible Preferred Stock of Family Bargain Corporation as described in
Family Bargain s prospectus dated July 14, 1994, registered with the
Securities Exchange Commission for resale to the public.
C. Other Benefits. Consultant shall not be entitled to participate in
the Company s health and medical or other benefit plans.
D. Miscellaneous Expenses.
The Company shall promptly reimburse Consultant for all reasonable and
necessary expenses incurred or paid by Consultant and approved in writing
in advance by the Company upon delivery to the Company or proper
evidence of such expenses.
6. Restrictive Covenants.
A. Nonsolicitation. During the term of this Agreement, the
Consultant agrees that he will not, either directly or indirectly, through any
person, firm,association or corporation with which he is now or may
hereafter become associated, solicit or contact for the purpose of soliciting
any customers of the Company with respect to retail apparel business (
Industry ), if any such customers or other persons conduct Industry
business in whole or in part within the States of Texas, New Mexico,
Arizona, California, Nevada, Oregon or Washington and if the Consultant
has had any contact for the purpose of soliciting Industry business with
such customer while the Consultant was employed as an employee (prior to
the term of this Agreement) by the Company.
B. No-Hire. During the term of this Agreement, the Consultant
agrees that he will not, either directly or indirectly, through any person,
firm, association or corporation with which he is now or may hereafter
become associated, cause or induce any present or future employee of the
Company to leave the engage or employment of the Company to accept
employment with the Consultant or with such person, firm, association or
corporation.
7. Termination of Engagement.
This Agreement may be terminated only by mutual agreement of the
Company and Consultant in writing.
8. Successors.
In the event of Joel Mandel s death before termination of this agreement,
Shirley Mandel will be his successor as Consultant, and, if she dies before
termination of this agreement, she will be succeeded by Barry Mandel as
Consultant, and, if he dies before termination of this agreement, he will be
succeeded by Cindy Kaplan as Consultant, and, if she dies before
termination of this agreement, she will be succeeded by Marlene Siegman
as Consultant; provided, however, that any such succession shall be subject
to receipt by the Company of the written agreement of the successor to
perform the obligations of the Consultant hereunder and to be bound by the
provisions of this Agreement.
9. General Provisions.
A. Notices. Any notice or other communication given or made
under or pursuant to this Agreement shall be in writing and may be
delivered to the relevant party or sent by registered or certified mail, return
receipt requested, postage prepaid, or sent by telex or facsimile
transmission (with follow-up notice sent immediately by registered or
certified mail) addressed to such party at such party s address below or
such other address as any party may hereafter designate for notice
purposes. Any notice delivered by letter shall be deemed to have been
given seventy-two hours after the mailing of such notice and if by personal
delivery, telex or facsimile transmission, when respectively delivered or
transmitted.
B. Other Agreements. This Agreement constitutes the entire
agreement of the parties hereto relative to the subject matter hereof,
expressly superseding all prior understandings, commitments and
agreements other than those expressly referred to in this Agreement,
whether written or oral, between the Company and Consultant, other than
the Settlement Agreement, which shall remain in effect.
C. Governing Law. This Agreement shall be governed by and
construed in all respects in accordance with the internal local laws of the
State of New York and the United States.
D. No Waiver. The failure of either party to insist in any one or
more instances upon the performance of any of the terms or conditions of
this Agreement shall not be construed as a waiver or relinquishment or any
right granted hereunder or of the future performance of any such term,
covenant or condition, and the obligations of either party with respect
thereto shall continue in full force and effect.
E. Severability. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid or unenforceable to
any extent, the remainder of this Agreement and the application of such
provisions to other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
F. Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender shall include all
other genders; the singular shall include the plural and vice versa. Titles of
sections and paragraphs are for convenience only and neither limit nor
amplify the provisions of this Agreement itself.
G. Binding Agreement. This Agreement shall inure to the benefit of
and be binding upon the undersigned parties and their respective heirs,
executors, successors and assigns. Whenever in this instrument, a
reference to any party is made, such reference shall be deemed to include a
reference to the successors and assigns of such party.
H. No Third Party Beneficiary. Any agreement to pay any amount
and any assumption of liability herein contained, express or implied, shall
be only for the benefit of the undersigned parties and their respective heirs,
executors, successors and assigns, and such agreement and assumption
shall not inure to the benefit of the obligee or any indebtedness or any other
party whomsoever it being the intention of the undersigned that no one
shall be deemed to be a third party beneficiary of this Agreement.
I. Independent Contractor. The Consultant is retained and engaged
by the Company only for the purposes and to the extent set forth in this
Agreement, and the Consultant s relation to the Company shall, during the
term of this Agreement, by that of independent contractor and not that of
an employee. In rendering his services hereunder, the Consultant shall not,
without prior written consent of the Company, represent that he has the
right or authority to bind the Company in any respect.
J. Remedies. The parties agree that any remedy at law for any actual
or threatened breach of this Agreement by either party would be inadequate
and that the non-breaching party shall be entitled to specific performance
hereof or injunctive relief or both, by temporary or permanent injunction or
such other appropriate judicial remedy, writ or order as may be entered
into by a court of competent jurisdiction in addition to any damages that
the prevailing party may be legally entitiled to recover together with
reasonable expenses of litigation, including reasonable attorneys fees
incurred by the prevailing party in connection therewith, as may be
approved by such court, and the parties further agree to waive any
requirements for the securing or posting of any bond in connection with the
obtaining of such injunctive or equitable relief.
This Agreement is executed in multiple counterparts, one copy of which
is to be retained by each party hereto and each copy of the executed
counterparts shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day andyear first set forth above.
COMPANY
GENERAL TEXTILES
a California Corporation
By: /s/ William W. Mowbray
Name: William W. Mowbray
Title: President and CEO
Address: 4000 Ruffin Road
San Diego, CA 92123-1866
CONSULTANT
By: /s/ Joel Mandel
Address: 5214 North Braeswood
Houston, TX 77096
With copy to: Wynne & Maney
2730 Texas Commerce Tower
Houston, TX 77002
PARENT GUARANTY
The Company s performance under this Consulting Agreement
is hereby guaranteed in all respects.
FAMILY BARGAIN CORPORATION
By: /s/ John A. Selzer
Name: John A. Selzer
Title: President and CEO
Address: 315 East 62nd Street
New York, NY 10021
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of August 1, 1995, by and between
GENERAL TEXTILES, a California corporation, with its principal office
at 315 East 62nd Street, New York, New York 10021 (the "Company"),
and WILLIAM MOWBRAY, with an address at 6814 Vianda Court,
Carlsbad, California 92083 (the "Employee").
INTRODUCTION
The parties hereto desire to provide for the employment of the
Employee with the Company. In order to accomplish such purposes and in
consideration of the terms, covenants and conditions hereinafter set forth,
the parties hereby enter into this Agreement.
ARTICLE I
EMPLOYMENT; TERM; DUTIES
1.01 Employment. Upon the terms and conditions hereinafter set forth,
the Company hereby employs the Employee, and the Employee hereby
accepts employment, for the position of President and as Chief Executive
Officer of the Company, as designated in its by-laws.
1.02 Term. Unless sooner terminated as hereinafter provided, the
Employee's employment hereunder shall be for a term (the "Term")
commencing on the date hereof and terminating on the third anniversary
date of the date hereof. The term of this Agreement shall be automatically
extended by one year on each anniversary, unless either Employee or the
Company notify the other, within sixty (60) days of each anniversary of the
date hereof of his or its intention not to extend the Term of this Agreement.
1.03 Duties. During the Term, the Employee shall perform such duties
for the Company and for its subsidiaries and affiliates, consistent with his
position hereunder, and as may be assigned to him from time to time by the
Board of Directors of the Company (the Board ). The Employee shall
devote his best efforts and his entire business time, attention and energies
to the performance of his duties hereunder.
1.04 Exclusive Agreement. The Employee represents and warrants to
the Company that there are no agreements or arrangements, whether
written or oral, in effect which would prevent the Employee from rendering
service to the Company during the term as provided herein.
ARTICLE II
COMPENSATION
2.01 Base Salary. For all services rendered by the
Employee hereunder and all covenants and conditions undertaken by him
pursuant to this Agreement, the Company shall pay, and the Employee shall
accept, as full compensation, an annual base salary, as adjusted pursuant to
Section 2.02 below ("Base Salary") of Three Hundred Thousand
($300,000) Dollars, (plus any amount earned under Section 2.03), payable
in not more than bi-weekly installments.
2.02 Annual Salary Adjustments. Beginning March 1, 1996 and on
March 1st of each year thereafter (each a "Salary Adjustment Date"), the
Base Salary of the Employee shall be increased by five percent of the
current Base Salary, plus an amount determined by multiplying the Base
Salary for such prior period by a fraction, the denominator of which shall
be the Consumer Price Index figure published immediately prior to the date
hereof, and the numerator of which shall be the Consumer Price Index
figure published immediately prior to the Salary Adjustment Date. As used
herein, the term "Consumer Price Index" shall mean the United States
Department of Labor's Bureau of Labor Statistics' Consumer Price Index,
All Urban Wage Earners and Clerical Workers, All items (1982-83-100)
for San Diego.
2.03 Incentive Compensation. In addition to the Base Salary and annual
salary adjustments provided for in Sections 2.01 and 2.02, if the Company,
for each of the Company's fiscal years (as hereinafter defined) has EBITDA
(as hereinafter defined) equal to at least eighty five (85%) percent of the
Projected EBITDA (as hereinafter defined) the Employee is employed by
the Company hereunder on the last day of such Fiscal Year, then the
Company shall, subject to the provisions of this Section 2.03, pay the
Employee a bonus (the "Bonus) calculated as follows:
(a) if the Company's EBITDA is equal to or greater than eighty five
(85%) percent and less than ninety (90%) percent of the Projected
EBITDA for such Fiscal Year, then the Bonus shall equal ten (10%)
percent of the Employee's Base Salary in effect on the last day of such
Fiscal Year;
(b) if the Company's EBITDA is equal to or greater than ninety
(90%) percent and less than one hundred (100%) percent of the Projected
EBITDA for such Fiscal Year, then the Bonus shall equal twenty (20%)
percent of the Employee's Base Salary in effect on the last day of such
Fiscal Year; and
(c) if the Company's EBITDA is equal to or greater than one
hundred (100%) percent of the Projected EBITDA for such Fiscal Year,
then the Bonus shall be thirty (30%) percent of the Employee's Base Salary
in effect on the last day of such Fiscal Year plus an additional one (1%)
percent of the Employee s Base Salary in effect on the last day of such
Fiscal Year for each one (1%) percent increase in EBITDA above one
hundred (100%) percent of the Projected EBITDA up to one hundred
thirty eight (138%) percent and one half (1/2%) percent of the Employee s
Base Salary in effect on the last day of such Fiscal Year for each one (1%)
percent increase in EBITDA above one hundred thirty eight (138%)
percent of Projected EBITDA up to a maximum of one hundred (100%)
percent of the Employee's salary as a Bonus.
For purposes of calculating any Bonus payable for the fiscal year ending
January 1996, the Employee s Base Salary shall be considered to equal two
hundred sixty three thousand five hundred ($263,500) dollars.
All bonus payments under this Section shall be paid within fifteen (15)
days following the issuance by the Company's independent certified public
accountants of the audited annual financial statements of the Company (the
"Financial Statements"). For purposes of computing EBITDA, the
Financial Statements shall be binding on the Company and the Employee.
For purposes of this Section:
Fiscal Year is the fifty-two (52) or fifty-three (53) week period
commencing on the day after the end of the previous fiscal year and ending
on the Saturday closest to January 31.
"EBITDA" is the combined net earnings from continuing operations
of General Textiles and Factory 2-U, Inc. Prior to provisions for interest,
taxes, management fees, depreciation amortization, and extraordinary items
and prior to any bonus payments to the President, Executive Vice President
and/or Senior Vice President of General Textiles compute in accordance
with generally accepted accounting principles applied on a consistent basis.
Projected EBITDA shall equal $6,512,000 for the fiscal year
ending January 1996. For fiscal years subsequent to the fiscal year ending
January 1996, the EBITDA thresholds for bonus calculations shall be
determined by the Executive Committee of the Board within thirty days
prior to the commencement of such fiscal year.
2.04 Disability Adjustments. Any compensation otherwise payable to
the Employee pursuant to Sections 2.01, 2.02 and 2.03 in respect of any
period during which the Employee is disabled (as contemplated in Section
4.03) shall be reduced by any amounts payable to the Employee for loss of
earnings or the like under any insurance plan or policy the premiums for
which are paid for in their entirely by the Company.
ARTICLE III
BENEFITS; EXPENSES
3.01 Benefits. During the Term, the Employee
shall be entitled to participate in such group life, health, accident,
disabilityor hospitalization insurance plans (the Health Plans ), pension plans
or retirement plans as the Company has previously made available to its other
executive employees as a group, all pursuant to the terms and conditions of
such plans as the same may, from time to time, be amended.
3.02 Expenses. The Company agrees that the Employee is authorized
to incur reasonable expenses in the performance of his duties hereunder,
and upon presentation of a reasonably itemized account thereof, the
Company shall promptly pay or reimburse the Employee for such
reasonable expenses so incurred by the Employee.
3.03 Vacations. For each twelve (12) month period of the Term, the
Employee shall be entitled to three (3) weeks of paid vacation, or a pro rata
portion thereof, for any portion of the Term which is less than twelve (12)
months, to be taken at times determined by the Employee which do not
unreasonably interfere with the performance of his duties hereunder,
provided, that no single vacation shall exceed three (3) consecutive weeks.
3.04 Automobile Allowance. During the Term, the Company at its sole
expense shall furnish the Employee with a monthly allowance of Eight
Hundred and Fifty ($850) Dollars before taxes for the use of an automobile
by the Employee in connection with his duties hereunder, and shall
reimburse Employee for expenses, such as insurance, repairs, maintenance,
license fees, gas and oil incurred therewith.
3.05 Life Insurance. During the Term, the Company agrees to
furnish the Employee with a Life Insurance policy, whose beneficiary shall
be named by the Employee, in an amount equal to twice the yearly Base
Salary as adjusted in Section 2.01 and 2.02.
ARTICLE IV
TERMINATION; DEATH; DISABILITY; CHANGE IN CONTROL; RETIREMENT
4.01 Termination of Employment with Cause;
Resignation; Non-Renewal. If the Employee (a) breaches any material
provision of this Agreement and such breach is not remedied within thirty
(30) days after written notice thereof from the Company; (b) has been
convicted (or confesses to) of committing a felony which results in
imprisonment in excess of three (3) months, or (c) has committed an act of
fraud, misappropriation of funds or embezzlement in connection with his
employment hereunder; or (d) resigns, or (e) does not extend his
employment agreement in accordance with Section 1.02 hereof, then in
addition to any other remedies available to it at law, in equity or as set
forth in this Agreement, the Company shall have the right, except in the
case of (e) above, upon written notice to the Employee, to immediately
terminate his employment (a "Termination With Cause") hereunder,
without any further liability or obligation to him hereunder or otherwise in
respect of his employment, other than its obligation to pay accrued but
unpaid Base Salary, vacation time and other accrued benefits and expenses
as of the date of termination. In the case of (e) above, such event shall also
be deemed a Termination With Cause, but the obligation of the Company
to pay accrued but unpaid Base Salary, annual salary adjustments, incentive
compensation, vacation time and other accrued expenses and benefits shall
continue to the date of expiration of the Term.
4.02 Termination of Employment Without Cause. Notwithstanding any
provision to the contrary herein, the Company may at any time, in its sole
and absolute discretion and for any or no reason, terminate the employment
of the Employee hereunder; provided, that if such termination is not a
Termination With Cause, the Company shall pay the Employee as follows:
(a) any accrued but unpaid compensation for Base Salary as of the
date of termination and a pro rata portion of the Bonus for such Fiscal
Year in which the termination occurred, as and when such amounts are due
and payable hereunder;
(b) payment (the "Severance Payments") for a period of one (1)
year in an amount equal to the Employee's base salary as adjusted pursuant
to Section 2.02 hereof, payable in twelve (12) monthly installments, with
the first payment being made on the thirtieth (30th) day following such date
of termination with each subsequent payment made on the same day of
each successive month for the following twelve (12) months,
(c) a cash payment immediately upon the date of termination equal
to the Employee's Base Salary on a daily basis (computed on a 260
workday year) in effect on the date of termination, multiplied by the
number of accrued and unused vacation days at the date of termination,
and
(d) the Employee shall also be entitled to Company paid benefits as
defined in Section 3.01 and 3.05 during any and all severance periods
defined in Section 4.02 (b). Such benefits will terminate at the end the
severance.
The Employee acknowledges that the payments referred to in this
Section 4.02 constitute the only payments which the Employee shall be
entitled to receive from the Company hereunder in the event of any
termination of his employment pursuant to this Section 4.02, and that
except for such payments and accrued but unpaid expenses and benefits as
of the date of termination, the Company shall have no further liability or
obligation to him hereunder or otherwise in respect of his employment.
4.03 Death; Disability. The Employee's employment hereunder shall
terminate (x) upon his death or (y) if the Employee becomes Disabled (as
such term is hereinafter defined), at the election of the Company by written
notice to the Employee. In the event of a termination of the Employee's
employment for death or Disability, the Company shall pay the Employee
(or his legal representatives, as the case may be) as follows:
(a) any accrued but unpaid compensation for Base Salary as of the
date of death or termination for Disability (and a pro rata portion of the
Bonus for such Fiscal Year in which the death or termination for Disability
occurred), as and when such amounts are due and payable hereunder;
(b) the Employee's Base Salary as adjusted pursuant to Section 2.02
hereof and in effect on the date of death or termination for Disability, in
monthly installments for the balance of the Term, but in no event shall such
payments be for more than twelve (12) months;
(c) a cash payment payable on the date of termination equal to the
Employee's Base Salary on a daily basis (computed on a 260-day year) in
effect on the date of death or termination, multiplied by the number of
accrued and unused vacation days at the date of such termination; and
(d) in the event the Employee is Disabled, the Company will
continue to pay Benefits under Section 3.01 and 3.05 hereto for the
Employee for the balance of the Term.
For the purposes of this Agreement, the Employee shall be deemed to
be "Disabled" or have a "Disability" if he has been unable to perform his
duties hereunder for three (3) consecutive months or ninety (90) days in
any twelve (12) consecutive month period, as determined in good faith by
the Board of Directors of the Company.
The Employee acknowledges that the payments referred to in this
Section 4.03 constitute the only payments to which the Employee (or his
legal representatives, as the case may be) shall be entitled to receive from
the Company hereunder in the event of a termination of his employment for
death or Disability, and that except for such payments and accrued but
unpaid expenses and benefits as of the date of termination, the Company
shall have no further liability or obligation to him (or his legal
representatives, as the case may be) hereunder or otherwise in respect of
his employment.
4.04 Change in Control. The Employee s employment hereunder may
at the option of the Employee terminate upon the occurrence of a Change
in Control of the Company or of Family Bargain Corporation ( FBC ), as
defined below, (a Change in Control ). In the event of such termination
for a Change in Control, the Company shall pay the Employee as follows:
(a) any accrued but unpaid compensation for Base Salary as of the
date of termination and a pro rate portion of the Bonus for such Fiscal
Year in which the termination occurred, as and when such amounts are due
and payable hereunder;
(b) payment (the Severance Payment ) of an amount equal to two
years of the Employee s Base Salary as adjusted pursuant to Section 2.02
hereof, payable within thirty (3) days following such date of termination,
and
(c) a cash payment immediately upon the date of termination equal
to the Employee s Base Salary on a daily basis (computed on a 260
workday year) in effect on the date of termination, multiplied by the
number of accrued and unused vacation days at date of termination.
The Employee acknowledges that the payments referred to in this
Section 4.04 constitute the only payments which the Employee shall be
entitled to receive from the Company hereunder in the event of any
termination of his employment pursuant to this Section 4.04, and that
except for such payments and accrued but unpaid expenses and benefits as
of the date of termination, the Company shall have no further liability or
obligation to him hereunder or otherwise in respect of his employment.
Employee may exercise his right of termination by providing written notice
thereof to the Company within 90 days of the Change of Control.
For purposes of this section, a Change of Control shall mean:
(i) The acquisition (other than from the Company or from FBC)
by any person, entity or group , within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act of 1934 (the Exchange Act ),
(excluding, for this purpose, FBC, the Company or their subsidiaries, or
any employee benefit plan of FBC or the Company or their subsidiaries
which acquires beneficial ownership of voting securities of FBC or the
Company) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 50% or more of either the then
outstanding shares of common stock or the combined voting power of FBC
s or the Company s then outstanding voting securities entitled to vote
generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board or
the Board of FBC (the Boards , as of the date hereof, collectively the
Incumbent Boards ) cease for any reason to constitute at least a majority of
each of the Boards, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company s shareholders, was approved by a vote of at least a majority
of the directors then comprising both of the Incumbent Boards (other than
an election or nomination of an individual whose initial assumption of
office is in connection with an actual or threatened election content relating
to the election of the Directors of FBC or the Company, as such terms are
used in Rule 14a-11 of Regulation 14A promulgated under the Exchange
Act) shall be, for purposes of this Agreement considered as though such
person were a member of the Incumbent Boards; or
(iii) Approval by the stockholders of FBC or the Company of a
reorganization, merger or consolidation, as a result of which, in each case,
persons who were the stockholders of FBC or the Company immediately
prior to such reorganization, merger or consolidation do not, immediately
thereafter, own more than 50% of the combined voting power entitled to
vote generally in the election of directors of the reorganized, merged or
consolidated company s then outstanding voting securities, or a liquidation
or dissolution of FBC or the Company or of the sale of all or substantially
all of the assets of FBC or the Company.
ARTICLE V
INVENTIONS; NON-DISCLOSURE; NON-COMPETITION
5.01 Inventions. All processes, technologies and
inventions (collectively, "Inventions"), including new contributions,
improvements, ideas, discoveries, logos, computer programs, trademarks
and trade names, conceived, developed, invented, made or found by the
Employee, alone or with others, during his employment by the Company,
whether or not patentable and whether or not conceived, developed,
invented, made or found on the Company's time or with the use of the
Company's facilities or materials, shall be the property of the Company and
shall be promptly and fully disclosed by the Employee to the Company.
The Employee shall perform all necessary acts (including, without
limitation, executing and delivering any confirmatory assignments,
documents or instruments requested by the Company) to vest title to any
such Invention in the Company and to enable the Company, at its expense,
to secure and maintain domestic and/or foreign patents or any other rights
for such Inventions.
5.02 Non-Disclosure. The Employee shall not, at any time during the
Term or thereafter, directly or indirectly disclose or furnish to any other
person, firm or corporation, except in the course of the proper performance
of his duties hereunder (a) any information relating to any process,
technique or procedure used by the Company which is not, specifically, a
matter of public knowledge; or (b) any information relating to the
operations or financial status of the Company (including, without
limitation, all financial data and sources of financing), which information is
not specifically a matter of public knowledge; or (c) any information of a
confidential nature obtained as a result of his present or future relationship
with the Company, which information is not specifically a matter of public
knowledge; or (d) the name, address or other information relating to any
customer or supplier of the Company; or (e) any other trade secrets of the
Company. Promptly upon the expiration or termination of the Employee
employment hereunder for any reason, the Employee shall surrender to the
Company all documents, drawings, work papers, lists, memoranda, records
and other data (including all copies) constituting or pertaining in any way
to any of the foregoing information.
5.03 Non-Competition. The Employee agrees that during the Term
and, in the event of a Termination With Cause, for a period of one (1) year
following such termination of his employment with the Company, he will
not, directly or indirectly, (a) compete with the Company in the operation
of a retail bargain clothing store or chain of such stores in the States or
California, Arizona, New Mexico, Washington and Oregon; or (b) be
interested in, employed by, engaged by, or participate in the ownership,
management, operation or control of, or act in any advisory or other
capacity for, any firm or corporation which competes with the Company in
the States of California, Arizona, New Mexico, Washington and Oregon;
provided, however, that notwithstanding the foregoing, the Employee may
make solely passive investments in any corporation the common stock of
which is "publicly held," and of which the Employee shall not own or
control securities which constitute more than one (1%) percent of the
voting rights or equity ownership of such corporation; or (c) solicit or
divert business from the Company or assist any person, firm or corporation
in doing so or attempting to do so; or (d) cause or seek to cause any
person, firm or corporation to refrain from dealing or doing business with
the Company or assist any person, firm or corporation in doing so or
attempting to do so.
