<PAGE> 1
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended MARCH 31, 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 1-9635
------
BISCAYNE APPAREL, INC.
(Exact name of registrant as specified in its charter)
Florida 65-0200397
------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1373 Broad Street, Clifton, New Jersey 07013
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
(201) 473-3240
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all the
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
At March 31, 1997, there were 10,741,819 outstanding shares of the
registrant's Common Stock, $0.01 par value.
================================================================================
<PAGE> 2
BISCAYNE APPAREL, INC.
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996................... 2
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996............. 3
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1997 and 1996............. 4
Notes to Consolidated Financial Statements............. 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 6
PART II. OTHER INFORMATION
Item 1 - Legal Proceedings............................. 10
Item 6 - Exhibits and Reports on Form 8-K.............. 10
Signatures............................................. 11
</TABLE>
1
<PAGE> 3
BISCAYNE APPAREL, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ................................ $ 613 $ 327
Trade accounts receivable, less allowances
of $1,639 in 1997 and $2,018 in 1996 .................... 9,318 14,374
Inventories .............................................. 15,474 14,554
Federal income tax receivable ............................ 2,095 1,455
Prepaid expenses and other ............................... 2,121 2,261
-------- --------
Total current assets .................................. 29,621 32,971
Property, plant and equipment, less
accumulated depreciation of $2,048 in 1997
and $1,912 in 1996 ....................................... 2,844 2,864
Other assets, net .......................................... 642 275
-------- --------
$ 33,107 $ 36,110
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ......................................... $ 4,558 $ 4,024
Accrued liabilities ...................................... 4,514 6,184
Notes payable to banks ................................... 2,357 1,473
Current portion of long-term debt ........................ 2,000 1,750
-------- --------
Total current liabilities ............................. 13,429 13,431
Subordinated notes ......................................... 6,444 6,444
Long-term debt ............................................. 2,500 4,500
Other liabilities .......................................... 477 557
Commitments and contingencies .............................. -- --
Stockholders' Equity:
Common stock, $0.01 par value; 25,000,000 shares
authorized; 10,741,819 issued and outstanding
in 1997 and 10,741,748 in 1996 .......................... 107 107
Additional paid-in capital ................................. 26,483 26,311
Unearned stock award ....................................... (51) (68)
Accumulated deficit ........................................ (16,282) (15,172)
-------- --------
Total stockholders' equity ............................ 10,257 11,178
-------- --------
$ 33,107 $ 36,110
======== ========
</TABLE>
See accompanying notes.
2
<PAGE> 4
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------------------
1997 1996
---- ----
<S> <C> <C>
Net sales .................................................. $ 14,849 $ 16,236
Operating costs and expenses:
Cost of goods sold ....................................... 11,037 12,270
Selling, general and administrative ...................... 4,947 5,718
Restructuring charges .................................... -- 89
------------ ------------
Operating loss ............................................. (1,135) (1,841)
Other income and (expenses):
Interest and other expenses ............................... (555) (837)
Interest and other income ................................. 13 151
Gain on sale and equity in net income of investee ......... -- 123
------------ ------------
Loss before income tax benefit ............................. (1,677) (2,404)
Income tax benefit ......................................... (567) (991)
------------ ------------
Net loss ................................................... $ (1,110) $ (1,413)
============ ============
Net loss per common share .................................. $ (0.10) $ (0.13)
============ ============
Shares used in computing net loss per common share ......... 10,741,819 10,741,407
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 5
BISCAYNE APPAREL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1997 1996
---- ----
<S> <C> <C>
Operating activities:
Net loss ....................................................... $ (1,110) $ (1,413)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Gain on sale of assets ....................................... -- (11)
Gain on sale of equity investee .............................. -- (123)
Amortization of unearned stock award compensation ............ 17 17
Amortization of warrants costs ............................... 33 --
Depreciation expense ......................................... 144 158
Amortization expense ......................................... 78 69
Provision for losses and sales allowances on receivables ..... 635 1,268
(Increase) decrease in operating assets:
Trade accounts receivable ..................................... 4,421 5,867
Inventories ................................................... (920) 1,064
Prepaid expenses and other .................................... 140 (101)
Federal income tax receivable ................................. (640) (967)
Other assets .................................................. (306) (133)
Increase (decrease) in operating liabilities:
Accounts payable .............................................. 534 (51)
Accrued liabilities ........................................... (1,670) (1,226)
Other liabilities ............................................. (58) --
-------- --------
Net cash provided by operating activities ................... 1,298 4,418
Investing activities:
Proceeds from net sale of assets ............................... -- 11
Capital expenditures ........................................... (124) (145)
Proceeds on sale of Hartwell Sports, Inc. ...................... -- 1,750
-------- --------
Net cash (used in) provided by investing activities .......... (124) 1,616
Financing activities:
Payments under notes payable to banks .......................... (5,306) (13,100)
Borrowings under notes payable to banks ........................ 6,190 8,200
Principal payments under term loan ............................. (1,750) (1,250)
Principal payments of long-term debt and capital leases ........ (22) (20)
-------- --------
Net cash used in financing activities ........................ (888) (6,170)
Net increase (decrease) in cash and cash equivalents ............ 286 (136)
Cash and cash equivalents at beginning of year .................. 327 312
-------- --------
Cash and cash equivalents at end of period ...................... $ 613 $ 176
======== ========
Supplemental disclosure information:
Interest expense paid .......................................... $ 366 $ 763
Income taxes paid .............................................. $ -- $ 59
</TABLE>
See accompanying notes.
4
<PAGE> 6
BISCAYNE APPAREL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited consolidated financial statements,
which are for an interim period, do not include all
disclosures provided in the annual consolidated financial
statements. These unaudited consolidated financial statements
should be read in conjunction with the consolidated financial
statements and the footnotes with respect thereto, contained
in the Biscayne Apparel, Inc., ("Company") 1996 Annual Report
on Form 10-K.
The consolidated financial statements of the Company include the
accounts of the parent company, and its wholly-owned subsidiaries,
Biscayne Apparel International, Inc. ("BAII"), and M&L International,
Inc. ("M&L"), which was acquired in November 1994, and its wholly-owned
subsidiaries, Unidex Garments (Philippines), Inc., Watersports Garment
Manufacturing, Inc., Teri Outerwear Manufacturing, Inc., GES Sportswear
Manufacturing Corp. and M&L International (H.K.) Limited. As of March
1, 1996, Unidex, Watersports, Teri, and GES ceased operations due to
operating losses caused by labor increases and production
inefficiencies. BAII operates through two divisions, Andy Johns
Fashions International ("Andy Johns") and Varon, and its wholly-owned
subsidiaries, Mackintosh of New England Co., Mackintosh (U.K.) Limited,
and Amy Industries De Honduras, S.A. de C.V., which was organized
during 1995. All material intercompany balances and transactions have
been eliminated. Certain amounts included in prior period financial
statements have been reclassified to conform with the 1997
presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The most significant
assumptions and estimates relate to sales allowances, inventory
reserves, and recoverability of assets. Actual results could differ
from those estimates.
2. In the opinion of the Company, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the financial
statements.
3. The results of operations for the three month periods ended March 31,
1997 and 1996 are not necessarily indicative of the results to be
expected for the full year.
5
<PAGE> 7
4. Effective for the year ending December 31, 1997 and
thereafter, earnings per share will be computed in accordance
with Statement of Financial Accounting Standards No. 128
"Earnings Per Share" ("FAS No. 128"). Earlier adoption for
interim periods during 1997 is prohibited. However, pro-forma
application of FAS. No. 128 would not result in a difference
to earnings per share as currently computed under APB No. 15.
FAS No. 128 establishes the standards for computing basic earnings per
share (excluding dilution) and diluted earnings per share (reflecting
the dilutive effect if securities or other contracts to issue common
stock were exercised or converted), and applies to entities with
publicly held common stock.
This standard simplifies the computation of earnings per share as
required under Accounting Principles Board Opinion No. 15, Earnings Per
Share, and makes them comparable to international earnings per share
standards.
5. Included in accounts payable at March 31, 1997 and March 31, 1996 are
the Company's obligations under outstanding letters of credit of
$1,474,000 and $1,015,000, respectively.
6. On March 24, 1997 Biscayne amended its Loan Agreement to reduce the
Revolver Agreement to $45,000,000; adjust the interest rate for
Revolver Agreement borrowings to prime plus 1.0%, or prime plus 1.75%
during agreed upon collateral overadvance periods; require additional
fees of $325,000; and waive violations of certain covenants during the
1996 period.
7. During 1996, the Company issued various warrants to its banks, Trivest,
Inc., an affiliate of the Company, and certain officers of the Company.
