<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ______________________
Commission file number 019774
United Retail Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 51 0303670
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
365 West Passaic Street, Rochelle Park, NJ 07662
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (201) 845-0880
- -----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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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 (the "1934 Act") 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
------- --------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
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 1934 Act
subsequent to the distribution of securities under a plan confirmed by a court.
YES NO
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of August 2, 1997, 12,190,375 shares of the registrant's common
stock, $.001 par value per share, were outstanding.
<PAGE> 3
Item 1. FINANCIAL STATEMENTS UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
August 2, February 1, August 3,
1997 1997 1996
------------ ------------ ------------
ASSETS (Unaudited) (Unaudited)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 19,806 $ 18,264 $ 17,773
Income taxes receivable -- 229 --
Accounts receivable 1,351 1,297 1,619
Inventory 38,655 40,778 39,527
Prepaid rents 4,351 4,485 4,513
Other prepaid expenses 2,854 2,656 2,857
Deferred income taxes -- -- 463
------------ ------------ ------------
Total current assets 67,017 67,709 66,752
Property and equipment, net 51,237 54,892 58,552
Deferred charges and other intangible assets,
net of accumulated amortization of $1,609, $1,490
and $1,373 7,105 7,031 6,997
Deferred income taxes -- -- 763
Other assets 251 715 1,087
------------ ------------ ------------
Total assets $ 125,610 $ 130,347 $ 134,151
============ ============ ============
LIABILITIES
Current liabilities:
Current portion of distribution center financing $ 1,012 $ 978 $ 936
Accounts payable, trade 11,731 16,543 14,200
Accrued expenses 15,605 13,247 14,414
------------ ------------ ------------
Total current liabilities 28,348 30,768 29,550
Distribution center financing 10,844 11,355 11,856
Other long-term liabilities 7,443 8,011 8,983
------------ ------------ ------------
Total liabilities 46,635 50,134 50,389
------------ ------------ ------------
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; authorized
1,000,000; none issued
Common stock, $.001 par value; authorized 13 13 13
30,000,000; issued 12,680,375; outstanding
12,190,375
Additional paid-in capital 78,259 78,259 78,259
Retained earnings 1,285 2,523 6,072
Treasury stock (490,000 shares) at cost (582) (582) (582)
------------ ------------ ------------
Total stockholders' equity 78,975 80,213 83,762
------------ ------------ ------------
Total liabilities and stockholders' equity $ 125,610 $ 130,347 $ 134,151
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 4
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------------------- ----------------------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 93,076 $ 96,178 $ 180,098 $ 185,051
Cost of goods sold, including
buying and occupancy costs 72,728 78,664 141,543 148,836
------------ ------------ ------------ ------------
Gross profit 20,348 17,514 38,555 36,215
General, administrative and
store operating expenses 19,800 20,480 39,480 39,898
------------ ------------ ------------ ------------
Operating income (loss) 548 (2,966) (925) (3,683)
Interest (income) expense, net 11 (34) 113 211
------------ ------------ ------------ ------------
Income (loss) before income taxes 537 (2,932) (1,038) (3,894)
Provision (benefit) for income taxes 186 (944) 200 (1,296)
------------ ------------ ------------ ------------
Net income (loss) $ 351 $ (1,988) $ (1,238) $ (2,598)
============ ============ ============ ============
Net income (loss) per
common share $ 0.03 $ ( 0.16) $ ( 0.10) $ ( 0.21)
============ ============ ============ ============
Weighted average number of
common and common equivalent
shares outstanding 12,613,537 12,190,375 12,190,375 12,190,375
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 5
UNITED RETAIL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
----------------------------
August 2, August 3,
1997 1996
--------- ----------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $( 1,238) $( 2,598)
Adjustments to reconcile net loss to net cash
from operating activities:
Depreciation and amortization of property and equipment 4,505 5,046
Amortization of deferred charges and other
intangible assets 119 109
Loss on disposal of assets 162 234
Gain on sale of investments (43) --
Compensation expense -- 77
Benefit from deferred income taxes -- (415)
Deferred lease assumption revenue amortization (259) (272)
Changes in operating assets and liabilities:
Accounts receivable (54) 151
Income tax receivable 229 2,719
Inventory 2,123 874
Accounts payable and accrued expenses (2,598) (790)
Prepaid expenses (64) 39
Other assets and liabilities (501) (277)
-------- --------
Net Cash From Operating Activities 2,381 4,897
-------- --------
Investing Activities:
Capital expenditures (1,012) (3,097)
Deferred payment for property and equipment 144 (625)
Proceeds from sale of investment 506 --
-------- --------
Net Cash Used for Investing Activities (362) (3,722)
-------- --------
Financing Activities:
Repayments of long-term debt (477) (442)
-------- --------
Net Cash Used for Financing Activities (477) (442)
-------- --------
Net increase in cash and cash equivalents 1,542 733
Cash and cash equivalents, beginning of period 18,264 17,040
-------- --------
Cash and cash equivalents, end of period $ 19,806 $ 17,773
======== ========
</TABLE>
The accompanying notes are an integral part of the Consolidated Financial
Statements.
<PAGE> 6
UNITED RETAIL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The consolidated financial statements include the accounts of United
Retail Group, Inc. and its subsidiaries (the "Company"). All significant
intercompany accounts and transactions have been eliminated.
The consolidated financial statements as of and for the thirteen and
twenty-six weeks ended August 2, 1997 and August 3, 1996 are unaudited and are
presented pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, the consolidated financial statements should be read in
conjunction with the financial statement disclosures contained in the Company's
1996 Annual Report and 1996 Form 10-K. In the opinion of management, the
accompanying consolidated financial statements reflect all adjustments necessary
(which are of a normal recurring nature) to present fairly the financial
position and results of operations and cash flows for the interim periods, but
are not necessarily indicative of the results of operations for a full fiscal
year.
Certain prior year balances have been reclassified to conform with
the fiscal 1997 presentation.
2. NET INCOME (LOSS) PER SHARE
Net income per common share is computed using the weighted average
number of common and common equivalent shares (stock options) outstanding during
the period. Net loss per common share excludes common equivalent shares (stock
options), because their effect is anti-dilutive.
3. FINANCING ARRANGEMENTS
In March 1994, the Company closed a fifteen-year $8.0 million loan
bearing interest at 8.64%. Interest and principal are payable in equal monthly
installments beginning May 1, 1994. The loan is collateralized by a mortgage on
the national distribution center owned by the Company in Troy, Ohio.
The Company and The Chase Manhattan Bank ("Chase") were parties to
agreements providing two credit facilities. The first facility provided for the
issuance by Chase of trade letters of credit for the account of the Company in
an aggregate amount at any time of up to $25.0 million, of which $22.1 million
was utilized at August 2, 1997. The second facility provided for
<PAGE> 7
revolving credit loans totaling a maximum of $15.0 million. As of August 2,
1997, the Company had not drawn upon its revolving credit facility except to
issue standby letters of credit totaling $4.0 million as collateral for
obligations under casualty insurance policies.
See Subsequent Event (Note 7).
4. OTHER OPERATING ACTIVITIES
In July 1995, the Company agreed to assume the lease obligations of
21 stores previously operated by another retail chain. In order to induce the
Company to assume these leases, the assignor of the leases paid the Company
approximately $3.5 million. This payment has been recorded as accrued rent
payable and will be amortized against rent expense over the life of the assumed
leases.
5. INCOME TAXES
The provision (benefit) for income taxes consists of (dollars in
thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
-------------------------- ----------------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Currently payable:
Federal $ 128 $ (672) $ 128 $ (914)
State 58 115 72 33
------- ------- ------- -------
186 (557) 200 (881)
------- ------- ------- -------
Deferred:
Federal 0 (317) 0 (340)
State 0 (70) 0 (75)
------- ------- ------- -------
0 (387) 0 (415)
------- ------- ------- -------
$ 186 $ (944) $ 200 $(1,296)
======= ======= ======= =======
</TABLE>
Reconciliation of the provision (benefit) for income taxes from the
U.S. Federal statutory rate to the Company's effective rate is as follows:
<PAGE> 8
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------------------------------
August 2, 1997 August 3, 1996
---------------------- -----------------------
<S> <C> <C> <C> <C>
Tax at Federal rate (34%) $ 182 34.0% $(997) (34.0%)
State income taxes, net of 21 3.9% 30 1.0%
federal benefit
Goodwill amortization 18 3.3% 18 0.6%
Other 7 1.3% 5 0.2%
Change in valuation allowance (42) (7.9%) 0 0.0%
----- ---- ----- -----
$ 186 34.6% $(944) (32.2%)
===== ==== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Twenty-Six Weeks Ended
----------------------------------------------------------
August 2, 1997 August 3, 1996
---------------------- --------------------------
<S> <C> <C> <C> <C>
Tax at Federal rate (34%) $ (353) (34.0%) $(1,324) (34.0%)
State income taxes, net of (15) (1.4%) (27) (0.7%)
federal benefit
Goodwill amortization 35 3.4% 35 0.9%
Other 11 1.0% 20 0.5%
Change in valuation allowance 522 50.2% 0 0.0%
------- ----- ------- -----
$ 200 19.2% $(1,296) (33.3%)
======= ===== ======= =====
</TABLE>
The net deferred tax asset reflects the tax impact of temporary
differences. The components of the net deferred tax asset are as follows:
<TABLE>
<S> <C>
Assets:
Inventory $ 184
Accruals and reserves 1,152
Compensation 1,716
NOL and credit carryforwards 2,817
-------
5,869
Liabilities:
Depreciation (1,859)
Prepaid rent (860)
Valuation allowance (3,150)
-------
(5,869)
Net deferred tax asset $ 0
=======
</TABLE>
Future realization of the tax benefits attributable to these
existing deductible temporary differences ultimately depends on the existence of
sufficient taxable income within the carryback
<PAGE> 9
and/or carryforward period available under the tax law at the time of the tax
deduction. As of August 2, 1997, the compensation related deferred tax asset
will be fully realizable upon the exercise of all of the outstanding options
only if (i) the market price of the stock equals or exceeds $3.125 per share
upon exercise and (ii) the compensation expense deduction is not limited by
future enacted tax laws. The underlying options of the compensation related
deferred tax asset are exercisable through December 31, 1999.
At August 2, 1997, the Company has pre-acquisition net operating loss
carryforwards, aggregating approximately $0.5 million, available to reduce
future taxable income in certain states, expiring through 2004.
6. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash flow from operating activities includes cash payments for
interest and income taxes as follows (dollars in thousands):
<TABLE>
<CAPTION>
Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------------- ---------------------------
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
------------ ----------- ----------- ---------
<S> <C> <C> <C> <C>
Cash interest:
Interest expense
(income), net per
statements of income $ 11 $ (34) $ 113 $ 211
Less: Non-cash
interest income (expense) (3) 34 (13) 20
------- ------- ------- -------
Net cash interest,
including interest income
of $260, $299,
$437 and $495 $ 8 $ 0 $ 100 $ 231
======= ======= ======= =======
Income tax payments (refunds) $ 54 $(2,995) $ 70 $(4,038)
======= ======= ======= =======
</TABLE>
<PAGE> 10
7. SUBSEQUENT EVENT
The Company and United Retail Incorporated, its subsidiary,
(collectively, the "Companies") are parties to a Financing Agreement, dated
August 15, 1997, with The CIT Group/Business Credit, Inc.(the "Financing
Agreement"). The Financing Agreement provides a revolving line of credit for a
term of three years in the aggregate amount of $40 million for the Companies,
subject to availability of credit according to a borrowing base computation. The
line of credit may be used on a revolving basis by either of the Companies to
support trade letters of credit and standby letters of credit and to finance
loans.
The Companies are required to maintain unused at all times combined
availability of at least $5 million. Except for the maintenance of a minimum
availability of $5 million and a limit on capital expenditures, the Financing
Agreement does not contain any financial covenants.
In the event a loan is made to one of the Companies, interest is
payable monthly based on a 360-day year at the prime rate or at two percent plus
the LIBOR rate on a per annum basis, at the borrower's option.
The line of credit is secured by a security interest in inventory and
proceeds and by the balance on deposit from time to time in a bank account that
has been pledged to the lenders. The Companies' other bank accounts are
unencumbered.
At August 30, 1997, the combined availability of the Companies was $7.9
million, the amount on deposit in the pledged bank account was $2.5 million; the
aggregate outstanding amount of letters of credit was $26.8 million and no loan
has been drawn down. Unrestricted cash on hand was $21.3 million.
<PAGE> 11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SECOND QUARTER FISCAL 1997 VERSUS SECOND QUARTER FISCAL 1996
Net sales for the second quarter of Fiscal 1997 decreased 3.2% from the
second quarter of Fiscal 1996, to $93.1 million from $96.2 million, principally
from a decrease in sales volume partially offset by an increase in average
price. Average stores open decreased from 582 to 560; see, "Properties,"
regarding the Company's real estate plan. Comparable store sales for the second
quarter of Fiscal 1997 declined 0.2%. (In August 1997, net sales decreased 6.5%
from August 1996, to $23.1 million from $24.7 million; comparable store sales
for August 1997 declined 3.7%.) There is no assurance that net sales, sales
volume and comparable store sales will not continue to decrease.
Gross profits increased by $2.8 million to $20.3 million in the second
quarter of Fiscal 1997 from $17.5 million in the second quarter of Fiscal 1996,
increasing as a percentage of net sales to 21.9% from 18.2%. The increase in
gross profits as a percentage of net sales was primarily attributable to an
increase in the merchandise margin rate.
General, administrative and store operating expenses were $19.8 million
in the second quarter of Fiscal 1997, compared to $20.5 million in the
comparable quarter of the previous year. As a percentage of net sales, general,
administrative and store operating expenses remained 21.3%.
During the second quarter of Fiscal 1997, the Company had operating
income of $0.5 million compared to an operating loss of $3.0 million in the
comparable quarter of the previous year. Operating income in the second quarter
of Fiscal 1997 was 0.6% of net sales.
Net interest expense was $11,000 in the second quarter of Fiscal 1997
compared with net interest income of $34,000 in the comparable quarter of
the previous year.
The Company had a provision for income taxes of $0.2 million in the
second quarter of Fiscal 1997. The Company had an income tax benefit of $0.9
million in the comparable quarter of the previous year.
During the second quarter of Fiscal 1997, the Company had net income of
$0.4 million compared to a net loss of $2.0 million in the comparable quarter of
the previous year. There is no assurance that the Company will continue to be
profitable. See, "Seasonality."
<PAGE> 12
FIRST HALF FISCAL 1997 VERSUS FIRST HALF FISCAL 1996
Net sales for the first half of Fiscal 1997 decreased 2.7% from the
first half of Fiscal 1996, to $180.1 million from $185.1 million, principally
from a decrease in sales volume partially offset by an increase in average
price. Average stores open decreased from 580 to 563; see, "Properties,"
regarding the Company's real estate plan. Comparable store sales for the first
half of Fiscal 1997 declined 0.2%. There is no assurance that net sales, sales
volume and comparable store sales will not continue to decrease.
Gross profits increased by $2.3 million to $38.6 million in the first
half of Fiscal 1997 from $36.2 million in the first half of Fiscal 1996,
increasing as a percentage of net sales to 21.4% from 19.6%. The increase in
gross profits as a percentage of net sales was primarily attributable to an
increase in the merchandise margin rate.
General, administrative and store operating expenses were $39.5 million
in the first half of Fiscal 1997, compared to $39.9 million in the comparable
half of the previous year. As a percentage of net sales, general, administrative
and store operating expenses increased to 21.9% from 21.6%, principally from
higher store payroll costs as a percentage of net sales.
During the first half of Fiscal 1997, the Company had an operating loss
of $0.9 million compared to an operating loss of $3.7 million in the comparable
half of the previous year. The operating loss in the first half of Fiscal 1997
was 0.5% of net sales.
Net interest expense was $0.1 million in the first half of Fiscal 1997
and $0.2 million in the comparable half of the previous year.
The Company had a provision for income taxes of $0.2 million in the
first half of Fiscal 1997. The Company had an income tax benefit of $1.3 million
in the comparable half of the previous year.
During the first half of Fiscal 1997, the Company had a net loss
of $1.2 million compared to a net loss of $2.6 million in the comparable half of
the previous year.
DECLINING TREND IN AVERAGE TRANSACTIONS PER STORE
The Company's gross profit declined in each of the last four
fiscal years, in part because the average number of transactions per store also
declined each year. (The average number of transactions per store also declined
in the second quarter of Fiscal 1997 and in the first half of Fiscal 1997.) The
Company believes that other store chains in the women's apparel specialty store
industry also experienced declines in average transactions in recent years,
partly as a result of increased competition from other channels of distribution,
including catalogues, mass merchants, discounters and off-price stores. Further,
the decline in the Company's average transactions was accelerated by increased
competition within the industry, including "going out of business" sales that
accompanied a reduction in the number of retail specialty stores selling women's
apparel.
The Company is implementing a branded merchandising strategy
intended to reverse the annual decline in average transactions and gross profit.
The strategy is expected to take several years to complete. In Fiscal 1996, the
new strategy began with (i) the replacement of the Company's older proprietary
brands of clothing with the new AVENUE [by design] brand, (ii) the recruitment
of an experienced executive to organize a product development function, that is,
the development of fashion content and design, (iii) the expansion of quality
assurance activities and (iv) an increase in marketing programs. The brand
identity is being defined, new marketing materials expressing that identity are
being created and direct marketing of the brand is being increased. There is no
assurance, however, that the branded merchandising strategy will increase
average transactions and gross profit. This paragraph constitutes
forward-looking information under the 1995 Private Securities Litigation Reform
Act (the "Reform Act") and is subject to the uncertainties and other risk
factors referred to under the caption "Future Results."
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash on hand increased to $19.8 million at August 2, 1997
from $17.8 million at August 3, 1996 and $18.3 million at February 1, 1997.
Net cash from operating activities during the first half of Fiscal
1997 was $2.4 million.
Inventory was $38.7 million at August 2, 1997, $39.5 million at August
3, 1996 and $40.8 million at February 1, 1997. The Company's inventory levels
peak in early May and December. During Fiscal 1996, the highest inventory level
was $50.6 million.
Import purchases are made in U.S. dollars and are generally financed by
trade letters of credit. As of August 2, 1997, trade letters of credit for the
account of the Company were outstanding in the aggregate amount of $22.1
million. (Standby letters of credit were also outstanding in the aggregate
amount of $4.0 million as collateral for obligations in the ordinary course of
business under casualty insurance policies.) Import purchases constituted
approximately 57% of total purchases in the first half of Fiscal 1997.
Short-term trade credit represents a significant source of financing
for domestic merchandise purchases. Trade credit arises from the willingness of
the Company's domestic vendors to grant extended payment terms for inventory
purchases and is generally financed either by the vendor or a third-party
factor.
The Company and United Retail Incorporated, its subsidiary,
(collectively, the "Companies") are parties to a Financing Agreement, dated
August 15, 1997, with The CIT Group/Business Credit, Inc. (the "Financing
Agreement"). The Financing Agreement provides a revolving line of credit for a
term of three years in the aggregate amount of $40 million for the Companies,
subject to availability of credit as described in the following paragraph. The
line of credit may be used on a revolving basis by either of the Companies to
support trade letters of credit and standby letters of credit and to finance
loans.
Subject to the following paragraph, the availability of credit (within
the aggregate $40 million line of credit) to either of the Companies at any time
is the excess of its borrowing base over the sum of (x) the aggregate
outstanding amount of its letters of credit and its loans, if any, and (y) at
CIT's option, the sum of (i) unpaid sales taxes, and (ii) up to $500,000 in
total liabilities of the Companies under permitted encumbrances (as defined in
the Financing Agreement). The borrowing base, as to either of the Companies, is
the sum of (x) a percentage of the book value of its eligible inventory (both on
hand and purchase orders financed with letters of credit), ranging from 60% to
65% depending on the season and (y) the balance on deposit in a bank account in
its name that has been pledged to the lenders. (At August 30, 1997, the combined
availability of the Companies was $7.9 million; the amount on deposit in the
pledged bank account was $2.5 million; the aggregate outstanding amount of
letters of credit was $26.8 million; no loan has been drawn down; and
unrestricted cash on hand was $21.3 million.)
The provisions of the preceding paragraph to the contrary
notwithstanding, the Companies are required to maintain unused at all times
combined availability of at least $5 million. Except for the maintenance of a
minimum availability of $5 million and a limit on capital expenditures, the
Financing Agreement does not contain any financial covenants.