5.04 Breach of Provisions. In the event that the Employee shall breach
any of the provisions of this Article V, or in the event hat any such breach
is threatened by the Employee, in addition to and without limiting or
waiving any other remedies available to the Company at law or in equity,
the Company shall be entitled to immediate injunctive relief in any court,
domestic or foreign, having the capacity to grant such relief, to restrain any
such breach or threatened breach and to enforce the provisions of this
Article V. The Employee acknowledges and agrees that there is no
adequate remedy at law for any such breach or threatened breach and, in
the event that any action or proceeding is brought seeking injunctive relief,
the Employee shall not use as a defense thereto that there is an adequate
remedy at law.
5.05 Reasonable Restrictions. The parties acknowledge that the
foregoing restrictions, the duration and the territorial scope thereof as set
forth in this Article V, are under all of the circumstances reasonable and
necessary for the protection of the Company and its business.
5.06 Definition. For purposes of this Article V, the term "Company"
shall be deemed to include any subsidiary or affiliate of, or predecessor to ,
the Company.
ARTICLE VI
MISCELLANEOUS
6.01 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
heirs, distributees, successors and assigns; provided, that the rights and
obligations of the Employee hereunder shall not be assignable by him.
6.02 Notices. Any notice provided for herein shall be in writing and
shall be deemed to have been given or made when personally delivered; or
(b) when sent by telecopier and confirmed within forty eight (48) hours by
letter mailed or delivered to the party to be notified at its or his address set
forth herein; (c) three (3) days following deposit for mailing by first class
registered or certified mail, return receipt requested, to the address of the
other party set forth or to such other address as may be specified by notice
given in accordance with this Section 6.02:
If to the Company:
c/o Family Bargain Corporation
315 East 62nd Street, Sixth Floor
New York, New York 10021
Attention: Chief Executive Officer
With a copy to:
Baer Marks & Upham
805 Third Avenue
New York, New York 10022
Attention: Mr. Joel M. Handel, Esq.
If to the Employee:
William W. Mowbray
6814 Vianda Court
Carlsbad, California 92083
6.03 Severability. If any provision of this Agreement, or portion
thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and shall not in any manner affect or render
invalid or unenforceable any other provision of this Agreement or portion
thereof, and this Agreement shall be carried out as if any such invalid or
unenforceable provision or portion thereof were not contained herein. In
addition, any such invalid or unenforceable provision or portion thereof
shall be deemed, without further action on the part of the parties hereto,
modified, amended or limited to the extent necessary to render the same
valid and enforceable.
6.04 Waiver. No waiver by a party hereto of a breach or default
hereunder by the other party shall be considered valid, unless in writing
signed by such first party, and no such waiver shall be deemed a waiver of
any subsequent breach or default of the same or any other nature.
6.05 Entire Agreement. This Agreement sets forth the entire
agreement between the parties with respect to the subject matter hereof,
and supersedes any and all prior agreements between the Company and the
Employee, whether written or oral, relating to any or all matters covered
by and contained or otherwise dealt with in this Agreement. This
Agreement does not constitute a commitment of the Company with regard
to the Employee's employment, express or implied, other than to the extent
expressly provided for herein.
6.06 Amendment. No modification, change or amendment of this
Agreement or any of its provisions shall be valid, unless in writing and
signed by the party against whom such claimed modification, change or
amendment is sought to be enforced.
6.07 Authority. The parties each represent and warrant that they have
the power, authority and right to enter into this Agreement and to carry out
and perform the terms, covenants and conditions hereof.
6.08 Titles. The titles of the Articles and Sections of this Agreement
are inserted merely for convenience and ease of reference and shall not
affect or modify the meaning of any of the terms, covenants or conditions
of this Agreement.
6.09 Applicable Law. This Agreement, and all of the rights and
obligations of the parties in connection with the employment relationship
established hereby, shall be governed by and construed in accordance with
the substantive laws of the State of New York without giving effect to
principles relating to conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
GENERAL TEXTILES
By: /s/ Jeffrey Gerstel
Name: Jeffrey Gerstel
Title: Senior Vice President
FAMILY BARGAIN CORPORATION
By: /s/ John A. Selzer
Name: John A. Selzer
Title: President and CEO
Family Bargain Corporation
/s/ William W. Mowbray
Employee
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of August 21, 1995, by and between
GENERAL TEXTILES, a California corporation, with its principal office
at 4000 Ruffin Road, San Diego, California 92123- 1866 (the "Company"),
and Kevin P. Frabotta, with an address at 22201 Canyon Crest Drive,
Mission Viejo, California 92692 (the "Employee").
INTRODUCTION
The parties hereto desire to provide for the employment of the
Employee with the Company. In order to accomplish such purposes and in
consideration of the terms, covenants and conditions hereinafter set forth,
the parties hereby enter into this Agreement.
ARTICLE I
EMPLOYMENT; TERM; DUTIES
1.01 Employment. Upon the terms and conditions hereinafter set forth,
the Company hereby employs the Employee, and the Employee hereby
accepts employment, as Senior Vice President, Store Operations of the
Company.
1.02 Term. Unless sooner terminated as hereinafter provided, the
Employee's employment hereunder shall be for a term (the "Term")
commencing on the date hereof and terminating on the third anniversary
date of the date hereof. The term of this Agreement shall be automatically
renewed for successive periods of one (1) year, unless either Employee or
the Company notify the other, within sixty (60) days of the expiration of
the existing Term of his or its intention not to renew the Term of this
Agreement.
1.03 Duties. During the Term, the Employee shall perform such duties
for the Company and for its subsidiaries and affiliates, consistent with his
position hereunder, and as may be assigned to him from time to time by the
Chief Executive Officer or the Board of Directors of the Company. The
Employee shall devote his best efforts and his entire business time,
attention and energies to the performance of his duties hereunder.
1.04 Exclusive Agreement. The Employee represents and warrants to
the Company that there are no agreements or arrangements, whether
written or oral, in effect which would prevent the Employee from rendering
service to the Company during the term as provided herein.
ARTICLE II
COMPENSATION
2.01 Base Salary. For all services rendered by the Employee hereunder
and all covenants and conditions undertaken by him pursuant to this
Agreement, the Company shall pay, and the Employee shall accept, as full
compensation an annual base salary, as adjusted pursuant to Section 2.02
below ("Base Salary") of One Hundred Thirty-Five Thousand ($135,000)
Dollars, payable in not more than bi-weekly installments.
2.02 Annual Salary Adjustments. Beginning March 1, 1996 the Base
Salary of the Employee shall be increased by five percent of the current
Base Salary, plus an amount determined by multiplying the Base Salary for
such prior period by a fraction, the denominator of which shall be the
Consumer Price Index figure published immediately prior to the date
hereof, and the numerator of which shall be the Consumer Price Index
figure published immediately prior to the Salary Adjustment Date. As used
herein, the term "Consumer Price Index" shall mean the United States
Department of Labor's Bureau of Labor Statistics' Consumer Price Index,
All Urban Wage Earners and Clerical Workers, All items (1982-83-100)
for San Diego.
2.03 Bonus. In addition to the Base Salary and annual salary
adjustments provided for in Sections 2.01 and 2.02 if the Company, for
each of the Company's fiscal years 1993, 1994 and 1995 which period shall
be the fifty-two (52) or fifty-three (53) week period commencing on the
day after the end of the previous fiscal year and ending on the Saturday
closest to January 31 ("Fiscal Year"), has EBITDA (as hereinafter defined)
equal to at least eighty-five (85%) percent of the Projected EBITDA (as
hereinafter defined) and the Employee is employed by the Company
hereunder on the last day of such Fiscal Year, then the Company shall,
subject to the provisions of this Section 2.03, pay the Employee a bonus
(the "Bonus) calculated as follows:
(a) if the Company's EBITDA is equal to or greater than eighty five
(85%) percent and less than ninety (90%) percent of the Projected
EBITDA for such Fiscal Year then the Bonus shall equal ten (10%) percent
of the Employee's Base Salary in effect on March 1st of such Fiscal Year or
for Fiscal Year 1993 in effect on March 1st of such Fiscal Year;
(b) if the Company's EBITDA is equal to or greater than ninety
(90%) percent and less than one hundred (100%) percent of the Projected
EBITDA for such Fiscal Year then the Bonus shall equal twenty (20%)
percent of the Employee's Base Salary in effect on March 1st of
such Fiscal Year; and
(c) if the Company's EBITDA is equal to or greater than one
hundred (100%) percent of the Projected EBITDA for such Fiscal Year
then the Bonus shall be thirty (30%) percent and additionally increase by
one (1%) percent of the Employee's Base Salary in effect on March 1st of
such Fiscal Year for each increase in one (1%) percent EBITDA above one
hundred (100% percent EBITDA up to one hundred thirty-eight (138%)
percent and one half (1/2%) percent of base salary for each one (1%)
percent increase in EBITDA above on hundred thirty-eight (138%)
percent, to a maximum of one hundred (100%) percent of the Employee s
salary in bonus.
All bonus payments under this Section shall be paid within fifteen (15)
days following the issuance by the Company's independent certified public
accountants of the audited annual financial statements of the Company (the
"Financial Statements"). For purposes of computing EBITDA, the
Financial Statements shall be binding on the Company and the Employee.
For purposes of this Section:
EBITDA is net earnings prior to provision for interest, taxes,
depreciation and amortization, reflected on the Company s financial
statements computed in accordance with generally accepted accounting
principles applied on a consistent basis but excluding any gain arising from
cancellation to indebtedness. The projected EBITDA for Fiscal Year 1996
is $10,021,000 and for Fiscal Year 1997 an amount to be set by the Board
of Directors. The bonus for Fiscal Year 1996 shall be paid to employee on
the basis of fifty (50%) percent of that to which the Employee would be
entitled had he been employed for the full year.
2.04 Stock Option and Purchase. In connection with Employee's
employment with the Company, Employee and the Parent shall enter into a
definitive option agreement, the form and terms of which shall be
determined at such time as option agreements are executed with the other
officers of General Textiles.
2.05 Deductions. The Company shall deduct from the compensation
described in Sections 2.01, 2.02 and 2.03 and to the extent applicable to
items described in Sections 3.05, any Federal State or city withholding
taxes, social security, contributions and any other amounts which may be
required to be deducted or withheld by the company pursuant to any
Federal, state or city laws, rules or regulations.
2.06 Disability Adjustments. Any compensation otherwise payable to
the Employee pursuant to Sections 2.01, 2.02 and 2.03 in respect of any
period during which the Employee is disabled (as contemplated in Section
4.03) shall be reduced by any amounts payable to the Employee for loss or
earnings or the like under any insurance plan or policy the premiums for
which are paid for in their entirety by the Company.
ARTICLE III
BENEFITS; EXPENSES
3.01 Benefits. During the Term, the Employee shall be entitled to
participate in such group life, health, accident, disability or hospitalization
insurance plans, pension plans or retirement plans as the Company has
previously made available to its other executive employees as a group.
3.02 Expenses. The Company agrees that the Employee is authorized to
incur reasonable expenses in the performance of his duties hereunder, and
upon presentation of a reasonably itemized account thereof, the Company
shall promptly pay or reimburse the Employee for such reasonable
expenses so incurred by the Employee.
3.03 Vacations. For each twelve (12) month period of the Term, the
Employee shall be entitled to three (3) weeks of paid vacation, or a pro rata
portion thereof, for any portion of the Term which is less than twelve (12)
months, to be taken at times determined by the Employee which do not
unreasonably interfere with the performance of his duties hereunder,
provided, that Employee shall not accrue any additional vacation time so
long as he has accrued three (3) weeks of vacation time and that no single
vacation shall exceed three (3) consecutive weeks.
3.04 Automobile Allowance. During the Term, the Company at its sole
expense shall furnish the Employee with a monthly allowance of Seven
Hundred Fifty($750) Dollars before taxes for the use of an automobile by
the Employee in connection with his duties hereunder, and shall reimburse
Employee for expenses, such as insurance, repairs, maintenance, license
fees, gas and oil incurred in connection therewith.
3.05 Relocation Allowance. This section intentionally left blank.
ARTICLE IV
TERMINATION; DEATH; DISABILITY
4.01 Termination of Employment with Cause;
Resignation; Non-Renewal. If the Employee (a) breaches any material
provision of this Agreement and such breach is not remedied within thirty
(30) days after written notice thereof from the Company; or (b) has
committed an act of gross misconduct within the Security Exchange
Commission's regulations in connection with the performance of his duties
hereunder; or (c) demonstrates habitual negligence (as determined in good
faith by the Board of Directors) and fails to cure such negligent behavior
within thirty (30) days after written notice from the Company; or (d) has
been convicted of committing a felony which results in imprisonment in
excess of six (6) months, or (e) has committed any act of fraud,
misappropriation of funds or embezzlement in connection with his
employment hereunder; or (f) resigns, or (g) does not renew his
employment agreement in accordance with Section 1.03 hereof, then, an
addition to any other remedies available to it at law, in equity or as set
forth in this Agreement, the Company shall have the right, except in the
case of (g) above, upon written notice to the Employee, to immediately
terminate his employment (a "Termination With Cause") hereunder,
without any further liability or obligation to him hereunder or otherwise in
respect of his employment, other than its obligation to pay accrued but
unpaid Base Salary and vacation time as of the date of termination. In the
case of (g) above, such event shall also be deemed a Termination With
Cause, but the obligation of the Company to pay accrued but unpaid Base
Salary and vacation time shall continue to the date of expiration of the
Term.
<PAGE>
4.02 Termination of Employment Without Cause. Notwithstanding any
provision to the contrary herein, the Company may at any time, in its sole
and absolute discretion and for any or no reason, terminate the employment
of the Employee hereunder; provided, that if such termination is not a
Termination With Cause, the Company shall pay the Employee as follows:
(a) any accrued but unpaid compensation for Base Salary as of the
date of termination and a pro rata portion of the Bonus for such Fiscal
Year in which the termination occurred, as and when such amounts are due
and payable hereunder;
(b) provided Employee has not accepted employment with another
employer (as provided below), payments (the "Severance Payments") for
the period of one (1) year in an amount equal to the Employee s base salary
as adjusted pursuant to Section 2.02 hereof, payable in twelve (12)
consecutive monthly installments, with the first payment being made on the
thirtieth (30th) day following such date of termination with each
subsequent payment made on the same day of each successive month for
the following twelve (12) months, and
(c) a cash payment immediately upon the date of termination equal
to the Employee s Base Salary on a daily basis (computed on a 260
workday year) in effect on the date of termination, multiplied by the
number of accrued and unused vacation days at the date of termination.
Severance Payments shall terminate when the Employee has secured
new employment with a base salary equal to or greater than the Employee's
Base Salary on the date of termination. If the Employee accepts new
employment with a base salary (the "New Salary") less than the Employee's
Base Salary on the date of termination and the severance period set forth
above has not expired, the Company, in lieu of the remaining Severance
Payments to be made, shall pay the Employee the difference between
Employee's Base Salary on the date of termination and the New Salary
during the remaining applicable Severance Period.
The Employee acknowledges that the payments referred to in this
Section 4.02 constitute the only payments which the Employee shall be
entitled to receive from the Company hereunder in the event of any
termination of his employment pursuant to this Section 4.02, and that
except for such payments the Company shall have no further liability or
obligation to him hereunder or otherwise in respect of his employment.
4.03 Death; Disability. The Employee's employment hereunder shall
terminate (x) upon his death or (y) if the Employee becomes Disabled (as
such term is hereinafter defined), at the election of the Company by written
notice to the Employee. In the event of a termination of the Employee's
employment for death or Disability, the Company shall pay the Employee
(or his legal representatives, as the case may be) as follows:
(a) any accrued but unpaid compensation for Base Salary as of the
date of death or termination for Disability [and a pro rata portion of the
Bonus for such Fiscal Year in which the death or termination for Disability
occurred}, as and when such amounts are due and payable hereunder;
(b) the Employee's Base Salary as adjusted pursuant to Section 2.02
hereof and in effect on the date of death or termination for Disability, in
monthly installments for the balance of the Term, but in no event shall such
payments be for more than twelve (12) months;
(c) a cash payment payable on the date of termination equal to the
Employee's Base Salary on a daily basis (computed on a 260-day year) in
effect on the date of death or termination, multiplied by the number of
accrued and unused vacation days at the date of such termination; and
(d) in the event the Employee is Disabled, the Company will
continue to pay Benefits under Section 3.01 hereto for the Employee for
the balance of the Term, until and unless the Employee obtains other
employment with comparable benefits within such Term.
For the purposes of this Agreement, the Employee shall be deemed to
be "Disabled" or have a "Disability" if he has been unable to perform his
duties hereunder for three (3) consecutive months or ninety (90) days in
any twelve (12) consecutive month period, as determined in good faith by
the Board of Directors of the Company.
The Employee acknowledges that the payments referred to in this
Section 4.03 constitute the only payments to which the Employee (or his
legal representatives, as the case may be) shall be entitled to receive from
the Company hereunder in the event of a termination of his employment for
death or Disability, and that except for such payments the Company shall
have no further liability or obligation to him (or his legal representatives, as
the case may be) hereunder or otherwise in respect of his employment.
ARTICLE V
INVENTIONS; NON-DISCLOSURE; NON-COMPETITION
5.01 Inventions. All processes, technologies and inventions
(collectively, "Inventions"), including new contributions, improvements,
ideas, discoveries, trademarks and trade names, conceived, developed,
invented, made or found by the Employee, alone or with others, during his
employment by the Company, whether or not patentable and whether or
not conceived, developed, invented, made or found on the Company's time
or with the use of the Company's facilities or materials, shall be the
property of the Company and shall be promptly and fully disclosed by the
Employee to the Company. The Employee shall perform all necessary acts
(including, without limitation, executing and delivering any confirmatory
assignments, documents or instruments requested by the Company) to vest
title to any such Invention in the Company and to enable the Company, at
its expense, to secure and maintain domestic and/or foreign patents or any
other rights for such Inventions.
<PAGE>
5.02 Non-Disclosure. The Employee shall not, at any time during the
Term or thereafter, directly or indirectly disclose or furnish to any other
person, firm or corporation, except in the course of the proper performance
of his duties hereunder (a) any information relating to any process,
technique or procedure used by the Company which is not, specifically, a
matter of public knowledge; or (b) any information relating to the
operations or financial status of the Company (including, without
limitation, all financial data and sources of financing), which information is
not specifically a matter of public knowledge; or (c) any information of a
confidential nature obtained as a result of his present or future relationship
with the Company, which information is not specifically a matter of public
knowledge; or (d) the name, address or other information relating to any
customer or supplier of the Company; or (e) any other trade secrets of the
Company. Promptly upon the expiration or termination of the Employee
employment hereunder for any reason, the Employee shall surrender to the
Company all documents, drawings, work papers, lists, memoranda, records
and other data (including all copies) constituting or pertaining in any way
to any of the foregoing information.
5.03 Non-Competition. The Employee agrees that during the Term
and, in the event of a Termination With Cause, for a period of one (1) year
following such termination of his employment with the Company, he will
not, directly or indirectly, (a) compete with the Company in the operation
of a retail bargain clothing store or chain of such stores; or (b) be interested
in, employed by, engaged in or participate in the ownership, management,
operation or control of, or act in any advisory or other capacity for, any
firm or corporation which competes with the Company in the States of
California, Arizona, New Mexico, Texas, Nevada, Oregon and
Washington; provided, however, that notwithstanding the foregoing, the
Employee may make solely passive investments in any corporation the
common stock of which is "publicly held," and of which the Employee shall
not own or control securities which constitute more than one (1%) percent
of the voting rights or equity ownership of such corporation; or (c) solicit
or divert business from the Company or assist any person, firm or
corporation in doing so or attempting to do so; or (d) cause or seek to
cause any person, firm or corporation to refrain from dealing or doing
business with the Company or assist any person, firm or corporation in
doing so or attempting to do so.
5.04 Non-Solicitation. The Employee shall not, during the Term, and
for a one (1) year period following a Termination With Cause, directly or
indirectly, solicit or hire any person who was an employee of the Company
at any time during the Term, or assist any person, firm or corporation in
doing so or attempting to do so.
5.05 Breach of Provisions. In the event that the Employee shall breach
any of the provisions of this Article V, or in the event that any such breach
is threatened by the Employee, in addition to and without limiting or
waiving any other remedies available to the Company at law or in equity,
the Company shall be entitled to immediate injunctive relief in any court,
domestic or foreign, having the capacity to grant such relief, to restrain any
such breach or threatened breach and to enforce the provisions of this
Article V. The Employee acknowledges and agrees that there is no
adequate remedy at law for any such breach or threatened breach and, in
the event that any action or proceeding is brought seeking injunctive relief,
the Employee shall not use as a defense thereto that there is an adequate
remedy at law.
5.06 Reasonable Restrictions. The parties acknowledge that the
foregoing restrictions, the duration and the territorial scope thereof as set
forth in this Article V, are under all of the circumstances reasonable and
necessary for the protection of the Company
and its business.
5.07 Definition. For purposes of this Article V, the term "Company"
shall be deemed to include any subsidiary or affiliate of, or predecessor to ,
the Company.
ARTICLE VI
MISCELLANEOUS
6.01 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective legal representatives,
heirs, distributees, successors and assigns; provided, that the rights and
obligations of the Employee hereunder shall not be assignable by him.
6.02 Notices. Any notice provided for herein shall be in writing and
shall be deemed to have been given or made when personally delivered; or
(b) when sent by telecopier and confirmed within forty eight (48) hours by
letter mailed or delivered to the party to be notified at its or his address set
forth herein; (c) three (3) days following deposit for mailing by first class
registered or certified mail, return receipt requested, to the address of the
other party set forth or to such other address as may be specified by notice
given in accordance with this Section 6.02:
If to the Company: If to the Employee:
General Textiles Kevin P. Frabotta
4000 Ruffin Road 22201 Canyon Crest Drive
San Diego, CA 92123 Mission Viejo, CA 92692
6.03 Severability. If any provision of this Agreement, or portion
thereof, shall be held invalid or unenforceable by a court of competent
jurisdiction, such invalidity or unenforceability shall attach only to such
provision or portion thereof, and shall not in any manner affect or render
invalid or unenforceable any other provision of this Agreement or portion
thereof, and this Agreement shall be carried out as if any such invalid or
unenforceable provision or portion thereof were not contained herein. In
addition, any such invalid or unenforceable provision or portion thereof
shall be deemed, without further action on the part of the parties hereto,
modified, amended or limited to the extent necessary to render the same
valid and enforceable.
6.04 Waiver. No waiver by a party hereto of a breach or default
hereunder by the other party shall be considered valid, unless in writing
signed by such first party, and no such waiver shall be deemed a waiver of
any subsequent breach or default of the same or any other nature.
<PAGE>
6.05 Entire Agreement. This Agreement sets forth the entire agreement
between the parties with respect to the subject matter hereof, and
supersedes any and all prior agreements between the Company and the
Employee, whether written or oral, relating to any or all matters covered
by and contained or otherwise dealt with in this Agreement. This
Agreement does not constitute a commitment of the Company with regard
to the Employee's employment, express or implied, other than to the extent
expressly provided for herein.
6.06 Amendment. No modification, change or amendment of this
Agreement or any of its provisions shall be valid, unless in writing and
signed by the party against whom such claimed modification, change or
amendment is sought to be enforced.
6.07 Authority. The parties each represent and warrant that they have
the power, authority and right to enter into this Agreement and to carry out
and perform the terms, covenants and conditions hereof.
6.08 Titles. The titles of the Articles and Sections of this Agreement
are inserted merely for convenience and ease of reference and shall not
affect or modify the meaning of any of the terms, covenants or conditions
of this Agreement.
6.09 Applicable Law. This Agreement, and all of the rights and
obligations of the parties in connection with the employment relationship
established hereby, shall be governed by and construed in accordance with
the substantive laws of the State of California without giving effect to
principles relating to conflicts of law.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
GENERAL TEXTILES
By: /s/ William W. Mowbray
Name: William W. Mowbray
Title:President and CEO
/s/ Kevin P. Frabotta
Kevin P. Frabotta
EXHIBIT 10.8 (a)
ADVISORY AGREEMENT
Advisory Agreement is made and entered into as of November 1,
1995, by and between FAMILY BARGAIN CORPORATION, a
Delaware corporation (the "Company") and H. JURGEN SCHLICHTING
("Advisor").