These warrants were valued at approximately $294,000 and have been
reflected in the Company's financial statements. The amortization of
these costs are included in current year selling, general and
administrative expense and interest expense.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
QUARTER ENDED MARCH 31, 1997 VERSUS QUARTER ENDED MARCH 31, 1996:
Net sales for the first quarter of 1997 decreased to $14,849,000 from the first
quarter 1996 sales of $16,236,000. The 9% decrease was due to lower sales at
Andy Johns, VARON, and M&L, offset by increased sales at Mackintosh. First
quarter sales typically approximate 15% of total year sales, due to the
Company's seasonal business.
6
<PAGE> 8
Consolidated sales backlog at May 2, 1997 was $72,259,000, compared to
$63,107,000 at May 3, 1996. The increase of 15% is largely due to increased
sales backlog from M&L.
Cost of goods sold, as a percentage of net sales, was 74% versus 76% for the
quarters ended March 31, 1997 and 1996, respectively. The decrease is
attributable to Andy Johns, Mackintosh, and M&L realizing lower costs of
production, offset by higher Varon costs of production.
Selling, general and administrative expenses ("S,G&A") as a percentage of net
sales decreased to 33% in 1997 from 36% in 1996. This decline resulted from
management's continuing efforts to reduce costs.
During the fourth quarter of 1996, the Consumer Product Safety Commission
("CPSC") issued 1997/1998 rules for the manufacturing of all cotton thermal and
long underwear products. These rules have had two effects: i) sleepwear
manufacturers are now able to produce their products in cotton, and ii) such
cotton sleepwear products now have to be "tight fitting". As a result of these
regulations, the Company expects significant changes in Varon's competitive
environment related to such products. The impact on Varon's market position is
unknown. Varon could face the following: i) a decrease in market share due to
increased competition from sleepwear manufacturers, and ii) a potential market
shift, from customers who previously purchased sleepwear when it was not
required to be "tight fitting", now purchasing other products. Alternatively,
Varon may be able to increase its market share of newly-approved cotton
sleepwear, due to its current expertise in manufacturing, if it can take away
market share from heretofore non-cotton sleepwear product sales. These
regulations could impact up to one-third of Varon's revenues.
The apparel industry is subject to substantial cyclical variation, with
purchases of apparel and related goods tending to decline during recessionary
periods when disposable income is low. This could have a material adverse effect
on the Company's business.
Certain information included herein contains forward-looking statements which
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from the
forward-looking statements. Those risks include, but are not limited to,
product acceptance and availability, changes in the level of consumer demand
and/or spending, fashion trends, weather patterns, further governmental
regulations, etc. All forward-looking statements should be considered in light
of these risks and uncertainties.
7
<PAGE> 9
OTHER
Interest and other expenses for the quarter ended March 31, 1996 decreased from
$837,000 to $555,000 for the comparable quarter of 1997. The decrease is
primarily due to decreased borrowings incurred during 1997.
Interest and other income decreased to $13,000 during the first quarter of 1997,
compared to $151,000 in 1996. The decline is primarily due to onetime licensee
revenues earned by M&L in the first quarter of 1996.
On March 27, 1996, the Company sold its 20% interest in Hartwell Sports, Inc.
for $1,750,000. Proceeds were used to reduce notes payable to banks. The sale
resulted in a gain during 1996 of $123,000.
INCOME TAXES
For the quarter ended March 31 1996, the income tax benefit was greater than the
benefit which would be derived upon application of the Federal statutory rate,
primarily because of state income tax benefits, and nondeductible amortization
of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $613,000 and $327,000 at March 31, 1997 and
December 31, 1996, respectively. At March 31, 1997, the Company's working
capital was $16,192,000, representing a current ratio of 2.21 to 1. This
compares to working capital of $19,540,000 and a current ratio of 2.45 to 1 at
December 31, 1996. These changes are due to seasonal reductions of current
assets, offset by seasonal first quarter losses and increased bank debt.
As presented in the Consolidated Statements of Cash Flows for the three months
ended March 31, 1997, the decrease of accounts receivable of $4,421,000, the
increase in inventories of $920,000, and decrease in accrued liabilities of
$1,670,000 are due to the seasonality of the Company's operations. On March 31,
1997 the Company repaid $1,750,000 of its long-term debt.
Capital expenditures for the three months ended March 31, 1996 decreased from
$145,000 to $124,000 in 1997. The decrease is attributable to Varon and Andy
Johns, offset by a slight increase at M&L.
The Company expects that cash on hand, cash from operations, and borrowings
under its revolving credit agreement will be sufficient to fund current
operations and to enable the Company to meet its obligations as they become due.
8
<PAGE> 10
EFFECT OF INFLATION AND SEASONALITY
The Company believes that inflation will not significantly effect its profit
margins, or have a material effect on the prices of other goods and services
used in its business operations. Further, in connection with increases in wool
and cotton costs over the last several years, the Company has increased offshore
production.
Sales of women's and children's outerwear are seasonal. Historically, Andy
Johns, Mackintosh, M&L, and Varon have significantly higher revenues in the
third and fourth quarters than in the first and second quarters. Therefore, the
results of any interim period are not necessarily indicative of the results
which might be expected during a full year. Additionally, there is a risk
inherently related to the outerwear industry, resulting from consumer reactions
to weather patterns, which have had a material effect on the Company's sales and
profitability in the past.
9
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is, from time to time, involved in routine
litigation. None of such litigation in which the Company is presently involved
is material to its financial position or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
10 Second Amended and Restated Credit Agreement
and Guaranty dated as of March 24, 1997 among
the Registrant, Biscayne Apparel
International, Inc., Mackintosh of New England
Co., and M&L International, Inc. and The Chase
Manhattan Bank (National Association) as Agent
and Milberg Factors, Inc. as Servicing Agent.
11 Computation of Per Share Earnings
27 Financial Data Schedule
b) Reports on Form 8-K:
During the quarter for which this Quarterly Report on
Form 10-Q is filed, the Registrant did not file any
Current Reports on Form 8-K.
10
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized:
BISCAYNE APPAREL, INC.
Date: May 13, 1997 By: /s/ Earl W. Powell
--------------------------------
Earl W. Powell
Chairman of the Board, President
and Chief Executive Officer
Date: May 13, 1997 By: /s/ Peter Vandenberg, Jr.
--------------------------------
Peter Vandenberg, Jr.
Executive Vice President,
Treasurer and
Chief Financial Officer
11
<PAGE> 1
Exhibit 10
SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND GUARANTY
Dated as of March 24, 1997
among
BISCAYNE APPAREL, INC.
BISCAYNE APPAREL INTERNATIONAL, INC.
MACKINTOSH OF NEW ENGLAND CO.,
and
M & L INTERNATIONAL, INC.
the Lenders signatory hereto
and
THE CHASE MANHATTAN BANK
as Agent
MILBERG FACTORS, INC.