In the event a loan is made to one of the Companies, interest is
payable monthly based on a 360-day year at the prime rate or at two percent plus
the LIBOR rate on a per annum basis, at the borrower's option.
The line of credit is secured by a security interest in inventory and
proceeds and by the balance on deposit from time to time in a bank account that
has been pledged to the lenders. The Companies' other bank accounts are
unencumbered.
<PAGE> 14
The Financing Agreement also includes certain restrictive covenants
that impose limitations (subject to certain exceptions) on the Companies with
respect to, among other things, making certain investments, declaring or paying
dividends, acquiring Common Stock or preferred stock of the Company, making
loans, engaging in certain transactions with affiliates, or consolidating,
merging or making acquisitions outside the ordinary course of business.
Purchases of Company merchandise made by customers with the Company's
proprietary credit cards are paid for daily at a discount by Citibank (South
Dakota), N.A. ("Citibank"). The Credit Plan Agreement between the Companies and
Citibank, dated June 3, 1992, as amended December 3, 1993 (the "Credit
Agreement"), provides for the issuance of credit cards by Citibank and contains
financial covenants that require that the Company's (i) consolidated tangible
net worth not be less than the sum of $32 million plus for each complete fiscal
year ended after February 1, 1992 for which net income has been positive, 50% of
net income, and (ii) consolidated fixed charges ratio for the four preceding
fiscal quarters combined not be less than 1.0:1.0.
The Company believes that availability of credit under the Financing
Agreement and cash flows from operating activities, including payments by
Citibank under the Credit Agreement, will be adequate to meet anticipated
working capital needs, including seasonal financing needs, for the next 12
months. This paragraph constitutes forward-looking information under the Reform
Act and is subject to the uncertainties and other risk factors referred to
under the caption "Future Results."
PROPERTIES
The Company leased 556 retail stores at August 2, 1997, of which 304
stores were located in strip shopping centers, 223 stores were located in malls
and 29 were located in downtown shopping districts. The Company's retail square
footage was 2.2 million square feet both at August 2, 1997 and August 3, 1996.
The Company presently plans to reduce retail square footage by letting
underperforming leases expire. The Company plans to open new mall stores only in
exceptional circumstances. The Company intends to pay the costs of new store
openings from net cash provided by operating activities. This paragraph
constitutes forward-looking information under the Reform Act and is subject to
the uncertainties and other risk factors referred to under the caption
"Future Results".
New stores and newly remodeled stores will use The Avenue(R) trade
name.
TAX MATTERS
The Company's federal income tax returns for Fiscal 1994 and Fiscal
1995 are being audited by the Internal Revenue Service.
COMPUTER SYSTEMS
The Company will modify its computer software programs to accommodate
dates after 1999. The cost of future modifications is not expected to be
material.
SEASONALITY
The Company's business is usually seasonal. From Fiscal 1991 through
Fiscal 1995, the first half of each year provided a greater portion of the
Company's annual operating income. In Fiscal 1996, however, the operating loss
in the first half exceeded the operating loss in the second half.
INFLATION AND CHANGING PRICES
Inflation has not had a significant effect on the Company's operations.
<PAGE> 15
FUTURE RESULTS
Future results could differ materially from those currently anticipated
by the Company due to possible (i) miscalculation of fashion trends, (ii)
shifting shopping patterns, both within the specialty store sector and in other
channels of distribution, (iii) extreme or unseasonable weather conditions, (iv)
economic downturns, weakness in overall consumer demand, and variations in the
demand for women's fashion apparel, (v) imposition by vendors, or their
third-party factors, of more onerous payment terms for domestic merchandise
purchases, (vi) acceleration in the rate of business failures and inventory
liquidations in the specialty store sector of the women's apparel industry, and
(vii) disruptions in the sourcing of merchandise abroad, including (a) China's
claims to sovereignty over Taiwan, (b) North Korea's claims to sovereignty over
South Korea, (c) exchange rate fluctuations, (d) political instability, (e)
trade sanctions or restrictions, (f) changes in quota and duty regulations, (g)
delays in shipping or (h) increased costs of transportation.
<PAGE> 16
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
(a) The Financing Agreement (see "Management's Discussion and Analysis of
Financial Condition and Results of Operations") prohibits the payment of
dividends by the Company.
(b) The following options to purchase shares of the Company's common stock
were issued without registration under the Securities Act of 1933 pursuant to
the Company's 1996 Stock Option Plan:
<TABLE>
<CAPTION>
Number of
Date of Grant Class of Grantee Underlying Shares Exercise Price
<S> <C> <C> <C>
7/1/97 Employee 5,000 $ 2.625
5/27/97 Directors 15,000 $ 3.250
5/27/97 Officers 10,000 $ 3.250
5/27/97 Employees 25,500 $ 3.250
2/27/97 Officers 25,000 $ 3.125
2/27/97 Employees 47,000 $ 3.125
12/2/96 Officer 25,000 $ 3.000
8/22/96 Officer 20,000 $ 3.000
----------
Total: 172,500
==========
</TABLE>
The grantees are officers and directors of United Retail Group, Inc.
and officers and employees of its subsidiaries.
Options become exercisable in five equal annual installments commencing
one year after the date of grant.
The above grants were exempt from the registration provisions of the
Securities Act under Section 4(2) thereof because all the grantees are members
of the Company's management. Nevertheless, the Company intends to file a
registration statement with respect to its 1996 Stock Option Plan.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
10.1 Financing Agreement, dated August 15, 1997,
among the Corporation, United Retail
Incorporated and The CIT Group/Business Credit,
Inc.
10.2* Amendment No. 1 to Restated Supplemental
Retirement Savings Plan
27 Financial Data Schedule
</TABLE>
The following exhibits to the Corporation's Annual Report on
Form 10-K for the year ended February 1, 1997 are incorporated herein by
reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
13 Sections of 1996 Annual Report to Stockholders
(including opinion of Independent Public
Accountants) that are incorporated by reference in
response to the items of the Annual Report on
Form 10-K
23.1 Consent of Independent Public Accountants for the
Corporation
</TABLE>
<PAGE> 17
The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended November 2, 1996 is incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1* Restated Supplemental Retirement Savings Plan
</TABLE>
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended May 4, 1996 are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1* Severance Pay Agreement, dated May 28, 1996, between
the Corporation and Raphael Benaroya
10.2* Severance Pay Agreement, dated May 28, 1996, between
the Corporation and George R. Remeta
10.3 Amended and Restated Term Sheet Agreement for
Hosiery, dated as of December 29, 1995, between The
Avenue, Inc. and American Licensing Group, Inc.
(Confidential portions have been deleted and filed
separately with the Secretary of the Commission)
</TABLE>
The Corporation's 1996 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1996 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibit to the Corporation's Current Report on Form 8-K, dated
March 22, 1996, is incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.3* Employment Agreement, dated March 1,
1996 , between the Corporation and
Kenneth P. Carroll
</TABLE>
The following exhibits to the Corporation's Amended Current Report on Form 8-KA,
dated May 22, 1995, are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1 Amended and Restated Gloria Vanderbilt Intimate
Apparel Sublicense Agreement, dated May 22, 1995,
between United Retail Incorporated and American
Licensing Group Limited Partnership ("ALGLP")
10.2 Gloria Vanderbilt Sleepwear Sublicense Agreement,
dated May 22, 1995, between United Retail
Incorporated and ALGLP
</TABLE>
The following exhibits to the Corporation's Annual Report on Form 10-K for the
year ended January 28, 1995 are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1* Incentive Compensation Program Summary
21 Subsidiaries of the Corporation
</TABLE>
<PAGE> 18
The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended July 30, 1994 is incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.2* Letter from the Corporation to Raphael
Benaroya and George R. Remeta, dated May 20,
1994, regarding their respective Restated
Employment Agreements, dated November 1,
1991
</TABLE>
The following exhibits to the Corporation's amended Annual Report on Form 10-KA
for the year ended January 29, 1994 are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.3 Amendment, dated December 6, 1993, to Credit
Agreement between the Corporation
and Citibank (South Dakota), N.A. ("Citibank")
10.4 Term Sheet Agreement, dated as of May 4, 1993, with
respect to Amended and Restated Gloria Vanderbilt
Hosiery Sublicense Agreement
</TABLE>
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended July 31, 1993 are incorporated herein by reference.
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
4.1 Amended By-Laws of the Corporation, as
amended June 1, 1993
4.2 Amendment No. 1, dated June 1, 1993, to
Restated Stockholders' Agreement, dated
December 23, 1992, between the Corporation
and certain of its stockholders
</TABLE>
The Corporation's Restated 1990 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1993 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibits to the Corporation's Current Report on Form 8-K, dated
January 6, 1993, are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
4.2 Restated Stockholders' Agreement, dated
December 23, 1992, between the Corporation and
certain of its stockholders
10.6 Second Amendment to Lease, dated June 30, 1992,
to Office Lease between Mack Passaic Street
Properties Co. and Sizes Unlimited, Inc.
(now known as United Retail Incorporated)
10.7 Guaranty of Lease, dated June 30, 1992, made by
Sizes Unlimited Holding Corporation (now known
as United Retail Holding Corporation)
to Mack Passaic Street Properties Co.
</TABLE>
<PAGE> 19
The following exhibits to the Corporation's Registration Statement on Form S-1
(Registration No. 33-44499), as amended, are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of
the Corporation
4.1 Specimen Certificate for Common Stock of the Corporation
10.2.1 Software License Agreement, dated as of April 30, 1989,
between The Limited Stores, Inc. and Sizes Unlimited,
Inc.
10.2.2 Amendment to Software License Agreement, dated December
10, 1991
10.7 Amended and Restated Gloria Vanderbilt Hosiery
Sublicense Agreement, dated as of April 30, 1989,
between American Licensing Group, Inc. (Licensee) and
Sizes Unlimited, Inc. (Sublicensee)
10.11 Office Lease, dated June 12, 1987, between Mack Passaic
Street Properties Co. and Sizes Unlimited, Inc. and
Amendment thereto dated August 21, 1988
10.12 Amended and Restated Master Affiliate Sublease
Agreement, dated as of July 17, 1989, among Lane Bryant,
Inc., Lerner Stores, Inc. (Landlord) and Sizes
Unlimited, Inc. (Tenant) and Amendment thereto, dated
July 17, 1989
10.23* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.25* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
10.29* Restated 1989 Management Stock Option Plan, dated
November 1, 1991
10.30* Performance Option Agreement, dated July 17, 1989,
between the Corporation, then known as Lernmark, Inc.,
and Raphael Benaroya and First Amendment thereto dated
November 1, 1991
10.31* Performance Option Agreement, dated July 17, 1989,
between the Corporation and George R. Remeta and First
Amendment thereto dated November 1, 1991
10.32* Second Amendment, dated November 1, 1991, to Performance
Option Agreements with Raphael Benaroya and George R.
Remeta
10.33* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.34* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
10.38 Management Services Agreement, dated August 26, 1989,
between American Licensing Group, Inc. and ALGLP
10.39 First Refusal Agreement, dated as of August 31, 1989,
between the Corporation and ALGLP
10.43 Credit Plan Agreement, dated June 3, 1992, among the
Corporation, Sizes Unlimited, Inc. and Citibank
</TABLE>
<PAGE> 20
The following exhibit to the Restated Schedule 13D, dated February 5, 1997, of
Raphael Benaroya with respect to shares of Common Stock of the Corporation is
incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
99.10 Amendment No. 2, dated February 1, 1997, to Restated
Stockholders' Agreement, dated December 23, 1992,
between the Corporation and certain of its stockholders
</TABLE>
- -------------------------
* A compensatory plan for the benefit of the Corporation's management
or a management contract.
---------------
(b) No Current Reports on Form 8-K were filed by the Corporation during
the fiscal quarter ended August 2, 1997
<PAGE> 21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
(Registrant) UNITED RETAIL GROUP, INC.
By: /s/ GEORGE R. REMETA
-------------------------------------------------------
George R. Remeta, Vice Chairman of the Board and Chief
Financial Officer - Authorized Signatory
By: /s/ JON GROSSMAN
-------------------------------------------------------
Jon Grossman, Vice President - Finance and Chief
Accounting Officer
Date: September 15, 1997
<PAGE> 22
EXHIBIT INDEX
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
10.1 Financing Agreement, dated August 15, 1997, among the
Corporation, United Retail Incorporated and The CIT
Group/Business Credit, Inc.
10.2* Amendment No. 1 to Restated Supplemental Retirement
Savings Plan
27 Financial Data Schedule
</TABLE>
The following exhibits to the Corporation's Annual Report
on Form 10-K for the year ended February 1, 1997 are incorporated herein by
reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
13 Sections of 1996 Annual Report to Stockholders
(including opinion of Independent Public Accountants)
that are incorporated by reference in response to the
items of the Annual Report on Form 10-K
23.1 Consent of Independent Public Accountants for the
Corporation
</TABLE>
The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended November 2, 1996 is incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1* Restated Supplemental Retirement Savings Plan
</TABLE>
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended May 4, 1996 are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1* Severance Pay Agreement, dated May 28, 1996, between the
Corporation and Raphael Benaroya
10.2* Severance Pay Agreement, dated May 28, 1996, between the
Corporation and George R. Remeta
10.3 Amended and Restated Term Sheet Agreement for Hosiery,
dated as of December 29, 1995, between The Avenue, Inc.
and American Licensing Group, Inc. (Confidential
portions have been deleted and filed separately with the
Secretary of the Commission)
</TABLE>
The Corporation's 1996 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1996 annual meeting of
stockholders is incorporated herein by reference.*
<PAGE> 23
The following exhibit to the Corporation's Current Report on Form 8-K, dated
March 22, 1996, is incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.3* Employment Agreement, dated March 1, 1996 , between the
Corporation and Kenneth P. Carroll
</TABLE>
The following exhibits to the Corporation's Amended Current Report on Form 8-KA,
dated May 22, 1995, are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1 Amended and Restated Gloria Vanderbilt Intimate Apparel
Sublicense Agreement, dated May 22, 1995, between United
Retail Incorporated and American Licensing Group Limited
Partnership ("ALGLP")
10.2 Gloria Vanderbilt Sleepwear Sublicense Agreement, dated
May 22, 1995, between United Retail Incorporated and
ALGLP
</TABLE>
The following exhibits to the Corporation's Annual Report on Form 10-K for the
year ended January 28, 1995 are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.1* Incentive Compensation Program Summary
21 Subsidiaries of the Corporation
</TABLE>
The following exhibit to the Corporation's Quarterly Report on Form 10-Q for the
period ended July 30, 1994 is incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.2* Letter from the Corporation to Raphael Benaroya and
George R. Remeta, dated May 20, 1994, regarding their
respective Restated Employment Agreements, dated
November 1, 1991
</TABLE>
The following exhibits to the Corporation's amended Annual Report on Form 10-KA
for the year ended January 29, 1994 are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.3 Amendment, dated December 6, 1993, to Credit
Agreement between the Corporation
and Citibank (South Dakota), N.A. ("Citibank")
10.4 Term Sheet Agreement, dated as of May 4, 1993, with
respect to Amended and Restated Gloria Vanderbilt
Hosiery Sublicense Agreement
</TABLE>
<PAGE> 24
The following exhibits to the Corporation's Quarterly Report on Form 10-Q for
the period ended July 31, 1993 are incorporated herein by reference.
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
4.1 Amended By-Laws of the Corporation, as amended June 1,
1993
4.2 Amendment No. 1, dated June 1, 1993, to Restated
Stockholders' Agreement, dated December 23, 1992,
between the Corporation and certain of its stockholders
</TABLE>
The Corporation's Restated 1990 Stock Option Plan set forth as Exhibit A to the
Corporation's proxy statement on Schedule 14A for its 1993 annual meeting of
stockholders is incorporated herein by reference.*
The following exhibits to the Corporation's Current Report on Form 8-K, dated
January 6, 1993, are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
4.2 Restated Stockholders' Agreement, dated December 23,
1992, between the Corporation and certain of its
stockholders
10.6 Second Amendment to Lease, dated June 30, 1992, to
Office Lease between Mack Passaic Street Properties Co.
and Sizes Unlimited, Inc. (now known as United Retail
Incorporated)
10.7 Guaranty of Lease, dated June 30, 1992, made by Sizes
Unlimited Holding Corporation (now known as United
Retail Holding Corporation) to Mack Passaic Street
Properties Co.
</TABLE>
The following exhibits to the Corporation's Registration Statement on Form S-1
(Registration No. 33-44499), as amended, are incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of
the Corporation
4.1 Specimen Certificate for Common Stock of the Corporation
10.2.1 Software License Agreement, dated as of April 30, 1989,
between The Limited Stores, Inc. and Sizes Unlimited,
Inc.
10.2.2 Amendment to Software License Agreement, dated December
10, 1991
10.7 Amended and Restated Gloria Vanderbilt Hosiery
Sublicense Agreement, dated as of April 30, 1989,
between American Licensing Group, Inc. (Licensee) and
Sizes Unlimited, Inc. (Sublicensee)
10.11 Office Lease, dated June 12, 1987, between Mack Passaic
Street Properties Co. and Sizes Unlimited, Inc. and
Amendment thereto dated August 21, 1988
10.12 Amended and Restated Master Affiliate Sublease
Agreement, dated as of July 17, 1989, among Lane Bryant,
Inc., Lerner Stores, Inc. (Landlord) and Sizes
Unlimited, Inc. (Tenant) and Amendment thereto, dated
July 17, 1989
10.23* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.25* Restated Employment Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
10.29* Restated 1989 Management Stock Option Plan, dated
November 1, 1991
10.30* Performance Option Agreement, dated July 17, 1989,
between the Corporation, then known as Lernmark, Inc.,
and Raphael Benaroya and First Amendment thereto dated
November 1, 1991
10.31* Performance Option Agreement, dated July 17, 1989,
between the Corporation and George R. Remeta and First
Amendment thereto dated November 1, 1991
10.32* Second Amendment, dated November 1, 1991, to Performance
Option Agreements with Raphael Benaroya and George R.
Remeta
10.33* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and Raphael Benaroya
10.34* 1991 Stock Option Agreement, dated November 1, 1991,
between the Corporation and George R. Remeta
10.38 Management Services Agreement, dated August 26, 1989,
between American Licensing Group, Inc. and ALGLP
10.39 First Refusal Agreement, dated as of August 31, 1989,
between the Corporation and ALGLP
10.43 Credit Plan Agreement, dated June 3, 1992, among the
Corporation, Sizes Unlimited, Inc. and Citibank
</TABLE>
The following exhibit to the Restated Schedule 13D, dated February 5, 1997, of
Raphael Benaroya with respect to shares of Common Stock of the Corporation is
incorporated herein by reference:
<TABLE>
<CAPTION>
Number in Filing Description
---------------- -----------
<S> <C>
99.10 Amendment No. 2, dated February 1, 1997, to Restated
Stockholders' Agreement, dated December 23, 1992,
between the Corporation and certain of its
stockholders
</TABLE>
- -------------------------
*A compensatory plan for the benefit of the Corporation's management or
a management contract.
<PAGE> 1
FINANCING AGREEMENT
THE CIT GROUP/BUSINESS CREDIT, INC.
AS AGENT AND LENDER
AND
UNITED RETAIL GROUP, INC. and
UNITED RETAIL INCORPORATED
(as Borrowers)
DATED: August 15, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. Definitions .............................................
SECTION 2. Conditions Precedent ....................................
SECTION 3. Revolving Loans .........................................
SECTION 4. Letters of Credit .......................................
SECTION 5. Collateral ..............................................
SECTION 6. Representations, Warranties and Covenants ...............
SECTION 7. Interest, Fees and Expenses .............................
SECTION 8. Powers ..................................................
SECTION 9. Events of Default and Remedies ..........................
SECTION 10. Termination .............................................
SECTION 11. Miscellaneous ...........................................
SECTION 12. Agreement between Lenders ...............................
SECTION 13. Agency ..................................................