W I T N E S S E T H:
WHEREAS, the Company has agreed to retain the Advisor as
provided in this Agreement; and
WHEREAS, the Advisor has agreed to render the advisory services
herein provided and to be bound by the non-competition and other
provisions set forth herein;
NOW, THEREFORE, for and in consideration of the premises and
intending to be legally bound, the parties agree as follows:
1. Engagement and Scope of Service.
The Company hereby engages Advisor, and Advisor hereby accepts
this engagement from the Company as a strategic and financial advisor to
the Company to provide advisory and consulting services to the Company
and agrees to perform the reasonable duties requested of him in such
capacity in good faith and with reasonable diligence; such requested duties
being those duties which are, from time to time, established and
designated and communicated to Advisor by the Chairman, Vice
Chairman or President of the Company, during the term of this Agreement.
Such duties shall initially include coordinating and negotiating strategic
financial matters of the Company (including its subsidiaries) and
participating in negotiations and discussions with the Company's
commercial and investment bankers and other financing sources of the
Company (including its subsidiaries) and coordinating the provision of
professional services to the Company and its subsidiaries and negotiating
the cost of such services. The parties will use their best efforts to
cause the Advisor to be elected to the Board of Directors of the Company
and, if elected, to serve as the Chairman of a Finance Committee of the
Board of Directors.
In the event that the Advisor ceases to serve as an advisor to the
Company pursuant to this or any other written agreement with the
Company, Advisor hereby agrees to resign from the Board of Directors of
the Company, and of each subsidiary of the Company of which he is a
director, effective upon the end of the term of engagement hereunder or
under such other agreement, and promptly upon such termination shall
submit such resignations in writing to the Secretary or President of the
Company; provided, however, that such resignations shall be effective
immediately upon the end of the term of engagement hereunder whether
or not such written resignations are received by the Company.
2. Place of Engagement.
The required duties of Advisor under this Agreement shall
principally and primarily be performed by Advisor at the Company's
executive offices in New York City, and incidentally and secondarily shall
be performed by Advisor at such other place or places to which the
Company may, from time to time, reasonably request Advisor to travel in
connection with the duties of Advisor under this Agreement.
3. Time to be Devoted to Business.
Advisor shall devote such time to the performance of his duties
hereunder as is necessary to properly perform such duties.
4. Term of Engagement.
The term of engagement of Adviisor by the Company shall
commence on the date hereof, and shall terminate on the first anniversary
of such date unless sooner terminated in accordance with Section 6, below.
5. Compensation.
The Company agrees to pay or cause to be paid to Advisor, for all
of Advisor's services hereunder, and Advisor agrees to accept in full
compensation therefor, the following:
A. Base Compensation. Advisor's compensation shall be
$100,000 per annum during the term hereof ("Base Compensation"),
payable monthly, on the first day of each month in advance.
B. Bonus. In the event that the Advisor introduces the
Company (or its subsidiaries) to an acquisition target ("Target") or source
of financing ("Target/Financing Source"), either for new financing or to
replace existing financing, for the Company or any of its subsidiaries, or
to the buyer of all or a material portion of the assets or stock of the
Company ("Buyer"), and the Company or any of its subsidiaries acquires
the stock or assets of the Target, or any material portion thereof, enters
into an agreement with the Financing Source, or sells assets to such Buyer
during the term hereof or within one year following the term hereof
pursuant to which financing is received, Advisor shall receive a fee equal
to:
(1) in the case of a new financing (financing which is not in
replacement of existing financing, such as a revolving line of credit), a
one-time fee equal to 2% of the net proceeds to the Company (and its
subsidiaries) from such financing; and
(2) in the case of replacement financing (financing which is
in replacement of existing financing, such as a revolving line of credit,
which is being terminated or repaid), 1% of the net savings to the Company
(and its subsidiaries, on a consolidated basis) (after deducting all
incremental fees payable by the Company which are attributable to such
replacement financing), payable semi-annually in arrears over the term of
such replacement financing (but in no event longer than three years from
the commencement of such financing) based on the net savings realized by
the Company and its subsidiaries in the preceding six months;
(3) in the case of an acquisition of stock or assets by the
Company or any of its subsidiaries in which the Target is introduced to the
Company by the Advisor, 3% of the purchase price paid by the Company
payable upon the closing (if the purchase price is paid by the Company at
the Closing), with the same percentage of the portion of the purchase price
payable after the closing to be payable semi-annually in arrears to Advisor
based on payments made by the Company in the preceding six months; and
(4) in the case of a sale of a material portion of the stock or
assets of the Company in which the Buyer is introduced to the Company by
the Advisor, 3% of the purchase price paid by the Buyer payable (in the
same proportions of cash, stock or other property as make up the purchase
price) upon the closing (if the purchase price is paid by the Buyer at the
Closing), with the same percentage of the portion of the purchase price
payable after the closing to be payable semi-annually in arrears to Advisor
based on payments made by the Buyer in the preceding six months; and
provided, however, that the aggregate annual compensation to Advisor
(including both base and bonus compensation) in any given period of this
Agreement shall not exceed the average annual compensation of the three
highest paid executives of Family Bargain in such period (the "FBC
Average"); provided, however, that the total fees payable in any annual
period pursuant to Sections 5.B(2), 5.B(3) and 5.B(4) for replacement
financings, acquisitions or sales consummated in a prior period shall not
exceed the difference between (i) the Base Compensation plus fees earned
pursuant to Section 5.B(1) in such period and (ii) the FBC Average for
the earliest annual period in which such any of such replacement
financings, acquisitions or sales were consummated.
C. Other Benefits. Advisor shall not be entitled to
participate in any of the Company's health, medical or other benefit plans.
D. Miscellaneous Expenses. The Company shall promptly
reimburse Advisor for all reasonable and necessary expenses incurred or
paid by Advisor, and approved by the Chairman, Vice Chairman or
President of the Company, upon delivery to the Company of proper
evidence of such expenses.
E. Directors Insurance and Indemnity. The Company
agrees to secure and maintain directors liability insurance. The Company
agrees to indemnify Advisor, to the full extent permitted by law, if he is or
was threatened to be made a party to any suit or action by reason of the
fact that he is or was a director or Advisor of the Company, against all
expenses, judgments and amounts paid in settlement actually and
reasonably incurred by him in connection with such suit or action.
6. Termination of Engagement.
A. This Agreement may be terminated, as follows:
(1) At any time when the Company and Advisor shall
mutually agree, in writing, to the termination of this Agreement;
(2) At the option of the Company, if Advisor (i) materially
defaults in the performance of his duties under this Agreement and fails to
cure such default within ten (10) days after written notice thereof by the
Company to Advisor, (ii) is convicted of (or confesses to) a felony for
which a prison term of three months or more may be imposed in the
applicable jurisdiction, or (iii) has committed an act of fraud,
misappropriation of funds or embezzlement, then, in addition to any other
remedies available to the Company under law, in equity or under this
Agreement, the Company shall have the right to immediately terminate the
Advisor's engagement hereunder "for cause" without any further liability or
obligation to the Advisor hereunder other than its obligation to pay accrued
but unpaid Base Compensation and expenses as of the date of termination.
Advisor shall promptly notify the Company in writing immediately
following the occurrence of any of the events set forth in subparts (ii) and
(iii) of this Section 6.A.(2); or (3) At the option of Advisor if the
Company materially defaults in the performance under this Agreement and
fails to cure such default within ten (10) days after written notice thereof by
the Advisor to the Company.
B. In the event of termination of this Agreement as herein
provided, Advisor's Base Compensation hereunder shall be prorated to the
effective date of such termination, unless Advisor terminates this
Agreement pursuant to Section 6.A(3) above.
7. Restrictive Covenants.
A. Restrictive Covenant. During the term of this
Agreement and for a period of two years, after the termination of this
Agreement (collectively, the "Noncompete Period"), the Advisor shall not
engage, as principal, agent, trustee or through the agency of any
corporation, partnership, association or agent or agency, anywhere within
the States of California, Oregon, Washington, Nevada, Texas, New
Mexico, or Arizona (the "Restricted Territory") in the retail apparel or
housewares business (the "Industry"), and the Advisor shall not be the
owner of more than 5% of any other ownership interest in any
corporation, partnership or other business enterprise, nor shall the
Advisor be an employee or consultant to any corporation, partnership or
other business enterprise, in any entity which, in any of the circumstances
referred to in this sentence operates in the Industry within the Restricted
Territory.
B. Nonsolicitation. During the Noncompete Period, the
Advisor agrees that he will not, either directly or indirectly, through any
person, firm, association or corporation with which he is now or may
hereafter become associated, solicit or contact for the purpose of soliciting
any customers of the Company with respect to Industry business, if any
such customers or other persons conduct Industry business in whole or in
part within the Restricted Territory and if the Advisor has had any contact
for the purpose of soliciting Industry business with such customer while the
Advisor was employed as an employee (prior to the term of this
Agreement) by the Company.
C. No-Hire. During the Noncompete period, the Advisor agrees
that he will not, either directly or indirectly, through any person, firm,
association or corporation with which he is now or may hereafter become
associated, cause or induce any present or future employee of the
Company to leave the engage or employment of the Company to accept
employment with the Advisor or with such person, firm, association or
corporation.
D. Enforceability; Waiver. The foregoing covenants of the
Advisor shall not be held invalid or unenforceable because of the scope of
the territory or actions subject thereto or restricted thereby, or the period
of time within which such covenants are operative; but any judgment of a
court of competent jurisdiction relative to granting injunctive relief may
define the maximum territory and actions subject to and restricted by this
Agreement and the period of time during which such agreement is
enforceable. Whenever possible, each term, phrase, clause, paragraph,
restriction, covenant and agreement contained in this Agreement shall be
interpreted in such a manner as to be effective and valid under applicable
law. However, except as set forth in the first sentence of this Section D, in
case any such term, phrase, clause, paragraph, restriction, covenant or
agreement shall be held to be invalid or unenforceable, the same shall be
deemed, and it is hereby intended and agreed that same are meant to be,
several and shall not defeat or impair the remaining provisions hereof. A
waiver by either the Company or Advisor of any breach of this Agreement
by the other party or any waiver of any duties imposed upon such other
party hereunder or by law shall not be construed as a waiver by the
Company or Advisor of any of either such party's rights pursuant to this
Agreement for any subsequent or continuing breach of this Agreement or
of any of the duties, obligations or agreements herein contained or
imposed by law.
E. Non-Disclosure. The Advisor shall not, at any time during the
term of this Agreement, or thereafter, directly or indirectly disclose or
furnish to any other person, firm or corporation, except in the course of
the proper performance of his duties hereunder (a) any information
relating to any process, technique or procedure used by the Company or
any of its subsidiaries which is not, specifically, a matter of public
knowledge; or (b) any information relating to the operations or financial
status of the Company or any of its subsidiaries (including, without
limitation, all financial data and sources of financing), which information
is not specifically a matter of public knowledge; or (c) any information of
a confidential nature obtained as a result of his present or future
relationship with the Company, which information is not specifically a
matter of public knowledge; or (d) the name, address or other information
relating to any customer or supplier of the Company or any of its
subsidiaries; or (e) any other trade secrets of the Company or any of its
subsidiaries. Promptly upon the expiration or termination of this
Agreement hereunder for any reason, the Advisor shall surrender to the
Company all documents, drawings, work papers, lists, memoranda,
records and other data (including all copies) constituting or pertaining in
any way to any of the foregoing information.
F. Representations of the Advisor. The Advisor represents and
warrants to and agrees with the Company that (i) the Advisor has the
right, power and authority to enter into and perform this Agreement, (ii)
such covenant is not oppressive to the Advisor in any respect, (iii) the
Advisor has carefully read this Agreement and understands the terms and
provisions hereof.
G. Excluded from the restrictions under Sections 7.A and B.
above is Advisors' position as Chairman of the Board of Pergament Home
Centers, Inc., Melville, New York, and of WesTek, Inc., Columbia, North
Carolina.
8. General Provisions.
A. Notices. Any notice or other communication given or made
under or pursuant to this Agreement shall be in writing and may be
delivered to the relevant party or sent by registered or certified mail,
return receipt requested, postage prepaid, or sent by telex or facsimile
transmission (with follow-up notice sent immediately by registered or
certified mail) addressed to such party at such party's address below or
such other address as any party may hereafter designate for notice
purposes. Any notice delivered by letter shall be deemed to have been
given seventy-two hours after the mailing of such notice and if by
personal delivery, telex or facsimile transmission, when respectively
delivered or transmitted.
B. Other Agreements. This Agreement constitutes the entire
agreement of the parties hereto relative to the subject matter hereof,
expressly superseding all prior understandings, commitments and
agreements other than those expressly referred to in this Agreement,
whether written or oral, between the Company and Advisor.
C. Governing Law. This Agreement shall be governed by and
construed in all respects in accordance with the internal local laws of the
State of New York and the United States.
D. No Waiver. The failure of either party to insist in any one or
more instances upon the performance of any of the terms or conditions of
this Agreement shall not be construed as a waiver or relinquishment of
any right granted hereunder or of the future performance of any such
term, covenant or condition, and the obligations of either party with
respect thereto shall continue in full force and effect.
E. Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the
application of such provisions to other persons or circumstances shall not
be affected thereby and shall be enforced to the greatest extent permitted
by law.
F. Terminology. All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender shall include all
other genders; the singular shall include the plural and vice versa. Titles
of sections and paragraphs are for convenience only and neither limit nor
amplify the provisions of this Agreement itself.
G. Binding Agreement. This Agreement shall inure to the benefit
of and be binding upon the undersigned parties and their respective heirs,
executors, successors and assigns. Whenever in this instrument, a
reference to any party is made, such reference shall be deemed to include
a reference to the successors and assigns of such party.
H. No Third Party Beneficiary. Any agreement to pay any
amount and any assumption of liability herein contained, express or
implied, shall be only for the benefit of the undersigned parties and their
respective heirs, executors, successors and assigns, and such agreements
and assumption shall not inure to the benefit of the obligee of any
indebtedness or any other party whomsoever, it being the intention of the
undersigned that no one shall be deemed to be a third party beneficiary of
this Agreement.
I. Independent Contractor. The Advisor is retained and engaged
by the Company only for the purposes and to the extent set forth in this
Agreement, and the Advisor's relation to the Company shall, during the
term of this Agreement, be that of independent contractor and not that of
an employee. In rendering his services hereunder, the Advisor shall not,
without the prior written consent of the Company, represent that he has
the right or authority to bind the Company in any respect.
J. Remedies. The parties agree that any remedy at
law for any actual or threatened breach of this Agreement by either party
would be inadequate and that the non-breaching party shall be entitled to
specific performance hereof or injunctive relief or both, by temporary or
permanent injunction or such other appropriate judicial remedy, writ or
order as may be entered into by a court of competent jurisdiction in
addition to any damages that the prevailing party may be legally entitled
to recover together with reasonable expenses of litigation, including
reasonable attorneys' fees incurred by the prevailing party in connection
therewith, as may be approved by such court, and the parties further agree
to waive any requirements for the securing or posting of any bond in
connection with the obtaining of any such injunctive or equitable relief.
This Agreement is executed in multiple counterparts, one copy
of which is to be retained by each party hereto and each copy of the
executed counterparts shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the day and year first set forth above.
"COMPANY":
FAMILY BARGAIN CORPORATION
a Delaware Corporation
By: John Selzer
Name: John Selzer
Title:President
Address: 315 East 62nd Street
New York, NY 10021
"Advisor"
H. Jurgen Schlichting
Address: 8 East 76th Street
New York, NY 10021
EXHIBIT 10.15 (b)
AMENDMENT NO. 5 TO LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NO. 5 TO LOAN AND SECURITY
AGREEMENT (this "Amendment") is entered into as of this 18th day of
April, 1996, by and between FINOVA CAPITAL CORPORATION, a
Delaware corporation ("Lender"), and GENERAL TEXTILES, a
California corporation ("Borrower").
W IT N E S S E T H:
WHEREAS, Borrower and Greyhound Financial Capital
Corporation, an Oregon corporation ("Original Lender") entered into a
Loan and Security Agreement dated as of October 14, 1993 (the "Original
Agreement"), which was amended by an Amendment No. 1 to Loan and
Security Agreement dated as of July 11, 1994 (the "First Amendment"),
by an Amendment No. 2 to Loan and Security Agreement dated as of
March 31, 1995 (the "Second Amendment"), by an Amendment No. 3 to
Loan and Security Agreement dated as of July 27, 1995 (the "Third
Amendment"), by an Amendment No. 4 to Loan and Security Agreement
dated as of November 10, 1995 (the Fourth Amendment ; the Original
Agreement, as amended by the First Amendment, the Second
Amendment, the Third Amendment and the Fourth Amendment, being
hereinafter collectively referred to as the "Loan Agreement"), that
evidences a loan from Lender to Borrower; and
WHEREAS, effective as of December 31, 1994, Original Lender
was merged with and into Lender (then known as Greyhound Financial
Corporation), with Lender being the surviving corporation of such
merger, and Lender succeeded to all the rights and obligations of Original
Lender under the Loan Agreement and the Loan Documents; and
WHEREAS, Borrower has asked Lender to modify the Loan
Agreement in accordance with the terms of, and subject to the conditions
contained in, this Amendment; and
WHEREAS, Lender is willing to enter into this Amendment so to
amend the Loan Agreement, upon the terms and conditions set forth
herein.
NOW, THEREFORE, in consideration of these recitals, the
covenants contained in this Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Lender and Borrower agree as follows:
1. Definitions. Unless otherwise defined in this Amendment, all
capitalized terms used herein which are defined in the Loan Agreement
shall have the same meaning as set forth in the Loan Agreement.
2. Loan Agreement. Provided the conditions precedent described
in Section 3 of this Amendment are met to the satisfaction of Lender, the
Loan Agreement is modified, as of the Fifth Amendment Effective Date,
as follows:
2.1 Section 1(A) of the Loan Agreement is hereby amended by
inserting the following new defined terms:
"Factory 2-U" means Factory 2-U, Inc., an Arizona
corporation.
"First Amendment" means that certain Amendment No. 1 to
Loan and Security Agreement between Factory 2-U and Lender dated as
of April 18, 1996, executed in connection with the Fifth Amendment.
"Fifth Amendment" means that certain Amendment No. 5 to
Loan and Security Agreement between Lender and Borrower dated as of
April ___, 1996.
"Fifth Amendment Availability Increase Amount" means ten
percent (10%) of the amount of Borrower's Eligible Inventory as of the
Fifth Amendment Effective Date.
"Fifth Amendment Effective Date" means February 1, 1996,
the date on which the Fifth Amendment became effective.
"Increased Availability Fee" means a sum equal to two and
one-half percent (2 1/2%) of the Fifth Amendment Availability Increase
Amount.
"Private Offering Fee" means a sum equal to one and
one-quarter percent (1 1/4%) of the Fifth Amendment Availability Increase
Amount.
"Term Loan" shall mean the term loan made by Lender to
Borrower in the amount of $1,100,000 pursuant to the terms of the Fifth
Amendment.
"Term Note" shall mean the promissory note of Borrower
made payable to Lender to evidence the Term Loan, repayable in
accordance with the terms set forth therein and in this Agreement.
2.2. Section 2(A) is hereby amended to read in its entirety as
follows:
2(A) Total Facility. Upon the terms and conditions set forth
herein and provided that no Event of Default or event which, with the
giving of notice or the passage of time, or both, would constitute an Event
of Default, shall have occurred and be continuing, Lender shall, upon
Borrower's request, make advances to Borrower from time to time in an
aggregate outstanding principal amount not to exceed Twenty-Two Million
Seven Hundred Thousand Dollars ($22,700,000) (the "Total Facility"),
subject to deduction of reserves as Lender deems proper from time to time
in exercise of its reasonable credit judgment, which reserves may include,
upon and during the continuance of an Event of Default, accrued interes
and other reserves as Lender deems proper.
2.3 Paragraph 32 of the Loan Agreement is hereby deleted in its
entirety. In substitution therefor, Paragraph 2(B) of the Loan Agreement is
hereby amended to read in its entirety as follows:
"2(B) Loans. Advances of the Total Facility shall be
comprised of the following:
(i) Inventory Loans: A revolving line of credit consisting
of loans against Borrower's Eligible Inventory ("Inventory Loans") in an
aggregate outstanding principal amount not to exceed the lesser of (a) the
amount obtained when the Advance Rate is multiplied by the value of
Borrower's Eligible Inventory, calculated at the lower of cost or market
and determined on a first-in, first-out basis; or (b) Twenty Million Dollars
($20,000,000). The Advance Rate shall equal (i) sixty percent (60%)
during the period commencing on the Fifth Amendment Effective Rate
through December 31, 1996, and (ii) fifty percent (50%) during the period
commencing January 1 through March 31 of each year
thereafter, fifty-five percent (55%) during the period
commencing April 1 through May 31 of each year thereafter, and
sixty percent (60%) during the period commencing June 1 through
December 31 of each year thereafter; and
(ii) Capital Expenditure Line. The Capital
Expenditure Line in such amounts and on such terms as are set
forth in the Second Amendment and in the Capex Note; and
(iii) Term Loan. The Term Loan on such terms as are
set forth in the Fifth Amendment and in the Term Note.
2.4 Paragraph 2(D) of the Loan Agreement is hereby
amended by adding the following sentence at the end thereof:
Unless sooner repaid in accordance with the terms of this
Agreement, all outstanding advances made under the Special Purpose Line
shall have been repaid in full no later than April 30, 1996; provided,
however, nothing herein shall be construed as a prohibition on Borrowers
right to request advances under the Special Purpose Line after such date,
subject to the terms of this Agreement.
2.5 Section 2 of the Loan Agreement is hereby amended
to add a new Section 2(I), to read in its entirety as follows:
(I) Term Loan. Upon satisfaction of each condition
precedent contained in the Fifth Amendment, Lender shall make the Term Loan
to Borrower. Lender shall advance the Term Loan in a single advance credited
to Borrower in reduction of the outstanding balance of the Inventory Loans on
such date. The Term Loan shall be evidenced by, and repaid in accordance with,
the Term Note.
2.6 Paragraph 3(A) of the Loan Agreement is hereby
amended to read in its entirety as follows:
(A) Interest. Borrower shall pay Lender interest
on the daily outstanding balance of Borrower's loan account at a
per annum rate of two percent (2%) in excess of the rate of interest
announced publicly by Citibank, N.A., from time to time as its "base rate"
(or any successor thereto), which may not be such institution's lowest rate
(the "Base Rate"); provided, however,that the portion of the Inventory
Loans that constitutes the Special Purpose Line shall accrue interest on the
daily outstanding balance of the Special Purpose Line at a per annum rate
of (i) four percent (4%) in excess of the Base Rate during the period
commencing on the Fifth Amendment Effective Date through April 30,
1996, and (ii) three percent (3%) in excess of the Base Rate on and after
May 1, 1996. The interest rate chargeable hereunder shall be
increased or decreased, as the case may be, without notice or demand of
any kind, upon the announcement of any change in the Base Rate. Each
change in the Base Rate shall be effective hereunder on the first day
following the announcement of such change, provided, that a cumulative
change of less than one-fourth of one percent (0.25%) shall not be
considered. Interest charges and all other fees and charges herein shall be
computed on the basis of a year of 360days and actual days elapsed and
will be payable to Lender in arrears on the first day of each month hereafter
at its address set forth in Exhibit B of the Original Agreement.
2.7 Paragraph 3(K) of the Loan Agreement is hereby
amended to read in its entirety as follows:
(K) Special Purpose Line Fee. During each month or portion
thereof that all or any part of the Special Purpose Line isoutstanding,
Borrower shall pay to Lender a fee in the amount
of
$1,000 in consideration of Lender's agreement to hold itself
willing and able to advance the proceeds of the Special Purpose Line upon
the terms and conditions herein set forth; provided, however, the fee
payable by Borrower to Lender for the months of February, March and
April, 1996 shall be $5,000 for each month.
2.8 Section 14 of the Loan Agreement is amended by adding
the following new Paragraphs 14(Q) and 14(R) to read in
their entirety as follows:
(Q) Merger or Acquisition. No later than December 31,
1996, Borrower shall have merged with Factory
2-U,or have acquired all of the outstanding capital stock of Factory
2-U, in either case on standard commercially reasonable terms and
conditions, comparable to those of an arm's-length transaction between
unaffiliated entities and accompanied by a valuation opinion satisfactory to
Lender in the exercise of its reasonable business judgment, prepared by an
accounting or investment firm acceptable to Lender.