as Servicing Agent
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS; ACCOUNTING TERMS..................................................................... 1
Section 1.01. Definitions.................................................................... 1
Section 1.02. Accounting Terms............................................................... 16
Section 1.03. Rules of Construction.......................................................... 16
ARTICLE 2. THE LOANS.................................................................................. 17
Section 2.01. Revolving Credit Loans......................................................... 17
Section 2.02. Term Loans..................................................................... 17
Section 2.03. The Notes...................................................................... 17
Section 2.04. Purpose........................................................................ 17
Section 2.05. Borrowing Procedures........................................................... 18
Section 2.06. Funding of Revolving Credit Loans by Servicing Agent........................... 18
Section 2.07. Prepayments and Conversions.................................................... 21
Section 2.08. Mandatory Prepayments.......................................................... 21
Section 2.09. Interest Periods; Renewals..................................................... 22
Section 2.10. Changes of Revolving Credit Commitments........................................ 23
Section 2.11. Certain Notices................................................................ 23
Section 2.12. Collection of Accounts......................................................... 23
Section 2.13. Minimum Amounts................................................................ 24
Section 2.14. Interest....................................................................... 24
Section 2.15. Fees........................................................................... 24
Section 2.16. Payments Generally............................................................. 25
Section 2.17. Administration and Servicing................................................... 26
Section 2.18. Adjustments to Existing Loans and Participations............................... 27
ARTICLE 3. LETTERS OF CREDIT.......................................................................... 27
Section 3.01. Letters of Credit.............................................................. 27
Section 3.02. Reimbursement Obligation....................................................... 29
Section 3.03. Payment of Commissions, Expenses and Interest.................................. 30
Section 3.04. Proper Drawing; Chase's Honoring............................................... 31
Section 3.05. Amendment, Change, Modification, No Waiver..................................... 31
Section 3.06. U.C.P.; Agreements and Acknowledgments; Indemnification........................ 31
Section 3.07. Licenses; Insurance; Regulations............................................... 33
Section 3.08. Additional Security............................................................ 33
Section 3.09. Continuing Rights and Obligations.............................................. 33
Section 3.10. Instructions; No Liability..................................................... 33
Section 3.11. Amended Agreement.............................................................. 34
Section 3.12. Chase (Geo Trade).............................................................. 34
Section 3.13. Bills of Lading................................................................ 34
Section 3.14. Use of Loans................................................................... 34
ARTICLE 4. LETTERS OF INDEMNITY....................................................................... 35
Section 4.01. Letters of Indemnity........................................................... 35
Section 4.02. Reimbursement Agreement........................................................ 35
Section 4.03. Authorization.................................................................. 35
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 4.04. Delivery of Required Documentation............................................. 35
Section 4.05. Continuing Obligations......................................................... 36
Section 4.06. Instructions................................................................... 36
Section 4.07. Fees........................................................................... 36
ARTICLE 5. PARTICIPATIONS............................................................................. 36
Section 5.01. Sale and Purchase Of Participations............................................ 36
Section 5.02. Participation in Fees and Collateral; Relationship............................. 36
Section 5.03. Procedures..................................................................... 37
Section 5.04. Collections and Remittances.................................................... 37
Section 5.05. Administration Standard of Care................................................ 38
ARTICLE 6. YIELD PROTECTION; ILLEGALITY; ETC.......................................................... 39
Section 6.01. Additional Costs............................................................... 39
Section 6.02. Limitation on Types of Loans................................................... 41
Section 6.03. Illegality..................................................................... 41
Section 6.04. Certain Conversions pursuant to Sections 6.01 and 6.03......................... 41
Section 6.05. Certain Compensation........................................................... 42
ARTICLE 7. CONDITIONS PRECEDENT....................................................................... 43
Section 7.01. Conditions Precedent to the Effectiveness of this
Agreement and the Initial Use of a Credit Facility on or after the
Third Closing Date................................................................... 43
Section 7.02. Additional Conditions Precedent................................................ 44
Section 7.03. Deemed Representations......................................................... 45
Section 7.04. Waiver......................................................................... 45
ARTICLE 8. REPRESENTATIONS AND WARRANTIES............................................................. 46
Section 8.01. Incorporation, Good Standing and Due Qualification............................. 46
Section 8.02. Corporate Power and Authority; No Conflicts.................................... 46
Section 8.03. Legally Enforceable Agreements................................................. 46
Section 8.04. Litigation..................................................................... 47
Section 8.05. Financial Statements........................................................... 47
Section 8.06. Ownership and Liens............................................................ 47
Section 8.07. Taxes.......................................................................... 48
Section 8.08. ERISA.......................................................................... 48
Section 8.09. Subsidiaries and Ownership of Stock............................................ 48
Section 8.10. Credit Arrangements............................................................ 48
Section 8.11. Operation of Business.......................................................... 48
Section 8.12. Hazardous Materials............................................................ 49
Section 8.13. No Default on Outstanding Judgments or Orders.................................. 50
Section 8.14. No Defaults on Other Agreements................................................ 51
Section 8.15. Labor Disputes and Acts of God................................................. 51
Section 8.16. Governmental Regulation........................................................ 51
Section 8.17. Partnerships................................................................... 51
Section 8.18. No Forfeiture.................................................................. 51
Section 8.19. Solvency....................................................................... 51
ARTICLE 9. AFFIRMATIVE COVENANTS...................................................................... 52
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
Section 9.01. Maintenance of Existence....................................................... 52
Section 9.02. Conduct of Business............................................................ 52
Section 9.03. Maintenance of Properties...................................................... 52
Section 9.04. Maintenance of Records......................................................... 52
Section 9.05. Maintenance of Insurance....................................................... 53
Section 9.06. Compliance with Laws........................................................... 53
Section 9.07. Right of Inspection............................................................ 53
Section 9.08. Asset Based Audit.............................................................. 53
Section 9.09. Reporting Requirements......................................................... 53
ARTICLE 10. NEGATIVE COVENANTS........................................................................ 58
Section 10.01. Debt.......................................................................... 58
Section 10.02. Guaranties, Etc............................................................... 58
Section 10.03. Liens......................................................................... 59
Section 10.04. Leases........................................................................ 60
Section 10.05. Investments................................................................... 60
Section 10.06. Dividends..................................................................... 60
Section 10.07. Sale of Assets................................................................ 61
Section 10.08. Stock of Subsidiaries, Etc.................................................... 61
Section 10.09. Transactions with Affiliates.................................................. 61
Section 10.10. Mergers, Etc.................................................................. 61
Section 10.11. No Activities Leading to Forfeiture........................................... 61
Section 10.12. No Modification of Significant Agreements..................................... 62
Section 10.13. Other Negative Pledge Agreements.............................................. 62
Section 10.14. Accounts Payable to Trade Creditors........................................... 62
Section 10.15. Change in Fiscal Year......................................................... 62
ARTICLE 11. FINANCIAL COVENANTS....................................................................... 62
Section 11.01. Minimum Subordinated Debt..................................................... 62
Section 11.02. Minimum Tangible Net Worth.................................................... 62
Section 11.03. Funded Debt to Tangible Net Worth............................................. 63
Section 11.04. Net Income.................................................................... 63
Section 11.05. Capital Expenditures.......................................................... 63
ARTICLE 12. EVENTS OF DEFAULT......................................................................... 63
Section 12.01. Events of Default............................................................. 63
Section 12.02. Remedies...................................................................... 65
ARTICLE 13. THE AGENTS; RELATIONS AMONG LENDERS AND
BORROWERS..................................................................................... 66
Section 13.01. Appointment, Powers and Immunities of Agent................................... 66
Section 13.02. Appointment, Powers and Immunities of Servicing Agent......................... 66
Section 13.03. Reliance by each of the Agent and the Servicing Agent......................... 67
Section 13.04. Defaults...................................................................... 67
Section 13.05. Rights of Each of the Agent and the Servicing Agent as a
Lender........................................................................ 68
Section 13.06. Indemnification of Agents..................................................... 68
Section 13.07. Documents..................................................................... 69
Section 13.08. Non-Reliance on the Agents and Other Lenders.................................. 69
</TABLE>
<PAGE> 5
<TABLE>
<S> <C>
Section 13.09. Failure of Either the Agent or the Servicing Agent to Act..................... 69
Section 13.10. Resignation or Removal of Either the Agent or the
Servicing Agent..................................................................... 69
Section 13.11. Amendments Concerning Agency Function......................................... 70
Section 13.12. Liability of Each of the Agent and the Servicing Agent........................ 70
Section 13.13. Transfer of Agency Function................................................... 70
Section 13.14. Non-Receipt of Funds by the Agent............................................. 70
Section 13.15. Withholding Taxes............................................................. 71
Section 13.16. Several Obligations and Rights of Lenders..................................... 71
Section 13.17. Pro Rata Treatment of Loans, Etc.............................................. 71
Section 13.18. Sharing of Payments Among Lenders............................................. 71
Section 13.19. Application of Proceeds of Collateral......................................... 72
ARTICLE 14. GUARANTY.................................................................................. 72
Section 14.01. Guaranty...................................................................... 72
Section 14.02. Guaranty Obligations Unconditional............................................ 72
Section 14.03. Waivers....................................................................... 73
Section 14.04. Subrogation................................................................... 74
Section 14.05. Contribution.................................................................. 74
Section 14.06. Limitation of Liability....................................................... 74
ARTICLE 15. MISCELLANEOUS............................................................................. 74
Section 15.01. Amendments and Waivers........................................................ 74
Section 15.02. Usury......................................................................... 75
Section 15.03. Expenses...................................................................... 75
Section 15.04. Survival...................................................................... 75
Section 15.05. Assignment: Participations.................................................... 75
Section 15.06. Notices....................................................................... 76
Section 15.07. Setoff........................................................................ 76
Section 15.08. JURISDICTION; IMMUNITIES...................................................... 77
Section 15.09. Table of Contents; Headings................................................... 78
Section 15.10. Severability.................................................................. 78
Section 15.11. Counterparts.................................................................. 78
Section 15.12. Integration................................................................... 78
Section 15.13. GOVERNING LAW................................................................. 78
Section 15.14. Confidentiality............................................................... 78
Section 15.15. Treatment of Certain Information.............................................. 79
Section 15.16. Collection of Accounts........................................................ 79
EXHIBITS
Exhibit A-1 or A-2 Note
Exhibit B Authorization Letter
Exhibit C Flash Report
Exhibit D Confidentiality Agreement
Exhibit E Opinion
SCHEDULES
Schedule 1.01 Subsidiaries and Other Ownership Interests of Borrowers
Schedule 8.05 Credit Arrangements
Schedule 8.09 Ownership of Stock
Schedule 8.10 Hazardous Materials
</TABLE>
<PAGE> 6
FIGURE 1
Servicing Agent shall have received written notice of all outstanding Letters of
Credit and all requested Letters of Credit.