EXHIBIT
Exhibit A - Form of Revolving Loan Promissory Note
Exhibit B - Form of Credit Card Letter
Exhibit C - Form of Assignment and Transfer Agreement
SCHEDULES
Schedule 1 - Existing Liens
Schedule 2 - Collateral Locations and Chief Executive Office
Schedule 3 - Letter of Credit Fees
</TABLE>
2
<PAGE> 3
THE CIT GROUP/BUSINESS CREDIT, INC., a New York corporation,
(hereinafter "CITBC") with offices located at 1211 Avenue of the Americas, New
York, NY 10036, (CITBC) and any other party hereafter becoming a Lender
hereunder pursuant to Section 12, Paragraph 9 hereof (each individually
sometimes referred to as a "Lender" and collectively the "Lenders") and CITBC as
Agent for the Lenders (hereinafter the "Agent") are pleased to confirm the terms
and conditions under which the Lenders acting through the Agent shall make
revolving loans and other financial accommodations to United Retail Group, Inc.,
(herein "URGI"), a Delaware corporation with a principal place of business at
365 West Passaic Street, Rochelle Park, New Jersey 07662, and United Retail
Incorporated (herein "URI"), a Delaware corporation with a principal place of
business at 365 West Passaic Street, Rochelle Park, New Jersey 07662 (URGI and
URI may be referred to herein individually as a "Company" and collectively as
the "Companies").
SECTION 1. DEFINITIONS
ACCOUNTS shall mean all of the Companies' now existing and future: (a) (i)
accounts (as defined in the U.C.C.) and other receivables (including but not
limited to any and all rights to payments under bank and non-bank credit cards)
created by or arising from all of their sales of Inventory or rendition of
services to their customers whether made under the Companies' names or any of
their trade names or styles, or through any of their divisions and (ii)
intercompany receivables by and among the Companies and/or their Affiliates; (b)
any and all instruments (as defined in the U.C.C.), documents (as defined in the
U.C.C.), contract rights (as defined in the U.C.C.), general intangibles (as
defined in the U.C.C.) and chattel paper (as defined in the U.C.C.) which are
created by or arise from the sale of Inventory; (c) unpaid seller's rights
(including rescission, replevin, reclamation and stoppage in transit) relating
to the foregoing or arising therefrom; (d) rights to any goods represented by
any of the foregoing, including rights to returned or repossessed goods; (e)
reserves and credit balances arising hereunder; (f) guarantees or collateral for
any of the foregoing; (g) insurance policies or rights relating to any of the
foregoing; and (h) cash and non-cash proceeds of any and all the foregoing.
ADDITIONAL AVAILABILITY RESERVE shall have the meaning specified in the
definition of Permitted Encumbrances.
AFFILIATE shall mean a person or entity which, directly or indirectly, is in
control of, or is controlled by, or is under common control with another person
or entity. "Control" as used herein shall mean the power, directly or
indirectly, either to (i) vote 50% or more of the capital stock having ordinary
voting power for election of directors of such person or entity or (ii) direct
or cause the direction of the management and policies of such person or entity
whether by contract or otherwise.
AGENT COMMITMENT LETTER shall mean the commitment letter dated July 24, 1997
issued by the Agent to, and accepted by, the Companies.
ANNIVERSARY DATE shall mean the date occurring three (3) years from the date
hereof and the same date in every year thereafter.
3
<PAGE> 4
ASSIGNMENT AND TRANSFER AGREEMENT shall mean the Assignment and Transfer
Agreement in the form of Exhibit C hereto.
AVAILABILITY shall mean, as to either Company, at any time the excess of a) the
Borrowing Base of such Company over the sum of x) the outstanding aggregate
amount of all Obligations of such Company, including, without limitation, all
Obligations with respect to Revolving Loans and Letters of Credit, and y) the
Availability Reserve of such Company, provided that it is hereby agreed that the
Availability of URGI maybe used to open Letters of Credit covering the purchase
of Inventory by URI.
AVAILABILITY RESERVE shall mean, as to either Company, the sum of (i) at CITBC's
option, the amount of all sales taxes collected by the Company and not yet
remitted to the authority to which such taxes are owed and (ii) any Additional
Availability Reserve.
BOOK VALUE shall mean the lower of (i) cost (including agent's commissions) or
(ii) market value, determined in accordance with GAAP.
BORROWING BASE shall mean, as to either Company, the sum of (a) (i) 60% of the
Book Value of Eligible Inventory of such Company from June 1 of each year
through October 31 and from January 1 of each year through March 31 or (ii) 65%
of the Book Value of Eligible Inventory of such Company from April 1 of each
year through May 31 and November 1 of each year through December 31, plus (b)
100% of all Eligible Cash Collateral pledged to Agent by such Company as
collateral hereunder (in form and substance satisfactory to Agent).
BUSINESS DAY shall mean any day that the Agent is open for business in New York,
New York, which is not (i) a Saturday, Sunday or legal holiday in the state of
New York or (ii) a day on which banking institutions chartered by the state of
New York or the United States are legally required to close.
CAPITAL EXPENDITURES for any period shall mean the aggregate of all expenditures
of the Companies during such period that in conformity with GAAP are required to
be included in or reflected by the property, plant or equipment or similar fixed
asset account reflected in the balance sheet of the Companies.
CAPITAL IMPROVEMENTS shall mean operating Equipment and facilities (other than
land) acquired or installed for use in the Companies' business operations.
CAPITAL LEASE shall mean any lease of property (whether real, personal or mixed)
which, in conformity with GAAP, is accounted for as a capital lease or a Capital
Expenditure on the balance sheet of the Companies.
CHASE BANK RATE shall mean the rate of interest per annum announced by Chase
Manhattan Bank ("Chase Bank") from time to time as its prime rate in effect at
its principal office in the City of New
4
<PAGE> 5
York. (The prime rate is not intended to be the lowest rate of interest charged
by Chase Bank to its borrowers).
CLOSING DATE shall mean the date on or after the date hereof upon which the
Agent in behalf of the Lenders makes the initial extension of credit hereunder
whether in the form of Revolving Loans or Letters of Credit.
COLLATERAL shall mean all present and future Accounts, Inventory, Documents of
Title and Other Collateral of the Companies.
COLLATERAL MANAGEMENT FEE shall mean the sum of $25,000 which shall be paid to
the Agent in accordance with Section 7, Paragraph 8 hereof to offset the
expenses and costs of the Agent in connection with record keeping, periodic
examinations, analyzing and evaluating the Collateral.
CONSOLIDATED BALANCE SHEET shall mean a consolidated balance sheet for URGI and
its consolidated subsidiaries(which shall include URI) eliminating all
inter-company transactions and prepared in accordance with GAAP.
CONSOLIDATING BALANCE SHEET shall mean a Consolidated Balance Sheet plus (i)
individual consolidated balance sheets for each of the Companies, and the
subsidiaries of each showing all eliminations of inter-company transactions and
prepared in accordance with GAAP and (ii) a balance sheet for each Company
exclusively.
CREDIT CARD LETTERS shall mean those letters by and among the Companies, the
Agent and each remitter with respect to credit card receipts, in the form
annexed hereto as Exhibit B.
CUMULATIVE EXCESS CASH FLOW shall mean EBITDA after August 2, 1997 minus
Interest Expense minus income taxes paid in cash plus income tax refunds
received in cash minus principal payments on Indebtedness minus Capital
Expenditures.
CUSTOMARILY PERMITTED LIENS shall mean
(a) statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other like liens imposed by law, created in the
ordinary course of business and for amounts which are (i) not yet due, (ii) are
being contested in good faith by appropriate proceedings or other appropriate
actions or (iii) bonded by surety agreements (in form and substance satisfactory
to the Agent in the exercise of Agent's reasonable business judgment), provided
that in any case under this paragraph (a) there is no imminent risk of sale of
Collateral in connection therewith, and with respect to which adequate reserves
or other appropriate provisions are being maintained in accordance with GAAP;
5
<PAGE> 6
(b) deposits made (and the liens thereon) in the ordinary course of
business (including, without limitation, security deposits for leases, surety
bonds and appeal bonds) in connection with general liability insurance, any
transfer of the Companies' credit card arrangements from Citibank, N.A. to
another bank, workers' compensation, unemployment insurance and other types of
social security benefits or to secure the performance of tenders, bids,
contracts (other than for the repayment or guarantee of borrowed money or
purchase money obligations), statutory obligations and other similar obligations
arising as a result of progress payments under government contracts; and
(c) easements (including, without limitation, reciprocal easement
agreements and utility agreements), encroachments, minor defects or
irregularities in title, variation and other restrictions, charges or
encumbrances (whether or not recorded) affecting the Real Estate and which in
the aggregate do not materially interfere with the occupation, use or enjoyment
by the Companies in their business of the property so encumbered.
DEFAULT shall mean any event specified in Section 9 hereof, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, event or act, has been satisfied.
DEFAULT RATE OF INTEREST shall mean a rate of interest per annum equal to the
sum of: a) two percent (2%) plus b) the applicable contract rate of interest
based upon the applicable increment over the Chase Bank Rate as determined under
Section 7 hereof, which the Agent in behalf of the Lenders shall be entitled to
charge the Companies on all Obligations due the Agent in behalf of the Lenders
by the Companies to the extent provided in Section 9, Paragraph 2 of this
Financing Agreement.
DEPOSITORY ACCOUNTS shall have the meaning specified in Section 3, Paragraph 4
hereof.
DOCUMENTATION FEE shall mean i) the sum which is included in the Loan Facility
Fee and is intended to compensate the Agent for the use of the Agent's in-house
Legal Department and facilities in documenting, in whole or in part, the initial
transaction solely on behalf of the Agent, exclusive of Out-of-Pocket Expenses,
and ii) the Agent's standard fees relating to any and all future modifications,
waivers, releases, amendments or additional collateral with respect to this
Financing Agreement, the Collateral and/or the Obligations.
DOCUMENTS OF TITLE shall mean all present and hereafter acquired documents (as
defined in the U.C.C.) including, without limitation all warehouse receipts,
bills of lading, shipping documents, letters of credit, chattel paper and
similar instruments all whether negotiable or not and all goods and Inventory
relating thereto and all cash and non-cash proceeds of the foregoing.
EARLY TERMINATION DATE shall mean the date on which the Companies terminate this
Financing Agreement or the Line of Credit which date is prior to the expiration
of one (1) year after the Closing Date.
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EARLY TERMINATION FEE shall: i) mean the fee the Agent in behalf of the Lenders
is entitled to charge the Companies in the event they terminate the Line of
Credit or this Financing Agreement on an Early Termination Date; and ii) be
equal to one percent (1%) of the Line of Credit.
EBITDA shall mean, in any period, all earnings before all (i) interest and
income taxes accrued or paid, (ii) depreciation, (iii) amortization and (iv)
other non-cash charges for said period, all determined in accordance with GAAP
on a basis consistent with the latest audited consolidated financial statements
of URGI but excluding the effect of extraordinary and/or non-recurring gains or
losses for such period and changes in the deferred tax asset that are recorded
in such period.
ELIGIBLE CASH COLLATERAL shall mean all cash pledged to Agent for the benefit of
the Lenders hereunder and upon which the Agent has a first priority and fully
perfected security interest, all in form and substance satisfactory to the
Agent.
ELIGIBLE INVENTORY shall mean finished goods Inventory and Goods on Order (as
defined below) of the Companies which at the time of determination meets all the
following qualifications:
(i) except for undelivered Goods on Order to the Companies, it is
lawfully owned by the Companies and not subject to any lien, other than
the lien in favor of the Agent that secures the payment of the
Obligations and Permitted Encumbrances and it is not held on
consignment and may be lawfully sold;
(ii) it is (A) located in the Companies' distribution centers,
warehouses or store locations listed on Schedule 2 hereto or in transit
from distribution centers and/or warehouses to store locations or
between store locations, (B) goods on order to the Companies, which are
purchased pursuant to Letters of Credit which are in form and substance
satisfactory to the Agent in the exercise of its reasonable business
judgment (herein "Goods on Order") or (C) located in other locations in
the continental United States as the Agent shall have approved in
writing from time to time, which approval shall be given upon the
Companies providing the Agent with evidence, satisfactory to the Agent
in the exercise of Agent's reasonable business judgment of (1) Agent's
perfected, first priority lien on all Inventory of the Companies
located in such locations and (2) the absence of any liens (other than
Permitted Encumbrances) on any Inventory of the Companies located in
such locations, which evidence may include the results of Uniform
Commercial Code, tax and judgment lien searches in such locations and
acknowledgment copies of Uniform Commercial Code financing statements
naming the Companies, as debtors, and the Agent, as secured party,
filed in such locations;
(iii) it is determined by the Agent in the exercise of Agent's
reasonable business judgment to be, when taken as whole, substantially
similar in quality and mix (having regard for seasonal variations) to
the Inventory maintained by the Companies in recent historical
operations prior to the Closing Date;
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(iv) has been valued after deducting the aggregate amount of (x)
reserves for (1) shrinkage, (2) displays, and (3) rejected, defective,
damaged, aged or otherwise unsalable Inventory and (y) lay-a-ways; and
(v) it is seasonal Inventory that was received by the Company for the
previous, current and next season or is non-seasonal Inventory.
Notwithstanding the foregoing, Eligible Inventory shall include Goods
on Order for delivery to the United States (whether or not present in
the United States) under Letters of Credit opened with Agent's
assistance hereunder, provided such Inventory (x) upon receipt thereof
by the Companies' foreign freight forwarder, is covered by insurance
satisfactory to the Agent in the exercise of its reasonable business
judgment and (y) is otherwise deemed eligible by the Agent in
accordance with, and subject to, the foregoing definition of Eligible
Inventory.
EQUIPMENT shall mean all present and hereafter acquired equipment (as defined in
the U.C.C.) including, without limitation, all machinery, equipment, furnishings
and fixtures, and all additions, substitutions and replacements thereof,
wherever located, together with all attachments, components, parts, equipment
and accessories installed thereon or affixed thereto and all proceeds of
whatever sort.
ERISA shall mean the Employee Retirement Income Security Act or 1974, as amended
from time to time and the rules and regulations promulgated thereunder from time
to time.
EVENT(S) OF DEFAULT shall have the meaning provided for in Section 9 of this
Financing Agreement.
GAAP shall mean generally accepted accounting principles in the United States of
America as in effect from time to time and for the period as to which such
accounting principles are to apply.
GUARANTORS shall mean the Companies.
INDEBTEDNESS shall mean, without duplication, all liabilities, contingent or
otherwise, which are any of the following: (a) obligations in respect of money
(borrowed or otherwise) or for the deferred purchase price of property, services
or assets, other than Inventory, or (b) lease obligations which, in accordance
with GAAP, have been, or which should be capitalized, excluding liabilities in
connection with gift certificates arising in the ordinary course of business.
INTEREST EXPENSE shall mean consolidated interest obligations (paid or accrued)
of URGI and its consolidated subsidiaries (including URI) determined in
accordance with GAAP on a basis consistent with its latest audited consolidated
financial statements.
INVENTORY shall mean all of the Companies' present and hereafter acquired
inventory (as defined in the U.C.C.) including, without limitation all
merchandise, inventory and goods, and all additions, substitutions and
replacements thereof, wherever located, together with all goods and materials
used
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or usable in manufacturing, processing, packaging or shipping same; and all
proceeds thereof of whatever sort.
ISSUING BANK shall mean the bank issuing Letters of Credit for or in behalf of
the Companies.
LETTER OF CREDIT GUARANTY shall mean the guaranty delivered by the Agent in
behalf of the Lenders to the Issuing Bank of the Companies' reimbursement
obligation under the Issuing Bank's Reimbursement Agreement, Application for
Letter of Credit or other like document.
LETTER OF CREDIT GUARANTY FEE shall mean the fee the Agent in behalf of the
Lenders may charge the Companies under Section 7, Paragraph 3 of this Financing
Agreement for: i) issuing the Letter of Credit Guaranty or ii) otherwise aiding
the Companies in obtaining Letters of Credit.
LETTER OF CREDIT SUB-LINE shall mean $40,000,000 in the aggregate for the
Companies.
LETTERS OF CREDIT shall mean all letters of credit issued with the assistance of
the Agent in behalf of the Lenders by the Issuing Bank for or on behalf of the
Companies.
LIBOR shall mean at any time of determination, and subject to availability, for
each interest period the higher of the applicable London Interbank Offered rate
paid in London on dollar deposits from other banks as (x) quoted by Chase Bank,
(y) published under "Money Rates" in the New York City edition of the Wall
Street Journal or if there is no such publication or statement therein as to
Libor then in any publication used in the New York City financial community or
(z) determined by the Agent based upon information presented on Telerate Systems
at Page 3750 as of 11:00 a.m. (London Time).
LIBOR LOAN shall mean those Revolving Loans, for which the Companies have
elected to use Libor for interest rate computations.
LIBOR PERIOD shall mean the Libor for one month, two month, three month or six
month U.S. dollar deposits, as selected by the Companies.
LINE OF CREDIT shall mean the commitment of the Lenders to make Revolving Loans
pursuant to Section 3 of this Financing Agreement and to assist the Companies in
opening Letters of Credit pursuant to Section 4 of this Financing Agreement, in
the aggregate amount equal to $40,000,000 for the Companies.
LINE OF CREDIT FEE shall: i) mean the fee due the Agent for the benefit of the
Lenders at the end of each month for the Line of Credit, and ii) be determined
by multiplying the difference between (a) the lesser of (x) the Line of Credit
or (y) the average daily Borrowing Base of the Companies and (b) the sum of (x)
the average daily balance of Revolving Loans of the Companies plus (y) the
average daily balance of Letters of Credit of the Companies for said month by
three eighths of one percent (3/8 of 1%) per annum for the number of days in
said month.
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LOAN FACILITY FEE shall mean the fee payable to the Agent for the benefit of the
Lenders in accordance with, and pursuant to, the provisions of Section 7,
Paragraph 7 of this Financing Agreement.
OBLIGATIONS shall mean all loans and advances made or to be made by the Agent
and/or the Lenders to the Companies or to others for the Companies' account
(including, without limitation, all Revolving Loans, and Letters of Credit); any
and all indebtedness and obligations which may at any time be owing by the
Companies to the Agent and/or the Lenders howsoever arising, whether now in
existence or incurred by the Companies from time to time hereafter; whether
secured by pledge, lien upon or security interest in any of the Companies'
assets or property or the assets or property of any other person, firm, entity
or corporation; whether such indebtedness is absolute or contingent, joint or
several, matured or unmatured, direct or indirect and whether the Companies are
liable to the Agent and/or the Lenders for such indebtedness as principal,
surety, endorser, guarantor or otherwise. Obligations shall also include
indebtedness owing to the Agent and/or the Lenders by the Companies under this
Financing Agreement or under any other agreement or arrangement now or hereafter
entered into between the Companies and the Agent and/or the Lenders;
indebtedness or obligations incurred by, or imposed on, the Agent and/or the
Lenders as a result of environmental claims (other than as a result of actions
of the Agent and/or the Lenders) arising out of the Companies' operation,
premises or waste disposal practices or sites; the Companies' liability to the
Agent and/or the Lenders as maker or endorser on any promissory note or other
instrument for the payment of money; the Companies' liability to the Agent
and/or the Lenders under any instrument of guaranty or indemnity, or arising
under any guaranty, endorsement or undertaking which the Agent and/or the
Lenders may make or issue to others for the Companies' account, including any
accommodation extended with respect to applications for Letters of Credit, the
Agent's (in behalf of the Lenders) acceptance of drafts or the Agent's (in
behalf of the Lenders) endorsement of notes or other instruments for the
Companies' account and benefit.
OTHER COLLATERAL shall mean all now owned and hereafter acquired deposit
accounts maintained with any bank or financial institutions into which the
proceeds of Collateral and/or Eligible Cash Collateral are deposited; all cash
and other monies and property in the possession or control of the Agent and/or
the Lenders; all books, records, ledger cards and disks at any time evidencing
or containing information relating to any of the Collateral described herein or
otherwise necessary or helpful in the collection thereof or realization thereon,
and all cash and non-cash proceeds of the foregoing.
OUT-OF-POCKET EXPENSES shall mean all of the Agent's and/or the Lenders' present
and future reasonable expenses incurred relative to this Financing Agreement,
whether incurred heretofore or hereafter, which expenses shall include, without
being limited to, the cost of record searches, all costs and expenses incurred
by the Agent and/or the Lenders in opening bank accounts, depositing checks,
receiving and transferring funds, and any charges imposed on the Agent and/or
the Lenders due to "insufficient funds" of deposited checks and the Agent's
and/or the Lenders' standard fee relating thereto, any amounts paid by the Agent
and/or the Lenders, or incurred by or charged to the Agent and/or Lenders by the
Issuing Bank under the Letter of Credit Guaranty or the Companies' Reimbursement
Agreement, Application for Letter of Credit or other like document which pertain
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either directly or indirectly to such Letters of Credit, and the Agent's and/or
the Lenders' standard fees relating to the Letters of Credit and any drafts
thereunder, all as more fully set forth on Schedule 3 hereto, fees and taxes
relative to the filing of financing statements, and all expenses, costs and fees
set forth in Section 9, Paragraph 3 of this Financing Agreement.