(R) Private Offering. No later than March 15, 1996,
Guarantor shall have completed a private offering of shares of its stock,
realizing net proceeds of not less than $3,100,000.00, $3,057,006.62 of
which net proceeds shall have been contributed to Factory 2-U and applied
by Factory 2-U in reduction of its obligations to Borrower. Borrower
shall have paid such proceeds to Lender in reduction of the Loan;
provided, however, in the event Borrower has not received and paid such
proceeds to Lender by such date, Borrower shall have paid to Lender the
Private Offering Fee.
2.9 Paragraph 36 of the Loan Agreement, modifying
Paragraph 15 (B) of the Loan Agreement, is hereby amended to read in its
entirety as follows:
36. Loans. Paragraph 15 (B) of the Loan Agreement
ishereby modified in its entirety to read as follows:
(B) Loans. Make any advances, loans or extensions of
credit to, or investment in, any Person; provided, however, that Borrower
shall be permitted to make loans or other extensions of credit to its
employees on the condition that such loans do not exceed $1,000 to any
one employee or $50,000 in aggregate to all employees at
any one time outstanding; and provided further, that Borrower may make
advances of inventory to Factory 2-U to be held by Factory 2-U for sale in
the ordinary course of Factory 2-U's business, provided (i) Factory 2-U's
obligation to reimburse Borrower is evidenced by the Merchandising Note,
(ii) each such advance which is made on or after June 30, 1996 is repaid
within thirty (30) days of Factory 2-U s receipt of the corresponding
inventory, and (iii) all such obligations of Factory 2-U to Borrower do not
exceed to $6,000,000.00 at any one time outstanding; and provided,
further, Borrower may advance point-of-sale equipment acquired with
proceeds of the Term Loan to Factory 2-U, provided (i) each such advance
shall be treated as a loan from Borrower to Factory 2-U on terms identical
to the Term Loan such that Factory 2-U shall pay to Borrower that portion
of each installment of the Term Loan which is proportionate to the share
of point-of-sale equipment purchased with Term Loan proceeds advanced
by Borrower to Factory 2-U, and (ii) the failure of Factory 2-U to make
any such payment shall not excuse the full and timely payment of any
installment of the Term Loan by Borrower when and as due.
2.10 Paragraph 15(L) of the Loan Agreement is
herebyamended by adding the following sentence at the end thereof:
Notwithstanding the foregoing, Borrower may advance inventory
to Factory 2-U in accordance with the provisions of Paragraph 15(B) of
this Agreement and the Merchandising Note.
2.11 Paragraph 17(C) of the Loan Agreement is hereby
amended by deleting the following sentence therefrom:
Notwithstanding the foregoing, unless this Agreement is sooner
terminated, the principal balance of each advance of the Special
Purpose Line and all accrued interest due and owing on such
advance shall be due and payable in full on a date which shall be
mutually agreeable to Borrower and Lender at the time of the
making of such advance, not to exceed, however, the datewhich
120 days from the date of the making of such advance.
2.12 Paragraph 18(A)(i) of the Loan Agreement is hereby
amended to read in its entirety as follows:
(i) Borrower fails to pay when due and payable
any portion of the Obligations at stated maturity, upon
acceleration or otherwise, or Borrower fails to observe or
perform any covenants or agreements made by Borrower in
Paragraphs 14(N)-(R), Paragraphs 15(I)-(K), Paragraph
38,Paragraph 4(D), or Paragraph 5(b);
2.13 Borrower acknowledges that Borrower may terminate
the Loan Agreement only upon prepayment in full of all of the outstanding
Obligations, including all outstanding Capex Advancesand the Term Loan.
In the event Borrower chooses to terminate the Loan Agreement, in
addition to the Termination Fee required by Paragraph 17(D), Borrower
shall pay the prepayment premium applicable to the Capital Expenditure
Line and to the Term Loan as provided in Paragraph 17(E) which is
hereafter set forth. Borrower shall be entitled to prepay the Capital
Expenditure Line and/or the Term Loan, however, without prepaying the
remaining Obligations or otherwise terminating the
Loan Agreement. Accordingly, Paragraph 17(E) of the Loan Agreement
is hereby amended to read in its entirety as follows:
(E) Borrower may voluntarily prepay the principal balance of
the Capital Expenditure Line, the Term Loan, or both in whole, but not in
part, at any time, subject to the following conditions:
(a) Not less than thirty (30) days prior to the date upon
which Borrower desires to make such prepayment, Borrower shall deliver
to Lender written notice of its intention to prepay, which notice shall be
irrevocable and state the prepayment date;
(b) In the event Borrower elects to prepay the Capital
Expenditure Line, Borrower shall pay to Lender concurrently with any
such prepayment (I) an amount equal to
one percent (1.0%) of the then outstanding principal balance of the Term
Loan as of the date of such prepayment, in the event such prepayment
occurs within the one year period following the date on which the Fifth
Amendment is executed, but without any obligation under this clause (I) in
the event any such prepayment occurs after the one year anniversary of the
date on which the Fifth Amendment is executed; (II) accrued and unpaid
interest through the date of such prepayment on the principal balance being
prepaid; and (III) any and all of the Borrower's other Obligations in respect
of the Term Loan which remain unpaid; and (c) In the event Borrower
elects to prepay the Term Loan, Borrower shall pay to Lender concurrently
with any such prepayment (I) an amount equal to one percent (1.0%) of the
then outstanding principal balance of the Term Loan of the date of such
prepayment, in the event such prepayment occurs within the one year
period following the date on which the Fifth Amendment is executed, but
without any obligation under this clause (I) in the event any such
prepayment occurs after the one year anniversary of the Fifth Amendment
is executed; (II) accrued and unpaid interest through the date of such
prepayment on the principal balance being prepaid; and (III) any and all of
the Borrower's other Obligations in respect of the Term Loan which remain
unpaid; and
2.14 Exhibit A to the Loan Agreement, entitled LOCATIONS
OF BORROWER'S CHIEF EXECUTIVE OFFICE
AND THE COLLATERAL, is hereby amended to be in the form attached
to this Amendment as "Replacement Exhibit A."
3. Term Loan Fee. Concurrently with the full execution hereof,
Borrower agrees to pay to Lender a fee (the "Term Loan Fee") in the
amount of $5,000.00 which Borrower acknowledges is fully earned by
Lender upon execution
by Lender of this Agreement and which Term Loan Fee may be deducted
from the proceeds of the Term Loan.
4. Conditions Precedent. The modifications described in Section 2
of this Amendment will not be effective unless and until each of the
following conditions precedent have been satisfied, in form manner and
substance satisfactory to Lender:
(a) Borrower shall have delivered or caused to be delivered to
Lender the following documents, all of which shall be properly
completed, executed and otherwise satisfactory to Lender:
(i) This Amendment;
(ii) The Term Note;
(iii) The Consent of Guarantor in the form attached
hereto;
(iv) Such acknowledgments and reaffirmations of the
Affiliate Debt Subordination Agreement as Lender shall require;
(v) Such acknowledgments and reaffirmations of the
Intercreditor Agreement as Lender shall require;
(vi) Such acknowledgments and reaffirmations of the
Subordination Agreement as Lender shall require;
(vii) Any other consents deemed necessary by Lender;
(viii) A corporate resolution of Borrower approving the
transactions contemplated hereby to which it is a party;
(ix) A corporate resolution of Guarantor approving the
transactions contemplated hereby to which it is a party;
(x) An opinion from Borrower's and Guarantor's
counsel, which counsel must be acceptable to Lender, with respect
to such matters as Lender shall require; and
(xi) Such other items as Lender may require.
(b) Lender shall have obtained the consent and acknowledgment
of any participants in the Inventory Loans to the execution and
delivery of this Amendment and the transactions contemplated hereunder.
(c) Lender shall have entered into the First Amendment, and
each condition to the effectiveness thereof shall have been satisfied.
(d) There shall not then exist an Event of Default or any act or
event which with notice, passage of time, or both would constitute an
Event of Default.
(e) All the representations and warranties of the Loan Parties in
the Loan Documents shall be true and correct, in all material respects,
before and after giving effect to the making of this Amendment.
(f) Borrower shall have paid all closing costs, recording fees
and taxes, appraisal fees and expenses, travel expenses, fees and
expenses of Lender's counsel, and all other costs and expenses incurred by
Lender in connection with the preparation of, closing of and disbursement
of the advances pursuant to this Amendment, which costs, fees and
expenses may be payable from the first advance made pursuant to this
Amendment.
(g) Borrower shall have paid the Increased Availability Fee;
provided, however, Borrower and Lender acknowledge that the
Increased Availability Fee may be paid from the proceeds of the initial
advance made on and after execution of this Amendment.
(h) Borrower shall have paid the Term Loan Fee; provided,
however, Borrower and Lender acknowledge that the Term Loan Fee
may be paid from the proceeds of the Term Loan.
5. Indebtedness Acknowledged. Borrower acknowledges that the
indebtedness evidenced by the Loan Documents is just and owing and
agrees to pay the indebtedness in accordance with the terms of the Loan
Documents. Borrower further acknowledges and represents that no event
has occurred and no condition presently exists that would constitute a
default or event of default by Lender under the Loan Agreement or any of
the other Loan Documents, with or without notice or lapse of time.
6. Validity of Documents. Borrower hereby ratifies, reaffirms,
acknowledges and agrees that the Loan Agreement and the other Loan
Documents represent valid, enforceable and collectable obligations of
Borrower, and that Borrower presently has no existing claims, defenses
(personal or otherwise) or rights of setoff whatsoever with respect to the
Obligations of Borrower under the Loan Agreement or any of the other
Loan Documents. Borrower furthermore agrees that it has no defense,
counterclaim, offset, cross-complaint, claim or demand of any nature
whatsoever which can be asserted as a basis to seek affirmative relief or
damages from Lender.
7. Reaffirmation of Warranties. Borrower hereby reaffirms to
Lender each of the representations, warranties, covenants and agreements
of Borrower as set forth in each of the Loan Documents with the same
force and effect as if each were separately stated herein and made as of
the date hereof. Borrower represents and warrants to Lender that with
respect to the financing transaction herein contemplated, no Person is
entitled to any brokerage fee or other commission and Borrower agrees to
indemnify and hold Lender harmless against any and all such claims.
8. Ratification of Terms and Conditions. All terms, conditions and
provisions of the Loan Agreement, and of each of the other Loan
Documents shall continue in full force and effect and shall remain
unaffected and unchanged except as specifically amended hereby. In the
event of any conflict between the terms and conditions of this Amendment
and any of the other Loan Documents, the provisions of this Amendment
shall control. Without limiting the generality of the foregoing, Borrower
reaffirms its obligation to deliver to Lender Landlord's Consents with
respect to all of Borrower's facilities in which Collateral is or is intended
to be kept or maintained and further acknowledges that Lender has not
waived its right to require the delivery of such Landlord's Consents.
9. Other Writings. Lender and Borrower will execute such other
writings as may be necessary to confirm or carry out the intentions of
Lender and Borrower evidenced by this Amendment.
10. Benefit of the Amendment. The terms and provisions of this
Amendment and the other Loan Documents shall be binding upon and inure
to the benefit of Lender and Borrower and their respective successors and
assigns, except that Borrower shall not have any right to assign its rights
under this Amendment or any of the Loan Documents or any interest
therein without the prior written consent of Lender.
11. Choice of Law. The Loan Documents and this Amendment shall
be performed and construed in accordance with the laws of the State of
Arizona.
12. Entire Agreement. Except as modified by this Amendment, the
Loan Documents remain in full force and effect. The Loan Documents as
modified by this Amendment embody the entire agreement and
understanding between Borrower and Lender, and supersede all prior
agreements and understandings between said parties relating to the
subject matter thereof.
13. Counterparts; Telecopy Execution. This Amendment may be
executed in any number of separate counterparts, all of which when taken
together shall constitute one and the same instrument, admissible into
evidence, notwithstanding the fact that all parties have not signed the
same counterpart. Delivery of an executed counterpart of this
Amendment by telefacsimile shall be equally as effective as delivery of a
manually executed counterpart of this Amendment. Any party delivering
an executed counterpart of this Amendment by telefacsimile shall also
deliver a manually executed counterpart of this Amendment, but the
failure to deliver a manually executed counterpart shall not affect the
validity, enforceability, and binding affect of this Amendment.
FINOVA CAPITAL CORPORATION, a
Delaware corporation, successor-by-
merger to Greyhound Financial Capital
Corporation, an Oregon corporation
By: Carlos Valles
Name: Carlos Valles
Title Vice President
GENERAL TEXTILES, a California
corporation
By: William W. Mowbray
Name: William W. Mowbray
Title President and CEO
EXHIBIT 10.28
FACTORY 2-U, INC.
4000 RUFFIN ROAD
SAN DIEGO, CA 92123
November 10, 1995
Family Bargain Corporation
315 East 62nd Street
New York, New York 10021
Re: Management Agreement
Gentlemen:
The undersigned, Factory 2-U, Inc., an Arizona corporation (the
"Corporation"), hereby agrees with Family Bargain Corporation
(hereinafter "FBC" or "you") as follows:
1. Management of the Corporation. FBC is hereby retained,
effective on the date hereof, to serve as a management consultant to the
Corporation. In such capacity, FBC shall provide such management and
consulting services as required by the Corporation, including with respect
to operations, finance and strategic planning matters, and such other
services as may be requested by the Board of Directors of the Corporation
from time to time.
2. Remuneration. As compensation for the services performed
pursuant to Section 1 hereof, you shall be paid a management fee (the
"Management Fee") in the amount of $46,667 per month, payable on the
first day of each month during the term hereof, plus a bonus equal to 10%
of the amount by which actual EBITDA of the Corporation exceeds the
projected EBITDA set forth in the projections attached as Exhibit A
hereto. The bonus amount shall be paid upon the
conclusion of the annual audit of the Corporation's financial statements.
3. Expenses. FBC shall be entitled to reimbursement of expenses in
an amount not to exceed $5,000 per month during the term hereof.
Reimbursements for such expenses shall be paid to FBC from time to time
during the term hereof upon provision to the Corporation of such
documentation as the Corporation shall deem necessary from time to time.
4. Indemnification. The Corporation will indemnify, defend and
hold FBC and its shareholders, directors, officers, employees, agents and
affiliates ("Indemnified Parties") harmless from any and all claims,
demands, proceedings, suits, actions, losses, liabilities, expenses and costs
arising out of its retention hereunder by the Corporation and the
performance of its functions hereunder, except where such matters are
solely the result of an Indemnified Party's willful misconduct or bad faith.
For purposes of this Agreement, any action taken by any of the Indemnified
Parties to acquire an interest in the Corporation shall not be deemed an act
of bad faith or willful misconduct. This Section 4 shall survive the
termination of this Agreement.
5 Term. This Agreement shall commence on January 1, 1996 and
terminate on May 1, 2010.
6 Miscellaneous. This Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, whether so expressed or not. THIS
AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS
OF LAW RULES THEREOF. The headings in this Agreement are for
purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be amended or modified only by a
written instrument executed by both parties hereto. This Agreement may
be executed in any number of counterparts, each of which shall be an
original, but all of which shall constitute one instrument.
If you are in agreement with the foregoing, please sign the enclosed
counterpart of this letter and return one of the same to the Corporation,
whereupon this letter shall become a binding agreement between you and
the undersigned.
Very truly yours,
FACTORY 2-U, INC.
By:/s/ William Mowbray
Name: William Mowbray
Title: President
7 The foregoing Agreement is hereby agreed to as of the date hereof:
Family Bargain Corporation
By: /s/ John Selzer
Name: John Selzer
Title: President
EXHIBIT A TO MANAGEMENT AGREEMENT
Projected EBITDA Fiscal Year Ended
1/96 $2,117,000
1/97 $6,012,000
1/98 - Until the end of the Term of the Management Agreement As
provided to Finova Capital in the budget submitted thereto or, after
thetermination of the Corporation's loan agreement with Finova, as set by
the Corporation's Board of Directors
EXHIBIT 10.29
GUARANTY FEE AGREEMENT
This Guarantee Fee Agreement (this "Agreement") is made this 8th day
of November, 1995, by and between Family Bargain Corporation, a
Delaware corporation ("Guarantor") and Factory 2-U, Inc., an Arizona
corporation (the "Obligor").
W I T N E S S E T H
WHEREAS, pursuant to the terms and conditions of a Stock Purchase
Agreement, dated as of August 29, 1995, Guarantor is purchasing all of the
issued and outstanding Common Stock of Obligor (the "Acquisition");
and
WHEREAS, in connection with the Acquisition, Guarantor has agreed
to guarantee certain obligations of Obligor to Esther Capin, the State of
Arizona, MetLife, and various other creditors of the Obligor, and Obligor
has secured financings from Finova Capital Corporation ("Finova") and
Bank of America ("BOA") and, as a condition for the provision of such
financings from Finova and BOA, Guarantor guaranteed the obligations of
Obligor to Finova and BOA (collectively, the "Guarantees").
NOW, THEREFORE, in consideration of the Guarantees and the
mutual promises, covenants and other agreements contained herein and in
the Guarantees, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. Guarantee Fee. In consideration of the execution and delivery by
Guarantor of the Guarantees, Obligor hereby agrees to pay to Guarantor
a monthly fee, payable on the first day of the month, in accordance with
Schedule A attached hereto.
2. Term. This Agreement shall commence on December 1, 1995 and
terminate on January 31, 2009.
3. Prepayment. Obligor may not make any payments due hereunder
prior to their due date, without premium or penalty.
4. Miscellaneous. This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and assigns
of the parties hereto, whether so expressed or not. THIS AGREEMENT
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO THE CONFLICTS OF LAW RULES
THEREOF. Headings in this Agreement are for purposes of reference only
and shall not limit or otherwise affect the meaning hereof. This
Agreement may be amended or modified only by a written instrument
executed by both parties hereto. This Agreement may be executed in one
or more counterparts, each of which shall be an original, but all of which
shall constitute one instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first set forth above.
FAMILY BARGAIN CORPORATION
By: /s/ John Selzer
Name: John Selzer
Title: President
FACTORY 2-U, INC.
By: /s/ William Mowbray
Name: William Mowbray
Title: President
SCHEDULE A
Fiscal Year
Monthly Fee Due
1/96
$27,000
1/97
$26,000
1/98
$24,000
1/99
$22,500
1/00
$20,500
1/01
$19,000
1/02
$17,000
1/03
$15,500
1/04
$13,500
1/05
$12,000
1/06
$10,000
1/07
$8,500
1/08
$6,500
1/09
$5,000
EXHIBIT 10.30 (a)
FINOVA
Loan and Security Agreement
Borrower: FACTORY 2-U, INC.
Address: 315 East 62nd Street, 6th Floor
New York, New York 10022
Date: November 10, 1995
THIS LOAN AND SECURITY AGREEMENT ("Agreement") dated the
date set forth above, is entered into by and between the borrower named
above ("Borrower"), whose address is set forth above and FINOVA
Capital Corporation ("Lender"), whose address is 355 South Grand
Avenue, Suite 2400, Los Angeles, California 90071.
1. LOANS.
1.1 Total Facility. Upon the terms and conditions set forth herein and
provided that no Event of Default or event which, with the giving of notice
or the passage of time, or both, would constitute an Event of Default, shall
have occurred and be continuing, Lender shall, upon Borrower's request,
make advances to Borrower from time to time in an aggregate outstanding
principal amount not to exceed the Total Facility amount (the "Total
Facility") set forth on the schedule hereto (the "Schedule"), subject to
deduction of reserves as Lender deems proper from time to time in the
exercise of its reasonable credit judgment, which reserves may include,
upon and during the continuance of an Event of Default, accrued interest
and other reserves as Lender deems proper. The Schedule is an integral
part of this Agreement and all references to "herein", "herewith" and words
of similar import shall for all purposes be deemed to include the Schedule.
1.2 Loans. Advances under the Total Facility ("Loans") shall be
comprised of the amounts shown on the Schedule.
1.3 Overlines. If at any time or for any reason the outstanding amount of
advances made pursuant hereto exceeds any of the dollar or percentage
limitations contained in the Schedule (any such excess, an "Overline"), then
Borrower shall, upon Lender's demand, immediately pay to Lender, in cash,
the full amount of such Overline. Without limiting Borrower's obligation
to repay to Lender on demand the amount of any Overline, Borrower
agrees to pay Lender interest on the outstanding principal amount of any
Overline, on demand, at the rate set forth in the Schedule.
1.4 Loan Account. All advances made hereunder shall be added to and
deemed part of the Obligations when made. Lender may from time to time
charge all Obligations of Borrower to Borrower's loan account with
Lender.
1.5 Application of Loan Proceeds. The initial advance hereunder shall be
applied to the repayment of Borrower's outstanding obligations to Bank of
America.
2. CONDITIONS PRECEDENT.
2.1 Initial Advance. The obligation of Lender to make the initial advance
hereunder is subject to the fulfillment, to the satisfaction of Lender and its
counsel, of each of the following conditions on or prior to the date set forth
on the Schedule: (a) Loan Documents. Lender shall have received (i)
each of the Loan Documents, executed, certified and/or acknowledged by
such parties as Lender shall designate, and, if applicable, duly
acknowledged for recording or filing in the appropriate governmental
offices; (ii) copies of all instruments constituting indebtedness of Borrower
held by the Subordinating Creditors showing a legend indicating the
subordinate nature thereof; (iii) such Blocked Account or Dominion
Account agreements as it shall determine; and (iv) such other documents,
instruments and agreements in connection herewith as Lender shall require,
executed, certified and/or acknowledged by such parties as Lender shall
designate; (b) Terminations by Existing Lenders. Subject to execution of
the Bank of America Agreement, other than those lenders identified in the
Schedule with reference to Section 18.1 of this Agreement, each of
Borrower's existing lenders shall have executed and delivered UCC
termination statements and other documentation evidencing the termination
of its liens and security interests in the assets of Borrower or a
subordination agreement in form and substance satisfactory to Lender in its
sole discretion; (c) Charter Documents. Lender shall have received copies
of Borrower's By-laws and Articles of Incorporation, as amended,
modified, or supplemented to the Closing Date, certified by the Secretary
of Borrower; (d) Good Standing. Lender shall have received a certificate
of corporate status with respect to Borrower, dated within ten (10) days of
the Closing Date, by the Secretary of State of the state of incorporation of
Borrower, which certificate shall indicate that Borrower is in good standing
in such state; (e) Foreign Qualification. Lender shall have received
certificates of corporate status with respect to Borrower and each other
Loan Party, each dated within ten (10) days of the Closing Date, issued by
the Secretary of State of each state in which its failure to be duly qualified
or licensed would have a material adverse effect on the financial condition
or assets of Borrower, indicating that Borrower is in good standing; (f)
Authorizing Resolutions and Incumbency. Lender shall have received a
certificate from the Secretary of Borrower attesting to (i) the adoption of
resolutions of Borrower's Board of Directors and Shareholders (if
necessary) authorizing the borrowing of money from Lender and execution
and delivery of this Agreement and the other Loan Documents to which
Borrower is a party, and authorizing specific officers of Borrower to
execute same, and (ii) the authenticity of original specimen signatures of
such officers; (g) Property Insurance. Lender shall have received the
insurance certificates, certified copies of policies, required by Section 4.4
hereof along with a BFU438 Lender's Loss Payable Endorsement naming
Lender as sole loss payee and mortgagee, all in form and substance
satisfactory to Lender and its counsel; (h) Searches; Certificates of Title.
Lender shall have received searches reflecting the filing of its financing
statements and fixture filings in such jurisdictions as it shall determine, and
shall have received certificates of title with respect to the Collateral which
shall have been duly executed in a manner sufficient to perfect all of the
security interests granted to Lender; (i) Landlord and Mortgagee Waivers.