With respect to all Revolving Credit Loans, on behalf of and
for the account of any Borrower funded by the Servicing Agent pursuant to this
Section, each Lender is only responsible for its Pro Rata Share of such
Revolving Credit Loans.
Section 1. PREPAYMENTS AND CONVERSIONS. The Borrowers shall
have the right to make prepayments of principal of any Loan at any time or from
time to time; provided that: (a) except as provided in Section 2.12, the
applicable Borrower shall give both Agents notice of each such prepayment as
provided in Section 2.11, and (b) prepayments of the Term Loan can only be made
on the last day of the applicable Interest Period (except as provided in Section
2.08) and shall be applied to the installments of principal in the inverse order
of their maturities. Prepayments of the Term Loan may not be reborrowed.
The Borrowers shall have the right to make or convert one type
of Term Loan into another type, at any time or from time to time; provided that:
(a) the applicable Borrower shall give the Agent notice of each such conversion
as provided in Section 2.11; (b) Eurodollar Loans may be prepaid or converted
only on the last day of an Interest Period for such Loans and, in the case of
conversion to a Eurodollar Loan, only if no Default or Event of Default is then
continuing.
Any such prepayment of the Term Loan shall include all accrued
interest to the date of such prepayment on the amount so prepaid.
Section 2. MANDATORY PREPAYMENTS. a. To the extent that (i)
the Revolving Credit Loans shall at any time exceed the lesser of (A) the
Revolving Credit Commitment minus the aggregate amount of the Outstanding Letter
of Credit Obligations and minus the aggregate face amount of all outstanding
Letters of Indemnity or (B) the then effective Revolving Credit Loans Maximum
Outstanding or (ii) the Revolving Credit Loans shall at any time exceed the then
effective Borrowing Base, the Borrowers shall within one (1) day after becoming
aware of such excess prepay the Revolving Credit Loans in the amount of such
excess.
b. Within ten (10) days after the availability of the
quarterly financial statements for March 31 required to be delivered pursuant to
Section 9.09(b) but in any event not later than June 1 of each year, the
Borrowers shall prepay the Term Loans in an amount equal to 50% of the amount of
the Excess Cash Flow for the 12 month period ended March 31 of such year. The
entire prepayment under this subsection shall be applied to the scheduled
installments of principal in the inverse order of maturity.
c. Within ten (10) Banking Days of receipt by any Borrower of
any cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable or otherwise) remaining after deducting all
reasonable costs of a sale, transfer or other disposition from the sale,
transfer or other disposition of any equity interest in or assets (other than
inventory disposed of in the ordinary course of business) of any Person owned by
such Borrower, such Borrower shall first prepay the Revolving Credit Loans in an
amount equal to the first $100,000 of such proceeds, second prepay the Term
Loans in an amount equal to one hundred percent (100%) of such proceeds and such
prepayments shall be applied in inverse order of maturity, and third, after the
Revolving Credit Loans have been prepaid in an amount equal to $100,000 and the
Term
<PAGE> 7
Loans are repaid in full prepay the Revolving Credit Loans and reduce the
Revolving Credit Commitment in an amount equal to the remaining proceeds.
d. Within five (5) days of receipt by any Borrower of any tax
refund, such Borrower shall prepay the Revolving Credit Loans in an amount equal
to one hundred percent (100%) of the amount of such tax refund.
e. Any prepayment of the Term Loan under this Section shall
include all accrued interest to the date of such prepayment on the amount so
prepaid as well as any and all compensation required to be paid in accordance
with Section 6.05.
f. Except as specifically set forth at the end of clause (c)
above, any prepayment of the Revolving Credit Loans under this Section shall not
reduce the amount of the Revolving Credit Commitment.
The mandatory prepayments required under subsection (a) shall be applied as
follows: first, to unreimbursed drawings under Letters of Credit, second, to
Revolving Loans outstanding, third to unreimbursed drawings under Letters of
Indemnity, and fourth to be held as cash collateral for the Borrowers'
obligations under the Facility Documents.
Section 3. INTEREST PERIODS; RENEWALS. a. In the case of each
Eurodollar Loan, the Borrowers shall select an Interest Period (provided no
Default of Event of Default is then continuing) of any duration in accordance
with the definition of Interest Period in Section 1.01, subject to the following
limitations: (i) no Interest Period on the Term Loans may extend beyond an
Amortization Date unless, after giving effect thereto, the aggregate principal
amount of the Eurodollar Loans having Interest Periods which end after such
Amortization Date shall be equal to or less than the principal amount to be
outstanding hereunder after such Amortization Date; (ii) notwithstanding clause
(i) above, no Interest Period shall have a duration less than one month, and if
any such proposed Interest Period would otherwise be for a shorter period, such
Interest Period shall not be available; (iii) if an Interest Period would end on
a day which is not a Banking Day, such Interest Period shall be extended to the
next Banking Day, unless such Banking Day would fall in the next calendar month
in which event such Interest Period shall end on the immediately preceding
Banking Day; and (iv) no more than twelve Interest Periods of each Lender may be
outstanding at any one time.
b. Upon notice to the Agent as provided in Section 2.11, the
Borrowers may (provided no Default or Event of Default is then continuing) renew
any Eurodollar Loan on the last day of the Interest Period therefor as the same
type of Loan with an Interest Period of the same or different duration in
accordance with the limitations provided above and in Section 2.07. If the
Borrowers shall fail to give notice to the Agent of such a renewal, such
Eurodollar Loan shall automatically become a Prime Rate Loan on the last day of
the current Interest Period; provided that the foregoing shall not prevent the
conversion of any type of Eurodollar Loan into another type of Loan in
accordance with Section 2.07.
Section 0.10. CHANGES OF REVOLVING CREDIT COMMITMENTS. The
Borrowers shall have the right to reduce or terminate the amount of unused
Revolving Credit Commitments at any time or from time to time, provided that:
the Borrowers shall give notice of each such reduction or termination to both
the Agents as provided in Section 2.11; and (b) each partial reduction shall be
in an aggregate amount at least equal to $1,000,000; provided, further, that the
Revolving Credit
<PAGE> 8
Commitment cannot be reduced to zero unless the Term Loan has been prepaid in
full. The Revolving Credit Commitments once reduced or terminated may not be
reinstated. Notwithstanding any other provision of this Agreement, the Revolving
Credit Commitments shall automatically be reduced in an amount equal to the
principal amount of all mandatory prepayments of the Revolving Credit Loans in
accordance with the provisions of Section 2.08(c).
Section 0.11. CERTAIN NOTICES. Notices by the Borrowers to the
Servicing Agent of each borrowing pursuant to Section 2.05 shall be irrevocable
and shall be effective only if received by the Servicing Agent not later than
11:00 a.m. (New York time) on the Banking Day of the requested Revolving Credit
Loan. Notices by the Borrowers of each prepayment pursuant to Section 2.07 or
2.08 and each reduction or termination of the Revolving Credit Commitments
pursuant to Section 2.10 shall be irrevocable and shall be effective only if
received by both Agents not later than 12:00 noon New York time one Banking Day
prior thereto (except for notice of prepayments which may be given on the same
Banking Day); and (b) in the case of reductions or termination of the Revolving
Credit Commitments, given not later than 12:00 noon three Banking Days prior
thereto. Each such notice shall specify the Loans to be borrowed or prepaid, the
amount thereof, and the date of the borrowing or prepayment. Each such notice of
reduction or termination shall specify the amount of the Revolving Credit
Commitments to be reduced or terminated. Notices by the Borrowers to the Agent
of each conversion pursuant to Section 2.06, 2.07 and each renewal pursuant to
Section 2.09, shall be irrevocable and shall be effective only if received by
both Agents not later than 12:00 noon New York time four Banking Days prior
thereto. Each such notice shall specify the Loans to be converted or renewed and
the amount (subject to Section 2.13) and type of the Loans to be converted, or
renewed (and, in the case of a conversion, the type of Loans to result from such
conversion and, the Interest Period therefor) and the date of the conversion or
renewal (which shall be a Banking Day). The applicable Agent shall promptly
notify the Lenders of the contents of each such notice. Notice to both Agents of
termination or reduction of the Revolving Credit Commitments shall be in writing
signed by all the Borrowers.