PATENTS shall mean all present and hereafter acquired patents and/or patent
rights of the Companies and all cash and non-cash proceeds thereof.
PERMITTED ENCUMBRANCES shall mean: i) liens existing on the date hereof and
listed on Schedule 1 hereto and other liens expressly permitted, or consented
to, by the Agent; ii) Purchase Money Liens; iii) Customarily Permitted Liens;
iv) liens granted the Agent by the Companies; v) liens of judgment creditors
which are bonded or covered by insurance maintained by the Company in each case
to the satisfaction of the Agent in the exercise of its reasonable business
judgment; and vi) liens for Taxes and sales taxes not yet due and payable; vii)
liens for Taxes and sales taxes due and payable which are being diligently
contested in good faith by the Companies by appropriate proceedings and which
liens are not x) senior to the liens of the Agent or y) for Taxes due the United
States of America and which have been filed of record, viii) other liens and
encumbrances whether such liens are (w) statutory liens of landlords and/or
liens of carriers, warehousemen, mechanics, materialmen and other like liens
imposed by law, (x) for Taxes and/or sales taxes, (y) arising in connection with
ERISA and/or (z) of judgment creditors, provided that (A) the amount (including
all interest and penalties applicable thereto) under clauses (w), (x), (y) and
(z) does not exceed $500,000 in the aggregate at any time and (B) the Agent may
(in its sole discretion) establish an additional Availability Reserve against
the maximum amount of Revolving Loans and Letters of Credit that would otherwise
be available under Section 3 and 4 of this Financing Agreement in an amount
equal to the Companies' potential liability therefor (including all interest and
penalties applicable thereto) (herein the "Additional Availability Reserve") and
(C) there is no imminent risk of sale of Collateral in connection therewith and
(ix) liens on pledged deposits arising in connection with Permitted
Transactions.
PERMITTED INDEBTEDNESS shall mean: i) current indebtedness maturing in less than
one year and incurred in the ordinary course of business consistent with the
Companies' past practices; ii) the indebtedness secured by the Purchase Money
Liens; iii) Subordinated Debt; iv) indebtedness arising under the Letters of
Credit and this Financing Agreement; v) deferred taxes and other expenses
incurred in the ordinary course of business; vi) other unsecured Indebtedness
not exceeding $250,000 in the aggregate outstanding at any time; and vii) other
indebtedness existing on the date of execution of this Financing Agreement and
listed in the most recent financial statement delivered to the Agent or
otherwise disclosed to the Agent in writing.
PERMITTED LAYAWAYS shall mean sales of Inventory to customers in the ordinary
course of business on a layaway basis provided that (i) such sales are
consistent with the Companies' past practices with respect thereto and (ii) the
unpaid balance of such sales does not exceed $4,000,000 in the aggregate at any
time and further provided that at any time that Availability is less than
$7,500,000 the Companies shall upon notice from the Agent deliver all
documentation in connection with such sales on a layaway basis to the Agent or
its designee.
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PERMITTED TRANSACTIONS shall mean advances, loans (other than loans and advances
by URI to URGI), pledged deposits, investments, guarantees and/or endorsements,
which would otherwise be prohibited by Section 6, Paragraphs 8(F), and (H);
provided that (i) the aggregate dollar amount thereof does not exceed the sum of
(x) $25,711,000 (herein "Cash On Hand At Closing") plus (y) $7,500,000 and (ii)
after giving effect thereto (A) the Companies are in compliance with Section 6,
Paragraph 8(I) and (B) no Default and/or Event of Default has occurred
hereunder.
PURCHASE MONEY LIENS shall mean liens on any item of Equipment acquired after
the date of this Financing Agreement provided that i) each such lien shall
attach only to the property to be acquired, and ii) the debt incurred in
connection with such acquisitions shall not exceed in the aggregate the maximum
amount of permitted Capital Expenditures under Section 6, Paragraph 10 hereof in
any fiscal year.
REAL ESTATE shall mean the Companies' fee and/or leasehold interests in real
property.
REQUIRED LENDERS shall mean Lenders holding more than fifty percent (50%) of the
outstanding loans, advances, extensions of credit and commitments to the
Companies hereunder.
RETAINED CASH shall mean an amount of cash sufficient to provide the URI's
retail stores with x) petty cash and y) cash register coins and currency in an
amount, in each case, consistent with its business practices.
REVOLVING LOAN ACCOUNT(S) shall have the meaning specified in Section 3,
Paragraph 6 hereof.
REVOLVING LOAN PROMISSORY NOTE shall mean the promissory note in the form of
Exhibit A hereto executed by the Companies to evidence Revolving Loans made by
the Agent in behalf of the Lenders to the Companies pursuant to Section 3
hereof.
REVOLVING LOANS shall mean the loans and advances made, from time to time, to or
for the account of the Companies by the Agent in behalf of the Lenders pursuant
to Section 3 of this Financing Agreement.
SETTLEMENT DATE shall mean the date, weekly, and more frequently, at the
discretion of the Agent, upon the occurrence of an Event of Default or a
continuing decline or increase of the Revolving Loans that the Agent and the
Lenders shall settle amongst themselves so that x) the Agent shall not have, as
the Agent, any money at risk and y) on such Settlement Date the Lenders shall
have a pro rata amount of all outstanding Revolving Loans and Letters of Credit,
provided that each Settlement Date for a Lender shall be a Business Day on which
such Lender and its bank are open for business.
SUBORDINATED DEBT shall mean the debt due a Subordinating Creditor (and the note
evidencing such) which has been subordinated, by a Subordination Agreement, to
the prior payment and satisfaction of
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the Obligations of the Companies to the Agent and/or the Lenders (in form and
substance satisfactory to the Agent).
SUBORDINATING CREDITOR shall mean any party hereafter executing a Subordination
Agreement.
SUBORDINATION AGREEMENT shall mean the agreement among the Companies, a
Subordinating Creditor and the Agent pursuant to which Subordinated Debt is
subordinated to the prior payment and satisfaction of the Companies' Obligations
to the Agent and/or the Lenders (in form and substance satisfactory to the
Agent).
TAXES shall mean all taxes, assessments, claims and other charges, lawfully
levied or assessed upon the Companies or their assets.
TRADE ACCOUNTS RECEIVABLE shall mean that portion of Accounts which arises from
the sale of Inventory or the rendition of services in the ordinary course of
business.
TRADEMARKS shall mean all present and hereafter acquired trademarks and/or
trademark rights (together with the goodwill associated therewith) and all cash
and non-cash proceeds thereof.
U.C.C. shall mean the Uniform Commercial Code as in effect from time to time in
the state of New York.
SECTION 2. CONDITIONS PRECEDENT
The obligation of the Agent and the Lenders to make loans hereunder is
subject to the satisfaction of, or waiver of, immediately prior to or
concurrently with the making of such loans, the following conditions precedent:
a) LIEN SEARCHES - The Agent shall have received tax, judgment and
Uniform Commercial Code searches satisfactory to the Agent for all locations
presently occupied or used by the Companies.
b) PROPERTY INSURANCE - The Companies shall have delivered to the Agent
evidence satisfactory to the Agent that property insurance policies covering the
Inventory listing the Agent as loss payee or mortgagee, as the case may be, are
in full force and effect, all as set forth in Section 6, Paragraph 4 of this
Financing Agreement.
c) UCC FILINGS - Any documents (including without limitation, financing
statements) required to be filed in order to create, in favor of the Agent for
the benefit of the Lenders, a first and exclusive perfected security interest in
the Collateral with respect to which a security interest may be perfected by a
filing under the U.C.C. shall have been properly filed in each office in each
jurisdiction required in order to create in favor of the Agent a perfected lien
on the Collateral. The Agent shall have received acknowledgment copies of all
such filings (or, in lieu thereof, the Agent shall have received other evidence
satisfactory to the Agent that all such filings have been made); and the Agent
shall have received evidence that all necessary filing fees and all taxes or
other expenses related to such filings have been paid in full.
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d) GUARANTIES - The Guarantors shall have executed and delivered to the
Agent guaranties, in form acceptable to the Agent, guaranteeing all present and
future Obligations of the Companies to the Agent and/or the Lenders.
e) OPINIONS - Counsel for the Companies and the Guarantors shall have
delivered to the Agent opinions satisfactory to the Agent opining, inter alia,
that, subject to the i) filing, priority and remedies provisions of the Uniform
Commercial Code, ii) the provisions of the Bankruptcy Code, insolvency statutes
or other like laws, iii) the equity powers of a court of law and iv) such other
matters as may be agreed upon with the Agent: (a) this Financing Agreement, (b)
the Guaranty of the Guarantors, and (c) all other loan documents of the
Companies and the Guarantors are x) valid, binding and enforceable according to
their terms, y) are duly authorized and z) do not violate any terms, provisions,
representations or covenants in the charter or by-laws of the Companies or the
Guarantors or, to the best knowledge of such counsel, of any loan agreement,
mortgage, deed of trust, note, security or pledge agreement or indenture to
which either of the Companies or the Guarantors is a signatory or by which the
Companies or the Guarantors or their assets are bound.
f) ADDITIONAL DOCUMENTS - The Companies shall have executed and
delivered to the Agent all loan documents necessary to consummate the lending
arrangement contemplated between the Companies and the Agent.
g) BOARD RESOLUTION - The Agent shall have received a copy of the
resolutions of the Boards of Directors of the Companies and the Guarantors (as
the case may be) authorizing the execution, delivery and performance of (i) this
Financing Agreement, (ii) the Guaranties and (iii) any related agreements, in
each case certified by the Secretary or Assistant Secretary of the Companies and
the Guarantors (as the case may be) as of the date hereof, together with a
certificate of the Secretary or Assistant Secretary of the Companies and the
Guarantors (as the case may be) as to the incumbency and signature of the
officers of the Companies and/or the Guarantors executing such agreements and
any certificate or other documents to be delivered by them pursuant hereto,
together with evidence of the incumbency of such Secretary or Assistant
Secretary.
h) CORPORATE ORGANIZATION - The Agent shall have received (i) a copy of
the Certificates of Incorporation of the Companies and the Guarantors certified
by the Secretary of State of Delaware, and (ii) a copy of the By-Laws (as
amended through the date hereof) of the Companies and the Guarantors certified
by the Secretary or Assistant Secretary thereof.
i) OFFICER'S CERTIFICATE - The Agent shall have received an executed
Officer's Certificate of the Companies, satisfactory in form and substance to
the Agent, certifying that (i) the representations and warranties contained
herein are true and correct in all material respects on and as of the date
hereof; (ii) the Companies are in compliance with all of the terms and
provisions set forth herein; and (iii) no Default or Event of Default has
occurred.
j) ABSENCE OF DEFAULT - No Default, Event of Default or material
adverse change in the financial condition, business, prospects, profits,
operations or assets of the Companies shall have occurred.
k) LEGAL RESTRAINTS/LITIGATION - At the date of execution of this
Financing Agreement, there shall be no x) litigation, investigation or
proceeding (judicial or administrative) pending or threatened against the
Companies or the Guarantors or their assets, by any agency, division or
department of any county, city, state or federal government arising out of this
Financing Agreement, y) injunction, writ or restraining order restraining or
prohibiting the consummation of the financing arrangements
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contemplated under this Financing Agreement or z) to the best knowledge of the
Companies, suit, action, investigation or proceeding (judicial or
administrative) pending or threatened against the Companies or the Guarantors or
their assets, which, in the reasonable opinion of the Agent, if adversely
determined could have a material adverse effect on the business, operation,
assets, financial condition or Collateral of the Companies and/or the Guarantors
after taking into account the Companies' insurance coverage with respect
thereto.
l) DISBURSEMENT AUTHORIZATION - The Companies shall have delivered to
the Agent all information necessary for the Agent to issue wire transfer
instructions on behalf of the Companies for the initial and subsequent loans
and/or advances to be made under this Agreement including, but not limited to,
disbursement authorizations in form acceptable to the Agent.
m) EXAMINATION & VERIFICATION - The Agent shall have completed to the
satisfaction of the Agent an examination and verification of the Accounts,
Inventory, books and records of the Companies and the Guarantors which
examination shall indicate that, after giving effect to all loans, advances and
extensions of credit to be made at closing, the Companies shall have an opening
additional aggregate Availability plus Cash On Hand At Closing in an aggregate
amount of at least $20,000,000. It is understood that such requirement
contemplates that all debts, obligations and payables are current.
n) CASH BUDGET PROJECTIONS - The Agent shall have received, reviewed
and be satisfied with a 12 month cash budget projection prepared by the
Companies in the form provided by the Agent.
o) COLLECTION ACCOUNTS - The Companies shall have established a system
of bank accounts with respect to the collection of Accounts and the deposit of
proceeds of Inventory as shall be acceptable to the Agent in all respects.
p) CREDIT CARD LETTERS - Agent shall have received a Credit Card Letter
executed by each remitter of credit card receipts.
q) EXISTING REVOLVING CREDIT AGREEMENT - The Companies' existing
credit agreement with the Chase Bank shall be (x) terminated, (y) all loans and
obligations of the Companies and/or the Guarantors thereunder shall be paid or
satisfied in full and (z) all liens upon or security interest in favor of the
Chase Bank in connection therewith shall be terminated and/or released upon such
payment or satisfaction.
r) AGENT COMMITMENT LETTER - The Companies shall have fully complied,
to the satisfaction of the Agent, with all of the terms and conditions of the
Agent Commitment Letter.
Upon the execution of this Financing Agreement and the initial extension of
credit hereunder, all of the above Conditions Precedent shall have been deemed
satisfied except as the Companies and the Agent shall otherwise agree herein or
in a separate writing.
SECTION 3. REVOLVING LOANS
1. Upon the Agent's receipt of an executed Revolving Loan Promissory
Note in the form of Exhibit A hereto the Lenders agree, subject to the terms and
conditions of this Financing Agreement from time to time, and within x) the
Availability and y) the Line of Credit, but subject to Lenders' right to make
"overadvances", to make loans and advances to each of the Companies on a
revolving basis (i.e. subject to the limitations set forth herein, the Companies
may borrow, repay and re-borrow
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Revolving Loans). Such loans and advances to each Company shall be in amounts up
to the Borrowing Base of such Company. Each request shall constitute, unless
otherwise disclosed in writing to the Agent and the Lenders, a representation
and warranty by the Companies that (i) after giving effect to the requested
advance, no Default or Event of Default has occurred and (ii) such requested
Revolving Loan is within the Line of Credit and Availability. All requests for
loans and advances must be received by an officer of the Agent no later than
1:00 p.m., New York time, of the day on which such loans and advances are
required. Should the Agent for any reason honor requests for advances in excess
of the limitations set forth herein, such advances shall be considered
"overadvances" and shall be made in the Agent's sole discretion, subject to any
additional terms the Agent deems necessary.
2. In furtherance of the continuing collateral assignment and security
interest in the Collateral, the Companies shall deliver to the Agent no later
than three (3) Business Days after the end of each week (in such form and manner
as the Agent may reasonably require) such written statements and schedules as
the Agent may reasonably require designating, identifying or describing the
Collateral, including but not limited to an inventory confirmation statement
stating the aggregate amount of Eligible Inventory of the Companies provided,
however, that after the occurrence of an Event of Default the Agent may, upon
notice to the Companies, require more frequent reporting then set forth above.
With respect to all such reports, the Companies will provide to the Agent such
additional information and material as the Agent may reasonably request to
effectively evaluate the Collateral, including but not limited to the mix of the
Inventory and such other information as the Agent may reasonably require to
evaluate the Companies' Accounts and Inventory, such as returns, claims, credits
and allowances. Failure to provide the Agent with any of the foregoing shall in
no way affect, diminish, modify or otherwise limit the security interests
granted herein.
3. Each of the Companies hereby represents and warrants that: each of
its Trade Accounts Receivable is based on an actual and bona fide sale and
delivery of goods or rendition of services to customers, made by it in the
ordinary course of its business; the Inventory being sold and the Trade Accounts
Receivable created are their exclusive property and are not and shall not be
subject to any lien, consignment arrangement, encumbrance, security interest or
financing statement whatsoever, other than the Permitted Encumbrances; the
invoices evidencing such Trade Accounts Receivable are in their name; and their
customers have accepted the goods or services, owe and are obligated to pay the
full amounts stated in the invoices according to their terms, without dispute,
offset, defense, counterclaim or contra, except for disputes and other matters
arising in the ordinary course of business with respect to which they have
complied with the notification requirements of Paragraph 5 of this Section 3.
Each of the Companies confirms to the Agent that any and all taxes or fees
relating to its business, its sales, the Accounts or goods relating thereto, are
its sole responsibility and that same will be paid by them when due and that
none of said taxes or fees represent a lien on or claim against the Accounts
except Permitted Encumbrances. Each of the Companies also warrants and
represents that it is a duly and validly existing corporation and is qualified
in all states where the failure to so qualify would have a adverse effect on its
business or its ability to enforce collection of Accounts or other amounts
representing the proceeds of the sale of Inventory due from customers residing
in that state. Each of the Companies agrees to maintain such books and records
regarding Accounts as the Agent
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may reasonably require and agrees that such books and records will reflect the
Agent's interest in the Accounts. All of the books and records of the Companies
will be available to the Agent at normal business hours, including any records
handled or maintained for the Companies by any other company or entity provided
that prior to the occurrence of a Default and/or event of Default hereunder the
Agent shall give the Companies reasonable prior notice thereof.
4. Until the Agent has advised the Companies to the contrary after the
occurrence of an Event of Default (other than an Event of Default which is
waived in writing by the Agent or cured to the Agent's reasonable satisfaction),
the Companies may and will enforce, collect and receive all amounts due and
owing on the Accounts for the Agent's benefit and on the Agent's behalf, but at
the Companies' expense; such privilege shall terminate automatically upon the
institution by or against the Companies of any proceeding under any bankruptcy
or insolvency law or, at the election of the Agent, upon the occurrence of any
other Event of Default (other than an Event of Default which is waived in
writing by the Agent or cured to the Agent's reasonable satisfaction) and until
such Event of Default is waived in writing by the Agent or cured to the Agent's
reasonable satisfaction. Except for Retained Cash, any checks, cash, notes or
other instruments or property received by the Companies with respect to any
Accounts and/or representing the proceeds of the sale of Inventory shall be held
by the Companies in trust for the Agent, separate from the Companies' own
property and funds, and immediately turned over to the Agent with proper
assignments or endorsements by deposit to the special depository accounts
designated by the Agent for such purposes (the "Depository Accounts"). Pursuant
to separate arrangements between the Agent and each institution at which a
Depository Account is located, each such institution has agreed, or will agree,
to remit the amount of such deposit to a concentration account owned by the
Agent (the "Concentration Account"). In addition, the Companies shall cause all
amounts due it under credit card sales to be promptly remitted by the credit
card companies to the Concentration Account. Until such time as it receives
notice from the Agent to the contrary as provided for in the following sentence,
the institution holding such Concentration Account will be instructed that when
it is satisfied that such funds on deposit are "good funds" such institution
will remit "good funds" to the Companies' operating account which shall be an
account (other than a pay-roll account) with a financial institution in the
United States. Notwithstanding the foregoing or anything to the contrary
contained herein or in any agreement with any institution holding the
Concentration Account, immediately upon the occurrence of either of the
following events: (x) the occurrence of a Default and/or Event of Default
hereunder (other than an Event of Default which is waived in writing by the
Agent or cured to the Agent's reasonable satisfaction) or (y) the Companies'
Availability (computed on the basis of all of the Companies' debts, obligations
and payables being current in accordance with the Companies' usual business
practices) hereunder being less than $5,000,000 in the aggregate, the Agent may
notify the institution holding the Concentration Account to remit all amounts
then or thereafter on deposit in such account to the Agent to be applied by the
Agent to the reduction of the Obligations in such order as the Agent may
determine, all as more fully set forth in Paragraph 6 of this Section 3. All
amounts received by the Agent in payment of Accounts and/or representing the
proceeds of the sale of Inventory will be credited to the Agent's account upon
the Agent's receipt of "collected funds" at the Agent's bank account in New
York, New York on the Business Day of receipt if received no later than 2:00 pm
or on the next succeeding Business Day if received after 2:00 pm. No checks,
drafts or other instrument received by the Agent
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shall constitute final payment to the Agent unless and until such instruments
have actually been collected.