Subject to the provisions of Section 1 of the Additional Provisions and to
receipt of the Bank of America Agreement, Lender shall have received
landlord and mortgagee waivers from the lessors and mortgagees of all
locations where any Collateral is located; (j) Fees. Borrower shall have
paid all fees payable by it on the Closing Date pursuant to this Agreement;
(k) Opinions of Counsel. Lender shall have received (i) an opinion of
Borrower's counsel covering such matters as Lender shall determine in its
sole discretion; and (ii) a copy of the opinion of counsel to Seller, which
opinion shall state that Lender shall be entitled to rely thereon; (l)
Officer's Certificate. Lender shall have received a certificate of the
President and the Chief Financial Officer or similar official of Borrower,
attesting to the accuracy of each of the representations and warranties of
Borrower set forth in the Agreement and the fulfillment of all conditions
precedent to the initial advance hereunder; (m) Solvency Certificate. Lender
shall have received a signed certificate of the Borrower's Chief Financial
Officer concerning the solvency and financial condition of Borrower, on Lender's
standard form; (n) Acquisition and Name Change. Lender shall have
approved the Acquisition Documents and the terms of the Acquisition and
shall have received evidence satisfactory to Lender that the Acquisition has
occurred together with duly executed corporate resolutions amending
Borrower's Articles of Incorporation changing Borrower's name from
Capin Mercantile Corporation to Factory 2-U, Inc.; (o) Environmental
Assessment. Borrower shall provide evidence satisfactory to Lender that
the subject transaction is environmentally acceptable. If required by
Lender, Borrower shall have retained a firm acceptable to Lender and
knowledgeable in environmental matters to perform a Phase I
environmental investigation of the real property owned, operated or
occupied by Borrower and the surrounding areas. Such investigation may
include, but not be limited to, soil and ground water testing and core
samplings to fully identify the scope of any environmental issues impacting
the transaction. All costs incurred in performing such investigation shall be
borne by Borrower. The scope and results of such investigation must be
satisfactory to Lender in form and substance. All costs associated with
compliance with the Applicable Laws, as indicated by such investigation,
shall be the sole responsibility of Borrower. Prior to the Closing, there
shall have been reported to the appropriate regulatory agencies such
matters concerning the condition of all real property owned, occupied, or
operated by Borrower as Lender, in its sole discretion, has determined are
subject to a reporting obligation under Applicable Laws; (p) Appraisal.
Lender shall have received a satisfactory appraisal of the Inventory
performed by a firm acceptable to Lender at Borrower's expense; (q)
Schedule Conditions. Borrower shall have complied with all additional
conditions precedent as set forth in the Schedule attached hereto; and (r)
Other Matters. All other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered
or executed or recorded and shall be in form and substance satisfactory to
Lender and its counsel.
2.2 Subsequent Advances. The obligation of Lender to make any advance
hereunder shall be subject to the further conditions precedent that, on and
as of the date of such advance: (a) The representations and warranties of
Borrower set forth in this Agreement shall be accurate, before and after
giving effect to such advance or issuance and to the application of any
proceeds thereof; (b) No Event of Default and no event which, with notice
or passage of time or both, would constitute an Event of Default has
occurred and is continuing, or would result from such advance or issuance
or from the application of any proceeds thereof; (c) no material adverse
change has occurred in the Borrower's business, operations, financial
condition, or assets or in the condition of the Collateral, or in the prospect
of repayment of the Obligations; and (d) Lender shall have received such
other approvals, opinions or documents as Lender shall reasonably request.
3. INTEREST RATE AND OTHER CHARGES.
3.1 Interest; Fees. Borrower shall pay Lender interest on the daily
outstanding balance of Borrower's loan account at the per annum rate set
forth on the Schedule. Borrower shall also pay Lender the fees set forth on
the Schedule.
3.2 Default Interest Rate. Upon the occurrence and during the
continuance of an Event of Default, Borrower shall pay Lender interest on
the daily outstanding balance of Borrower's loan account at a rate per
annum which is two percent (2%) in excess of the rate which would
otherwise be applicable thereto pursuant to the Schedule.
3.3 Examination Fees. Borrower agrees to pay to Lender an examination
fee in the amount set forth on the Schedule in connection with each audit
or examination of Borrower performed by Lender prior to or after the date
hereof. Without limiting the generality of the foregoing, Borrower shall
pay to Lender an initial examination fee in an amount equal to the amount
set forth on the Schedule. Such initial examination fee shall be deemed
fully earned at the time of payment and due and payable upon the closing of
this transaction, and shall be deducted from any good faith deposit paid by
Borrower to Lender prior to the date of this Agreement.
3.4 Excess Interest. In no event whatsoever shall the interest rate and
other charges charged hereunder exceed the highest rate permissible under
any law which a court of competent jurisdiction shall, in a final
determination, deem applicable hereto. In the event that a court determines
that Lender has received interest and other charges hereunder in excess of
the highest permissible rate applicable thereto, Lender shall promptly apply
such excess to the Obligations in such order as Lender shall determine in its
sole discretion or refund the amount thereof to Borrower, and the
provisions hereof shall be deemed amended to provide for such permissible
rate.
4. COLLATERAL.
4.1 Security Interest in the Collateral. To secure the payment and
performance of the Obligations when due, Borrower hereby grants to
Lender a first priority security interest in all of Borrower's now owned or
hereafter acquired or arising Inventory, Equipment, Receivables,
Trademarks, Licenses and Patents, and General Intangibles, including,
without limitation, all of Borrower's Deposit Accounts, money, any and all
property now or at any time hereafter in Lender's possession (including
claims and credit balances), marketable securities and all proceeds
(including proceeds of any insurance policies, proceeds of proceeds and
claims against third parties), all products and all books and records related
to any of the foregoing (all of the foregoing, together with all other
property in which Lender may be granted a lien or security interest, is
referred to herein, collectively, as the "Collateral").
4.2 Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions requested by Lender at any time to perfect,
maintain, protect and enforce Lender's security interest and other rights in
the Collateral and the priority thereof from time to time, including, without
limitation, (i) executing and filing financing or continuation statements and
amendments thereof and executing and delivering such documents and
titles in connection with motor vehicles as Lender shall require, all in form
and substance satisfactory to Lender, (ii) maintaining a perpetual inventory
and complete and accurate stock records, (iii) delivering to Lender
warehouse receipts covering any portion of the Collateral located in
warehouses and for which warehouse receipts are issued, and transferring
Inventory to warehouses designated by Lender, (iv) placing notations on
Borrower's books of account to disclose Lender's security interest therein
and (v) delivering to Lender all letters of credit on which Borrower is
named beneficiary. Lender may file, without Borrower's signature, one or
more financing statements disclosing Lender's security interest under this
Agreement. Borrower agrees that a carbon, photographic, photostatic or
other reproduction of this Agreement or of a financing statement is
sufficient as a financing statement. If any Collateral is at any time in the
possession or control of any warehouseman, bailee or any of Borrower's
agents or processors, Borrower shall notify such Person of Lender's
security interest in such Collateral and, upon Lender's request, instruct
them to hold all such Collateral for Lender's account subject to Lender's
instructions. From time to time, Borrower shall, upon Lender's request,
execute and deliver confirmatory written instruments pledging the
Collateral to Lender, but Borrower's failure to do so shall not affect or limit
Lender's security interest or other rights in and to the Collateral. Until the
Obligations have been fully satisfied and Lender's obligation to make
further advances hereunder has terminated, Lender's security interest in the
Collateral shall continue in full force and effect.
4.3 Preservation of Collateral. Lender may, in its sole discretion, at any
time discharge any lien or encumbrance on the Collateral or bond the same,
or upon the occurrence and during the continuance of an Event of Default,
pay any insurance, maintain guards, pay any service bureau, obtain any
record or take any other action to preserve the Collateral. The cost
incurred in taking any of the foregoing actions shall be charged to
Borrower's loan account as an Obligation.
4.4 Insurance. Borrower shall insure the Collateral against loss or damage
by fire, theft, burglary, pilferage, loss in transit and such other hazards as
Lender shall specify, in amounts, form, under policies and by insurers
acceptable to Lender, with a rating by A.M. Best Company, Inc., of at least
A-VII. Each policy shall include a provision requiring thirty (30) days'
prior written notice to Lender of any cancellation or substantial
modification and shall contain a lender loss payee endorsement in favor of
Lender in form acceptable to Lender. All premiums shall be paid by
Borrower as and when due and accurate and complete copies of the
policies shall be delivered by Borrower to Lender. If Borrower fails to do
so, Lender may (but shall not be required to) procure such insurance at
Borrower's expense. Any amount so advanced by Lender in that regard
shall accrue interest at the rate set forth in Section 3.2 of this Agreement.
4.5 Lender Deed of Trust. As additional security for the payment and
performance of the Obligations, Borrower shall deliver or cause to be
delivered to Lender all of the following at Borrower's sole expense: (i) the
Lender Deed of Trust, satisfactory in form and substance to Lender, duly
executed by Borrower, with all blanks filled in and dated as of a date not
more than two weeks following the Closing, whereby Borrower shall grant
to Lender a mortgage lien on the Nogales Real Property, encumbering the
Nogales Real Property and subject only to such exceptions to title as
Lender shall deem acceptable; provided, however, Lender acknowledges
the liens in favor of Bank of America and General Textiles under the
Gentex Deed of Trust; (ii) a policy or policies of title insurance in a face
amount and in a form satisfactory to Lender and issued by an insurer
satisfactory to Lender, insuring Lender's liens upon the Nogales Real
Property as valid real estate liens subject only to the exceptions described
in clause (i) above; (iii) as soon as available per Borrower's best efforts, an
ALTA survey certified by a licensed surveyor, acceptable to Lender; (iv)
evidence that the Nogales Real Property is not located within a "special
flood hazard" area as such term is used in the National Flood Insurance Act
of 1968, as amended and supplemented by the Flood Disaster Protection
Act of 1973, and in regulations, interpretations from rulings thereunder;
and (v) such other items as Lender may request as are normal and
customary in connection with real estate secured loan.
5. EXAMINATION OF RECORDS; FINANCIAL REPORTING.
5.1 Examinations. Lender shall at all reasonable times have full access to
and the right to examine, audit, make abstracts and copies from and inspect
Borrower's records, files, books of account and all other documents,
instruments and agreements relating to the Collateral and the right to
check, test and appraise the Collateral. Borrower will deliver to Lender
any instrument necessary for Lender to obtain records from any service
bureau maintaining records for Borrower. All instruments and certificates
prepared by Borrower showing the value of any of the Collateral shall be
accompanied, upon Lender's request, by copies of related purchase orders
and invoices or, if impossible to furnish same, such information shall be
examined at Borrower's executive office upon Lender's request. Lender
may, at any time after the occurrence of an Event of Default, remove from
Borrower's premises Borrower's books and records (or copies thereof) or
require Borrower to deliver such books and records or copies to Lender.
Lender may, without expense to Lender, use such of Borrower's personnel,
supplies and premises as may be reasonably necessary for maintaining or
enforcing Lender's security interest.
5.2 Reporting Requirements. Borrower shall furnish Lender, upon
request, such information and statements as Lender shall request from time
to time regarding Borrower's business affairs, financial condition and the
results of its operations. Without limiting the generality of the foregoing,
Borrower will provide Lender with (i) copies of sales invoices, customer
statements and credit memoranda issued or, if impossible to furnish same,
such information shall be examined at Borrower's executive office upon
Lender's request, remittance advices and reports and copies of deposit
slips, daily, upon request; (ii) copies of shipping and delivery documents,
upon request; (iii) on or prior to the fifteenth (15th) day of each month,
monthly agings (aged from invoice date) and reconciliations of Receivables
(with listings of concentrated accounts), payables reports, (including
monthly agings thereof, aged from invoice date), outstanding or held check
registers; (iv) on or prior to the thirtieth (30th) day of each month,
unaudited financial statements with respect to the prior month prepared on
a basis consistent with such statements prepared in prior months and
otherwise in accordance with generally accepted accounting principles,
consistently applied; (v) weekly inventory reports and certificates, valuing
the Inventory at the lower of cost or market on a first-in, first-out basis,
together with perpetual inventory reports and other inventory reports
reasonably requested by Lender, no later than five (5) days after the end of
each week of the same type and nature as are currently supplied by General
Textiles; (vi) Capital Expenditure Report setting forth Borrower's total
Capital Expenditures incurred during the then fiscal year up through the
prior month; (vii) audited annual financial statements, prepared on a
consolidated an consolidating basis with Family Bargain Corporation and in
accordance with generally accepted accounting principles applied on a basis
consistent with the most recent Prepared Financials provided to Lender by
Borrower, with the unqualified report thereon of independent certified
public accountants acceptable to Lender, as soon as available, and in any
event, within ninety (90) days after the end of each of Borrower's fiscal
years; (viii) an annual operating budget (including income statements,
balance sheets and cash flow statements by month) for the upcoming fiscal
year, at least thirty (30) days prior to the end of Borrower's fiscal year; and
(ix) such certificates relating to the foregoing as Lender may request,
including, without limitation, a monthly certificate from the president and
the chief financial officer of Borrower showing Borrower's compliance with
each of the financial covenants set forth in this Agreement, and stating
whether any Event of Default has occurred or event which, with giving of
notice or the passage of time, or both, would constitute an Event of
Default, and if so, the steps being taken to prevent or cure such Event of
Default, and (x) during such time as there exists an Event of Default, such
appraisals of the Inventory, at such intervals as Lender shall request,
performed by a firm satisfactory to Lender.
5.3 Guarantor's Financial Statements and Tax Returns. Borrower shall
cause each of the Guarantors to deliver to Lender such Guarantor's annual
financial statement (in form acceptable to Lender) and a copy of such
Guarantor's federal income tax return with respect to the corresponding
year, in each case on the date when such tax return is due or, if earlier, on
the date when available.
6. COLLATERAL REPORTING; INVENTORY.
6.1 Invoices. Borrower will not re-date any invoice or sale from the
original date thereof (other than in connection with normal and customary
lay-a-way transactions) or make sales on extended terms beyond those
customary in Borrower's industry, or otherwise extend or modify the term
of any Receivable. If Borrower becomes aware of any matter affecting any
Receivable, including information affecting the credit of the account debtor
thereon, Borrower will promptly notify Lender in writing.
6.2 Instruments. In the event any Receivable is or becomes evidenced by a
promissory note, trade acceptance or any other instrument for the payment
of money, Borrower will immediately deliver such instrument to Lender
appropriately endorsed to Lender and, regardless of the form of any
presentment, demand, notice of dishonor, protest and notice of protest with
respect thereto, Borrower will remain liable thereon until such instrument is
paid in full.
6.3 Physical Inventory. Borrower shall conduct a physical count of the
Inventory no less frequently than twice per calendar year, provided,
however, during such time as there exists an Event of Default, such
physical count shall be conducted at such intervals as Lender shall request.
Within thirty (30) days following the conclusion of the physical count of
the Inventory, Borrower shall supply Lender with a copy of such accounts
accompanied by a report of the value (calculated at the lower of cost or
market value on a first-in, first-out basis) of the Inventory and such
additional information with respect to the Inventory as Lender may request
from time to time.
6.4 Returns. For so long as no Event of Default has occurred and is
continuing and subject to the provisions of Section 9.2, if any account
debtor returns any Inventory to Borrower in the ordinary course of its
business, Borrower shall promptly determine the reason for such return and
promptly issue a credit memorandum to the account debtor (sending a copy
to Lender, if requested by Lender) or issue a cash refund in the appropriate
amount. In the event any attempted return occurs after the occurrence of
any Event of Default, Borrower shall (i) hold the returned Inventory in
trust for Lender, (ii) segregate all returned Inventory from all of its other
property, (iii) if Lender has then realized upon its security interest in such
Inventory, conspicuously label the returned Inventory as Lender's property
and (iv) immediately notify Lender of the return of any Inventory,
specifying the reason for such return, the location and condition of the
returned Inventory, and on Lender's request deliver such returned
Inventory to Lender. Borrower shall not consign any Inventory.
7. PRINCIPAL PAYMENTS; PROCEEDS OF COLLATERAL.
7.1 Principal Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to Lender specifically containing
payment provisions which are in conflict with this Section 7.1 (in which
event the conflicting provisions of said notes or other instruments shall
govern and control), the Obligations shall be payable by Borrower to
Lender immediately upon the earliest of (i) the receipt by Lender or
Borrower of any proceeds of any of the Collateral, to the extent of said
proceeds, (ii) the occurrence of an Event of Default in consequence of
which Lender elects to accelerate the maturity and payment of such loans,
or (iii) any termination of this Agreement pursuant to Section 16 hereof;
provided, however, that any Overline shall be payable on demand pursuant
to the provisions of Section 1.3 hereof.
7.2 Collections. Until Lender notifies Borrower to the contrary, Borrower
may make collection of all Receivables for Lender and shall receive all
payments as trustee of Lender and immediately deliver all payments to
Lender in their original form as set forth below, duly endorsed in blank.
Borrower agrees that all banks into which proceeds of Borrower's business
activities are deposited shall have executed standing instructions providing
for the daily transfer of such funds to a Dominion Account. Lender or its
designee may, at any time, notify account debtors that the Receivables have
been assigned to Lender and of Lender's security interest therein, and may
collect the Receivables directly and charge the collection costs and
expenses to Borrower's loan account. Borrower agrees that, in computing
the charges under this Agreement, all items of payment shall be deemed
applied by Lender on account of the Obligations one (1) Business Day after
receipt by Lender of good funds which have been finally credited to
Lender's account, whether such funds are received directly from Borrower
or from the Blocked Account bank or the Dominion Account bank,
pursuant to Section 7.3. Lender is not, however, required to credit
Borrower's account for the amount of any item of payment which is
unsatisfactory to Lender in its sole but reasonable discretion and Lender
may charge Borrower's loan account for the amount of any item of
payment which is returned to Lender unpaid.
7.3 Establishment of a Blocked Account or Dominion Account. All
proceeds of Collateral shall, at the direction of Lender, be deposited by
Borrower into a "blocked account" as Lender may require (the "Blocked
Account") pursuant to an arrangement with such bank as may be selected
by Borrower and be acceptable to Lender. Borrower shall issue to any
such bank an irrevocable letter of instruction directing said bank to transfer
such funds so deposited to Lender, either to any account maintained by
Lender at said bank or by wire transfer to appropriate account(s) of
Lender. All funds deposited in a Blocked Account shall immediately
become the sole property of Lender. Borrower shall obtain the agreement
by such bank to waive any offset rights against the funds so deposited on
the same basis and to the same extent as obtained in connection with
Lender's loan to General Textiles. Lender assumes no responsibility for
any Blocked Account arrangement, including without limitation, any claim
of accord and satisfaction or release with respect to deposits accepted by
any bank thereunder. Alternatively, Lender may establish depository
accounts in the name of Lender at a bank or banks for the deposit of such
funds (each, a "Dominion Account") and Borrower shall deposit all
proceeds of Receivables and all cash proceeds of any sale of Inventory or,
to the extent permitted herein, Equipment or cause same to be deposited, in
kind, in such Dominion Accounts of Lender in lieu of depositing same to
Blocked Accounts.
7.4 Payments Without Deductions. Borrower shall pay principal, interest,
and all other amounts payable hereunder, or under any related agreement,
without any deduction whatsoever, including, but not limited to, any
deduction for any setoff or counterclaim.
7.5 Collection Days Upon Repayment. In the event Borrower repays the
Obligations in full at any time hereafter, such payment in full will be
credited (conditioned upon final collection) to Borrower's loan account one
(1) Business Day after Lender's receipt thereof.
7.6 Monthly Accountings. Lender will provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to
this Agreement. Lender shall use reasonable efforts to supply such reports
on or before the fifteen (15th) Business Day of the month, with respect to
the prior month. Such account shall be deemed correct, accurate and
binding on Borrower and an account stated (except for reverses and
reapplications of payments made and corrections of errors discovered by
Lender), unless Borrower notifies Lender in writing to the contrary within
thirty (30) days after each account is rendered, describing the nature of any
alleged errors or omissions.
8. POWER OF ATTORNEY.
Borrower appoints Lender and its designees as Borrower's attorney, with
the power to endorse Borrower's name on any checks, notes, acceptances,
money orders or other forms of payment or security that come into
Lender's possession; to sign Borrower's name on any invoice or bill of
lading relating to any Receivable, on drafts against customers, on
assignments of Receivables, on notices of assignment, financing statements
and other public records, on verifications of accounts and on notices to
customers or account debtors; to send requests for verification of
Receivables to customers or account debtors; after the occurrence of any
Event of Default, to notify the post office authorities to change the address
for delivery of Borrower's mail to an address designated by Lender and to
open and dispose of all mail addressed to Borrower; and to do all other
things Lender deems necessary or desirable to carry out the terms of this
Agreement. Borrower hereby ratifies and approves all acts of such
attorney. Neither Lender nor any of its designees will be liable for any acts
or omissions nor for any error of judgment or mistake of fact or law acting
as Borrower's attorney. This power, being coupled with an interest, is
irrevocable until the Obligations have been fully satisfied and Lender's
obligation to provide loans hereunder shall have terminated. 9.
RECEIVABLES.
9.1 Validity. Borrower represents and warrants that each Receivable
covers and will cover a bona fide sale or lease and delivery by it of goods
or the rendition by it of services in the ordinary course of its business, and
will be for a liquidated amount and Lender's security interest will not be
subject to any offset, deduction, counterclaim, rights of return or
cancellation, lien or other condition.
9.2 Disputes. Borrower shall notify Lender promptly of all disputes and
claims not resolved within thirty (30) days and settle or adjust such
disputes or claims at no expense to Lender, but no discount, credit or
allowance shall be granted to any account debtor and no returns of
merchandise shall be accepted by Borrower without Lender's consent,
except for discounts, credits and allowances made or given in the ordinary
course of Borrower's business. Lender may, at any time after the
occurrence of an Event of Default, settle or adjust disputes and claims
directly with account debtors for amounts and upon terms which Lender
considers advisable in its reasonable credit judgment and, in all cases,
Lender will credit Borrower's loan account with only the net amounts
received by Lender in payment of any Receivables.
10. EQUIPMENT.
Borrower shall keep and maintain the Equipment in good operating
condition and repair and make all necessary replacements thereto to
maintain and preserve the value and operating efficiency thereof at all times
consistent with Borrower's past practice, ordinary wear and tear excepted.
Borrower shall not permit any item of Equipment to become a fixture
(other than a trade fixture) to real estate or an accession to other property.
The foregoing notwithstanding, during each Loan Year, Borrower shall
have the right to dispose of Equipment, not material to or necessary for the
continued operation of Borrower, as long as the aggregate fair market
value of all such Equipment disposed of during such Loan Year does not
exceed $100,000. Borrower shall give Lender written notice as to the
disposition of any such Equipment no later than ten (10) Business Days
following such disposition.
11. OTHER LIENS; NO DISPOSITION OF COLLATERAL. Borrower
represents, warrants and covenants that (a) all Collateral is and will
continue to be owned by it free and clear of all liens, claims and
encumbrances whatsoever (except for Lender's security interest, Permitted
Encumbrances, and such other liens, claims and encumbrances as may be
permitted by Lender in its sole discretion from time to time in writing), and
(b) Borrower will not, without Lender's prior written approval, sell,
encumber or dispose of or permit the sale, encumbrance or disposal of any
Collateral or any interest of Borrower therein, except for the sale of
Inventory in the ordinary course of Borrower's business. The proceeds of
any such sales shall be remitted to Lender pursuant to this Agreement for
application to the Obligations.
12. GENERAL REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants that:
12.1 Due Organization. It is a corporation duly organized, validly existing
and in good standing under the laws of the State set forth on the Schedule,
is qualified and authorized to do business and is in good standing in all
states in which such qualification and good standing are necessary in order
for it to conduct its business and own its property, and has all requisite
power and authority to conduct its business as presently conducted, to own
its property and to execute and deliver each of the Loan Documents to
which it is a party and perform all of its Obligations thereunder, and has not
taken any steps to wind-up, dissolve or otherwise liquidate its assets;
12.2 Other Names. Borrower has not, during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set
forth on the Schedule, nor has Borrower been the surviving corporation of
a merger or consolidation or acquired all or substantially all of the assets of
any person during such time except as set forth on the Schedule.