Section 0.12. COLLECTION OF ACCOUNTS. Each Borrower will
direct that all of its customers remit all of their payments on any and all
Accounts owed to such Borrower to the Lock Box Account. In addition, any
payments on any Accounts received directly by a Borrower shall be remitted by
such Borrower to the Lock Box Account. At the close of business on each Banking
Day, the Agent will transfer all collected funds in the Lock Box Account to the
Servicing Agent Account and on the following Banking Day, the Servicing Agent
will apply all such funds (i) first, to the payment of any amounts owed or due
to the Servicing Agent under this Agreement (including, without limitation, any
fees, costs and expenses to which the Servicing Agent is entitled under this
Agreement) and (ii) thereafter, to the prepayment of the Revolving Credit Loans.
Section 0.13. MINIMUM AMOUNTS. Prepayments or conversions
which result in the prepayment or conversion of all Loans of a particular type,
or conversions made pursuant to Section 6.04, shall be in an amount at least
equal to Two Million Five Hundred Thousand Dollars ($2,500,000) in the aggregate
for all Lenders for Eurodollar Loans (borrowings, prepayments, conversions or
renewals of or into Loans, having different Interest Periods at the same time
hereunder to be deemed separate borrowings, prepayments, conversions and
renewals for the purposes of the foregoing, one for each type of Interest
Period).
Section 0.14. INTEREST. (a) Interest shall accrue on the
outstanding and unpaid principal amount of each Loan for the period from and
including the date of such Loan to but
<PAGE> 9
excluding the date such Loan is due at the following rates per annum: (i) for a
Prime Rate Loan, a variable rate per annum equal to the Prime Rate plus the
Margin, or (ii) for a Eurodollar Loan, a fixed rate equal to the Eurodollar Rate
plus the Margin. Any overdraft created in connection with satisfying any of the
Outstanding Working Capital Obligations shall bear interest at the Default Rate.
If the principal amount of any Loan and any other amount payable by any Borrower
hereunder or under the Notes shall not be paid when due (at stated maturity, by
acceleration or otherwise), interest shall accrue on such amount to the fullest
extent permitted by Law from and including such due date to but excluding the
date such amount is paid in full at the Default Rate.
(b) The interest rate on each Prime Rate Loan shall change
when the Prime Rate changes and interest on each such Loan shall be calculated
on the basis of a year of 360 for the actual number of days elapsed. Interest on
each Eurodollar Loan shall be calculated on the basis of a year of 360 days for
the actual number of days elapsed. Promptly after the determination of any
interest rate provided for herein or any change therein, the Agent shall notify
the Borrowers and the Lenders.
(c) Accrued interest shall be due and payable in arrears upon
any payment of principal or conversion (with respect to the Term Loan only), and
(i) for each Prime Rate Loan, on the last day of each month, commencing the
first such date after such Loan and (ii) for each Eurodollar Loan, on the last
day of the Interest Period with respect thereto; provided that interest accruing
at the Default Rate shall be due and payable from time to time on demand of the
Agent.
(d) For purposes of this Agreement, each advance made as part
of the Servicing Agent Funding Amount is a Revolving Credit Loan and as such
shall be subject to the terms and provisions contained herein, including but
limited to the terms and provisions of this Section 2.14.
Section 0.15. FEES. (a) The Borrowers shall pay on the Third
Closing Date to the Agent for the account of the Lenders a non-refundable fee
equal to Two Hundred Twenty-Five Thousand Dollars ($225,000). Each such Lender
shall be entitled to twenty percent (20%) of such fee.
(b) The Borrowers shall pay to the Agent as compensation for
its services hereunder as Agent a non-refundable agency fee in the amount of One
Hundred Thousand Dollars ($100,000). This agency fee shall be due and payable on
the Third Closing Date.
(c) The Borrowers shall pay to the Servicing Agent as
compensation for its services hereunder as Servicing Agent, unless and until the
Servicing Agent has resigned or been removed in accordance with Section 13.10, a
fee in the amount of two-tenths of one percent (.20%) of the gross sales less
discounts of all of the Borrowers, due and payable as such sales are made. The
minimum aggregate fee payable under this paragraph for each year of this
Agreement shall be One Hundred Seventy-Five Thousand Dollars ($175,000), which,
to the extent of any deficiency based on gross sales less discounts (calculated
on a cumulative basis, assuming a minimum rate of Fourteen Thousand Five Hundred
Eighty-Three Dollars ($14,583) per month) shall be due and payable on the last
day of each month.
Section 0.16. PAYMENTS GENERALLY. All payments of the
Revolving Credit Loans on a date other than the Revolving Credit Termination
Date shall be made in Dollars in immediately available funds not later than
11:00 am. New York City time (each such payment made after such time on such
date to be deemed made on the next succeeding Banking Day) to the Servicing
Agent
<PAGE> 10
Account, and all such payments shall be for the account of the Lenders. All
payments under this Agreement on the Term Loans or of the Revolving Credit Loan
on the Revolving Credit Termination Date shall be made in Dollars in immediately
available funds not later than 11:00 a.m. New York City time on the relevant
dates specified above (each such payment made after such time on such due date
to be deemed to have been made on the next succeeding Banking Day) to the
Agent's account number 323-503-314 maintained at the Principal Office for the
account of the applicable Lending Office of each Lender. The Servicing Agent,
the Agent, or any Lender for whose account any such payment is to be made, may
(but shall not be obligated to) debit the amount of any such payment which is
not made by such time to any ordinary deposit account of any Borrower with the
Agent or such Lender, as the case may be, and any Lender so doing shall promptly
notify both Agents. Except for payments of the Revolving Credit Loans with the
proceeds of Accounts of the Borrowers, the applicable Borrower shall, at the
time of making each payment under this Agreement or the Notes, specify to the
applicable Agent the principal or other amount payable by the Borrowers under
this Agreement or the Notes to which such payment is to be applied (and in the
event that it fails to so specify, or if a Default or Event of Default has
occurred and is continuing, the Agent may apply such payment as it may elect in
its sole discretion (subject to Section 13.17)). If the due date of any payment
under this Agreement or the Notes would otherwise fall on a day which is not a
Banking Day, such date shall be extended to the next succeeding Banking Day and
interest shall be payable for any principal so extended for the period of such
extension. Each payment received by the Agent hereunder or under any Note for
the account of a Lender shall be remitted promptly (not later than 3:00 p.m. on
the day received, if received prior to 11:00 a.m.) to such Lender, in
immediately available funds. Each payment received by the Servicing Agent
hereunder or under any Revolving Credit Note for the account of a Lender shall
be remitted to such Lender, in immediately available funds, in accordance with
the provisions of Section 2.06.
Section 0.17. ADMINISTRATION AND SERVICING. The Servicing
Agent shall on behalf of the Lenders perform the following servicing and
administrative activities with respect to the Revolving Credit Facility:
(a) on days on which the Servicing Agent receives notice of a
requested borrowing of a Revolving Credit Loan or notice of a requested issuance
or amendment of a Letter of Credit, calculate (based upon the most recent
information available to the Servicing Agent) the Collateral Borrowing Base,
such calculation to be based on information provided to it by the Borrowers (and
on which the Servicing Agent is hereby authorized to rely) and subject to and in
accordance with the final sentence of the seventh paragraph of Section 2.06;
(b) on days on which the Servicing Agent receives notice of a
requested borrowing of a Revolving Credit Loan calculate whether after the
making of such Revolving Credit Loan, the aggregate principal amount of the
Revolving Credit Loans exceeds either (i) the Borrowing Base (as calculated
pursuant to paragraph (a) above), or (ii) the Revolving Credit Loans Maximum
Outstanding;
(c) on days on which the Servicing Agent receives notice of a
requested issuance or amendment of a Letter of Credit calculate whether after
the issuance of or amendment to such Letter of Credit, the aggregate principal
amount of Letters of Credit issued or amended to increase the face amount of an
outstanding Letter of Credit is in compliance with sub-limits set forth for the
Borrowers and Andy Johns in Section 3.01;
<PAGE> 11
(d) no less frequently than twice each week, issue a status
report of the Borrowers' Accounts to each Lender based upon the most recent
sales and cash receipts journals provided by the Borrowers to the Servicing
Agent;
(e) upon notice to the Servicing Agent of any Borrower's
request for the issuance of a Letter of Credit for its account request
information from such Borrower as to the amount and timing of orders that are to
be filled with the goods to be imported under such Letter of Credit;
(f) collect payments due to each of the Lenders under the
Revolving Credit Facility, and remit same to the appropriate Lender in
accordance with Section 2.06;
(g) notify each of the Lenders as to Revolving Credit Loans to
be made by each of the Lenders to or for the benefit of any of the Borrowers
pursuant to the Revolving Credit Facility;
(h) maintain a list of all outstanding Letters of Credit
issued (i) for the account of the Borrowers and (ii) for the account of BAI
where the goods covered by such Letter of Credit relate to Andy Johns, including
without limitation monthly lists of all such information, so that the Lenders
can calculate compliance with the sub-limits set forth in Section 3.01;
(i) maintain complete and accurate books and records relating
to its activities hereunder, including, without limitation, records of Revolving
Credit Loans made and of collections made and remittances thereof to each of the
Lenders; and
(j) from time to time, in accordance with its usual business
practice and on a sample basis only, send requests to customers of the Borrowers
for verification of invoices that are in an amount exceeding a specified amount
determined by the Servicing Agent (it being understood, however, that the
Servicing Agent will not send such requests to customers that customarily do not
respond to requests for verification). All determinations under this clause (j)
shall be made by the Servicing Agent in its sole discretion.