5. Each of the Companies agrees to notify the Agent promptly of any
matters materially affecting the value, enforceability or collectibility of the
Accounts taken as a whole and of customer disputes, offsets, defenses,
counterclaims, returns, rejections and all reclaimed or repossessed merchandise
or goods which in the aggregate are material. Each of the Companies agrees to
issue credit memoranda promptly (with duplicates to the Agent upon request after
the occurrence of an Event of Default) upon accepting returns or granting
allowances, and may continue to do so until the Agent has notified the Companies
that an Event of Default has occurred.
6. The Agent shall maintain a separate account on its books in each of
the Companies' names (the "Revolving Loan Account") in which the Companies will
be charged with loans and advances made by the Agent to it or for its account,
and with any other Obligations, including any and all reasonable costs, expenses
and reasonable attorney's fees which the Agent may incur in connection with the
exercise by or for the Agent of any of the rights or powers herein conferred
upon the Agent, or in the prosecution or defense of any action or proceeding to
enforce or protect any rights of the Agent in connection with this Financing
Agreement or the Collateral assigned hereunder, or any Obligations owing to the
Agent by the Companies. Subject to the provisions of Paragraph 4 above, the
Companies will be credited with all amounts received by the Agent from the
Companies or from others for the Companies' account, including, as above set
forth, all amounts received by the Agent in payment of assigned Accounts and
such amounts will be applied to payment of the Obligations. In no event shall
prior recourse to any Accounts or other security granted to or by the Companies
be a prerequisite to the Agent's right to demand payment of any Obligation.
Further, it is understood that the Agent shall have no obligation whatsoever to
perform in any respect any of the Companies' contracts or obligations relating
to the Accounts.
7. After the end of each month, the Agent shall promptly send the
Companies a statement showing the accounting for the charges, loans, advances
and other transactions occurring between the Agent and the Companies during that
month. The monthly statements shall be deemed correct and binding upon the
Companies and shall constitute an account stated between the Companies and the
Agent unless the Agent receives a written statement of the exceptions within
thirty (30) days of the date of the monthly statement.
8. In the event that the sum of (i) the outstanding balance of
Revolving Loans and (ii) outstanding balance of Letters of Credit exceeds (x) as
to any Company the maximum amount thereof available to such Company under
Sections 3 and 4 hereof or (y) for both of the Companies the Line of Credit
(herein the amount of any such excess shall be referred to as the "Excess") such
Excess shall be due and payable to the Agent for the benefit of the Lenders
immediately upon the Agent's demand therefor.
SECTION 4. LETTERS OF CREDIT
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In order to assist the Companies in establishing or opening Letters of
Credit with an Issuing Bank to cover the purchase of Inventory, and subject to
the provisions of Section 6, Paragraph 8(I) hereof, other general corporate
business purposes the Companies have requested the Agent in behalf of the
Lenders to join in the applications for such Letters of Credit, and/or guarantee
payment or performance of such Letters of Credit and any drafts or acceptances
thereunder through the issuance of the Letters of Credit Guaranty, thereby
lending the Agent's and the Lenders' credit to the Companies and the Agent and
the Lenders have agreed to do so. These arrangements shall be handled by the
Agent subject to the terms and conditions set forth below.
1. Within the Line of Credit and Availability, the Agent and the
Lenders shall assist the Companies in obtaining Letter(s) of Credit in an amount
not to exceed the Letter of Credit Sub-Line in the aggregate outstanding at any
one time. The Agent's and Lenders' assistance for amounts in excess of the
limitation set forth herein shall at all times and in all respects be in the
Agent's sole discretion. It is understood that the form of each Letter of Credit
must be acceptable to the Agent in its reasonable business judgment.
Notwithstanding anything herein to the contrary, upon the occurrence of a
Default and/or Event of Default, the Agent's assistance in connection with the
Letter of Credit Guaranty shall be in the Agent's sole discretion unless such
Default and/or Event of Default is cured to the Agent's satisfaction or waived
by the Agent in writing.
2. The Agent shall have the right, without notice to the Companies, to
charge the Companies' Revolving Loan Accounts on the Agent's books with the
amount of any and all indebtedness, liability or obligation of any kind incurred
by the Agent under the Letters of Credit Guaranty at the earlier of a) payment
by the Agent under the Letters of Credit Guaranty, or b) the occurrence of an
Event of Default. Any amount charged to the Companies' Revolving Loan Accounts
shall be deemed a Revolving Loan hereunder and shall incur interest at the rate
provided in Section 7, Paragraph 1 of this Financing Agreement.
3. Each of the Companies jointly and severally unconditionally
indemnifies the Agent and the Lenders and holds the Agent and the Lenders
harmless from any and all loss, claim or liability incurred by the Agent and/or
the Lenders arising from any transactions or occurrences relating to Letters of
Credit established or opened for the Companies' account, the collateral relating
thereto and any drafts or acceptances thereunder, and all Obligations
thereunder, including any such loss or claim due to any action taken by any
Issuing Bank, other than for any such loss, claim or liability arising out of
the gross negligence or willful misconduct by the Agent and/or the Lenders under
the Letters of Credit Guaranty. Each of the Companies further agrees to jointly
and severally hold the Agent and the Lenders harmless from any errors or
omission, negligence or misconduct by the Issuing Bank. The Companies'
unconditional obligation to the Agent and the Lenders hereunder shall not be
modified or diminished for any reason or in any manner whatsoever, other than as
a result of the Agent's gross negligence or willful misconduct. Each of the
Companies agrees that any charges incurred by the Agent and/or the Lenders for
their account by the Issuing Bank shall be conclusive on the Agent and the
Lenders and may be charged to their Revolving Loan Accounts.
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4. The Agent and/or the Lenders shall not be responsible for: the
existence, character, quality, quantity, condition, packing, value or delivery
of the goods purporting to be represented by any documents; any difference or
variation in the character, quality, quantity, condition, packing, value or
delivery of the goods from that expressed in the documents; the validity,
sufficiency or genuineness of any documents or of any endorsements thereon, even
if such documents should in fact prove to be in any or all respects invalid,
insufficient, fraudulent or forged; the time, place, manner or order in which
shipment is made; partial or incomplete shipment, or failure or omission to ship
any or all of the goods referred to in the Letters of Credit or documents; any
deviation from instructions; delay, default, or fraud by the shipper and/or
anyone else in connection with the Collateral or the shipping thereof; or any
breach of contract between the shipper or vendors and the Companies.
Furthermore, without being limited by the foregoing, the Agent and/or the
Lenders shall not be responsible for any act or omission with respect to or in
connection with any Collateral.
5. Each of the Companies agrees that any action taken by the Agent, if
taken in good faith, or any action taken by any Issuing Bank, under or in
connection with the Letters of Credit, the guarantees, the drafts or
acceptances, or the Collateral, shall be binding on the Companies and shall not
put the Agent in any resulting liability to the Agent unless such liability
arises directly out of the gross negligence or willful misconduct of the Agent.
In furtherance thereof, upon the occurrence of an Event of Default, the Agent
shall have the full right and authority to clear and resolve any questions of
non-compliance of documents; to give any instructions as to acceptance or
rejection of any documents or goods; to execute any and all steamship or airways
guaranties (and applications therefor), indemnities or delivery orders; to grant
any extensions of the maturity of, time of payment for, or time of presentation
of, any drafts, acceptances, or documents; and to agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letters of Credit, drafts or
acceptances; all in the Agent's sole name, and the Issuing Bank shall be
entitled to comply with and honor any and all such documents or instruments
executed by or received solely from the Agent, all without any notice to or any
consent from the Companies. The Companies confirm and agree that the Agent shall
have no obligation to act upon any request by the Companies hereunder with
respect to: (x) amending any Letter of Credit, (y) waiving or resolving any
questions of non-compliance of documents thereunder, or (z) accepting or
rejecting any documents or goods thereunder, unless such requests are in
writing.
6. Without the Agent's express consent and endorsement in writing, each
of the Companies agrees that after the occurrence of an Event of Default
hereunder it will not: (i) execute any and all applications for steamship or
airway guaranties, indemnities or delivery orders; (ii) grant any extensions of
the maturity of, time of payment for, or time of presentation of, any drafts,
acceptances or documents; (iii) agree to any amendments, renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the applications, Letters of Credit, drafts or acceptances; vi) clear and
resolve any questions of non-compliance of documents, or v) give any
instructions as to acceptances or rejection of any documents or goods.
7. Each of the Companies agrees that any necessary import, export or
other licenses or certificates for the import or handling of the Collateral will
have been promptly procured; all foreign
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and domestic governmental laws and regulations in regard to the shipment and
importation of the Collateral, or the financing thereof will have been promptly
and full complied with; and any certificates in that regard that the Agent may
at any time request will be promptly furnished. In this connection, each of the
Companies warrants and represents that all shipments made under any such Letters
of Credit are in accordance with the laws and regulations of the countries in
which the shipments originate and terminate, and are not prohibited by any such
laws and regulations. The Companies assume all risk, liability and
responsibility for, and agree to pay and discharge, all present and future
local, state, federal or foreign taxes, duties, or levies. Any embargo,
restriction, laws, customs or regulations of any country, state, city, or other
political subdivision, where the Collateral is or may be located, or wherein
payments are to be made, or wherein drafts may be drawn, negotiated, accepted,
or paid, shall be solely the Companies' risk, liability and responsibility.
8. Upon any payments made to the Issuing Bank under the Letter of
Credit Guaranty, the Agent for the benefit of the Lenders shall acquire by
subrogation, any rights, remedies, duties or obligations granted or undertaken
by the Companies to the Issuing Bank in any application for Letters of Credit,
any standing agreement relating to Letters of Credit or otherwise, all of which
shall be deemed to have been granted to the Agent and apply in all respects to
the Agent for the benefit of the Lenders and shall be in addition to any rights,
remedies, duties or obligations contained herein.
9. Nothing contained herein shall affect, modify, release or diminish
any right which the Companies may have against the Issuing Bank with respect to
any Letter of Credit opened with the Agent's assistance hereunder.
10. Notwithstanding any provision to the contrary contained herein
Documents of Title with respect to Inventory covered by Letters of Credit shall
not be required to be consigned to the Agent unless and until the occurrence of
the earlier of (x) the Companies' Availability being $7,500,000 or less in the
aggregate for a period of two (2) consecutive weeks or (y) a Default and/or an
Event of Default. Thereafter, all such Documents of Title shall be consigned to
the Agent until the Companies' Availability exceeds $7,500,000 in the aggregate
for two (2) consecutive weeks and no Default and/or Event of Defaults exists,
subject to the Agent's rights under the first sentence of this paragraph 10.
11. The Companies may designate the Issuing Bank, provided that such
Issuing Bank shall (i) be acceptable to the Agent in its reasonable business
judgment and (ii) execute and deliver an agreement with respect to the issuance
of letters of credit and the relative rights of the Agent and the Issuing Bank
in connection therewith, all in form and substance satisfactory to the Agent in
its reasonable business judgment.
SECTION 5. COLLATERAL
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1. As security for the prompt payment in full of all loans and advances
made and to be made to the Companies from time to time by the Agent and/or the
Lenders pursuant hereto, as well as to secure the payment in full of the other
Obligations, each of the Companies hereby pledges and grants to the Agent for
the benefit of the Lenders a continuing general lien upon and security interest
in all of its:
(a) present and hereafter acquired Inventory;
(b) present and future Accounts;
(c) present and future Documents of Title; and
(d) present and future Other Collateral.
2. The security interests granted hereunder shall extend and attach to:
(a) All Collateral which is presently in existence and which is owned
by the Companies or in which the Companies have any interest, whether held by
them or others for their account; and
(b) All Inventory and any portion thereof which may be returned,
rejected, reclaimed or repossessed by either the Agent or the Companies from the
Companies' customers, as well as to all supplies, goods, incidentals, packaging
materials, labels and any other items which contribute to the finished goods or
products purchased by the Companies, or to the sale, promotion or shipment
thereof.
3. The Companies agree to safeguard, protect and hold all Inventory for
the Agent's account and make no disposition thereof except in the regular course
of the business of the Companies (including Inventory sell offs outside its
retail channel of distribution provided such sell offs are consistent with the
Companies past practices with respect thereto and do not result in losses on
such sell-offs [based upon the Book Value of the Inventory subject thereto] in
excess of $1,000,000 in the aggregate during any fiscal year, provided that at
any time that the Companies' Availability is less than $7,500,000 in the
aggregate no sell-offs shall be done without the prior written consent of the
Agent) as herein provided. Until the Agent has given the Companies notice to the
contrary, as provided for below, any Inventory may be sold and shipped by the
Companies to their customers in the ordinary course of their business, on open
account and on terms currently being extended by them to their customers,
provided that all proceeds of all sales (including cash, accounts receivable,
checks, notes, instruments for the payment of money and similar proceeds) are
forthwith transferred, endorsed, and turned over by deposit to the Depository
Accounts in accordance with Section 3, Paragraph 4 of this Financing Agreement.
The Agent shall have the right to withdraw this permission at any time upon the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by the Agent or cured to the Agent's satisfaction, in which
event no further disposition shall be made of the Inventory by the Companies
without the Agent's prior written
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approval. Except for Permitted Layaways, sales of inventory in which a lien
upon, or security interest in, Inventory is retained by the Companies shall be
made by the Companies only with the approval of the Agent, and the proceeds of
such sales or sales of Inventory for cash (including Permitted Layaways) shall
be deposited to the Depository Accounts in accordance with Section 3, Paragraph
4 hereof. Upon the sale, exchange, or other disposition of Inventory, as herein
provided, the security interest in the Companies' Inventory provided for herein
shall, without break in continuity and without further formality or act,
continue in, and attach to, all proceeds, including any instruments for the
payment of money, accounts receivable, contract rights, documents of title,
shipping documents, chattel paper and all other cash and non-cash proceeds of
such sale, exchange or disposition. As to any such sale (other than a sale with
respect to which full, final and indefeasible payment has been received),
exchange or other disposition, the Agent shall have all of the rights of an
unpaid seller, including stoppage in transit, replevin, rescission and
reclamation.
4. The rights and security interests granted to the Agent for the
benefit of the Lenders hereunder are to continue in full force and effect,
notwithstanding the termination of this Financing Agreement or the fact that any
account maintained in the Companies' name on the books of the Agent may from
time to time be temporarily in a credit position, until the final payment in
full to the Agent and the Lenders of all Obligations and the termination of this
Financing Agreement. Any delay, or omission by the Agent and/or the Lenders to
exercise any right hereunder, shall not be deemed a waiver thereof, or be deemed
a waiver of any other right, unless such waiver be in writing and signed by the
Agent. A waiver on any one occasion shall not be construed as a bar to or waiver
of any right or remedy on any future occasion.
5. To the extent that the Obligations are now or hereafter secured by
any assets or property other than the Collateral or by the guarantee,
endorsement, assets or property of any other person, then the Agent shall have
the right in its sole discretion to determine which rights, security, liens,
security interests or remedies the Agent shall at any time pursue, foreclose
upon, relinquish, subordinate, modify or take any other action with respect to,
without in any way modifying or affecting any of them, or any of the Agent's or
Lenders' rights hereunder.
6. Any reserves or balances to the credit of the Companies and any
other property or assets of the Companies in the possession of the Agent and/or
the Lenders may be held by the Agent as security for any Obligations and applied
in whole or partial satisfaction of such Obligations when due. The liens and
security interests granted herein and any other lien or security interest the
Agent may have in any other assets of the Companies, shall secure payment and
performance of all now existing and future Obligations. The Agent may in its
discretion charge any or all of the Obligations to the Revolving Loan Accounts
of the Companies when due.
7. The Companies agree that to the extent any Accounts or other
Collateral hereunder is evidenced by an instrument, all such instruments shall
be endorsed and delivered to the Agent, provided that the foregoing shall not be
applicable to checks and/or credit card receipts arising in connection with the
sale of Inventory in the ordinary course of business. All Accounts evidencing
rights to payment under bank and non-bank credit cards may be sold by the
Companies in the ordinary
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course of business, provided that all proceeds of such sales are forthwith
transferred, endorsed and turned over by deposit to the Depository Accounts in
accordance with Section 3, Paragraph 4 of this Financing Agreement.
8. Each of the Companies acknowledges and agrees that portions of the
Inventory bear Trademarks and/or tradenames used by the Companies and owned by
the Companies and/or their affiliates, including the name "The Avenue" which is
owned by an affiliate, The Avenue, Inc. (herein collectively the "Intellectual
Property"). Therefore, it is hereby agreed that, the Companies hereby grant, and
shall cause such affiliates to grant, to the Agent a limited royalty free
license to use the Intellectual Property to sell or otherwise realize upon the
Inventory after the occurrence of an Event of Default (other than an Event of
Default which is waived in writing by the Agent or cured to the Agent's
reasonable satisfaction). Such license shall be at no cost to the Agent, shall
not be subject to any restrictions or limitation whatsoever and shall continue
until terminated in accordance with the provisions hereof. In addition, such
license shall be unaffected by any transfer of title to, or grant of a lien upon
or security interest in, such Intellectual Property. Each of the Companies
agrees that (x) it shall not sell, assign, transfer or encumber such
Intellectual Property to any party other than an Affiliate who has executed a
similar license agreement as required hereunder (herein "Transfer") without the
prior written consent of the Agent (other than with respect to licensing
arrangements entered into by the Companies in the ordinary course of its
business, provided that such licensing arrangements do not adversely affect the
Agent's license and/or rights hereunder), (y) in the event that the Agent
consents to any such Transfer, the Companies shall make such Transfer explicitly
subject to the license in favor of the Agent hereunder and (z) upon the Agent's
reasonable request, it will execute any documents necessary to evidence,
preserve and maintain such license on any applicable public records. Said
license shall expire automatically upon termination of this Financing Agreement
and the full, final and indefeasible payment of all Obligations of the Companies
to the Agent. In addition, the Companies agree to obtain from the owner of such
Intellectual Property similar license agreements for all names used by the
Companies and owned by Affiliates (including but not limited to the name, "The
Avenue").
9. The Companies agree to take all actions necessary (including the
execution and delivery of all documentation) requested by Agent to validly
perfect Agent's first and exclusive lien upon all Eligible Cash Collateral
pledged hereunder.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS
1. Each of the Companies hereby warrants and represents and/or
covenants that: i) the fair value of its assets exceeds the book value of its
liabilities; ii) it is generally able to pay its debts as they become due and
payable; and iii) it does not have unreasonably small capital to carry on its
business as it is currently conducted absent extraordinary and unforeseen
circumstances. Each of the Companies further warrants and represents that
Schedule 2 hereto correctly and completely sets forth its chief executive office
and all of its Collateral locations; and except for the Permitted Encumbrances,
the security interests granted herein constitute and shall at all times
constitute the first and only liens on the Collateral; that, except for the
Permitted Encumbrances, the Companies are or
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will be at the time additional Collateral is acquired by them, the absolute
owner of the Collateral with full right to pledge, sell, consign, transfer and
create a security interest therein, free and clear of any and all claims or
liens in favor of others; that the Companies will at their expense forever
warrant and, at the Agent's request, defend the same from any and all claims and
demands of any other person other than the Permitted Encumbrances; that the
Companies will not grant, create or permit to exist, any lien upon or security
interest in the Collateral, or any proceeds thereof, in favor of any other
person other than the holders of the Permitted Encumbrances.
2. The Companies agree to maintain books and records pertaining to the
Collateral in such detail, form and scope as the Agent shall reasonably require.
The Companies agree that the Agent or its agents may enter upon the Companies'
premises at any time during normal business hours, and from time to time, for
the purpose of inspecting the Collateral, and any and all records pertaining
thereto provided that prior to the occurrence of a Default and/or Event of
Default the Agent shall give the Companies reasonable prior notice thereof. The
Companies agree to afford the Agent prior written notice of any change in the
location of any Collateral, other than to locations, that are known to the Agent
and at which the Agent has filed financing statements and otherwise fully
perfected its liens thereon. Each of the Companies is also to advise the Agent
promptly, in sufficient detail, of any material adverse change relating to the
type, quantity or quality of the Collateral or of the security interests granted
to the Agent therein.
3. The Companies agree to comply with the requirements of all state and
federal laws in order to grant to the Agent valid and perfected first security
interests in the Collateral, subject only to the Permitted Encumbrances. The
Agent is hereby authorized by the Companies to file any financing statements
covering the Collateral whether or not the Companies' signature appears thereon.