12.3 Due Authorization. The execution, delivery and performance by
Borrower of the Loan Documents to which it is a party have been
authorized by all necessary corporate action and do not and will not
constitute a violation of any applicable law or of Borrower's Articles or
Certificate of Incorporation or By-Laws or any other document, agreement
or instrument to which Borrower is a party or by which Borrower or its
assets are bound;
12.4 Binding Obligation. Each of the Loan Documents to which Borrower
is a party is the legal, valid and binding obligation of Borrower enforceable
against it in accordance with its terms;
12.5 Intangible Property. Borrower possesses adequate assets, licenses,
patents, patent application, copyrights, trademarks, trademark applications
and trade names for the present and planned future conduct of its business
without any known conflict with the rights of others, and each is valid and
has been duly registered or filed with the appropriate governmental
authorities;
12.6 Capital. Borrower has capital sufficient to conduct its business, is
able to pay its debts as they mature;
12.7 Material Litigation. Borrower has no pending or overtly threatened
litigation, actions or proceedings which would materially and adversely
affect its business, assets, operations, or condition, financial or otherwise,
or the Collateral or any of Lender's interests therein, except as disclosed in
Schedule 2.15 to the Acquisition Agreement;
12.8 Title; Security Interests of Lender. Borrower has good, indefeasible
and merchantable title to the Collateral and, upon the filing of UCC-1
Financing Statements and the recording of any mortgages or deeds of trust
with respect to real property, in each case in the appropriate offices, this
Agreement and such documents will create valid and perfected first priority
liens in the Collateral, subject only to Permitted Encumbrances;
12.9 Restrictive Agreements; Labor Contracts. Borrower is not a party or
subject to any contract or subject to any charge, corporate restriction,
judgment, decree or order materially and adversely affecting its business,
assets, operations, prospects or condition, financial or otherwise, or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition, no labor contract is scheduled to expire during
the Initial Term of this Agreement, except as disclosed to Lender in writing
prior to the date hereof;
12.10 Laws. Borrower is not in violation of any applicable statute,
regulation, ordinance or any order of any court, tribunal or governmental
agency, in any respect materially and adversely affecting the Collateral or
its business, assets, operations, prospects or condition, financial or
otherwise;
12.11 Consents. Borrower has obtained or caused to be obtained or
issued any required consent of a governmental agency or other Person in
connection with the financing contemplated hereby;
12.12 Defaults. Borrower is not in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed or other agreement to
which it is a party or by which it or its assets are bound, nor has any event
occurred which, with the giving of notice or the lapse of time, or both,
would cause such a default; provided, however, Borrower only represents
and warrants that it is not in material default with respect to any of the
leases under which it occupies the locations referenced in Section 12.16 of
this Agreement;
12.13 Financial Condition. The Prepared Financials fairly present
Borrower's financial condition and results of operations and those of such
other Persons described therein as of the date thereof; there are no material
omissions from the Prepared Financials or other facts or circumstances not
reflected in the Prepared Financials; and there has been no material and
adverse change in such financial conditions or operations since the date of
the initial Prepared Financials delivered to Lender hereunder;
12.14 ERISA. None of Borrower, any ERISA Affiliate, or any Plan is
or has been in violation of any of the provisions of ERISA, any of the
qualification requirements of IRC Section 401(a) or any of the published
interpretations thereunder, nor have Borrower or any ERISA Affiliate
received any notice to such effect. No notice of intent to terminate a Plan
has been filed under Section 4041 of ERISA, nor has any Plan been
terminated under ERISA. The PBGC has not instituted proceedings to
terminate, or appoint a trustee to administer, a Plan. No lien upon the
assets of Borrower has arisen with respect to a Plan. No prohibited
transaction or Reportable Event has occurred with respect to a Plan.
Neither Borrower nor any ERISA Affiliate has incurred any withdrawal
liability with respect to any Multiemployer Plan. Borrower and each
ERISA Affiliate have made all contributions required to be made by them
to any Plan or Multiemployer Plan when due. There is no accumulated
funding deficiency in any Plan, whether or not waived;
12.15 Taxes. Borrower has filed all tax returns and such other reports
as it is required by law to file and has paid or made adequate provision for
the payment on or prior to the date when due of all taxes, assessments and
similar charges that are due and payable;
12.16 Locations. Borrower's chief executive office and the offices and
locations where it keeps the Collateral (except for Inventory in transit) are
at the locations set forth on the Schedule, except to the extent that such
locations may have been changed after notice to Lender in accordance with
Section 13.5 below;
12.17 Business Relationships. Except as disclosed in the Acquisition
Agreement, there exists no actual or threatened termination, cancellation or
limitation of, or any modification or change in, the business relationship
between Borrower and any customer or any group of customers whose
purchases from Borrower individually or in the aggregate are material to
the business of Borrower following the consummation of the Acquisition,
or with any material supplier, and there exists no present condition or state
of facts or circumstances of which Borrower is aware which would
materially and adversely affect Borrower or prevent Borrower from
conducting such business after the consummation of the transactions
contemplated by this Agreement in substantially the same manner in which
it has heretofore been conducted; and
12.18 Reaffirmations. Each request for a loan made by Borrower
pursuant to this Agreement shall constitute (i) an automatic representation
and warranty by Borrower to Lender that there does not then exist any
Event of Default and (ii) a reaffirmation as of the date of said request of all
of the representations and warranties of Borrower contained in this
Agreement and the other Loan Documents.
12.19 Use of Proceeds. No portion of the initial or any subsequent
advance hereunder shall be used to fund the Acquisition. The initial
advances hereunder shall be used to repay certain indebtedness of
Borrower to Bank of America. All advances of the Total Facility shall be
used for Borrower's working capital purposes.
13. AFFIRMATIVE COVENANTS.
Borrower covenants that, so long as any Obligation remains outstanding
and this Agreement is in effect, it shall:
13.1 Expenses. Borrower shall reimburse Lender for all costs, fees and
expenses incurred by Lender in connection with the negotiation,
preparation, execution, delivery, administration and enforcement of each of
the Loan Documents, including, but not limited to, the attorneys' and
paralegals' fees of in-house and outside counsel, lien, title search and
insurance fees, appraisal fees, all charges and expenses incurred in
connection with any and all environmental reports and environmental
remediation activities, and all other costs, expenses, taxes and filing or
recording fees payable in connection with the transactions contemplated by
this Agreement including without limitation all such costs, fees and
expenses as Lender shall incur or for which Lender shall become obligated
in connection with (i) any inspection or verification of the Collateral, (ii)
any proceeding relating to the Loan Documents or the Collateral, (iii)
actions taken with respect to the Collateral and Lender's security interest
therein, including, without limitation, the defense or prosecution of any
action involving Lender and Borrower or any third party, (iv) enforcement
of any of Lender's rights and remedies with respect to the Obligations or
Collateral and (v) consultation with Lender's attorneys and participation in
any workout, bankruptcy or other insolvency or other proceeding involving
any Loan Party or any Affiliate, whether or not suit is filed. Borrower shall
also pay all Lender charges in connection with bank wire transfers,
forwarding of loan proceeds, deposits of checks and other items of
payment, returned checks, establishment and maintenance of lock boxes
and other blocked accounts, and all other bank and administrative matters,
in accordance with Lender's schedule of bank and administrative fees and
charges in effect from time to time.
13.2 Taxes. File all tax returns and pay or make adequate provision for the
payment of all taxes, assessments and other charges on or prior to the date
when due;
13.3 Notice of Litigation. Promptly notify Lender in writing of any
litigation, suit or administrative proceeding which may materially and
adversely affect the Collateral or Borrower's business, assets, operations,
prospects or condition, financial or otherwise, whether or not the claim is
covered by insurance;
13.4 ERISA. Notify Lender in writing (i) promptly upon the occurrence of
any event described in Paragraph 4043 of ERISA, other than a termination,
partial termination or merger of a Plan or a transfer of a Plan's assets and
(ii) prior to any termination, partial termination or merger of a Plan or a
transfer of a Plan's assets;
13.5 Change in Location. Notify Lender in writing forty-five (45) days
prior to any change in the location of Borrower's chief executive office and
notify Lender in writing thirty (30) days prior to any change in the location
of any Collateral, or Borrower's opening or closing of any other place of
business;
13.6 Corporate Existence. Maintain its corporate existence and its
qualification to do business and good standing in all states necessary for the
conduct of its business and the ownership of its property and maintain
adequate assets, licenses, patents, copyrights, trademarks and trade names
for the conduct of its business;
13.7 Labor Disputes. Promptly notify Lender in writing of any labor
dispute to which Borrower is or may become subject and the expiration of
any labor contract to which Borrower is a party or bound;
13.8 Violations of Law. Promptly notify Lender in writing of any violation
of any law, statute, regulation or ordinance of any governmental entity, or
of any agency thereof, applicable to Borrower which may materially and
adversely affect the Collateral or Borrower's business, assets, prospects,
operations or condition, financial or otherwise;
13.9 Defaults. Notify Lender in writing within five (5) Business Days of
Borrower's default under any note, indenture, loan agreement, mortgage,
lease or other agreement to which Borrower is a party or bound, or of any
other default under any Indebtedness of Borrower; provided, however,
with respect to any of the leases under which Borrower occupies the
locations referenced in Section 12.16 of this Agreement, Borrower shall be
obligated to notify Lender only upon the occurrence of a material default;
13.10 Capital Expenditures. Promptly notify Lender in writing of the
making of any Capital Expenditure materially affecting Borrower's
business, assets, prospects, operations or condition, financial or otherwise
that are not reflected in the annual operating budget delivered to Lender
pursuant to Section 5.2(viii);
13.11 Books and Records. Keep adequate records and books of
account with respect to its business activities in which proper entries are
made in accordance with generally accepted accounting principles
consistently applied, reflecting all its financial transactions;
13.12 Leases; Warehouse Agreements. Provide Lender with (i) copies
of all agreements between Borrower and any landlord or warehouseman
which owns any premises at which any Collateral may, from time to time,
be located, and (ii) in addition to all landlord and mortgagee waivers
provided pursuant to Section 1 of the Additional Provisions, additional
landlord and mortgagee waivers in form acceptable to Lender with respect
to all locations where any Collateral is hereafter located.
13.13 Additional Documents. At Lender's request, promptly execute or
cause to be executed and delivered to Lender any and all documents,
instruments and agreements deemed reasonably necessary by Lender to
facilitate the collection of the Collateral or otherwise to give effect to or
carry out the terms or intent of this Agreement or any of the other Loan
Documents. Without limiting the generality of the foregoing, if any of the
Receivables with a face value in excess of $1,000.00 arises out of a
contract with the United States of America or any department, agency,
subdivision or instrumentality thereof, Borrower shall promptly notify
Lender of such fact in writing and shall execute any instruments and take
any other action required or requested by Lender to comply with the
provisions of the Federal Assignment of Claims Act;
13.14 Financial Covenants. Comply with the financial covenants set
forth on the Schedule.
13.15 Repayment of Merchandising Note. Shall cause all of Borrower's
obligations under the Merchandising Note (i) not to exceed $6,000,000 at
any one time outstanding, and (ii) to be repaid in full no later than
December 31, 1995; the Merchandising Note shall have been terminated
and liens pursuant thereto released by such date.
14. NEGATIVE COVENANTS.
Without Lender's prior written consent, which consent Lender may
withhold in its sole discretion, so long as any Obligation remains
outstanding and this Agreement is in effect, Borrower shall not: (a)
Mergers. Merge or consolidate with or acquire any other Person, or make
any other material change in its capital structure or in its business or
operations which might adversely affect the repayment of the Obligations;
(b) Loans. Make advances, loans or extensions of credit to, or invest in,
any Person; provided, however, Borrower shall be permitted to make loan
or other extensions of credit to its employees under each of the following
conditions: (i) if the proceeds of such loans are used for purposes other
than those set forth in clause (ii) below, the amount of such loan shall not
exceed One Thousand Dollars ($1,000) to any one employee or Fifty
Thousand Dollars ($50,000) in the aggregate, to all employees, or (ii) if the
proceeds of such loans are used to finance the purchase by an employee of
stock in Borrower, the amount of such loans shall not exceed One
Thousand Dollars ($1,000) to any one employee or Fifty Thousand Dollars
($50,000), in the aggregate to all employees; (c) Dividends. Declare,
make or pay a Distribution; (d) Adverse Transactions. Enter into any
transaction which materially and adversely affects the Collateral or its
ability to repay the Obligations in full as and when due; (e) Indebtedness
of Others. Become directly or contingently liable for the Indebtedness of
any Person, except by endorsement of instruments for deposit; (f)
Repurchase. Make any sale of Inventory to any customer on a
bill-and-hold, guaranteed sale, sale and return, sale on approval,
consignment, or any other repurchase or return basis; provided, however,
Borrower shall be permitted, in the ordinary course of its business, to make
such a sale of Inventory, providing the same does not constitute a material
portion of its Inventory, in the aggregate; (g) Name. Use any corporate
name other than Factory 2-U, Inc. or any fictitious name other than Factory
2-U; (h) Prepayment. Except as otherwise expressly provided herein,
prepay any Indebtedness other than trade payables, the Obligations, and the
payment to be made to Bank of America on the Closing Date; (i) Capital
Expenditure. Make or incur any Capital Expenditure if, after giving effect
thereto, the aggregate amount of all Capital Expenditures by Borrower in
any fiscal year would exceed the amount set forth on the Schedule; (j)
Compensation. Pay total compensation, including salaries, withdrawals,
fees, bonuses, commissions, drawing accounts and other payments,
whether directly or indirectly, in money or otherwise, during any fiscal year
to all of Borrower's executives, officers and directors (or any relative
thereof) in an amount in excess of the amount set forth on the Schedule;
(k) Indebtedness. Create, incur, assume or permit to exist any
Indebtedness (including Indebtedness in connection with Capital Leases) in
excess of the amount set forth on the Schedule; (l) Affiliate Transactions.
Except as set forth below, sell, transfer, distribute or pay any money or
property to any Affiliate, other than as required under the terms of the
Merchandising Note and the Capin Note as the same come due (but in each
case subject to the terms of the Subordination Agreement), or invest in (by
capital contribution or otherwise) or purchase or repurchase any stock or
Indebtedness, or any property, of any Affiliate, it being expressly
understood that Borrower shall not purchase or sell inventory from or to
General Textiles or any other Affiliate, except as required under the
Merchandising Note, or become liable on any guaranty of the indebtedness,
dividends or other obligations of any Affiliate. Notwithstanding the
foregoing, Borrower may pay compensation permitted by Section 14(j) to
employees who are Affiliates, and management fees and guaranty fees
payable to FBC pursuant to the FBC Management Agreement and the FBC
Guaranty Fee Agreement, subject to the Subordination Agreement. It is
further agreed that nothing herein shall prevent Borrower from paying to
General Textiles Borrower's share of overhead expenses, calculated in
accordance with Section 5 of the Additional Provisions, subject to the
provisions of the Subordination Agreement; (m) Nature of Business. Enter
into any new business or make any material change in any of Borrower's
business objectives, purposes and operations; (n) Lender's Name. Use the
name of Lender in connection with any of Borrower's business or activities,
except in connection with internal business matters or as required in
dealings with governmental agencies and financial institutions or with trade
creditors of Borrower, solely for credit reference purposes; or (o) Margin
Security. Own, purchase or acquire (or enter into any contract to purchase
or acquire) any "margin security" as defined by any regulation of the
Federal Reserve Board as now in effect or as the same may hereafter be in
effect; (p) Amendment of Charter and By-laws. Amend, modify or waive
any term or provision of Borrower's corporate charter or By-laws unless
required in connection with the issuance of Borrower's capital stock or
unless required by law, in which event Borrower shall give Lender at least
ten (10) days written notice prior to the making of such amendment,
modification or waive; (q) Prepayment of Subordinated Debt. Fully or
partially prepay the Subordinated Debt other than in accordance with the
Subordination Agreement; or (r) Prepayment of Bank of America Debt.
Fully or partially prepay the Bank of America Debt other than in
accordance with the Bank of America Agreement.
15. ENVIRONMENTAL MATTERS.
15.1 Definitions. The following definitions apply to the provisions of this
Section 15: (i) The term "Applicable Law" shall include, but shall not be
limited to, each statute named or referred to in this Section 15.1 and all
rules and regulations thereunder, and any other local, state and/or federal
laws, rules, regulations and ordinances, whether currently in existence or
hereafter enacted, which govern, to the extent applicable to the Property or
to Borrower, (a) the existence, cleanup and/or remedy of contamination
on real property; (b) the protection of the environment from soil, air or
water pollution, or from spilled, deposited or otherwise emplaced
contamination; (c) the emission or discharge of hazardous substances into
the environment; (d) the control of hazardous wastes; or (e) the use,
generation, transport, treatment, removal or recovery of Hazardous
Substances. (ii) The term "Hazardous Substance" shall mean (a) any oil,
flammable substance, explosives, radioactive materials, hazardous wastes
or substances, toxic wastes or substances or any other wastes, materials or
pollutants which (i) pose a hazard to the Property or to persons on or
about the Property or (ii) cause the Property to be in violation of any
Applicable Law; (b) asbestos in any form which is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment which
contain dielectric fluid containing levels of polychlorinated biphenyls, or
radon gas; (c) any chemical, material or substance defined as or included in
the definition of "hazardous substances," "waste," "hazardous wastes,"
"hazardous materials," "extremely hazardous waste," "restricted hazardous
waste," or "toxic substances" or words of similar import under any
Applicable Law, including, but not limited to, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"),
42 USC Section 9601 et seq.; the Resource Conservation and Recovery Act
("RCRA"), 42 USC Section 6901 et seq.; the Hazardous Materials
Transportation Act, 49 USC Section 1801 et seq.; and the Federal Water
Pollution Control Act, 33 USC Section 1251 et seq.; (d) any other chemical,
material or substance, exposure to which is prohibited, limited or regulated
by any governmental authority which may or could pose a hazard to the
health and safety of the occupants of the Property or the owners and/or
occupants of property adjacent to or surrounding the Property, or any
other person coming upon the Property or adjacent property; and (e) any
other chemical, materials or substance which may or could pose a hazard to
the environment. (iii) The term "Property" shall mean all real property,
wherever located, in which Borrower or any Affiliate of Borrower has any
right, title or interest, whether now existing or hereafter arising, and
including, without limitation, as owner, lessor or lessee.
15.2 Covenants and Representations. Borrower represents and warrants
that there have not been during the period of Borrower's possession of any
interest in the Property and, to the best of its knowledge after reasonable
inquiry, there have not been at any other times, any activities on the
Property involving, directly or indirectly, the use, generation, treatment,
storage or disposal of any Hazardous Substances except in compliance with
Applicable Law (a) under, on or in the land included in the Property,
whether contained in soil, tanks, sumps, ponds, lagoons, barrels, cans or
other containments, structures or equipment, (b) incorporated in the
buildings, structures or improvements included in the Property, including
any building material containing asbestos, or (c) used in connection with
any operations on or in the Property. Without limiting the generality of the
foregoing and to the extent not included within the scope of this Section
15.2, Borrower represents and warrants that it is in full compliance with
Applicable Law and has received no notice from any person or any
governmental agency or other entity of any violation by Borrower or its
Affiliates of any Applicable Law. Borrower shall be solely responsible for
and agrees to indemnify Lender, protect and defend with counsel
reasonably acceptable to Lender, and hold Lender harmless from and
against any claims actions, administrative proceedings, judgments,
damages, punitive damages, penalties, fines, costs, liabilities (including
sums paid in settlements of claims), interest or losses, attorneys' fees
(including any fees and expenses incurred in enforcing this indemnity),
consultant fees, expert fees, and other out-of-pocket costs or expenses
actually incurred by Lender (collectively, the "Environmental Costs"), that
may, at any time or from time to time, arise directly or indirectly from or in
connection with: (a) the presence, suspected presence, release or
suspected release of any Hazardous Substance whether into the air, soil,
surface water or groundwater of or at the Property, or any other violation
of Applicable Law, or (b) any breach of the foregoing representations and
covenants; except to the extent any of the foregoing result from the actions
of Lender, its employees, agents and representatives. All Environmental
Costs incurred or advanced by Lender shall be deemed to be made by
Lender in good faith and shall constitute Obligations hereunder.
16. TERM; TERMINATION.
16.1 Term. The initial term of this Agreement shall be as set forth on the
Schedule (the "Initial Term") and shall be automatically renewed for
successive periods of one (1) year (each, a "Renewal Term"), unless earlier
terminated as provided herein.
16.2 Prior Notice. Each party shall have the right to terminate this
Agreement at the end of the Initial Term or at the end of any Renewal
Term by giving the other party written notice not less than sixty (60) days
prior to the effective date of such termination, by registered or certified
mail.
16.3 Payment in Full. Upon the effective date of termination, the
Obligations shall become immediately due and payable in full in cash.
16.4 Early Termination; Termination Fee. In addition to the procedure set
forth in Section 16.2, Borrower may terminate this Agreement at any time
upon sixty (60) days' prior written notice and prepay the Obligations.
Upon any such early termination by Borrower or any termination of this
Agreement by Lender upon the occurrence of an Event of Default, then,
and in any such event, Borrower shall pay to Lender upon the effective
date of such termination a fee (the "Termination Fee") in an amount equal
to the amount shown on the Schedule.
16.5 Termination upon Voluntary Prepayment by General Textiles. In the
event General Textiles voluntarily prepays all of its obligations to Lender
and terminates that certain Loan and Security Agreement dated as of
October 14, 1993 between General Textiles and Lender, as previously or
hereafter from time to time amended, modified, supplemented, restated or
renewed, the Obligations shall be immediately due and payable in full and
Borrower shall pay the Termination Fee payable as of the effective date of
such termination.
17. DEFAULT.
17.1 Events of Default. The occurrence and continuance of any one or
more of the following events shall constitute an Event of Default under this
Agreement:
(i) Borrower fails to pay when due and payable any portion of the
Obligations at stated maturity, upon acceleration or otherwise or Borrower
fails to observe or perform any covenants or agreements made by
Borrower in Sections 4.2, 4.4, 5.1, 5.2, 7.2, 13.6, 13.14, 13.15, 14(c),
14(e), 14(h), 14(i), 14(j), 14(k) or 14(l);
(ii) Borrower or any other Loan Party fails or neglects to perform, keep,
or observe any term, provision, condition, covenant or agreement (not
otherwise described in this Section 17.1) contained in any Loan Document
to which such Loan Party is a party and such failure or neglect continues
for a period of ten (10) days;
(iii) Any material adverse change occurs in Borrower's business,
assets, operations or condition, financial or otherwise;
(iv) The value or priority of Lender's security interest in the Collateral is
materially impaired;
(v) Any material portion of Borrower's assets is seized, attached,
subjected to a writ or distress warrant, is levied upon or comes into the
possession of any judicial officer;
(vi) Borrower shall generally not pay its debts as they become due, or
pursuant to the Composition Agreement or shall enter into any agreement
(whether written or oral), or offer to enter into any agreement, with all or a
significant number of its creditors regarding any moratorium or other
indulgence with respect to its debts or the participation of such creditors or
their representatives in the supervision, management or control of the
business of Borrower other than the Composition Agreement;
(vii) Any bankruptcy or other insolvency proceeding is commenced by
Borrower, or any such proceeding is commenced against Borrower and
remains undischarged or unstayed for seventy-five (75) days;
(viii) (A) Any notice of lien, levy or assessment is filed of record with
respect to any of Borrower's assets and the aggregate amount of all such
liens, levies and assessments exceeds $100,000, or (B) any notice of lien,
levy or assessment is filed of record with respect to any of Borrower's
assets, the aggregate amount of all such liens, levies and assessments is
$100,000 or less and, in connection with this clause (B) only, Borrower has
not posted and maintained a bond or other security, satisfactory to Lender
staying the enforcement of such lien, levy or assessment;
(ix) Any judgments are entered against Borrower in an aggregate amount
exceeding $100,000, which have not been discharged in full or any
judgments are entered against Borrower in an aggregate amount of
$100,000 or less which have not been discharged in full or stayed pending
appeal;
(x) If (i) Borrower at any time shall be in default with respect to any of
the Subordinated Debt or the Bank of America Debt, after the expiration of
grace periods, if any, or (ii) Borrower, at any time, shall be in material
default under any material agreement between Borrower and any third
party (including, without limitation, any material leases) beyond the grace
period, if any, applicable thereto, the default would entitle such third party
to accelerate the maturity of the Indebtedness of Borrower to such third
party and either (A) the aggregate amount of such payments then in default
beyond such grace period shall exceed $100,000, or (B) the outstanding
principal amount of such Indebtedness exceeds $100,000;
(xi) Any representation or warranty made or deemed to be made by
Borrower, any Affiliate or any other Loan Party in any Loan Document or
any other statement, document or report made or delivered to Lender in
connection therewith shall prove to have been misleading in any material
respect;
(xii) Any Guarantor terminates or attempts to terminate its guarantee
or becomes subject to any bankruptcy or other insolvency proceeding;
(xiii) Any Prohibited Transaction or Reportable Event shall occur with
respect to a Plan which could have a material adverse effect on the financial
condition of Borrower; any lien upon the assets of Borrower in connection
with any Plan shall arise; Borrower or any of its ERISA Affiliates shall fail
to make full payment when due of all amounts which Borrower or any of
its ERISA Affiliates may be required to pay to any Plan or any
Multiemployer Plan as one or more contributions thereto; Borrower or any
of its ERISA Affiliates creates or permits the creation of any accumulated
funding deficiency, whether or not waived;
(xiv) Other than in connection with an Initial Public Offering of
common stock of Borrower pursuant to an effective registration statement
under the Securities Act of 1933 or any comparable state securities statute,
any transfer of more than fifteen percent (15%) of the issued and
outstanding shares of common stock or other evidence of ownership of
Borrower; or
(xv) FBC defaults in any of its obligations to Seller under the Acquisition
Documents, following the expiration of the applicable grace period, if any,
provided such default does not arise from the failure of FBC to make a
payment to Seller when due after Lender has invoked the Subordination
Agreement and while such invocation remains in effect.