Section 0.18. ADJUSTMENTS TO EXISTING LOANS AND
PARTICIPATIONS. On the Third Closing Date each of the Lenders agrees to and
hereby does assign to each other Lender a portion of its Loans and
Participations so that after giving effect to all such assignments and
assumptions that all Lenders hold on the Third Closing Date their respective Pro
Rata Share of the Loans and Participations. The parties hereto agree that after
making all the assignments and assumptions noted above that all such Loans are
continuations of the Loans (as defined in the 1995 Credit Agreement). In
addition, to facilitate the assignments and assumptions set forth in this
Section, each Borrower agrees, notwithstanding any of the other terms and
provisions of this Agreement, to pay to the Lenders on the Third Closing Date
all accrued and unpaid interest on its respective Loans.
ARTICLE 1. LETTERS OF CREDIT.
Section 1.01. LETTERS OF CREDIT. Chase agrees, on the terms
and conditions hereinafter set forth, to issue trade letters of credit ("Letters
of Credit") for the account of any Borrower, from time to time during the period
from the Closing Date to the Revolving Credit Termination Date with an aggregate
face amount of all outstanding Letters of Credit not to exceed at any time the
lesser of: (a) the Revolving Credit Commitment; or (b) the Revolving Credit
<PAGE> 12
Commitment minus the Revolving Credit Loans and minus all unreimbursed
obligations on Letters of Credit and minus any and all overdrafts created as a
result of or in connection with the satisfaction of a reimbursement obligation
under a Letter of Credit and minus the aggregate face amount of all outstanding
Letters of Indemnity; provided that Chase will not be required to issue a Letter
of Credit with an expiration date more than 180 days from the date of issuance
of such Letter of Credit; provided, further that Chase will not be required to
issue a Letter of Credit with a maturity date later than May 31, 1998; provided,
further, that Chase will not be required to issue a Letter of Credit with a
maturity date between March 31, 1998 and May 31, 1998 if after giving effect to
the issuance thereof the aggregate face amount of all Letters of Credit issued
by Chase with a maturity date between March 31, 1998 and May 31, 1998 is equal
to or greater than Eleven Million Dollars ($11,000,000); finally, Chase will not
be required to issue any Letter of Credit which permits the beneficiary of such
Letter of Credit to make a drawing under such Letter of Credit without the
presentation of documents or documents of title where the aggregate unused face
amount of all such Letters of Credit outstanding at any time is greater than One
Hundred Fifty Thousand Dollars ($150,000).
Notwithstanding the foregoing, during each period set forth
below Chase will not be required to issue a Letter of Credit if after giving
effect to the issuance thereof the total of the aggregate face amount of all
Letters of Credit issued during such period is equal to or greater than the
amount set forth below for such period:
- --------------------------------------------------------------------------------
Period Amount
- ------ ------
- --------------------------------------------------------------------------------
January 1, 1997 to and
including March 31, 1997 $23,000,000
- --------------------------------------------------------------------------------
January 1, 1997 to and
including June 30, 1997 $34,000,000
- --------------------------------------------------------------------------------
January 1, 1997 to and
including September 30, 1997 $38,500,000
- --------------------------------------------------------------------------------
January 1, 1997 to and
including December 31, 1997 $50,000,000
- --------------------------------------------------------------------------------
January 1, 1998 to and
including March 31, 1998 $23,000,000
- --------------------------------------------------------------------------------
provided, however, the amounts set forth above shall be increased in an amount
equal to the total of (1) the face amount of all Letters of Credit cancelled
during such period, and (2) the reduction in the face amount of all Letters of
Credit so reduced during such period.
In addition, during each period set forth below, Chase will
not be required to issue a Letter of Credit for the account of BAI where the
goods covered by such Letter of Credit are for or such Letter of Credit
otherwise relates to Andy Johns if after giving effect to the issuance thereof
the total of the aggregate face amount of all such Letters of Credit issued
during such period is equal to or greater than the amount set forth below for
each such period:
<PAGE> 13
- --------------------------------------------------------------------------------
Period Amount
- ------ ------
- --------------------------------------------------------------------------------
January 1, 1997] to and
including March 31, 1997 $9,000,000
- --------------------------------------------------------------------------------
January 1, 1997 to and
including June 30, 1997 $13,000,000
- --------------------------------------------------------------------------------
January 1, 1997 to and
including September 30, 1997 $13,500,000
- --------------------------------------------------------------------------------
January 1, 1997 to and
including December 31, 1997 $14,500,000
- --------------------------------------------------------------------------------
January 1, 1998 to and
including March 31, 1998 $9,000,000
- --------------------------------------------------------------------------------
provided, however, the amounts set forth above shall be increased in an amount
equal to the total of (1) the face amount of all Letters of Credit cancelled
during such period, and (2) the reduction in the face amount of all Letters of
Credit so reduced during such period.
Notwithstanding the foregoing, on March 31, 1998, the
Borrowers shall provide standby letters of credit with an expiration date no
earlier than November 30, 1998, in an amount equal to one hundred five percent
(105%) of the undrawn face amount of all Letters of Credit outstanding on such
date and each such letter of credit shall be issued by a financial institution
acceptable to the Required Lenders and pursuant to which Chase can draw for any
unpaid reimbursement obligation in connection with any and all such outstanding
Letters of Credit, or in the event that the Required Lenders reasonably
determine that the proposed financial institutions are not acceptable, the
Borrowers shall provide Cash Collateral in an amount equal to one hundred five
percent (105%) of the undrawn face amount of all Letters of Credit outstanding
on March 31, 1998.
Any Letter of Credit issued by Chase for the account of any
Borrower and outstanding as of Third Closing Date shall be a Letter of Credit.
Notwithstanding any other provision of this Agreement, each
amendment to a Letter of Credit shall be deemed to be and treated as and subject
to the provisions of this Agreement that apply to the issuance of a new Letter
of Credit.
Section 1.02. REIMBURSEMENT OBLIGATION. The applicable
Borrower will pay Chase, on demand at Chase's Principal Office, in immediately
available funds, the amount required to reimburse Chase in respect of Chase's
payment of each instrument under a Letter of Credit. If reimbursed within two
(2) Business Days after the Borrower is obligated to reimburse Chase, then such
reimbursement shall be made with interest at the rate of interest on Revolving
Credit Loans (plus the Margin) from the date of Chase's payment of such
instrument to the date of the applicable Borrower's reimbursement of Chase, and
if reimbursed thereafter, such reimbursement shall be made with interest at the
Default Rate on Revolving Credit Loans from the date of Chase's payment of such
instrument to the date of reimbursement. If any instrument is payable in a
foreign currency, such reimbursement shall be in United States currency at
Chase's selling rate for cable transfers to the place of payment of the
instrument current on the date of payment or of Chase's settlement
<PAGE> 14
of its obligation, as Chase may require. If, for any cause, on the date of
payment or settlement, as the case may be, there is no selling rate or other
rate of exchange generally current in New York for effecting such transfers, the
applicable Borrower will pay Chase on demand an amount in United States currency
equivalent to Chase's actual cost of settlement of its obligation however or
whenever Chase shall make such settlement, with interest at the Prime Rate plus
the Margin for Revolving Credit Loans from the date of settlement to the date of
payment. Each Borrower will comply with all governmental exchange regulations
now or hereafter applicable to each Letter of Credit or instrument or payments
related thereto and will pay Chase, on demand, in Dollars, such amount as Chase
may be or may have been required to expend on account of such regulations. Chase
may debit or direct any other Lender, the Agent, or the Servicing Agent to debit
any account or accounts maintained by such Borrower with any office of Chase or
any other Lender.
Section 1.03. PAYMENT OF COMMISSIONS, EXPENSES AND INTEREST.