The Companies agree to do whatever the Agent may reasonably request, from time
to time, by way of: filing notices of liens, financing statements, amendments,
renewals and continuations thereof; cooperating with the Agent's custodians;
keeping stock records; transferring proceeds of Collateral to the Agent's
possession; and performing such further acts as the Agent may reasonably require
in order to effect the purposes of this Financing Agreement.
4. The Companies agree to maintain insurance on the Inventory under
such policies of insurance, with such insurance companies, in such reasonable
amounts and covering such insurable risks as are at all times reasonably
satisfactory to the Agent, provided that the existing deductible thereunder of
$100,000 is acceptable to the Agent. All policies covering the Inventory are,
subject to the rights of any holders of Permitted Encumbrances holding claims
senior to the Agent, to be made payable to the Agent for the benefit of the
Lenders, in case of loss, under a standard non-contributory "mortgagee",
"lender" or "secured party" clause and are to contain such other provisions as
the Agent may require to fully protect the Agent's interest in the Inventory and
to any payments to be made under such policies. All original policies or true
copies thereof are to be delivered to the Agent within fifteen (15) days after
the receipt by the Companies, premium prepaid, with the loss payable endorsement
in the Agent's favor, and shall provide for not less than thirty (30) days prior
written notice to the Agent of the exercise of any right of cancellation. At the
Companies' request, or if the Companies fail to maintain such insurance, the
Agent may arrange for such insurance, but at the
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Companies' expense and without any responsibility on the Agent's part for:
obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. Upon the occurrence of an Event of
Default which is not waived or cured to the Agent's satisfaction, the Agent
shall, subject to the rights of any holders of Permitted Encumbrances holding
claims senior to the Agent, have the sole right, in the name of the Agent or the
Companies, to file claims under any insurance policies, to receive, receipt and
give acquittance for any payments that may be payable thereunder, and to execute
any and all endorsements, receipts, releases, assignments, reassignments or
other documents that may be necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. In the event of any
loss or damage by fire or other casualty, insurance proceeds relating to
Inventory of any Company shall reduce such Company's Revolving Loans.
5. Each of the Companies agrees to pay, when due, all Taxes lawfully
levied or assessed upon the Companies or the Collateral and if such Taxes remain
unpaid after the date fixed for the payment thereof unless such Taxes constitute
Permitted Encumbrances which taxes in the Agent's opinion might create a valid
obligation having priority over the rights granted to the Agent herein, the
Agent may upon concurrent notice to the Companies, on the Companies' behalf, pay
such taxes, and the amount thereof shall be an Obligation secured hereby and due
to the Agent on demand.
6. Each of the Companies: (a) agrees to comply with all acts, rules,
regulations and orders of any legislative, administrative or judicial body or
official, which the failure to comply with would have a material and adverse
impact on the Collateral, or any material part thereof, or on the operation of
the Companies' business; provided that the Companies may contest any acts,
rules, regulations, orders and directions of such bodies or officials in any
reasonable manner which will not, in the Agent's reasonable opinion, materially
and adversely effect the Agent's rights or priority in the Collateral; (b)
agrees to comply with all environmental statutes, acts, rules, regulations or
orders as presently existing or as adopted or amended in the future, applicable
to the ownership and/or use of its real property and operation of its business,
which the failure to comply with would have a material and adverse impact on the
Collateral, or any material part thereof, or on the operation of the business of
the Companies; and (c) shall not be deemed to have breached any provision of
this Paragraph 6 if (i) the failure to comply with the requirements of this
Paragraph 6 resulted from good faith error or innocent omission, (ii) the
Companies promptly commence and diligently pursues a cure of such breach and
(iii) such failure is cured within thirty (30) business days following the
Companies' receipt of notice of such failure or such longer period so long as
the Companies are diligently pursuing such cure and are in compliance with all
governmental orders with respect thereto. Each of the Companies hereby jointly
and severally indemnifies the Agent and the Lenders and agrees to defend and
hold the Agent and the Lenders harmless from and against any and all loss,
damage, claim, liability, injury or expense which the Agent and/or the Lenders
may sustain or incur (other than as a result of actions of the Agent and/or the
Lenders) in connection with: any claim or expense asserted against the Agent
and/or the Lenders as a result of any environmental pollution, hazardous
material or environmental clean-up of the Companies' real property; or any claim
or expense which results from the Companies' operations (including, but not
limited to, the Companies' off-site disposal practices) and the
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Companies further agree that this indemnification shall survive termination of
this Financing Agreement as well as the payment of all Obligations or amounts
payable hereunder.
7. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, unless
the Agent shall have otherwise consented in writing, the Companies will furnish
to the Agent and each Lender, within ninety (90) days after the end of each
fiscal year of the Companies, an audited Consolidated Balance Sheet and an
unaudited Consolidating Balance Sheet as at the close of such year, and
statements of profit and loss, cash flow and stockholders' equity of URGI and
its consolidated subsidiaries (including URI) for such year, which audited
financial statements are audited by independent public accountants selected by
URGI and satisfactory to the Agent; within forty-five (45) days after the end of
each fiscal quarter (except the fourth fiscal quarter of each fiscal year) a
Consolidated Balance Sheet and Consolidating Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and stockholders equity of
URGI and its consolidated subsidiaries (including URI) certified by an
authorized financial or accounting officer of URGI; and within thirty (30) days
after the end of each month a Consolidated Balance Sheet as at the end of such
period and statements of profit and loss, cash flow and stockholders equity of
URGI and its consolidated subsidiaries (including URI) for such period,
certified by an authorized financial or accounting officer of URGI; and from
time to time, such further information regarding the business affairs and
financial condition of the Companies and any subsidiaries thereof as the Agent
may reasonably request, including without limitation (a) the accountant's
management practice letter and (b) annual cash flow projections in form
satisfactory to the Agent and (c) copies of all (i) annual and/or quarterly
filings which URGI is required to make with the Securities and Exchange
Commission and (ii) financial or other reports distributed by URGI to its
shareholders. Each financial statement which the Companies are required to
submit hereunder must be accompanied by an officer's certificate, signed by the
President, Chief Financial Officer, Vice President, Controller, or Treasurer,
pursuant to which any one such officer must certify that: (i) the financial
statement(s) fairly and accurately represent(s) the Companies' financial
condition at the end of the particular accounting period, as well as the
Companies' operating results during such accounting period, subject to year-end
audit adjustments; and (ii) during the particular accounting period: (x) there
has been no Default or Event of Default under this Financing Agreement,
provided, however, that if any such officer has knowledge that any such Default
or Event of Default, has occurred during such period, the existence of and a
detailed description of same shall be set forth in such officer's certificate;
and (y) the Companies have not received any notice of cancellation with respect
to its property insurance policies.
8. Until termination of the Financing Agreement and payment and
satisfaction of all Obligations due hereunder, the Companies agree that, without
the prior written consent of the Agent, except as otherwise herein provided, the
Companies will not:
A. Mortgage, assign, pledge, transfer or otherwise permit any
lien, charge, security interest, encumbrance or judgment,
(whether as a result of a purchase money or title retention
transaction, or other security interest, or otherwise) to
exist on any of its
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assets or goods, whether real, personal or mixed, whether now
owned or hereafter acquired, except for the Permitted
Encumbrances;
B. Incur or create any Indebtedness other than the Permitted
Indebtedness;
C. Borrow any money on the security of the Collateral from
sources other than the Agent and the Lenders;
D. Sell, lease, assign, transfer or otherwise dispose of i)
Collateral, except as otherwise specifically permitted by this
Financing Agreement, or ii) either all or substantially all of
their assets, which do not constitute Collateral except for
Permitted Transactions;
E. Merge, consolidate or otherwise alter or modify its corporate
name, principal place of business, structure, status or
existence, or enter into or engage in any operation or
activity materially different from that presently being
conducted by the Companies, except that the Companies may (i)
merge with each other and/or (ii) change their corporate name
or address; provided that in any instance under clauses (i)
and (ii) (x) the Companies shall give the Agent thirty (30)
days prior written notice thereof and (y) the Companies shall
execute and deliver prior to or simultaneously with any such
action any and all documents and agreements requested by the
Agent (including, without limitation, any and all U.C.C.
financing statements) to confirm (A) the assumption by the
surviving corporation of all Obligations to the Agent and the
Lenders of the other Company so merged, (B) the continuation
and preservation of all security interests and liens granted
to the Agent hereunder and (C) that such surviving corporation
adopts, ratifies and confirms its agreement to be bound by and
comply with this Financing Agreement;
F. Assume, guarantee, endorse, or otherwise become liable upon
the obligations of any person, firm, entity or corporation,
except (i) by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary
course of business; and (ii) Permitted Transactions.
G. Declare or pay any dividend of any kind on, or purchase,
acquire, redeem or retire, any of the capital stock or equity
interest, of any class whatsoever, whether now or hereafter
outstanding, except that (i) URGI may acquire, retire and/or
redeem shares of its capital stock in consideration of the
issuance of other shares of capital stock and (ii) URI may
declare and pay dividends on its capital stock in an amount
sufficient to enable URGI to pay income or franchise taxes of
URI due as a result of the filing of a consolidated, combined
or unitary tax return in which the operations of URI are
included, provided that, in any instance under this paragraph
G, after giving effect thereto, no Default or Event of Default
has occurred hereunder;
H. Make any advance or loan to, or any investment in, any firm,
entity, person or corporation, except (i) Permitted
Transactions and (ii) loans and advances to employees not to
exceed $500,000 in the aggregate at any time outstanding;
I. Use more than $7,500,000 in the aggregate of the proceeds of
Revolving Loans and/or Letters of Credit during the term of
this Financing Agreement for purposes other than for working
capital, provided that the Companies must first exhaust their
Cash On Hand At Closing prior to using any Revolving Loans
and/or Letters of Credit for any purpose other than working
capital; or
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J. Change their fiscal year from that presently in effect.
9. Until termination of the Financing Agreement and payment and
satisfaction in full of all Obligations hereunder, the Companies shall maintain
at all times an Availability hereunder of at least $5,000,000 in the aggregate.
10. Without the prior written consent of the Agent, the Companies will
not contract for, purchase, make expenditures for, lease pursuant to a Capital
Lease or otherwise incur obligations with respect to Capital Expenditures
(whether subject to a security interest or otherwise) during any fiscal year in
the aggregate amount for the Companies in excess of $5,000,000 plus an amount
equal to the positive difference (if any) between Cumulative Excess Cash Flow
minus $1,000,000.
11. The Companies agree to advise the Agent in writing of: a) all
expenditures (actual or anticipated) in excess of $150,000 for x) environmental
clean-up, y) environmental compliance or z) environmental testing and the impact
of said expenses on the Companies' Working Capital; and b) any notices the
Companies receive from any local, state or federal authority advising the
Companies of any environmental liability (real or potential) stemming from the
Companies' operations, premises, waste disposal practices, or waste disposal
sites used by the Companies and to provide the Agent with copies of all such
notices if so required.
12. Without the prior written consent of the Agent, the Companies agree
that, except for Permitted Transactions and the creation of Subordinated Debt,
they will not enter into any transaction, including, without limitation, any
purchase, sale, lease, loan or exchange of property with any Affiliate of the
Companies other than transactions arising in the ordinary course of the
Companies' business which are on terms no less favorable to the Companies than
they would obtain in an arms length transaction with an unrelated third party,
provided that such transactions are not otherwise prohibited by Paragraph 8 of
this Section 6 of this Financing Agreement.
13. The Companies shall conduct or cause to be conducted, not less than
once in any fiscal year, an actual physical count of their Inventory and upon
the occurrence of a Default or an Event of Default, more frequently upon the
request of the Agent.
14. The Companies shall advise the Agent of any decision to (i) open
any new stores not less than thirty (30) calendar days prior to actual opening
of any store and (ii) close stores within five (5) calendar days after closing
such stores provided that (x) the unsold Inventory at such closed store is moved
to a store location at which the Agent has a perfected security interest and (y)
there shall at no time be more than five (5) unreported store closings at any
time. In addition, the Companies shall deliver to the Agent together with the
monthly financial reports required under this Financing Agreement a report of
all current store locations and bank accounts.
15. Except for Permitted Encumbrances, the Companies shall remit any
and all sales taxes when due to the appropriate sales tax authorities when any
such remittances are due and payable, provided, however, that such remittances
need not be made on or before such due date if: i) such
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sales taxes are being diligently contested by the Companies in good faith and by
appropriate proceedings; ii) the Companies establish such reserves as may be
required by GAAP and iii) the failure to remit such sales taxes does not create
a lien in favor of such sales tax authorities, or impose upon the Agent any
obligation to segregate proceeds.
SECTION 7. INTEREST, FEES AND EXPENSES
1. Interest on the Revolving Loan shall be payable monthly as of the
end of each month and shall be an amount equal to (a) the Chase Bank Rate per
annum on the average of the net balances owing by the Companies to the Agent in
the Companies' Revolving Loan Account(s) at the close of each day during such
month on balances other than Libor Loans and (b) two percent (2%) plus the
applicable Libor on any Libor Loan, on a per annum basis, on the average of the
net balances owing by the Companies to the Agent and/or the Lenders in the
Companies' Revolving Loan Account(s) at the close of each day during such month.
In the event of any change in said Chase Bank Rate, the rate under clause (a)
above shall change, as of the first of the month following any change, so as to
remain equal to the Chase Bank Rate. The rate hereunder shall be calculated
based on a 360-day year. The Agent and the Lenders shall be entitled to charge
the Companies' Revolving Loan Account(s) at the rate provided for herein when
due until all Obligations have been paid in full.
2. The Companies may elect to use Libor as to any outstanding Revolving
Loans provided A) there is then no Default or Event of Default, B) the Companies
have so advised the Agent of their election to use Libor and the Libor Period
selected no later than three (3) Business Days preceding the first day of a
Libor Period and C) the election and Libor shall be effective, provided, there
is then no Default or Event of Default, on the fourth Business Day following
said notice. The Libor elections must be for $500,000 or whole multiples thereof
and there shall be no more than three (3) Libor Loans outstanding at one time.
If no such election is timely made or can be made, or if the Libor rate can not
be determined, then the Agent shall use the Chase Bank Rate to compute interest.
In addition, the Companies shall pay to the Agent for the benefit of the
Lenders, upon the request of the Agent such amount or amounts as shall
compensate the Agent and/or the Lenders for any loss, costs or expenses incurred
by the Agent and/or the Lenders (as reasonably determined by the Agent and the
Lenders) as a result of: (i) any payment or prepayment on a date other than the
last day of a Libor Period for such Libor Loan, or (ii) any failure of the
Companies to borrow a Libor Loan on the date for such borrowing specified in the
relevant notice; such compensation to include, without limitation, an amount
equal to any loss or expense suffered by the Agent and/or the Lenders during the
period from the date of receipt of such payment or prepayment or the date of
such failure to borrow to the last day of such Libor Period if the rate of
interest obtained by the Agent and/or the Lenders upon the reemployment of an
amount of funds equal to the amount of such payment, prepayment or failure to
borrow is less than the rate of interest applicable to such Libor Loan for such
Libor Period. The determination by the Agent and/or the Lenders of the amount of
any such loss or expense, when set forth in a written notice to the Companies,
containing the Agent's and/or the Lenders' calculations thereof in reasonable
detail, shall be conclusive on the Company, in the absence of manifest error.
Calculation of all amounts payable to the Agent and/or the Lenders under this
paragraph with regard to Libor Loans shall be made as though the Agent and/or
the Lenders had actually funded the Libor
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Loans through the purchase of deposits in the relevant market and currency, as
the case may be, bearing interest at the rate applicable to such Libor Loans in
an amount equal to the amount of the Libor Loans and having a maturity
comparable to the relevant interest period provided, however, that the Agent and
the Lenders may fund each of the Libor Loans in any manner the Agent and the
Lenders see fit and the foregoing assumption shall be used only for calculation
of amounts payable under this paragraph. In addition, notwithstanding anything
to the contrary contained herein, the Agent and the Lenders shall apply all
proceeds of Collateral, including the Accounts, and all other amounts received
by it from or on behalf of the Companies (i) initially to the Chase Bank Rate
loans and (ii) subsequently to Libor Loans; provided, however, x) upon the
occurrence of an Event of Default or y) in the event the aggregate amount of
outstanding Libor Rate Loans exceeds Availability or the applicable maximum
levels set forth therefor, the Agent and the Lenders may apply all such amounts
received by it to the payment of Obligations in such manner and in such order as
the Agent may elect in its reasonable business judgment. In the event that any
such amounts are applied to Revolving Loans which are Libor Loans, such
application shall be treated as a prepayment of such loans and the Agent and the
Lenders shall be entitled to indemnification hereunder.
3. In consideration of the Letter of Credit Guaranty of the Agent, the
Companies shall jointly and severally pay the Agent for the benefit of the
Lenders the Letter of Credit Guaranty Fee which shall be an amount equal to
three quarters of one percent (3/4 of 1%) per annum, payable monthly, on the
face amount of each Letter of Credit less the amount of any and all amounts
previously drawn under the Letter of Credit.
4. Any charges, fees, commissions, costs and expenses charged to the
Agent and/or the Lenders for the Companies' account by any Issuing Bank in
connection with or arising out of Letters of Credit issued pursuant to this
Financing Agreement or out of transactions relating thereto will be charged to
the Companies' account in full when charged to or paid by the Agent and when
made by any such Issuing Bank shall be conclusive on the Agent.
5. The Companies shall jointly and severally reimburse or pay the
Agent, as the case may be, for: i) all Out-of-Pocket Expenses and ii) any
applicable Documentation Fee.
6. Upon the last Business Day of each month, commencing with the last
day of the month in which this Financing Agreement is executed the Companies
shall jointly and severally pay the Agent for the benefit of the Lenders the
Line of Credit Fee.
7. To induce the Agent and the Lenders to enter into this Financing
Agreement and to extend to the Companies the Revolving Loan and Letters of
Credit, the Companies shall jointly and severally pay to the Agent for the
benefit of the Lenders a Loan Facility Fee in the amount of $150,000 payable
upon execution of this Financing Agreement provided that the $75,000 Commitment
Fee paid in connection with the Agent Commitment Letter shall be credited
against such Loan Facility Fee.
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8. Upon the date hereof and on such annual anniversary hereof the
Companies shall jointly and severally pay to the Agent the Collateral Management
Fee, which shall be fully earned and not refundable or rebateable when due.
9. The Companies shall jointly and severally pay the Agent's standard
charges for, and the fees and expenses of, the Agent personnel used by the Agent
for reviewing the books and records of the Companies and for verifying, testing,
protecting, safeguarding, preserving or disposing of all or any part of the
Collateral provided, however, that the foregoing shall not be payable until the
occurrence of an Event of Default if the Companies are paying a Collateral
Management Fee.
10. Each of the Companies hereby authorizes the Agent to charge its
Revolving Loan Account with the Agent with the amount of all payments due
hereunder as such payments become due. Each of the Companies confirms that any
charges which the Agent may so make to the Companies' account as herein provided
will be made as an accommodation to the Companies and solely at the Agent's
discretion. The Agent may in its sole and absolute discretion allocate any of
the above fees and/or any other payments due under this Financing Agreement to
the Companies' respective Revolving Loan Accounts in any proportion that the
Agent may decide.
SECTION 8. POWERS
Each of the Companies hereby constitutes the Agent in behalf of the
Lenders or any person or agent the Agent may designate as its attorney-in-fact,
at the Companies' cost and expense, to exercise all of the following powers,
which being coupled with an interest, shall be irrevocable until all of the
Companies' Obligations to the Agent and the Lenders have been paid in full:
(a) To receive, take, endorse, sign, assign and deliver, all in the
name of the Agent or the Companies, any and all checks, notes, drafts, and other
documents or instruments relating to the Collateral;
(b) To receive, open and dispose of all mail addressed to the Companies
and to notify postal authorities to change the address for delivery thereof to
such address as the Agent may designate;
(c) To request from customers indebted on Accounts at any time, in the
name of the Agent or the Companies or that of the Agent's designee, information
concerning the amounts owing on the Accounts;
(d) To transmit to customers indebted on Accounts notice of the Agent's
interest therein and to notify customers indebted on Accounts to make payment
directly to the Agent for the Companies' account; and
(e) To take or bring, in the name of the Agent or the Companies, all
steps, actions, suits or proceedings deemed by the Agent necessary or desirable
to enforce or effect collection of the Accounts.