17.2 Remedies. Upon the occurrence and during the continuance of an
Event of Default, Lender may, at its option and in its sole discretion and in
addition to all of its other rights under the Loan Documents, terminate this
Agreement and declare all of the Obligations to be immediately payable in
full. Lender shall also have all of its rights and remedies under applicable
law, including, without limitation, the default rights and remedies of a
secured party under the Code, and further, Lender may, at any time, take
possession of the Collateral and keep it on Borrower's premises, at no cost
to Lender, or remove any part of it to such other place(s) as Lender may
desire or Borrower shall, upon Lender's demand, at Borrower's sole cost,
assemble the Collateral and make it available to Lender at a place
reasonably convenient to Lender and Lender may sell and deliver any
Collateral at public or private sales, for cash, upon credit or otherwise, at
such prices and upon such terms as Lender deems advisable, at Lender's
discretion, and may, if Lender deems it reasonable, postpone or adjourn
any sale of the Collateral by an announcement at the time and place of sale
or of such postponed or adjourned sale without giving a new notice of sale.
Borrower agrees that Lender has no obligation to preserve rights to the
Collateral or marshall any Collateral for the benefit of any Person. Lender
is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, name, trade secrets, trade names,
trademarks and advertising matter, or any similar property, in completing
production, advertising or selling any Collateral and Borrower's rights
under all licenses and all franchise agreements shall inure to Lender's
benefit. Any requirement of reasonable notice shall be met if such notice is
mailed certified mail, return receipt requested, to Borrower at its address
set forth in the heading to this Agreement at least five (5) Business Days
before sale or other disposition. The proceeds of sale shall be applied, first,
to all attorneys fees and other expenses of sale, and second, to the
Obligations in such order as Lender shall elect, in its sole discretion.
Lender shall return any excess to Borrower and Borrower shall remain
liable for any deficiency to the fullest extent permitted by law.
17.3 Standards for Determining Commercial Reasonableness. Borrower
and Lender agree that the following conduct by Lender with respect to any
disposition of Collateral shall conclusively be deemed commercially
reasonable (but other conduct by Lender, including, but not limited to,
Lender's use in its sole discretion of other or different times, places and
manners of noticing and conducting any disposition of Collateral shall not
automatically be deemed unreasonable): Any public or private disposition
as to which on no later than the fifth calendar day prior thereto written
notice thereof is mailed or personally delivered to Borrower and, with
respect to any public disposition, on no later than the fifth calendar day
prior thereto notice thereof describing in general non-specific terms, the
Collateral to be disposed of is published once in a newspaper of general
circulation in the county where the sale is to be conducted, at any place
designated by Lender, with or without the Collateral being present, and
which commences at any time between 8:00 a.m. and 5:00 p.m. (provided
that no notice of any public or private disposition need be given to the
Borrower if the Collateral is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized market). Without
limiting the generality of the foregoing, Borrower expressly agrees that,
with respect to any disposition of accounts, instruments and general
intangibles, it shall be commercially reasonable for Lender to direct any
prospective purchaser thereof to ascertain directly from Borrower any and
all information concerning the same, including, but not limited to, the terms
of payment, aging and delinquency, if any, the financial condition of any
obligor or account debtor thereon or guarantor thereof, and any collateral
therefor.
18. DEFINITIONS.
18.1 Defined Terms. As used in this Agreement, the following terms have
the definitions set forth below:
"Acquisition" shall mean the transactions pursuant to which FBC shall
acquire all of the issued and outstanding capital stock of Borrower,
pursuant to and in accordance with the Acquisition Documents.
"Acquisition Agreement" shall mean that certain Stock, Purchase
Agreement dated as of August 29, 1995 among FBC as Buyer and each of
the shareholders listed on the signature page thereof as Seller.
"Acquisition Documents" shall mean each document, agreement and/or
instrument executed and/or delivered in connection with or pursuant to the
Acquisition Agreement.
"Additional Provisions" shall mean the Additional Provisions portion of the
Schedule.
"Affiliate" means any Person controlling, controlled by or under common
control with Borrower. For purposes of this definition, "control" means
the possession, directly or indirectly, of the power to direct or cause
direction of the management and policies of Borrower, whether through
ownership of common or preferred stock or other equity interests, by
contract or otherwise. Without limiting the generality of the foregoing,
each of the following shall be an Affiliate: General Textiles, any officer,
director, employee or other agent of Borrower, any shareholder or
subsidiary of Borrower, and any other Person with whom or which
Borrower has common shareholders, officers or directors.
"Bank of America" means Bank of America, Arizona.
"Bank of America Agreement" means that certain letter of agreement, of
even date herewith, between Bank of America and Lender relating to the
Nogales Warehouse and Lender's and Bank of America's respective rights
in relation thereto and any Collateral located thereat.
"Bank of America Debt" means those obligations of Borrower to Bank of
America which shall survive the Closing, as described with more
particularity in the Bank of America Agreement.
"Business Day" means any day on which commercial banks in both Los
Angeles, California and Phoenix, Arizona are open for business.
"Capital Expenditures" means all expenditures made and liabilities incurred
for the acquisition of any fixed asset or improvement, replacement,
substitution or addition thereto which has a useful life of more than one
year and including, without limitation, those arising in connection with
Capital Leases.
"Capin Note" shall mean the promissory note of Borrower payable to the
order of Robert S. Stuchen as agent for the Escrow Parties, as defined
therein, of even date herewith, in the principal amount of $1,849,000, as
collaterally assigned and made payable to the order of FBC, without giving
effect to any modification, forbearance, restatement or replacement for any
or all thereof.
"Capital Lease" means any lease of property by Borrower that, in
accordance with generally accepted accounting principles, should be
capitalized for financial reporting purposes and reflected as a liability on the
balance sheet of Borrower.
"Closing" means the disbursement of the initial advance under the Total
Facility.
"Closing Date" means the date of the Closing.
"Code" means the Uniform Commercial Code as adopted, amended, and in
effect in the State of Arizona from time to time.
"Collateral" has the meaning set forth in Section 4.1 above.
"Collateral Assignment - Intellectual Property" means that certain
Collateral Assignment of Trademarks, Licenses and Patents and Security
Agreement, of even date herewith, between Borrower and Lender.
"Composition Agreement" means, collectively, those agreements
substantially in the form attached hereto as Exhibit A, between Borrower
and Borrower's trade creditors providing for the re-scheduling of the
payment of Borrower's obligations to each.
"Debt Service Coverage Ratio Covenant" shall have the meaning set forth
in the Financial Covenants section of the Schedule.
"Debt to Net Worth Covenant" shall have the meaning set forth in the
Financial Covenants section of the Schedule.
"Deposit Accounts" has the meaning set forth in Section 47-9105 of the
Code.
"Distribution" means any act or event which results in the declaration or
payment of any cash dividends upon any of the stock of Borrower or the
distribution or any of Borrower's property for the redemption, retirement,
purchase, or acquisition, directly or indirectly, of any of Borrower's stock.
Distribution shall not include any permitted payment made by Borrower to
FBC under the Capin Note, the FBC Management Agreement or the FBC
Guaranty Fee Agreement, subject in each case to the Subordination
Agreement.
"Eligible Inventory" means Inventory which Lender, in its sole judgment,
deems Eligible Inventory, based on such considerations as Lender may
from time to time deem appropriate, in the exercise of its reasonable credit
judgment. Without limiting the generality of the foregoing, no Inventory
shall be Eligible Inventory unless, in Lender's sole judgment, such
Inventory (i) consists of finished goods, in good, new and salable condition
which are not obsolete or unmerchantable, and are not comprised of raw
materials, work in process or packaging, materials or supplies, layaway,
discontinued items slow-moving or held on consignment; (ii) meets all
standards imposed by any governmental agency or authority; (iii) conforms
in all respects to the warranties and representations set forth herein; (iv) is
at all times subject to Lender's duly perfected, first priority security
interest; and (v) subject to Section 1 of the Additional Provisions, is
situated at a location in compliance with Section 12.16 hereof. The value of
Eligible Inventory shall be reduced by such reserves as Lender from time to
time deems appropriate, in the exercise of its reasonable credit judgment,
including without limitation, freight capitalization, markdown accruals and
shrinkage reserves.
"Environmental Certificate" means that certain Environmental Certificate
with Representations, Covenants and Warranties of even date herewith and
executed by Borrower with respect to all premises where or any portion of
the Collateral is or may be located.
"Equipment" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dyes, jigs, goods and
other tangible personal property (other than Inventory) of every kind and
description used in Borrower's operations or owned by Borrower and any
interest in any of the foregoing, and all attachments, accessories,
accessions, replacements, substitutions, additions and improvements to any
of the foregoing, wherever located.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated and whether or not foreign) which is or may hereafter become
a member of a group of which Borrower is a member and which is treated
as a single employer under ERISA Section 4001(b)(1), or IRC Section
414.
"Event of Default" means any of the events set forth in Section 17.1 of this
Agreement.
"FBC" means Family Bargain Corporation, a Delaware corporation. "FBC
Guaranty Fee Agreement" means that Guaranty Fee Agreement of even
date herewith by and between Borrower and FBC.
"FBC Management Agreement" means that certain letter of agreement of
even date herewith prepared by Borrower and accepted by FBC, pursuant
to which FBC shall provide management services to Borrower..
"FBC Note" means that certain Second Amended and Restated Senior
Secured Term Note, dated as of January 28, 1994 in the original principal
amount of $5,200,000 and made payable by General Textiles to the order
of Guilford Investments Inc., as subsequently endorsed and transferred to
FBC.
"FBC Note Pledge Agreement" means that certain Note Pledge
Agreement, executed by FBC in favor of Lender, and pursuant to which
FBC assigns to Lender all of FBC's right, title and interest in and to the
FBC Note and all collateral securing same.
"Fixed Asset Loans" has the meaning set forth on the Schedule.
"General Intangibles" means all general intangibles of Borrower, whether
now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or other
business records, Deposit Accounts, inventions, designs, drawings,
blueprints, patents, patent applications, trademarks and the goodwill of the
business symbolized thereby, names, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, security and
other deposits, rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments
now or hereafter arising therefrom, all claims of Borrower against Lender,
rights to purchase or sell real or personal property, rights as a licensor or
licensee of any kind, royalties, telephone numbers, proprietary information,
purchase orders, and all insurance policies and claims (including without
limitation credit, liability, property and other insurance)tax refunds and
claims, computer programs, discs, tapes and tape files, claims under
guaranties, security interests or other security held by or granted to
Borrower to secure payment of any of the Receivables by an account
debtor, all rights to indemnification and all other intangible property of
every kind and nature (other than Receivables).
"General Textiles" means General Textiles, a California corporation.
"GenTex Deed of Trust" means that certain Deed of Trust dated August
31, 1995, and executed by Borrower as Trustor in favor of FBC as
Beneficiary, as the beneficial interest therein was subsequently assigned to
General Textiles pursuant to that certain Assignment of Beneficial Interest
dated November 10, 1995, and executed by FBC as Assignor in favor of
General Textiles as Assignee.
"GenTex Deed of Trust Assignment" means that certain Assignment of
Beneficial Interest under Deed of Trust of even date herewith, executed by
General Textiles in favor of Lender, and pursuant to which General
Textiles shall assign to Lender all of its right, title and interest as
successor beneficiary under the GenTex Deed of Trust.
"GenTex Note Pledge Agreement" means that certain Note Pledge
Agreement, executed by General Textiles in favor of Lender, and pursuant
to which General Textile, as assignee and holder of the Merchandising
Note, assigns to Lender all of General Textiles' right, title and interest in
and to the Merchandising Note and all collateral securing the same.
"Guarantor" means jointly and severally, each such person set forth on the
Schedule.
"Guaranty" means individually and collectively, that certain Continuing
Guaranty of even date herewith from Guarantor in favor of Lender in a
form acceptable to Lender.
"Indebtedness" means all of Borrower's present and future obligations,
liabilities, debts, claims and indebtedness, contingent, fixed or otherwise,
however evidenced, created, incurred, acquired, owing or arising, whether
under written or oral agreement, operation of law or otherwise, and
includes, without limiting the foregoing (i) the Obligations, (ii) obligations
and liabilities of any Person secured by a lien, claim, encumbrance or
security interest upon property owned by Borrower, even though Borrower
has not assumed or become liable therefor, (iii) obligations and liabilities
created or arising under any Capital Leases or conditional sales contract or
other title retention agreement with respect to property used or acquired by
Borrower, even though the rights and remedies of the lessor, seller or
lender are limited to repossession, (iv) all unfunded pension fund
obligations and liabilities and (v) deferred taxes.
"Initial Term" has the meaning set forth on the Schedule.
"Inventory" means all of Borrower's now owned and hereafter acquired
goods, merchandise and other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease, all raw
materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in
Borrower's business or used in connection with the manufacture, packing,
shipping, advertising, selling or finishing of such goods, merchandise and
other personal property, and all documents of title or other documents
representing them.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Landlord or Mortgagee Consent" shall have the meaning set forth in the
Schedule.
"Lender Deed of Trust" means that certain Deed of Trust, Assignment of
Rents and Proceeds and Security Agreement to be executed and delivered
by Borrower in favor of Lender, and placed of record in the land records of
Santa Cruz County, Arizona, with respect to the Nogales Real Property,
not later than two weeks following the Closing.
"Loan Documents" means, collectively, this Agreement, the Schedule, the
Environmental Certificate, each Guaranty, the Collateral Assignment -
Intellectual Property, each Subordination Agreement, the Bank of America
Agreement, the GenTex Deed of Trust Assignment, the GenTex Note
Pledge Agreement, the FBC Management Agreement, the FBC Guaranty
Fee Agreement, the FBC Note Pledge Agreement, the Standstill
Agreement, any note or notes executed by Borrower and payable to
Lender, and any other agreement entered into in connection with this
Agreement, such security agreements, intellectual property assignments and
mortgages as Lender may require with respect to this Agreement or any
such Guaranty, together with all alterations, amendments, changes,
extensions, modifications, refinancings, refundings, renewals, replacements,
restatements, or supplements, of or to any of the foregoing, all in form and
substance acceptable to Lender.
"Loan Party" means Borrower, each Guarantor, each Subordinating
Creditor and each other party (other than Lender) to any Loan Document.
"Loan Year" shall mean a period from the Closing Date or any annual
anniversary of the Closing Date through the date preceding the immediately
succeeding annual anniversary of the Closing Date.
"Merchandising Note" means that certain Merchandising Note and Security
Agreement dated as of August 29, 1995, executed by Borrower in favor
FBC in the stated amount of $2,000,000, as amended by that certain First
Amendment to Merchandising Note and Security Agreement dated on or
about October 12, 1995, as further amended by that certain Second
Amendment to Merchandising Note and Security Agreement of even date
herewith.
"Multiemployer Plan" means a "multiemployer plan" as defined in ERISA
Sections 3(37) or 4001(a)(3) or IRC Section 414(f) which covers
employees of Borrower or any ERISA Affiliate.
"Net Worth" at any date means the Borrower's net worth as determined in
accordance with generally accepted accounting principles, consistently
applied.
"Net Worth Covenant" shall have the meaning set forth in the Financial
Covenant sections of the Schedule.
"Nogales Real Property" means all real property of Borrower owned and
located in Santa Cruz County, Arizona.
"Nogales Warehouse" means Borrower's warehouse facility located at
1500 La Quinta Street, Nogales, Santa Cruz County, Arizona.
"Obligations" means all present and future loans, advances, debts,
liabilities, obligations, covenants, duties and indebtedness at any time
owing by Borrower to Lender, whether evidenced by this Agreement any
note or other instrument or document, whether arising from an extension of
credit, opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Lender in
Borrower's debts owing to others), absolute or contingent, due or to
become due, including, without limitation, all interest, charges, expenses,
fees, attorney's fees and any other sums chargeable to Borrower hereunder
or under any other agreement with Lender.
"Operating Cash Flow" means, for any period, Borrower's consolidated net
income or loss (excluding the effect of any extraordinary gains or losses
from sales of property not in the ordinary course of business), determined
in accordance with generally accepted accounting principles, after income
taxes paid or accrued plus each of the following items (determined on a
consolidated basis) to the extent deducted from the revenues of Borrower
in the calculation of net income or loss: (i) depreciation; (ii) amortization;
and (iii) interest expense paid or accrued; less the cash portion of all
Capital Expenditures made during such period.
"Overlines" has the meaning set forth in Section 1.3.
"PBGC" means the Pension Benefit Guarantee Corporation.
"Permitted Encumbrance" means each of the liens, mortgages and other
security interests set forth on the Schedule and incorporated herein by this
reference.
"Person" means any individual, sole proprietorship, partnership, joint
venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.
"Plan" means any plan described in ERISA Section 3(2) maintained for
employees of Borrower or any ERISA Affiliate, other than a
Multiemployer Plan.
"Power of Attorney" means that certain Power of Attorney of even date
herewith executed by FBC in favor of Lender.
"Prepared Financials" means the balance sheets of Borrower as of the date
set forth in the Schedule, and as of each subsequent date on which audited
balance sheets are delivered to Lender from time to time hereunder, and the
related statements of operations, changes in stockholder's equity and
changes in cash flow for the periods ended on such dates.
"Prohibited Transaction" means any transaction described in Section 406 of
ERISA which is not exempt by reason of Section 408 of ERISA, and any
transaction described in Section 4975(c) of the IRC which is not exempt by
reason of Section 4975(c)(2) of the IRC.
"Receivables" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), proceeds of any letters
of credit naming Borrower as beneficiary, contract rights, chattel paper,
instruments, documents and all other forms of obligations at any time
owing to Borrower, all guaranties and other security therefor, whether
secured or unsecured, all merchandise returned to or repossessed by
Borrower, and all rights of stoppage in transit and all other rights or
remedies of an unpaid vendor, lienor or secured party.
"Renewal Term" has the meaning set forth on the Schedule.
"Reportable Event" means a reportable event described in Section 4043 of
ERISA or the regulations thereunder, a withdrawal from a Plan described
in Section 4063 of ERISA, or a cessation of operations described in
Section 4068(f) of ERISA.
"Seller" means, collectively, each person so identified in the Acquisition
Agreement.
"Standstill Agreement" means that certain letter of agreement of even date
herewith between Seller and Lender in respect of FBC's obligations to
Seller under the Acquisition Documents.
"Subordinated Debt" means liabilities of Borrower the repayment of which
is subordinated, to the payment and performance of the Obligations,
pursuant to a Subordination Agreement.
"Subordinating Creditor" means each person so identified on the Schedule.
"Subordination Agreement" means individually, and collectively, those
Standstill and Subordination Agreements dated of even date herewith, by
and between each Subordinating Creditor and Lender, as such
Subordination Agreements may be amended, supplemented or otherwise
modified from time to time.
"Total Contractual Debt Service" means, for any period, the sum of
payments made or required to be made by Borrower during such period for
interest and scheduled principal payments due on any and all Indebtedness
of Borrower.
"Total Facility" has the meaning set forth on the Schedule.
"Trademarks, Licenses and Patent" means all of Borrower's right, title and
interest in and to: (i) trademarks, trademark registrations, trade names,
trade name registrations, and trademark or trade name applications,
including without limitation such as are listed on the Schedule, attached
hereto and made a part hereof, as the same may be amended from time to
time, and (a) renewals thereof, (b) all income, royalties, damages and
payments now and hereafter due and/or payable with respect thereto,
including, without limitation, damages and payments for past or future
infringements thereof, (c) the right to sue for past, present and future
infringements thereof, (d) all rights corresponding thereto throughout the
world, and (e) the goodwill of the business operated by Assignor connected
with and symbolized by any trademarks or trade names; and (ii) license
agreements, including without limitation such as are listed on the Schedule
attached hereto and made a part hereof, and the right to prepare for sale,
sell, and advertise for sale any Inventory now or hereafter owned by
Assignor and now or hereafter covered by such licenses; and (iii) patents
and patent applications, registered or pending, including without limitation
such as are listed on the Schedule attached hereto, together with all
income, royalties, shoprights, damages and payments thereto, the right to
sue for infringements thereof, and all rights thereto throughout the world,
and all reissues, divisions, continuations, renewals, extensions and
continuations in part thereof, and the goodwill of the business connected
with the use of and symbolized by such patents.
18.2 Other Terms. All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in
accordance with generally accepted accounting principles, consistently
applied. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.
19. MISCELLANEOUS.
19.1 Recourse to Security; Certain Waivers. All Obligations shall be
payable by Borrower as provided for herein and, in full, at the termination
of this Agreement; recourse to security will not be required at any time.
Borrower waives presentment and protest of any instrument and notice
thereof, notice of default and, to the extent permitted by applicable law, all
other notices to which Borrower might otherwise be entitled.
19.2 No Waiver by Lender. Lender's failure to exercise any right, remedy
or option under this Agreement or any supplement or other agreement
between Lender and Borrower or delay by Lender in exercising the same
will not operate as a waiver. No waiver by Lender will be effective unless
in writing and then only to the extent stated. No waiver by Lender shall
affect its right to require strict performance of this Agreement. Lender's
rights and remedies will be cumulative and not exclusive.
19.3 Binding on Successor and Assigns. All terms, conditions, promises,
covenants, provisions and warranties shall inure to the benefit of and bind
Lender's and Borrower's respective representatives, successors and assigns.
19.4 Severability. If any provision of this Agreement shall be prohibited or
invalid under applicable law, it shall be ineffective only to such extent,
without invalidating the remainder of this Agreement.
19.5 Amendments; Assignments. This Agreement may not be modified,
altered or amended, except by an agreement in writing signed by Borrower
and Lender. Borrower may not sell, assign or transfer any interest in this
Agreement or any other Loan Document, or any portion thereof, including,
without limitation, any of Borrower's rights, title, interests, remedies,
powers and duties hereunder or thereunder. Borrower hereby consents to
Lender's participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of this Agreement and any of the other Loan
Documents, or of any portion hereof or thereof, including, without
limitation, Lender's rights, title, interests, remedies, powers and duties
hereunder or thereunder. In connection therewith, Lender may disclose all
documents and information which Lender now or hereafter may have
relating to Borrower or Borrower's business. To the extent that Lender
assigns its rights and obligations hereunder to a third party, Lender shall
thereafter be released from such assigned obligations to Borrower and such
assignment shall effect a novation between Borrower and such third party.
19.6 Integration. This Agreement, together with the Schedule (which is a
part hereof) and the other Loan Documents, reflect the entire
understanding of the parties with respect to the transactions contemplated
hereby.
19.7 Governing Law; Waivers. THIS AGREEMENT SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF ARIZONA
AND SHALL BE INTERPRETED IN ACCORDANCE WITH THE
INTERNAL LAWS OF ARIZONA AND NOT THE CONFLICT OF
LAWS RULES OF THE STATE OF ARIZONA GOVERNING
CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE. BORROWER HEREBY AGREES TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED
WITHIN THE COUNTY OF MARICOPA, STATE OF ARIZONA OR,
AT THE SOLE OPTION OF LENDER, IN ANY OTHER COURT IN
WHICH LENDER SHALL INITIATE LEGAL OR EQUITABLE
PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY.
BORROWER WAIVES ANY OBJECTION OF FORUM NON
CONVENIENS AND VENUE. BORROWER FURTHER WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE MADE IN
THE MANNER SET FORTH IN SECTION 19.13 HEREOF FOR THE
GIVING OF NOTICE.
19.8 Survival. All of the representations and warranties of Borrower
contained in this Agreement shall survive the execution, delivery and
acceptance thereof by the parties. No termination of this Agreement or of
any guaranty of the Obligations shall affect or impair the powers,
obligations, duties, rights, representations, warranties or liabilities of the
parties hereto and all shall survive such termination.