Each Borrower will pay Chase, on demand, Chase's commission and all charges,
costs, and expenses paid or incurred by Chase in connection with any Letter of
Credit or Letter of Indemnity, and interest where chargeable, including fees and
charges of counsel in connection with the preparation, performance, or
enforcement of this Agreement or any Letter of Credit or Letter of Indemnity.
Unless otherwise agreed:
(a) commissions payable hereunder shall be at the rate
customarily charged by Chase at the time in like circumstances;
(b) interest payable under Article 3 on amounts not paid when
due shall be at the lesser of (i) the maximum rate permissible under applicable
Law or (ii) the Prime Rate plus the Margin for Revolving Credit Loans; and
(c) in addition to commissions, fees and amounts otherwise
payable with respect to the issuance of the Letter of Credit, the applicable
Borrower shall pay to Chase or any Lender on demand such amounts as Chase or
such Lender in its sole discretion determines are necessary to compensate it for
any cost attributable to its issuing or having outstanding such Letter of Credit
or a participation in such Letter of Credit resulting from the application of
any Law or regulation applicable to Chase or such Lender regarding any reserve,
assessment, capital adequacy or similar requirements relating to letters of
credit or their participation therein or the reimbursement agreements with
respect thereto or to similar liabilities or assets of Chase or such Lender
whether existing at the time of issuance of the Letter of Credit or adopted
thereafter. Each Borrower acknowledges that there may be various methods of
allocating costs to the Letter of Credit and agrees that Chase's or such
Lender's allocation for purposes of determining the costs referred to above
shall be conclusive and binding upon such Borrower provided such allocation is
made in good faith.
In addition to any and all of Chase's customary issuance,
amendment, draw and expiration fees, steamship fees, airway release fees,
processing fees and other expenses to be paid by each Borrower to Chase for its
own account with respect to a Letter of Credit and Letters of Indemnity, the
applicable Borrower shall pay to Chase for the account of the Lenders a drawing
fee equal to the greater of: (1) five-sixteenths of one percent (5/16%) of the
amount drawn under such Letter of Credit or (2) Chase's then effective minimum
charge for a draw under a letter of credit.
<PAGE> 15
Section 1.04. PROPER DRAWING; CHASE'S HONORING. Chase shall
accept or pay conforming drawings presented to it on or before the expiration
date set forth in the related application. Except insofar as written
instructions expressly to the contrary are received by it prior to the issuance
of a Letter of Credit:
(a) Chase may honor the related instrument(s) in an amount or
amounts not exceeding the amount of such Letter of Credit, although shipment(s)
in excess of the quantity called for under such Letter of Credit are made, and
(b) Chase may honor, as complying with the terms of such
Letter of Credit and of the Application relating to it, any instrument or other
document otherwise in conformity signed or issued by a person purporting to be
an administrator, executor, trustee in bankruptcy, debtor in possession,
assignee for the benefit of creditors, liquidator, receiver or other legal
representative of the party authorized under such Letter of Credit to draw or
issue such instruments or other documents.
Section 1.05. AMENDMENT, CHANGE, MODIFICATION, NO WAIVER. In
the event of any amendment, change or modification, with the consent of the
applicable Borrower, relating to a Letter of Credit or any instruments or
documents called for thereunder, including waiver of noncompliance of any such
instruments or documents with the terms of such Letter of Credit, this Agreement
shall be binding upon such Borrower with regard to such Letter of Credit as so
amended, changed, or modified, and to any action taken by Chase or any of its
correspondents relating thereto. No amendment, change, waiver, or modification
to which Chase has consented shall be deemed to mean that Chase will consent or
has consented to any other or subsequent request to amend, change, modify or
waive a term of such Letter of Credit. Chase shall not be deemed to have waived
any of its rights hereunder, unless Chase or its authorized agent shall have
signed such waiver in writing. No such waiver, unless expressly stated therein,
shall be effective as to any transaction which occurs subsequent to the date of
such waiver, nor as to any continuance of a breach after such waiver.
Section 1.06. U.C.P.; AGREEMENTS AND ACKNOWLEDGMENTS;
INDEMNIFICATION. The Uniform Customs and Practice shall be binding on each
Borrower and Chase, except to the extent it is otherwise expressly agreed. It is
also agreed that:
(a) user(s) of a Letter of Credit shall not be deemed agents
of Chase;
(b) none of Chase, its affiliates, Subsidiaries, or its
correspondents shall be responsible for
(i) failure of any instrument to bear any
reference to the related Letter of Credit or inadequate
reference in any instrument to such Letter of Credit, or
failure of any document (other than documents expressly
required to be presented under such Letter of Credit) to
accompany any instrument at negotiation, or failure of any
person to note the amount of any instrument on the reverse of
a Letter of Credit, or to surrender or take up a Letter of
Credit or to forward documents apart from instruments as
required by the terms of such Letter of Credit, each of which
provisions, if contained in a Letter of Credit itself, it is
agreed may be waived by Chase; or
<PAGE> 16
(ii) errors, omissions, interruptions or
delays in transmission, or delivery of any message, by mail,
telex, cable, telegraph, wireless or other teletransmission or
by oral instructions, whether or not they may be in cipher;
(c) Chase shall not be responsible for any act, error, neglect
or default, omission, insolvency or failure in business of any of its
correspondents;
(d) the occurrence of any one or more of the contingencies or
events referred to in the Uniform Customs and Practice or in the preceding
clauses of subparagraphs (i) and (ii) shall not affect, impair, or prevent the
vesting of any of Chase's rights or powers hereunder or the Borrowers'
obligation to make payment;
(e) each Borrower will promptly examine:
(i) any copy of a Letter of Credit; and of any
amendments thereof sent to it by Chase; and
(ii) all instruments and documents delivered
to it from time to time, and, in the event of any claim of
noncompliance with such Borrower's Instructions or other
irregularity, such Borrower will immediately notify Chase
thereof in writing, the Borrowers being conclusively deemed to
have waived any such claim against Chase and its
correspondents unless such notice is given as aforesaid;
(f) any action, inaction or omission on the part of Chase or
any of its correspondents, under or in connection with a Letter of Credit or the
related instruments, documents or property, if in good faith, shall be binding
upon the applicable Borrower and shall not place Chase or any of its
correspondents under any liability to such Borrower; and
(g) in the event that Chase shall preassign a letter of credit
number or numbers to any Borrower, such Borrower shall keep such number(s)
confidential and shall not disclose any such number to any Person until the
Letter of Credit to which such number relates has been approved by Chase.
Each Borrower agrees to hold Chase, the other Lenders, their
officers, directors, and employees, each of their affiliates and Subsidiaries,
and their correspondents indemnified and harmless against any and all claims,
loss, liability or damage, including reasonable counsel fees, howsoever arising
from or in connection with any Letter of Credit or any application, including,
without limitation, any such claim, loss, liability or damage arising out of any
transfer, sale, delivery, surrender or endorsement of any document at any
time(s) held by Chase, the Lenders, or any of their affiliates or Subsidiaries,
or held for the account of any one of them by any correspondent of any of them,
or arising out of any action for injunctive or other judicial or administrative
relief arising out of or in connection with any Letter of Credit and affecting,
directly or indirectly, Chase, the Lenders or such Affiliate or Subsidiary.
Section 1.07. LICENSES; INSURANCE; REGULATIONS. Each Borrower
will procure promptly any necessary import, export or other licenses for the
import, export or shipping of the property shipped under or pursuant to or in
connection with each Letter of Credit, and will comply with all foreign and
domestic governmental regulations in regard to the shipment of such property or
the financing thereof, and will furnish such certificates in that respect as
Chase may at any
<PAGE> 17
time(s) require, and will keep such property adequately covered by insurance in
amounts, against risks and with companies satisfactory to Chase, and will assign
the policies or certificates of insurance to Chase as Agent for the benefit of
the Lenders, or will make the loss or adjustment, if any, payable to Chase, at
Chase's option, and will furnish Chase, on its demand, with evidence of
acceptance by the insurers of such assignment. Should the insurance upon such
property for any reason be unsatisfactory to Chase, Chase may, at the Borrowers'
expense, obtain insurance satisfactory to Chase.
Each Application for a Letter of Credit hereunder shall
constitute the warranty and certification by the applicable Borrower that no
shipment or payment to be made in connection with such Letter of Credit violates
or will violate any United States export, currency control, or other
regulations.
Section 1.08. ADDITIONAL SECURITY. If a temporary restraining
order or an injunction (preliminary or permanent) or any similar order is issued
in connection with any Lender of Credit or any instrument or documents relating
thereto, which order, injunction, or similar order may apply, directly or
indirectly, to Chase, the applicable Borrower shall, on demand, deliver, convey,
transfer, or assign to the Agent additional security of a value and character
satisfactory to Chase, or make such payment as Chase may require.