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Notwithstanding anything hereinabove contained to the contrary, the
powers set forth in (b), (d) and (e) above may only be exercised after the
occurrence of an Event of Default and until such time as such Event of Default
is waived in writing by the Agent or cured to the Agent's satisfaction. In
addition, the powers set forth in (c) above will only be exercised in the name
of the Companies or a certified public accountant designated by the Agent prior
to the occurrence of such Event of Default.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES
1. Notwithstanding anything hereinabove to the contrary, the Lenders
acting through the Agent may terminate this Financing Agreement immediately upon
the occurrence of any of the following (herein "Events of Default"):
a) cessation of the business of the Companies, or either one of
them, or the calling of a meeting of the creditors of the
Companies, or either one of them, for purposes of compromising
their debts and obligations;
b) the failure of the Companies, or either one of them, to
generally meet debts as they mature;
c) the commencement by or against the Companies, or either one of
them, of any bankruptcy, insolvency, arrangement,
reorganization, receivership or similar proceedings under any
federal or state law, provided that in the event of any
involuntary proceeding commenced against the Companies such
proceeding is not dismissed or discharged within thirty (30)
days after commencement thereof;
d) breach in any material respect by the Companies, or either one
of them, of any warranty, representation or covenant contained
herein (other than those referred to in sub-paragraph e below)
or in any other written agreement between the Companies and
the Agent and/or the Lenders, provided that such breach by the
Companies of any of the warranties, representations or
covenants referred in this clause d shall not be deemed to be
an Event of Default unless and until such breach shall remain
unremedied to the Agent's satisfaction for a period of thirty
(30) days from the date of such breach;
e) breach in any material respect by the Companies, or either one
of them, of any warranty, representation or covenant of
Section 3, Paragraphs 3 (other than the third sentence of
paragraph 3) and 4; Section 5, Paragraph 3; Section 6,
Paragraphs 1,3, 4,5, and 7 through 15;
f) failure of the Companies to pay any of the Obligations within
five (5) Business Days of the due date thereof, provided that
nothing contained herein shall prohibit the Agent from
charging such amounts to the Companies' Revolving Loan
Accounts on the due date thereof (which charge shall
constitute a waiver of any failure to pay the Obligation so
charged), provided further that in the event the Agent elects
not to charge any such Obligations to the Companies' Revolving
Loan Accounts, the Companies shall not be in default hereunder
until five (5) Business Days after notice from the Agent of
such election;
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g) the Companies, or either one of them, shall i) engage in any
"prohibited transaction" as defined in ERISA, ii) have any
"accumulated funding deficiency" as defined in ERISA, iii)
have any Reportable Event as defined in ERISA, iv) terminate
any Plan, as defined in ERISA or v) be engaged in any
proceeding in which the Pension Benefit Guaranty Corporation
shall seek appointment, or is appointed, as trustee or
administrator of any Plan, as defined in ERISA, and with
respect to this sub-paragraph g such event or condition x)
remains uncured for a period of thirty (30) days from date of
occurrence and y) could, in the reasonable opinion of the
Agent, subject the Companies to any tax, penalty or other
liability material to the business, operations or financial
condition of the Companies;
h) without the prior written consent of the Agent, the Companies
shall x) amend or modify the Subordinated Debt, or y) make any
payment on account of the Subordinated Debt except as
permitted in the Subordination Agreement;
i) the occurrence of any default or event of default (after
giving effect to any applicable grace or cure periods) under
any instrument or agreement evidencing (x) Subordinated Debt
or (y) any other Indebtedness of the Companies having a
principal amount in excess of $250,000; or
j) the stock presently held (directly or indirectly) by URGI in
URI is transferred.
2. Upon the occurrence of a Default and/or an Event of Default, the
Agent may (at its option) and shall at the direction of the Required Lenders
declare that, all loans, advances and extensions of credit provided for in
Sections 3 and 4 of this Financing Agreement shall be thereafter in the Agent's
sole discretion and the obligation of the Agent and/or the Lenders to make
Revolving Loans, open Letters of Credit, shall cease unless such Default or
Event of Default is waived in writing by the Agent or cured to the Agent's
satisfaction, and upon the occurrence of an Event of Default the Agent may (at
its option) and shall at the direction of the Required Lenders declare that: I)
all Obligations shall become immediately due and payable; ii) the Default Rate
of Interest shall be charged on all then outstanding or thereafter incurred
Obligations in lieu of the interest provided for in Section 7 of this Financing
Agreement provided that respect to this clause "ii)" a) the Agent has given the
Companies written notice of the Event of Default, provided, however, that no
notice is required if the Event of Default is the Event listed in paragraph 1(c)
of this Section 9 and b) the Companies have failed to cure the Event of Default
within ten (10) days after x) the Agent deposited such notice in the United
States mail or y) the occurrence of the Event of Default listed in paragraph
1(c) of this Section 7; and III) this Financing Agreement shall immediately
terminate upon notice to the Companies, provided, however, that no notice of
termination is required if the Event of Default is the Event listed in paragraph
1(c) of this Section 9. The exercise of any option is not exclusive of any other
option which may be exercised at any time by the Agent and/or the Lenders.
3. Immediately upon the occurrence of any Event of Default, the Agent
may and at the request of the Required Lenders shall to the extent permitted by
law: (a) remove from any premises where same may be located any and all
documents, instruments, files and records, and any receptacles or cabinets
containing same, relating to the Accounts, or the Agent may use, at the
Companies' expense, such of the Companies' personnel, computer software,
supplies or space at the Companies'
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places of business or otherwise, as may be necessary to properly administer and
control the Accounts or the handling of collections and realizations thereon;
(b) bring suit, in the name of the Companies or the Agent in behalf of the
Lenders, and generally shall have all other rights respecting said Accounts,
including without limitation the right to: accelerate or extend the time of
payment, settle, compromise, release in whole or in part any amounts owing on
any Accounts and issue credits in the name of the Companies or the Agent; (c)
sell, assign and deliver the Collateral and any returned, reclaimed or
repossessed merchandise, with or without advertisement, at public or private
sale, for cash, on credit or otherwise, at the Agent's sole option and
discretion, and the Agent may bid or become a purchaser at any such sale, free
from any right of redemption, which right is hereby expressly waived by the
Companies; (d) foreclose the security interests created herein by any available
judicial procedure, or to take possession of any or all of the Collateral
without judicial process, and to enter any premises where any Collateral may be
located for the purpose of taking possession of or removing the same and (e)
exercise any other rights and remedies provided in law, in equity, by contract
or otherwise. The Agent shall have the right, without notice or advertisement,
to sell, lease, or otherwise dispose of all or any part of the Collateral
whether in its then condition or after further preparation or processing, in the
name of the Companies or the Agent, or in the name of such other party as the
Agent may designate, either at public or private sale or at any broker's board,
in lots or in bulk, for cash or for credit, with or without warranties or
representations, and upon such other terms and conditions as the Agent in its
sole discretion may deem advisable, and the Agent shall have the right to
purchase at any such sale. If any Collateral shall require rebuilding,
repairing, maintenance or preparation, the Agent shall have the right, at its
option, to do such of the aforesaid as is necessary, for the purpose of putting
the Collateral in such saleable form as the Agent shall deem appropriate. The
Companies agree, at the request of the Agent, to assemble the Collateral and to
make it available to the Agent at premises of the Companies or elsewhere and to
make available to the Agent the premises and facilities of the Companies for the
purpose of the Agent's taking possession of, removing or putting the Collateral
in saleable form. However, if notice of intended disposition of any Collateral
is required by law, it is agreed that ten (10) days notice shall constitute
reasonable notification and full compliance with the law. The net cash proceeds
resulting from the Agent's exercise of any of the foregoing rights, (after
deducting all charges, costs and expenses, including reasonable attorneys' fees)
shall be applied by the Agent to the payment of the Companies' Obligations,
whether due or to become due, in such order as the Agent may elect, and the
Companies shall remain liable to the Agent and the Lenders for any deficiencies,
and the Agent and the Lenders in turn agree to remit to the Companies or their
successors or assigns, any surplus resulting therefrom. The enumeration of the
foregoing rights is not intended to be exhaustive and the exercise of any right
shall not preclude the exercise of any other rights, all of which shall be
cumulative.
SECTION 10. TERMINATION
Except as otherwise permitted herein, the Companies or any Lender
acting through the Agent may terminate this Financing Agreement and the Line of
Credit only as of the initial or any subsequent Anniversary Date and then only
by giving the other at least sixty (60) days prior written notice of
termination. Notwithstanding the foregoing the Lenders acting through the Agent
may terminate the Financing Agreement immediately upon the occurrence of an
Event of Default,
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provided, however, that if the Event of Default is an event listed in paragraph
1(c) of Section 9 of this Financing Agreement, the Agent and the Lenders may
regard the Financing Agreement as terminated and notice to that effect is not
required. This Financing Agreement, unless terminated as herein provided, shall
automatically continue from Anniversary Date to Anniversary Date.
Notwithstanding the foregoing, the Companies may terminate this Financing
Agreement and the Line of Credit prior to any applicable Anniversary Date upon
sixty (60) days' prior written notice to the Agent and the Lenders, provided
that the Companies pay to the Agent for the benefit of the Lenders immediately
on demand, an Early Termination Fee, if applicable. Termination by any of the
Companies shall constitute termination with respect to all Companies. All
Obligations shall become due and payable as of any termination hereunder or
under Section 9 hereof and, pending a final accounting, the Agent and the
Lenders may withhold any balances in the Companies' accounts (unless supplied
with an indemnity satisfactory to the Agent) to cover all of the Companies'
Obligations, whether absolute or contingent. All of the Agent's and Lenders'
rights, liens and security interests shall continue after any termination until
all Obligations have been paid and satisfied in full.
SECTION 11. MISCELLANEOUS
1. Each of the Companies hereby waives diligence, demand, presentment
and protest and any notices thereof as well as notice of nonpayment. No delay or
omission of the Agent or the Lenders or the Companies to exercise any right or
remedy hereunder, whether before or after the happening of any Event of Default,
shall impair any such right or shall operate as a waiver thereof or as a waiver
of any such Event of Default. No single or partial exercise by the Agent or the
Lenders of any right or remedy precludes any other or further exercise thereof,
or precludes any other right or remedy.
2. This Financing Agreement and the documents executed and delivered in
connection therewith constitute the entire agreement between the Companies and
the Agent and the Lenders; supersede any prior agreements; and shall bind and
benefit the Companies and the Agent and their respective successors and assigns.
This Financing Agreement can be amended, modified or changed only by a writing
signed by the Companies, the Agent and the Required Lenders (unless the consent
of all Lenders is required pursuant to Section 13, Paragraph 10 hereof).
3. In no event shall the Companies, upon demand by the Agent and/or the
Lenders for payment of any indebtedness relating hereto, by acceleration of the
maturity thereof, or otherwise, be obligated to pay interest and fees in excess
of the amount permitted by law. Regardless of any provision herein or in any
agreement made in connection herewith, the Agent and/or the Lenders shall never
be entitled to receive, charge or apply, as interest on any indebtedness
relating hereto, any amount in excess of the maximum amount of interest
permissible under applicable law. If the Agent and/or the Lenders ever receive,
collect or apply any such excess, it shall be deemed a partial repayment of
principal and treated as such; and if principal is paid in full, any remaining
excess shall be refunded to the Companies. This paragraph shall control every
other provision hereof and of any other agreement made in connection herewith.
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<PAGE> 37
4. If any provision hereof or of any other agreement made in connection
herewith is held to be illegal or unenforceable, such provision shall be fully
severable, and the remaining provisions of the applicable agreement shall remain
in full force and effect and shall not be affected by such provision's
severance. Furthermore, in lieu of any such provision, there shall be added
automatically as a part of the applicable agreement a legal and enforceable
provision as similar in terms to the severed provision as may be possible.
5. THE COMPANIES, THE AGENT AND THE LENDERS EACH HEREBY WAIVE ANY RIGHT
TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS FINANCING
AGREEMENT. EACH OF THE COMPANIES HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF
PROCESS AND CONSENTS TO SERVICE OF PROCESS BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED.
6. Except as otherwise herein provided, any notice or other
communication required hereunder shall be in writing, and shall be deemed to
have been validly served, given or delivered when hand delivered or sent by
telegram, telex or facsimile transmission, or three days after deposit in the
United State mails, with proper first class postage prepaid and addressed to the
party to be notified as follows:
(A) if to the Agent, at:
The CIT Group/Business Credit, Inc.
1211 Avenue of the Americas
New York, NY 10036
Attn: Robert Smith, Senior Vice President and Regional Manager
Fax No.: (212) 536-1295
(B) if to any other party becoming a Lender hereunder
to the address specified in the Assignment and
Transfer Agreement.
(C) if to the Companies at:
365 West Passaic Street
Rochelle Park, NJ 07662
Attn: George Remeta, Vice Chairman and CFO
Fax No.: (201) 845-6309
or to such other address as any party may designate for itself by like notice.
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<PAGE> 38
7. THE VALIDITY, INTERPRETATION AND ENFORCEMENT OF THIS FINANCING
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 12. AGREEMENT BETWEEN THE LENDERS
1. a) The Agent, for the account of the Lenders, shall disburse
all loans and advances to the Companies and shall handle all collections of
Collateral and repayment of Obligations. It is understood that for purposes of
advances to the Companies and for purposes of this Section 12 the Agent is using
the funds of the Agent.
b) Unless the Agent shall have been notified in writing by any
Lender prior to any advance to the Companies that such Lender will not make the
amount which would constitute its share of the borrowing on such date available
to the Agent, the Agent may assume that such Lender shall make such amount
available to the Agent on a Settlement Date, and the Agent may, in reliance upon
such assumption, make available to the Companies a corresponding amount. A
certificate of the Agent submitted to any Lender with respect to any amount
owing under this subsection shall be conclusive, absent manifest error. If such
Lender's share of such borrowing is not in fact made available to the Agent by
such Lender on the Settlement Date, the Agent shall be entitled to recover such
amount with interest thereon at the rate per annum applicable to Revolving Loans
hereunder, on demand, from the Companies without prejudice to any rights which
the Agent may have against such Lender hereunder. Nothing contained in this
subsection shall relieve any Lender which has failed to make available its
ratable portion of any borrowing hereunder from its obligation to do so in
accordance with the terms hereof. Nothing contained herein shall be deemed to
obligate the Agent to make available to the Companies the full amount of a
requested advance when the Agent has any notice (written or otherwise) that any
of the Lenders will not advance its ratable portion thereof.
2. On the Settlement Date, the Agent and the Lenders shall each remit
to the other, in immediately available funds, all amounts necessary so as to
ensure that, as of the Settlement Date, the Lenders shall have their
proportionate share of all outstanding Obligations.
3. The Agent shall forward to each Lender, at the end of each month, a
copy of the account statement rendered by the Agent to the Companies.
4. The Agent shall, after receipt of any interest and fees earned under
this Financing Agreement, promptly remit to the Lenders: a) their pro rata
portion of all fees, provided, however, that the Lenders (other than CITBC in
its role as the Agent) shall x) not share in the Collateral Management Fee or
Documentation Fees or the fees provided for in Section 7, Paragraph 9; and y)
receive their share of the Loan Facility Fee in accordance with their respective
agreements with the Agent; and b) interest computed at the rate and as provided
for in Section 7 of this Financing Agreement on all outstanding amounts advanced
by the Lenders on each Settlement Date, prior to adjustment, that are subsequent
to the last remittance by the Agent to the Lenders of the Companies' interest.
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<PAGE> 39
5. (a) The Companies acknowledge that the Lenders may sell
participation in the loans and extensions of credit made and to be made to the
Companies hereunder. The Companies further acknowledge that in doing so, the
Lenders may grant to such participants certain rights which would require the
participant's consent to certain waivers, amendments and other actions with
respect to the provisions of this Financing Agreement, provided that the consent
of any such participant shall not be required except for matters requiring the
consent of all Lenders hereunder as set forth in Section 13, Paragraph 10
hereof.
(b) The Companies authorize each Lender to disclose to any
participant or purchasing lender (each, a "Transferee") and any prospective
Transferee any and all financial information in such Lender's possession
concerning the Companies and their affiliates which has been delivered to such
Lender by or on behalf of the Companies pursuant to this Agreement or which has
been delivered to such Lender by or on behalf of the Companies in connection
with such Lender's credit evaluation of the Companies and their affiliates prior
to entering into this Agreement, provided that (i) such Transferee agrees to
hold such information confidential and make no disclosure thereof except as may
be required by law or pursuant to the request of any governmental agency having
jurisdiction over Transferee and (ii) no such disclosure may be made to a
competitor of the Companies.
6. The Companies hereby agree that each Lender is solely responsible
for its portion of the Line of Credit and that neither the Agent nor any Lender
shall be responsible for, nor assume any obligations for the failure of any
Lender to make available its portion of the Line of Credit. Further, should any
Lender refuse to make available its portion of the Line of Credit, then the
other Lender may, but without obligation to do so, increase, unilaterally, its
portion of the Line of Credit in which event the Companies are so obligated to
that other Lender.
7. In the event that the Agent, the Lenders or any one of them is sued
or threatened with suit by the Companies or any one of them, or by any receiver,
trustee, creditor or any committee of creditors on account of any preference,
voidable transfer or lender liability issue, alleged to have occurred or been
received as a result of, or during the transactions contemplated under this
Financing Agreement, then in such event any money paid in satisfaction or
compromise of such suit, action, claim or demand and any expenses, costs and
attorneys' fees paid or incurred in connection therewith, whether by the Agent,
the Lenders or any one of them, shall be shared proportionately by the Lenders.
In addition, any costs, expenses, fees or disbursements incurred by outside
agencies or attorneys retained by the Agent to effect collection or enforcement
of any rights in the Collateral, including enforcing, preserving or maintaining
rights under this Financing Agreement shall be shared proportionately between
and among the Lenders to the extent not reimbursed by the Companies or from the
proceeds of Collateral. The provisions of this paragraph shall not apply to any
suits, actions, proceedings or claims that x) predate the date of this Financing
Agreement or y) are based on transactions, actions or omissions that predate the
date of this Financing Agreement.
8. Each of the Lenders agrees with each other Lender that any money or
assets of the Companies held or received by such Lender, no matter how or when
received, shall be applied to the reduction of the Obligations (to the extent
permitted hereunder) after x) the occurrence of an Event of
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<PAGE> 40
Default and y) the election by the Required Lenders to accelerate the
Obligations. In addition, the Companies authorize, and the Lenders shall have
the right, without notice, upon any amount becoming due and payable hereunder,
to set-off and apply against any and all property held by, or in the possession
of such Lender the Obligations due such Lenders.
9. CITBC shall have the right at any time to assign to one or more
commercial banks, commercial finance lenders or other financial institutions all
or a portion of its rights and obligations under this Financing Agreement
(including, without limitation, its obligations under the Line of Credit, the
Revolving Loans and its rights and obligations with respect to Letters of
Credit), provided that CITBC agrees with the Companies that prior to the
occurrence of an Event of Default it shall retain for its own account at least
51% of the obligations under this Financing Agreement. Upon execution of an
Assignment and Transfer Agreement, (i) the assignee thereunder shall be a party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such assignment, have the rights and obligations of
CITBC as the case may be hereunder and (ii) CITBC shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
assignment, relinquish its rights and be released from its obligations under
this Financing Agreement. The Companies shall, if necessary, execute any
documents reasonably required to effectuate the assignments. No other Lender may
assign its interest in the loans and advances and extensions of credit hereunder
without the prior written consent of the Agent.
SECTION 13. AGENCY
1. Each Lender hereby irrevocably designates and appoints CITBC as the
Agent for the Lenders under this Financing Agreement and any ancillary loan
documents and irrevocably authorizes CITBC as the Agent for such Lender, to take
such action on its behalf under the provisions of this Financing Agreement and
all ancillary documents and to exercise such powers and perform such duties as
are expressly delegated to the Agent by the terms of this Financing Agreement
and all ancillary documents together with such other powers as are reasonably
incidental thereto. Notwithstanding any provision to the contrary elsewhere in
this Financing Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Lender and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into
Financing Agreement and the ancillary documents or otherwise exist against the
Agent.
2. The Agent may execute any of its duties under this Financing
Agreement and all ancillary documents by or through agents or attorneys-in-fact
and shall be entitled to the advice of counsel concerning all matters pertaining
to such duties.
3. Neither the Agent nor any of its officers, directors, employees,
agents, or attorneys-in-fact shall be (i) liable to any Lender for any action
lawfully taken or omitted to be taken by it or such person under or in
connection with this Financing Agreement and all ancillary documents (except for
its or such person's own gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Companies
40
<PAGE> 41
or any officer thereof contained in this Financing Agreement and all ancillary
documents or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Financing Agreement and all ancillary documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Financing
Agreement and all ancillary documents or for any failure of the Companies to
perform their obligations thereunder. The Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Financing Agreement and all ancillary documents or to inspect the properties,
books or records of the Companies.