19.9 Evidence of Obligations. Each Obligation may, in Lender's discretion,
be evidenced by notes or other instruments issued or made by Borrower to
Lender. If not so evidenced, such Obligation shall be evidenced solely by
entries upon Lender's books and records.
19.10 Collateral Security. The Obligations shall constitute one loan
secured by the Collateral. Lender may, in its sole discretion, (i) exchange,
enforce, waive or release any of the Collateral, (ii) apply Collateral and
direct the order or manner of sale thereof as it may determine and (iii)
settle, compromise, collect or otherwise liquidate any Collateral in any
manner without affecting its right to take any other action with respect to
any other Collateral.
19.11 Application of Collateral. Lender shall have the continuing and
exclusive right to apply or reverse and re-apply any and all payments to any
portion of the Obligations. To the extent that Borrower makes a payment
or Lender receives any payment or proceeds of the Collateral for
Borrower's benefit which is subsequently invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
debtor in possession, receiver or any other party under any bankruptcy law,
common law or equitable cause, then, to such extent, the Obligations or
part thereof intended to be satisfied shall be revived and continue as if such
payment or proceeds had not been received by Lender.
19.12 Loan Requests. Each oral or written request for a loan by any
Person who purports to be any employee, officer or authorized agent of
Borrower shall be made to Lender on or prior to 10:00 a.m., Los Angeles
time, on the Business Day on which the proceeds thereof are requested to
be paid to Borrower and shall be conclusively presumed to be made by a
Person authorized by Borrower to do so and the crediting of a loan to
Borrower's operating account shall conclusively establish Borrower's
obligation to repay such loan. Unless and until Borrower otherwise directs
Lender in writing, all loans shall be wired to Borrower's operating account
set forth on the Schedule.
19.13 Notices. Any notice required hereunder shall be in writing and
addressed to the Borrower and Lender at their addresses set forth at the
beginning of this Agreement. Notices hereunder shall be deemed received
on the earlier of receipt, whether by mail, personal delivery, facsimile,
overnight courier, or otherwise, or three (3) days after deposit in the
United States mail, return receipt requested, postage prepaid, if received or
refused.
19.14 Brokerage Fees. Borrower represents and warrants to Lender
that, with respect to the financing transaction herein contemplated, no
Person is entitled to any brokerage fee or other commission and Borrower
agrees to indemnify and hold Lender harmless against any and all such
claims.
19.15 Disclosure. No representation or warranty made by Borrower in
this Agreement, or in any financial statement, report, certificate or any
other document furnished in connection herewith contains any untrue
statement of a material fact or omits to state any material fact necessary to
make the statements herein or therein not misleading. There is no fact
known to Borrower or which reasonably should be known to Borrower
which Borrower has not disclosed to Lender in writing with respect to the
transactions contemplated by this Agreement which materially and
adversely affects the business, assets, operations, prospects or condition
(financial or otherwise), of Borrower.
19.16 Publicity. Lender is hereby authorized to issue appropriate press
releases and to cause a tombstone to be published, at its sole expense,
announcing the consummation of this transaction and the aggregate amount
thereof.
19.17 Captions. The Section titles contained in this Agreement are
without substantive meaning and are not part of this Agreement.
19.18 Injunctive Relief. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its Obligations
under this Agreement, any remedy at law may prove to be inadequate relief
to Lender. Therefore, Lender, if it so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.
19.19 Counterparts. This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
19.20 Construction. The parties acknowledge that each party and its
counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of this
Agreement or any amendments or exhibits hereto.
19.21 Time of Essence. Time is of the essence for the performance by
Borrower of the Obligations set forth in this Agreement.
19.22 Limitation of Actions. Borrower agrees that any claim or cause of
action by Borrower against Lender, or any of Lender's directors, officers,
employees, agents, accountants or attorneys, based upon, arising from, or
relating to this Agreement, or any other present or future agreement, or
any other transaction contemplated hereby or thereby or relating hereto or
thereto, or any other matter, cause or thing whatsoever, whether or not
relating hereto or thereto, occurred, done, omitted or suffered to be done
by Lender, or by Lender's directors, officers, employees, agents,
accountants or attorneys, whether sounding in contract or in tort or
otherwise, shall be barred unless asserted by Borrower by the
commencement of an action or proceeding in a court of competent
jurisdiction by the filing of a complaint within one year after the first act,
occurrence or omission upon which such claim or cause of action, or any
part thereof, is based and service of a summons and complaint on an officer
of Lender or any other person authorized to accept service of process on
behalf of Lender, within 30 days thereafter. Borrower agrees that such
one-year period of time is a reasonable and sufficient time for a Borrower
to investigate and act upon any such claim or cause of action. The
one-year period provided herein shall not be waived, tolled, or extended
except by a specific written agreement of Lender. This provision shall
survive any termination of this Loan Agreement or any other agreement.
19.23 Liability. Neither Lender nor any Lender Affiliate shall be liable
for any indirect, special, incidental or consequential damages in connection
with any breach of contract, tort or other wrong relating to this Agreement
or the Obligations or the establishment, administration or collection thereof
(including without limitation damages for loss of profits, business
interruption, and the like), whether such damages are foreseeable or
unforeseeable, even if Lender has been advised of the possibility of such
damages. Neither Lender, nor any Lender Affiliate shall be liable for any
claims, demands, losses or damages, of any kind whatsoever, made,
claimed, incurred or suffered by the Borrower through the ordinary
negligence of Lender, or any Lender Affiliate. "Lender Affiliate" shall
mean Lender's directors, officers, employees, agents, attorneys and any
other person or entity affiliated with or representing Lender.
19.24 Notice of Breach by Lender. Borrower agrees to give Lender
written notice of (i) any action or inaction by Lender or any attorney of
Lender in connection with any Loan Documents that may be actionable
against Lender or any attorney of Lender or (ii) any defense to the payment
of the Obligations for any reason, including, but not limited to, commission
of a tort or violation of any contractual duty or duty implied by law.
Borrower agrees that unless such notice is fully given as promptly as
possible (and in any event within thirty (30) days) after Borrower has
knowledge, or with the exercise of reasonable diligence should have had
knowledge, of any such action, inaction or defense, Borrower shall not
assert, and Borrower shall be deemed to have waived, any claim or defense
arising therefrom.
19.25 Application of Insurance Proceeds. The net proceeds of any
casualty insurance insuring the Collateral, after deducting all costs and
expenses (including attorneys' fees) of collection, shall be applied, at
Lender's option, either toward replacing or restoring the Collateral, in a
manner and on terms satisfactory to Lender, or toward payment of the
Obligations. Any proceeds applied to the payment of Obligations shall be
applied in such manner as Lender may elect. In no event shall such
application relieve Borrower from payment in full of all installments of
principal and interest which thereafter become due in the order of maturity
thereof.
19.26 MUTUAL WAIVER OF RIGHT TO JURY TRIAL. LENDER
AND BORROWER EACH HEREBY WAIVE THE RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO: (i) THIS
AGREEMENT; OR (ii) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN LENDER AND
BORROWER; OR (iii) ANY CONDUCT, ACTS OR OMISSIONS OF
LENDER OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER
PERSONS AFFILIATED WITH LENDER OR BORROWER; IN EACH
OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.
Borrower:
FACTORY 2-U, INC.
BY William W. Mowbray
PRESIDENT
BY Jeff Gerstel
ASS'T SECRETARY
Lender:
FINOVA CAPITAL CORPORATION
BY Carlos Valles
TITLE Vice President
EXHBIT 10.30 (b)
AMENDMENT NO. 1 TO LOAN AND SECURITY
AGREEMENT AND WAIVER
This Amendment No. 1 to Loan and Security Agreement (the
Amendment ), is entered into this 18th day of April, 1996, by and
between FACTORY 2-U, INC., an Arizona corporation ( Borrower ),
and FINOVA CAPITAL CORPORATION, a Delaware corporation,
W IT N E S S E T H :
WHEREAS, Borrower and Lender are parties to that certain Loan and
Security Agreement dated as of November 10, 1995 (the Loan Agreement); and
WHEREAS, Borrower has requested that Lender amend the Loan
Agreement in certain respects and, subject to the terms and conditions set
forth below, Lender is willing to do so.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and undertakings set forth herein, the parties hereby
agree as follows:
1. Defined Terms. All capitalized terms used herein and not
otherwise defined shall have the meanings given such terms in the Loan
Agreement.
2. Amendment to Loan Agreement. The Loan Agreement and the
Schedule are hereby amended, as of the First Amendment Effective Date,
as follows:
2.1 Section 13.15 of the Loan Agreement is hereby amended to
read in its entirety as follows:
13.15 Repayment of Merchandising Note. Shall cause all
of Borrower's obligations under the Merchandising Note (i) not to exceed
$6,000,000 at any one time outstanding, (ii) with respect to all such
obligations outstanding on June 30, 1996, to be repaid within thirty (30)
days of such date (iii) with respect to all such obligations incurred after
June 30, 1996, to be repaid within thirty (30) days of when incurred, and
(iv) to represent at any point in time all of Borrower s obligations to
General Textiles for inventory purchased from General Textiles by
Borrower.
2.2 Section 18 of the Loan Agreement is hereby amended by
inserting the following new defined terms:
First Amendment means that certain Amendment No. 1 to
Loan and Security Agreement, effective as of the First Amendment
Effective Date, by and between Borrower and Lender.
First Amendment Effective Date means February 1, 1996.
GenTex Availability Increase Amount means the Fifth
Amendment Availability Increase Amount, as that term is defined in
Section 2.1 of the GenTex Fifth Amendment.
GenTex Fifth Amendment means that certain Amendment
No. 5 to Loan and Security Agreement dated as of the First Amendment
Effective Date by and between Lender and General Textiles.
Refinancing Fee means an amount equal to one and one-
quarter percent (1-1/4%) of the GenTex Availability Increase
Amount, payable, if at all, pursuant to Paragraphs 3, 4 or 5 of the
Additional Provisions.
2.3 That Section of the Schedule to the Loan Agreement entitled
"LOANS" is hereby amended by adding the following sentence at the end
thereof:
Notwithstanding the provisions of the foregoing subparagraph (b),
Lender agrees to establish advance rates in respect of Borrower's Eligible
Inventory equal to the advance rates applicable to "Eligible Inventory"
under that certain Loan and Security Agreement between Lender and
General Textiles, as such advance rates may be adjusted from time to time,
upon receipt by Lender (i) of evidence that Borrower has installed the
point-of-sale equipment referenced in paragraph 7 of that Section of the
Schedule entitled "ADDITIONAL PROVISIONS" and that such
point-of-sale equipment is fully functional and generating inventory reports
in form acceptable to Lender, and (ii) of an inventory valuation report
prepared by Gordon Brothers or other inventory appraiser acceptable to
Lender, which report demonstrates, in Lender's sole credit discretion, that
application of such advance rates to Borrower's Eligible
Inventory is appropriate.
2.4 The definition of "Capital Expenditures" set forth in that
Section of the Schedule to the Loan Agreement entitled "NEGATIVE
COVENANTS" is hereby amended to read in its entirety as follows:
Borrower shall not make or incur any Capital Expenditure if, after
giving effect thereto, the aggregate amount of all Capital Expenditures by
Borrower in any fiscal year would exceed $500,000; provided, however,
the purchase by Borrower of point-of-sale equipment with proceeds of the
Term Loan, as that term is defined in the GenTex Fifth Amendment, shall
not be considered a Capital Expenditure for purposes of calculating
Borrower's compliance with this covenant.
2.5 Paragraphs 3, 4, and 5 of that Section of the Schedule to the
Loan Agreement entitled "ADDITIONAL PROVISIONS" are hereby
amended to read in their entirety as follows:
3. Refinancing of Nogales Real Property. Borrower shall obtain
replacement financing for the Bank of America Debt or shall have repaid
the Bank of America Debt in full no later than May 31, 1996. Lender
agrees that it shall thereupon subordinate its lien under the GenTex Deed
of Trust to the lien of such new lender, provided, (i) no Event of Default
or event or condition which, with the passage of time, giving of notice, or
both, would constitute an Event of Default, exists and is continuing at the
time of such refinancing, (ii) such new lender shall have entered into an
agreement with Lender, on such terms as Lender shall deem acceptable,
corresponding to the Bank of America Agreement, and (iii) the amount
and other terms of such refinancing shall be acceptable to Lender in its
sole discretion. In the event Borrower fails to receive proceeds of such
re-financing by such date Borrower shall nonetheless have satisfied the
requirements of this Paragraph
(i) by complying with the requirements of either Paragraph 4 or Paragraph
5 below, or (ii) by paying the Refinancing Fee.
4. Sale-Leaseback of Nogales Warehouse. Borrower shall enter
into a sale-leaseback transaction with respect to the Nogales Warehouse
not later than May 31, 1996. Lender agrees that it shall thereupon release
its lien under the GenTex Deed of Trust, provided, (i) no Event of Default
or event or condition which, with the passage of time, giving of notice, or
both, would constitute an Event of Default, exists and is continuing at the
time of such release and termination, (ii) such sale-leaseback transaction,
in Lender's sole discretion, shall constitute an arm's-length, bona-fide
transaction, (iii) Borrower shall have executed and delivered a leasehold
deed of trust and such other agreements as Lender shall require to reflect
lender's security interest in and to Borrower's interest in the Nogales
Warehouse, (iv) the purchaser- lessor of the Nogales Warehouse shall
have entered into an agreement with Lender, on such terms as Lender shall
deem acceptable, corresponding to the Bank of America Agreement, (v)
Borrower shall have received net proceeds of such sale transaction of
approximately $1,500,000. In the event Borrower fails to receive proceeds
of such sale-leaseback by such date Borrower shall nonetheless have
satisfied the requirements of this Paragraph 4 (i) by complying with the
requirements of either Paragraph 3 above or Paragraph 5 below, or (ii) by
paying the Refinancing Fee.
5. Sale of Nogales Warehouse. Borrower shall sell the Nogales
Warehouse not later than May 31, 1996. Lender agrees that it shall
thereupon release its lien under the GenTex Deed of Trust, provided, (i)
no Event of Default or event or condition which, with the passage of time,
giving of notice, or both, would constitute an Event of Default, exists and
is continuing at the time of such release and termination, (ii) such sale
transaction, in Lender's sole discretion, shall constitute an arm's-length,
bona-fide transaction, and (iii) the net cash proceeds to Borrower shall be
approximately $4,000,000, payable in cash at the closing of such sale. In
the event Borrower fails to receive proceeds of such sale by such date
Borrower shall nonetheless have satisfied the requirements of this
Paragraph 5 (i) by complying with the requirements of either Paragraph 3
or Paragraph 4 above, or (ii) by paying the Refinancing Fee.
2.6 New Paragraphs 8 and 9 are hereby added to the Additional
Provisions to read in their entirety as follows:
8. Capital Contribution. No later than March 15, 1996, FBC shall
have made a capital contribution to Borrower in an amount not less than
$3,057,006.62. On the date of such contribution, Borrower shall pay a fee
to Lender equal to the greater of (i) $65,000, or (ii) two percent (2%) of
such contribution. After payment of such fee, the balance of such capital
contribution shall be paid to General Textiles in reduction of Borrower s
obligations under the Merchandising Note.
9. Merger or Acquisition. No later than December 31, 1996, (i)
Borrower shall have merged with and into General Textiles, with General
Textiles the surviving corporation, or (ii) General Textiles shall have
purchased all of the outstanding shares of Borrower's capital stock, in
either case on standard commercially reasonable terms and conditions,
comparable to those of an arm's-length transaction between unaffiliated
entities and accompanied by a valuation opinion satisfactory to Lender in
the exercise of its reasonable business judgment, prepared by an
accounting or investment firm acceptable to Lender.
2.7 The list of Permitted Encumbrances set forth in that Section
of the Schedule to the Loan Agreement entitled BORROWER
INFORMATION is hereby amended by adding the following new entry at
the end thereof:
i) Liens in favor of General Textiles on all of Borrower s
personal property assets, as collateral security for all of Borrower s
obligations to General Textiles, including without limitation, under the
Merchandising Note, provided all of General Textile s rights have been
collaterally assigned to Lender.
2.8 The paragraph entitled "Indebtedness" set forth in that
Section of the Schedule entitled "NEGATIVE COVENANTS" is hereby
amended by deleting the period at the end thereof and inserting the
following new clause (viii) to read in its entirety as follows:
, and (viii) Indebtedness to General Textiles for point-of-sale
equipment advanced to Borrower by General Textiles, on the terms set
forth in Section 2.9 of the GenTex Fifth Amendment.
3. Waivers of Events of Default. The waivers set forth in this
Section 3 are specific to the matters set forth herein: no future acts,
events or occurrences, or acts, events or occurrences of which Lender
does not have actual present knowledge, which either constitute an Event
of Default or which with the passage of time, giving of notice, or both,
would constitute an Event of Default, are waived by Lender, including,
without limitation, any circumstances which are of a continuing nature,
the existence of which would independently give rise to an Event of
Default under the Loan Agreement after giving effect to this Agreement;
provided, that with respect to any financial covenants or reporting
obligations which are only tested or to be complied with as of specified
dates pursuant to the Loan Agreement, no Event of Default shall exist
unless a breach occurs or exists as of the time such covenants are to be
tested or complied with as of a date subsequent to the date of this
Agreement.
3.1 Merchandising Note. Subject to satisfaction of each
condition precedent set forth in Section 4 below, Lender hereby waives
Borrower s non- compliance with Section 13.15 of the Loan Agreement
for the period commencing December 31, 1995 through June 30, 1996,
provided Borrower's obligations under the Merchandising Note shall not
exceed, during the period commencing on the date of this Amendment
through June 30, 1996, the amount outstanding under the Merchandising
Note on the date of this Amendment, and all sums repaid by Borrower
during such period of time may not be re-borrowed to the extent the
balance of Borrower's obligations under the Merchandising Note after
giving effect to such re-borrowing would exceed $6,000,000.
4. Conditions Precedent. The modifications described in Section 2
of this Amendment and the waivers set forth in Section 3 of this
Amendment will not be effective unless and until each of the following
conditions precedent have been satisfied, in form, manner and substance
satisfactory to Lender:
(a) Borrower shall have delivered or caused to be delivered to
Lender the following documents, all of which shall be properly completed,
executed and otherwise satisfactory to Lender:
(i) This Amendment;
(ii) The Consent of Guarantor in the form attached hereto;
(iii) Such acknowledgments and reaffirmations of the
Subordination Agreement as Lender shall require;
(iv) Any other consents deemed necessary by Lender;
(v) Duly executed Uniform Commercial Code financing
statements required by Section 2.5 of this Amendment;
(vi) A corporate resolution of Borrower approving the
transactions contemplated hereby to which it is a party;
(vii) A corporate resolution of Guarantor approving the
transactions contemplated hereby to which it is a party;
(viii) An opinion from Borrower's and Guarantor's counsel,
which counsel must be acceptable to Lender, with respect to such matters
as Lender shall require; and
(ix) Such other items as Lender may require.
(b) Lender shall have obtained the consent and acknowledgment
of any participants in the Inventory Loans to the execution and delivery of
this Amendment and the transactions contemplated hereunder.
(c) Lender shall have entered into the GenTex Fith Amendment
and each condition to the effectiveness thereof shall have been satisfied.
(d) There shall not then exist an Event of Default or any act or
event which with notice, passage of time, or both would constitute an
Event of Default.
(e) All the representations and warranties of the Loan Parties in
the Loan Documents shall be true and correct, in all material respects,
before and after giving effect to the making of this Amendment.
(f) Borrower shall have paid all closing costs, recording fees and
taxes, appraisal fees and expenses, travel expenses, fees and expenses of
Lender's counsel, and all other costs and expenses incurred by Lender in
connection with the preparation of, closing of and disbursement of the
advances pursuant to this Amendment, which costs, fees and expenses may
be payable from the first advance made pursuant to this Amendment.
5. Indebtedness Acknowledged. Borrower acknowledges that the
indebtedness evidenced by the Loan Documents is just and owing and
agrees to pay the indebtedness in accordance with the terms of the Loan
Documents. Borrower further acknowledges and represents that no event
has occurred and no condition presently exists that would constitute a
default or event of default by Lender under the Loan Agreement or any of
the other Loan Documents, with or without notice or lapse of time.
6. Validity of Documents. Borrower hereby ratifies, reaffirms,
acknowledges and agrees that the Loan Agreement and the other Loan
Documents represent valid, enforceable and collectable obligations of
Borrower, and that Borrower presently has no existing claims, defenses
(personal or otherwise) or rights of setoff whatsoever with respect to the
Obligations of Borrower under the Loan Agreement or any of the other
Loan Documents. Borrower furthermore agrees that it has no defense,
counterclaim, offset, cross-complaint, claim or demand of any nature
whatsoever which can be asserted as a basis to seek affirmative relief or
damages from Lender.
7. Reaffirmation of Warranties. Borrower hereby reaffirms to
Lender each of the representations, warranties, covenants and agreements
of Borrower as set forth in each of the Loan Documents with the same
force and effect as if each were separately stated herein and made as of the
date hereof. Borrower represents and warrants to Lender that with respect
to the financing transaction herein contemplated, no Person is entitled to
any brokerage fee or other commission and Borrower agrees to indemnify
and hold Lender harmless against any and all such claims.
8. Ratification of Terms and Conditions. All terms, conditions and
provisions of the Loan Agreement, and of each of the other Loan
Documents shall continue in full force and effect and shall remain
unaffected and unchanged except as specifically amended hereby. In the
event of any conflict between the terms and conditions of this Amendment
and any of the other Loan Documents, the provisions of this Amendment
shall control. Without limiting the generality of the foregoing, Borrower
reaffirms its obligation to deliver to Lender Landlord's Consents with
respect to all of Borrower's facilities in which Collateral is or is intended
to be kept or maintained and further acknowledges that Lender has not
waived its right to require the delivery of such Landlord's Consents.
9. Other Writings. Lender and Borrower will execute such other
writings as may be necessary to confirm or carry out the intentions of
Lender and Borrower evidenced by this Amendment.
10. Benefit of the Amendment. The terms and provisions of this
Amendment and the other Loan Documents shall be binding upon and inure
to the benefit of Lender and Borrower and their respective successors and
assigns, except that Borrower shall not have any right to assign its rights
under this Amendment or any of the Loan Documents or any interest
therein without the prior written consent of Lender.
11. Choice of Law. The Loan Documents and this Amendment
shall be performed and construed in accordance with the laws of the State
of Arizona.
12. Entire Agreement. Except as modified by this Amendment, the
Loan Documents remain in full force and effect. The Loan Documents as
modified by this Amendment embody the entire agreement and
understanding between Borrower and Lender, and supersede all prior
agreements and understandings between said parties relating to the
subject matter thereof.
13. Counterparts; Telecopy Execution. This Amendment may be
executed in any number of separate counterparts, all of which when taken
together shall constitute one and the same instrument, admissible into
evidence, notwithstanding the fact that all parties have not signed the
same counterpart. Delivery of an executed counterpart of this
Amendment by telefacsimile shall be equally as effective as delivery of a
manually executed counterpart of this Amendment. Any party delivering
an executed counterpart of this Amendment by telefacsimile shall also
deliver a manually executed counterpart of this Amendment, but the
failure to deliver a manually executed counterpart shall not affect the
validity, enforceability, and binding effect of this Amendment.
FINOVA CAPITAL CORPORATION, a
Delaware corporation
By:Carlos Valles
Name: Carlos Valles
Title Vice President
FACTORY 2-U, INC., an Arizona
corporation
By: William W. Mowbray
Name: William W. Mowbray
Title President and CEO
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
NAME OF SUBSIDIARY STATE OF INCORPORATION
DRS Apparel, Inc. Delaware
DRS Real Estate, Inc. Delaware
General Textiles
d/b/a Family Bargain Center California
Factory 2-U, Inc. Arizona
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors and Stockholders
Family Bargain Corporation:
We consent to incorporation by reference in the registration statement
(No. 333-1066) on Form S-8 of Family Bargain Corporation and
subsidiaries of our report dated April 23, 1996, relating to the consolidated
balance sheets of Family Bargain Corporation and subsidiaries as of
January 28, 1995 and January 27, 1996, and the related consolidated
statements of operations, stockholders' equity (deficit), and cash flows for
the nine months ended January 29, 1994 and the twelve months ended
January 28, 1995 and January 27, 1996, which report appears in the
January 27, 1996, annual report on Form 10-K of Family Bargain
Corporation.
KPMG Peat Marwick LLP
San Diego, California
April 23, 1996