4. The Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper person or
persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Companies), independent accountants and other experts
selected by the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Financing Agreement and all ancillary documents
unless it shall first receive such advice or concurrence of the Lenders, or the
Required Lenders, as the case may be, as it deems appropriate or it shall first
be indemnified to its satisfaction by the Lenders against any and all liability
and expense which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Financing Agreement and all ancillary
documents in accordance with a request of the Lenders, or the Required Lenders,
as the case may be, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the Lenders.
5. The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default hereunder unless the Agent has
received notice from a Lender or the Companies describing such Default or Event
of Default. In the event that the Agent receives such a notice, the Agent shall
promptly give notice thereof to the Lenders. The Agent shall take such action
with respect to such Default or Event of Default as shall be reasonably directed
by the Lenders, or Required Lenders, as the case may be; provided that unless
and until the Agent shall have received such direction, the Agent may in the
interim (but shall not be obligated to) take such action, or refrain from taking
such action, with respect to such Default or Event of Default as it shall deem
advisable and in the best interests of the Lenders.
6. Each Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents or attorneys-in-fact has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Companies shall be deemed to
constitute any representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own appraisal of and investigation into
the business, operations, property, financial and other condition and
creditworthiness of the Companies and made its own decision to enter into this
Financing
41
<PAGE> 42
Agreement. Each Lender also represents that it will, independently and without
reliance upon the Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
the Financing Agreement and to make such investigation as it deems necessary to
inform itself as to the business, operations, property, financial and other
condition or creditworthiness of the Companies. The Agent, however, shall
provide the Lenders with copies of all financial statements, projections and
business plans which come into the possession of the Agent or any of its
officers, employees, agents or attorneys-in-fact.
7. The Lenders agree to indemnify the Agent in its capacity as such (to
the extent not reimbursed by the Companies and without limiting the obligation
of the Companies to do so), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever (including negligence on the
part of the Agent) which may at any time be imposed on, incurred by or asserted
against the Agent in anyway relating to or arising out of this Financing
Agreement or any ancillary documents or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any action taken
or omitted by the Agent under or in connection with any of the foregoing;
provided that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Agent's gross
negligence or willful misconduct. The agreements in this paragraph shall survive
the payment of the obligations.
8. The Agent may make loans to, and generally engage in any kind of
business with the Companies as though the Agent were not the Agent hereunder.
With respect to its loans made or renewed by it or loan obligations hereunder as
Lender, the Agent shall have the same rights and powers, duties and liabilities
under this Financing Agreement as any Lender and may exercise the same as though
it was not the Agent and the terms "Lender" and "Lenders" shall include the
Agent in its individual capacities.
9. The Agent may resign as the Agent upon 30 days' notice to the
Lenders and such resignation shall be effective upon the appointment of a
successor Agent. If the Agent shall resign as Agent, then the Lenders shall
appoint a successor Agent for the Lenders whereupon such successor Agent shall
succeed to the rights, powers and duties of the Agent and the term "the Agent"
shall mean such successor Agent effective upon its appointment, and the former
Agent's rights, powers and duties as the Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Financing Agreement. After any retiring Agent's resignation
hereunder as the Agent the provisions of this Section 13 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was the
Agent.
10. Notwithstanding anything contained in this Financing Agreement to
the contrary, the Agent will not, without the prior written consent of all
Lenders: a) amend the Financing Agreement to v) increase the Line of Credit; w)
reduce the interest rates; x) reduce or waive i) any fees in which the Lenders
share hereunder; or ii) the repayment of any Obligations due the Lenders; y)
extend the
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<PAGE> 43
maturity of the Obligations; or z) alter or amend 1) this Paragraph 10 or 2) the
definitions of Eligible Inventory, Borrowing Base, Collateral or Required
Lenders, or the Agent's criteria for determining compliance with such
definitions of eligibility; b) release Collateral in bulk without a
corresponding reduction in the Obligations to the Lenders, or c) intentionally
make any Revolving Loan or assist in opening any Letter of Credit hereunder if
after giving effect thereto the total of Revolving Loans and Letters of Credit
hereunder for the Companies would exceed one hundred and ten percent (110%) of
the maximum amount available under Sections 3 and 4 hereof. In all other
respects the Agent is authorized to take such actions or fail to take such
actions if the Agent, in its reasonable discretion, deems such to be advisable
and in the best interest of the Lenders, including, but not limited to, the
making of an overadvance or the termination of the Financing Agreement upon the
occurrence of an Event of Default unless it is specifically instructed to the
contrary by the Required Lenders.
11. In the event any Lender's consent is required pursuant to the
provisions of this Financing Agreement and such Lender does not respond to any
request by the Agent for such consent within 10 days after such request is made
to such Lender, such failure to respond shall be deemed a consent. In addition,
in the event that any Lender declines to give its consent to any such request,
it is hereby mutually agreed that the Agent and/or any other Lender shall have
the right (but not the obligation) to purchase such Lender's share of the Loans
for the full amount thereof together with accrued interest thereon to the date
of such purchase.
12. Each Lender agrees that notwithstanding the provisions of Section
10 of this Financing Agreement any Lender may terminate this Financing Agreement
and the Line of Credit only as of the initial or any subsequent Anniversary Date
and then only by giving the Agent 90 days prior written notice thereof. Within
30 days after receipt of any such termination notice, the Agent shall, at its
option, either (i) give notice of termination to the Companies hereunder or (ii)
purchase the Lender's share of the Obligations hereunder for the full amount
thereof plus accrued interest thereon. Unless so terminated this Financing
Agreement and the Line of Credit shall be automatically extended from
Anniversary Date to Anniversary Date.
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<PAGE> 44
IN WITNESS WHEREOF, the parties hereto have caused this Financing
Agreement to be executed and delivered by their proper and duly authorized
officers as of the date set forth above. This Financing Agreement shall take
effect as of the date set forth above after being accepted below by an officer
of the Agent and the Lenders after which, the Agent shall forward to the
Companies a fully executed original for their files.
Very truly yours,
THE CIT GROUP/BUSINESS
CREDIT, INC., AS AGENT AND LENDER
By PATRICK LEE
------------------------------
Vice President
Read and Agreed to:
UNITED RETAIL GROUP, INC.
By: GEORGE R. REMETA
------------------------------
Title: Vice Chairman
UNITED RETAIL INCORPORATED
By: KENNETH P. CARROLL
------------------------------
Title: President
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<PAGE> 45
EXHIBIT A
REVOLVING LOAN PROMISSORY NOTE
__________________, 1997
$___________
FOR VALUE RECEIVED, the undersigned, __________________, a Delaware corporation
(the "Company"), promises to pay to the order of THE CIT GROUP/BUSINESS CREDIT,
INC. (herein "CITBC") as Agent for the Lenders under a certain Financing
Agreement of even date herewith between CITBC as Agent and Lender, other Lenders
parties thereto and the Company (herein the "Financing Agreement") at its office
located at 1211 Avenue of the Americas, New York, NY 10036, in lawful money of
the United States of America and in immediately available funds, the principal
amount of Forty Million Dollars ($40,000,000), or such other principal amount
advanced pursuant to Section 3, Paragraph 1 of the Financing Agreement. The
balance of such Revolving Loan will fluctuate as a result of the daily
application of the proceeds of collections of the Accounts and the making of
additional Revolving Loans as described in Section 3. The Revolving Loans may be
borrowed, repaid and reborrowed by the Company. A final payment in an amount
equal to the outstanding aggregate balance of principal and interest remaining
unpaid, if any, under this Revolving Loan Promissory Note as shown on the books
and records of the Agent shall be due and payable upon any termination of the
Financing Agreement.
All capitalized terms used herein shall have the meaning provided therefor in
the Financing Agreement, unless otherwise defined herein.
The Company further promises to pay interest at such office, in like money, on
the unpaid principal amount owing hereunder from time to time from the date
hereof on the dates and at the rates specified in Section 7, Paragraph 1 of the
Financing Agreement.
If any payment on this Revolving Loan Promissory Note becomes due and payable on
a day other than a Business Day, the maturity thereof shall be extended to the
next succeeding Business Day, and with respect to payments of principal,
interest thereon shall be payable at the then applicable rate during such
extension.
This Revolving Loan Promissory Note is the Revolving Loan Promissory Note
referred to in the Financing Agreement, and is subject to, and entitled to, all
provisions and benefits thereof and is subject to optional and mandatory
prepayment, in whole or in part, as provided therein.
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<PAGE> 46
The date and amount of the advance(s) made hereunder may be recorded on the
schedule which is attached hereto and hereby made part of this Note or the
separate ledgers maintained by the Agent, provided that any failure to record
any such information on such schedule shall not in any manner affect the
obligation of the Company to make payments of principal and interest in
accordance with the terms of this Revolving Loan Promissory Note. The aggregate
unpaid principal amount of all advances made pursuant hereto may be set forth in
the balance column on said schedule or such ledgers maintained by the Agent. All
such advances, whether or not so recorded, shall be due as part of this
Revolving Loan Promissory Note.
The Company confirms that any amount received by or paid to the Agent in
connection with the Financing Agreement and/or any balances standing to its
credit on any of its accounts on the Agent's books under the Financing Agreement
may in accordance with the terms of the Financing Agreement be applied in
reduction of this Revolving Loan Promissory Note, but no balance or amounts
shall be deemed to effect payment in whole or in part of this Revolving Loan
Promissory Note unless the Agent shall have actually charged such account or
accounts for the purposes of such reduction or payment of this Revolving Loan
Promissory Note.
Upon the occurrence of any one or more of the Events of Default specified in the
Financing Agreement or upon termination of the Financing Agreement, all amounts
then remaining unpaid on this Revolving Loan Promissory Note may become, or be
declared to be, immediately due and payable as provided in the Financing
Agreement.
The Company and any and all guarantors, sureties and endorsers jointly and
severally waive grace, demand, presentment for payment, notice of dishonor or
default, notice of intent to accelerate, notice of acceleration, protest and
diligence in collecting.
This Revolving Loan Promissory Note shall be governed by, and construed in
accordance with, the laws of the state of New York and the applicable federal
laws of the United States.
_________________________
By:_________________
Title:
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<PAGE> 47
SCHEDULE TO GRID
<TABLE>
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</TABLE>
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EXHIBIT B - FORM OF CREDIT CARD LETTER
_______________, 199__
[Bank Name
and Address]
Attn:
Dear Sirs:
Per this letter, please be advised that ____________________ (the "Company") is
entering into a new financing arrangement with The CIT Group/Business Credit,
Inc. ("CITBC"), on or about the date hereof. We have advised CITBC that you are
our remitter for all Mastercard, Visa, Discover and American Express credit card
receipts. The Company and CITBC wish to confirm the remittance bank for all
credit card remittances going forward after the date hereof.
We request that you transfer, in Federal Funds or ACH, all credit card
remittances to:
Bank: ______________________________
ABA No.: ______________________________
Reference: For the account of _______________________
Account: ______________________________
Unless otherwise notified in writing by both an officer of the Company and of
CITBC, you cannot redirect the credit card remittance to any bank account other
than the account listed above.
Please acknowledge receipt of this letter and your confirmation and agreement
with its provisions by signing and returning the enclosed copy to my attention
for further transmittal to CITBC.
Sincerely,
[COMPANY]
By: __________________________
Title: Chief Financial Officer
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<PAGE> 49
Acknowledged and Agreed to as of
this _____ day of _________________, 199__
[BANK NAME]
By: _______________________________
Title:
Acknowledged this _________ day
of ___________________, 199__
THE CIT GROUP/BUSINESS
CREDIT, INC.
By: _______________________________
Title:
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<PAGE> 50
EXHIBIT C - ASSIGNMENT AND TRANSFER AGREEMENT
Dated: ______________, 199__
Reference is made to the Financing Agreement dated as of ______________, ___,
1997 (as amended, modified, supplemented and in effect from time to time, the
"Financing Agreement"), among United Retail Group, Inc., a Delaware corporation,
United Retail Incorporated a Delaware corporation (collectively the "Company"),
the Lenders named therein, and The CIT Group/Business Credit, Inc., as Agent
(the "Agent"). Capitalized terms used herein and not otherwise defined shall
have the meanings assigned to such terms in the Financing Agreement. This
Assignment and Transfer Agreement, between the Assignor (as defined and set
forth on Schedule 1 hereto and made a part hereof) and the Assignee (as defined
and set forth on Schedule 1 hereto and made a part hereof) is dated as of
Effective Date (as set forth on Schedule 1 hereto and made a part hereof).
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date, an undivided interest (the "Assigned Interest") in and to all
the Assignor's rights and obligations under the Financing Agreement respecting
those, and only those, financing facilities contained in the Financing Agreement
as are set forth on Schedule 1 (collectively, the "Assigned Facilities" and
individually, an "Assigned Facility"), in a principal amount for each Assigned
Facility as set forth on Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Financing Agreement or any other instrument,
document or agreement executed in conjunction therewith (collectively the
"Ancillary Documents") or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Financing Agreement, any Collateral
thereunder or any of the Ancillary Documents furnished pursuant thereto, other
than that it is the legal and beneficial owner of the interest being assigned by
it hereunder and that such interest is free and clear of any adverse claim and
(ii) makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Company or any guarantor or the
performance or observance by the Company or any guarantor of any of its
respective obligations under the Financing Agreement or any of the Ancillary
Documents furnished pursuant thereto.
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Transfer Agreement; (ii) confirms
that it has received a copy of the Financing Agreement, together with the copies
of the most recent financial statements of the Company, and such other documents
and information as it has deemed appropriate to make its own credit analysis;
(iii) agrees that it will, independently and without reliance upon the Agent,
the Assignor or any other Lender and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under the Financing Agreement; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to
50
<PAGE> 51
exercise such powers under the Financing Agreement as are delegated to the Agent
by the terms thereof, together with such powers as are reasonably incidental
thereto; (v) agrees that it will be bound by the provisions of the Financing
Agreement and will perform in accordance with its terms all the obligations
which by the terms of the Financing Agreement are required to be performed by it
as Lender; and (vi) if the Assignee is organized under the laws of a
jurisdiction outside the United States, attaches the forms prescribed by the
Internal Revenue Service of the United States certifying as to the Assignee's
exemption from United States withholding taxes with respect to all payments to
be made to the Assignee under the Financing Agreement or such other documents as
are necessary to indicate that all such payments are subject to such tax at a
rate reduced by an applicable tax treaty.
4. Following the execution of this Assignment and Transfer Agreement,
such agreement will be delivered to the Agent for acceptance by it and the
Company, effective as of the Effective Date.
5. Upon such acceptance, from and after the Effective Date, the Agent
shall make all payments in respect of the assigned interest (including payments
of principal, interest, fees and other amounts) to the Assignee, whether such
amounts have accrued prior to the Effective Date or accrue subsequent to the
Effective Date. The Assignor and Assignee shall make all appropriate adjustments
in payments for periods prior to the Effective Date made by the Agent or with
respect to the making of this assignment directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party
to the Financing Agreement and, to the extent provided in this Assignment and
Transfer Agreement, have the rights and obligations of a Lender thereunder, and
(ii) the Assignor shall, to the extent provided in this Assignment and Transfer
Agreement, relinquish its rights and be released from its obligations under the
Financing Agreement.
7. THIS ASSIGNMENT AND TRANSFER AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed by their respective duly authorized officers on
Schedule 1 hereto.
51
<PAGE> 52
SCHEDULE 1 TO ASSIGNMENT AND TRANSFER AGREEMENT
Name of Assignor: ______________________
Name of Assignee: ______________________
Effective Date of Assignment: ________________, 199___
<TABLE>
<CAPTION>
Percentage Assigned of
Each Facility (Shown
as a percentage of
Principal aggregate original
Amount (or, principal amount
with respect to [or, with respect to
Letters of Credit Letters of Credit,
Assigned face amount) face amount]
Facilities Assigned of all Lenders)
- ---------- -------- ---------------
<S> <C> <C> <C>
Revolving Loans $ %
Letter of Credit
participation
interest $ %
Term Loans: $ %
Total $
</TABLE>
52
<PAGE> 53
Accepted:
THE CIT GROUP/BUSINESS
CREDIT, INC., AS AGENT
___________________________________
as Assignor
By:________________________________ By:________________________________
Title:_____________________________ Title:_____________________________
UNITED RETAIL GROUP, INC.
___________________________________
as Assignee
By:________________________________ By:________________________________
Title:_____________________________ Title:_____________________________
UNITED RETAIL INCORPORATED
By:________________________________
Title:_____________________________
53
<PAGE> 54
SCHEDULE 1 - EXISTING LIENS
<TABLE>
<CAPTION>
FILING FILING SECURED
LOCATION DEBTOR NUMBER DATE PARTY COLLATERAL
- -------- ------ ------ ---- ----- ----------
<S> <C> <C> <C> <C> <C>
</TABLE>
LIENS DISCLOSED BY LIEN SEARCHES CONDUCTED BY NATIONAL CODE CORPORATION AND
LISTED IN REPORT LETTERS DELIVERED TO THE AGENT ON OR PRIOR TO THE CLOSING DATE.
54
<PAGE> 55
SCHEDULE 2 - COLLATERAL LOCATIONS AND CHIEF EXECUTIVE OFFICE
UNITED RETAIL GROUP, INC.
CHIEF EXECUTIVE OFFICE
365 West Passaic Street
Rochelle Park, NJ 07662
COLLATERAL LOCATIONS
365 West Passaic Street
Rochelle Park, NJ 07662
UNITED RETAIL INCORPORATED
365 West Passaic Street
Rochelle Park, NJ 07662
COLLATERAL LOCATIONS
DISTRIBUTION CENTER
1 United Retail Plaza
Troy, Ohio 45373 (Miami County)
STORE LOCATIONS
SEE ATTACHED LIST
55
<PAGE> 56
SCHEDULE 3 - LETTER OF CREDIT FEES
PROPOSED DOCUMENTARY LETTER OF CREDIT CHARGES FOR UNITED RETAIL (BASED ON
CURRENT PRICING)
<TABLE>
<S> <C>
Presentation of L/C's $ 60.00 (plus $45.00 for each additional set of Bills of Lading)
Issuance* $ 40.00
Issuance Cable Fee $ 30.00
Amendment* $ 50.00
Over 4 Amendments $110.00
Amendment Cable Fee $ 10.00
Steamship Guaranty $ 70.00
Air Release $ 70.00
Advance B/L $ 30.00
Discrepancy $ 30.00
Unutilized $100.00
</TABLE>
*Assumes the Company is currently using Chase's Electronic Banking
System to communicate on Letters of Credit.
56
<PAGE> 1
EXHIBIT NO. 10.2
FIRST AMENDMENT TO THE UNITED RETAIL GROUP
SUPPLEMENTAL RETIREMENT SAVINGS PLAN
1) Section 7.5 of the United Retail Group Supplemental Retirement Savings Plan
("Plan") is hereby amended by adding the following language:
"A Participant may apply for and receive an early payment of any or all
vested amounts held in the Account of such Participant for any reason
whatsoever. Upon taking such distribution, the Participant will forfeit
to the Employer 10% of the amount that is distributed before payment is
made to the Participant.
The in-service distribution will be withdrawn from the Participant's
account balances on a pro rata basis. The in-service distribution net of
forfeiture is subject to all applicable social security and income
taxes. Following an in-service withdrawal, a participant's weekly
contributions will be suspended for a period of twelve months."
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-START> MAY-04-1997
<PERIOD-END> AUG-02-1997
<CASH> 19,806
<SECURITIES> 0
<RECEIVABLES> 1,351
<ALLOWANCES> 0
<INVENTORY> 38,655
<CURRENT-ASSETS> 67,017
<PP&E> 114,021
<DEPRECIATION> 62,784
<TOTAL-ASSETS> 125,610
<CURRENT-LIABILITIES> 28,348
<BONDS> 10,844
0
0
<COMMON> 13
<OTHER-SE> 78,962
<TOTAL-LIABILITY-AND-EQUITY> 125,610
<SALES> 93,076
<TOTAL-REVENUES> 93,076
<CGS> 72,728
<TOTAL-COSTS> 72,728
<OTHER-EXPENSES> 19,800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11
<INCOME-PRETAX> 537
<INCOME-TAX> 186
<INCOME-CONTINUING> 351
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 351
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