Section 1.09. SECTION CONTINUING RIGHTS AND OBLIGATIONS.
Chase's rights and the rights of any other Lender hereunder shall continue
unimpaired, and each Borrower shall be and remain obligated in accordance with
the terms and provisions hereof, notwithstanding the release and/or substitution
of any property which may be held as Collateral at any time(s), or of any rights
or interest therein. No delay, extension of time, renewal, compromise or other
indulgence which may occur or be granted by Chase shall impair Chase's or any
Lender's rights or powers hereunder.
Section 3.10. INSTRUCTIONS; NO LIABILITY. Instructions may be
honored by Chase when received from anyone purporting to be an authorized
person. Each Borrower may furnish Chase with written confirmation of any such
instruction, but Chase's responsibility with respect to any instruction shall
not be affected by its failure to receive such confirmation or the content
thereof. Chase shall have no responsibility to notify the applicable Borrower of
any discrepancies between such Borrower's instructions and its written
confirmation, and in the event of any such discrepancy, the original instruction
shall govern. Chase shall be fully protected in, and shall incur no liability to
any Borrower for, acting upon any Instructions or any oral, written, telephone,
teleprocess, electronic, or other amendments thereto which Chase in good faith
believes to have been given by any authorized person, and in no event shall
Chase be liable for special, consequential, or punitive damages. Chase may, at
its option, use any means of verifying any Instruction received by it. Chase
also may, at its option, refuse to act upon any instruction or other
communication or any part thereof, without incurring any responsibility for any
loss, liability or expense arising out of such refusal. All such authorizations
and instructions shall continue in full force and effect unless Chase may elect
to act upon additional instructions delivered to it by the applicable Borrower
prior to the issuance of a Letter of Credit in reliance upon the original
instructions.
Section 3.11. AMENDED AGREEMENT. In the event that Chase shall
revise its standard reimbursement agreement executed by each applicant for a
Letter of Credit, each Borrower shall execute and deliver to Chase an amendment
to this Agreement incorporating such
<PAGE> 18
changes, promptly upon request therefor from Chase. No such amendment which
would adversely affect the rights or benefits of the Lenders, shall be made
without the consent of all the Lenders.
Section 3.12. CHASE (GEO TRADE). Each Borrower and the Lenders
recognize that certain terms and provisions of this Agreement assume that the
Borrowers are utilizing the Chase (Geo Trade) product and procedures in
connection with the Letters of Credit. Notwithstanding anything in this
Agreement to the contrary, unless the Chase (Geo Trade) is in effect all letters
of credit issued by Chase for the account of any Borrower will be Letters of
Credit issued under and subject to the terms of this Agreement. To the extent
the applications or procedures for issuance of such Letters of Credit are
different from those set forth in this Agreement, each Borrower agrees to comply
with the terms of such applications and the required procedures. To the extent
the terms (including, without limitation, terms with respect to fees and
reimbursement obligations) of any such agreement conflict with the terms of this
Agreement, the terms of this Agreement shall govern.
Section 3.13. BILLS OF LADING. To the extent possible, all
bills of lading will be consigned to the Borrowers or to Chase; provided that,
at the direction of the Required Lenders the Borrower must assign all bills of
lading in its possession to Chase and all new bills of lading shall be consigned
to Chase.
Section 3.14. USE OF LOANS. Notwithstanding any provision
contained in this Agreement to the contrary, each Lender may make a Revolving
Credit Loan to repay in whole or in part any amount required to be paid pursuant
to this Article 3, including but not limited to the repayment of a reimbursement
obligation.
ARTICLE 4. LETTERS OF INDEMNITY.
Section 4.01. LETTERS OF INDEMNITY. The Borrowers recognize
and agree that none of the Agent, the Servicing Agent, or any of the Lenders has
any commitment or obligation to issue steamship guaranties and air way releases
(each a "Letter of Indemnity") hereunder and that the issuance of any such
Letter of Indemnity is in the sole discretion of Chase. Chase may in its sole
discretion and from time to time during the period from the Closing Date to the
Revolving Credit Termination Date issue Letters of Indemnity for the benefit of
the Borrowers, provided (a) the Letter of Indemnity covers goods imported by the
applicable Borrower under a Letter of Credit, (b) the aggregate amount, as
determined in accordance with Chase's policies and procedures, of Letters of
Indemnity outstanding at any time shall not exceed Seven Hundred Fifty Thousand
Dollars ($750,000), and (c) such Letters of Indemnity shall be in addition to
Chase's Revolving Credit Commitment.
Section 4.02. REIMBURSEMENT AGREEMENT. On demand the Borrowers
shall pay, or reimburse Chase in cash for, the amount of any and all payments
made or required to be made by Chase to any Person as a result of, arising out
of, pursuant to, or based upon, the issuance and delivery of a Letter of
Indemnity.
In addition, at Chase's request, the Borrowers shall defend
(through counsel reasonably acceptable to Chase) or assist Chase in defending
any action, suit, or proceeding brought against Chase with respect to a Letter
of Indemnity, and on demand shall pay, or reimburse Chase in cash for, the
amount of any and all costs, judgments (including special and
<PAGE> 19
consequential damages), settlement, and expenses (including attorney fees) with
respect thereto. Chase shall have the right, in its sole discretion and without
notice to or the consent of the Borrowers, to determine the reasonableness of
any claim or demand for payment and the amount of any payment (including
payments in settlement of any claim).
Section 4.03. AUTHORIZATION. Chase is authorized to accept
and/or pay any and all drafts presented in connection with, or drawn under any
Letter of Credit issued by Chase for the account of the applicable Borrower with
respect to any goods related to a Letter of Indemnity, whether or not documents
complying with the terms of any such draft or credit are received, with the same
effect as though documents in full and exact compliance were received.
Section 4.04. DELIVERY OF REQUIRED DOCUMENTATION. The
applicable Borrower shall use its best efforts to deliver or cause to be
delivered to Chase all required documents related to any goods with respect to
which Chase shall issue and deliver a Letter of Indemnity. Chase is authorized
to retain an original of each bill of lading or other title document which is
delivered to Chase in connection with any goods with respect to which Chase has
issued and delivered a Letter of Indemnity. The applicable Borrower shall, upon
delivery to an air or marine carrier of all required documents related to goods
with respect to which Chase issued and delivered a Letter of Indemnity, obtain
and deliver to Chase any requested releases of Chase's obligations under such
Letter of Indemnity.
Section 4.05. CONTINUING OBLIGATIONS. The obligations of the
Borrowers under this Article 4 shall be continuing. Chase may continue to act in
reliance hereon until the receipt by Chase of written notice from the Borrowers
not to extend further accommodation hereunder. No such notice, however, shall
release the Borrowers from any of their obligations hereunder with respect to
any Letter of Indemnity which was issued and delivered by Chase prior to receipt
of such notice.
Section 4.06. INSTRUCTIONS. Chase is authorized to accept and
rely upon any written instructions given on behalf of the Borrowers by any
officer or employee authorized by or in accordance with an appropriate
resolution delivered to Chase in connection herewith (such employee or officer
being an "Authorized Officer"). In addition, Chase is authorized to accept and
rely upon any instructions received by telephone, telex, TWX, facsimile
transmission or bank wire which Chase believes in good faith to have been given
by or on behalf of an Authorized Officer. Chase shall incur no liability to the
Borrowers or otherwise as a result of any act or omission of Chase pursuant to
such instructions. All instructions delivered to Chase by telephone shall be
confirmed by the Borrowers promptly thereafter in writing. Chase, however, shall
have no liability to the Borrowers for acting pursuant to telephone instructions
even though it fails to receive such written confirmation or thereafter receives
any inconsistent written confirmation.
Section 4.07. FEES. The Borrowers agree to pay to Chase for
its own account its standard fees and charges as in effect from time to time
related to the issuance and delivery of Letters of Indemnity.
<PAGE> 20
ARTICLE 5. PARTICIPATIONS.
Section 5.01. SALE AND PURCHASE OF PARTICIPATIONS. Each Lender
hereby irrevocably and unconditionally agrees to purchase, and Chase hereby
agrees to sell and transfer to each Lender, an undivided fractional interest (a
"Participation") equal to such Lender's Pro Rata Share in (a) each Letter of
Credit upon issuance thereof and each draw thereunder upon such drawing and the
obligations of the Borrowers in respect of each such Letter of Credit under this
Agreement; and (b) each Letter of Indemnity upon issuance thereof and each draw
thereunder upon such drawing and the obligations of the Borrowers in respect of
each such Letter of Indemnity under this Agreement.
Section 5.02. PARTICIPATION IN FEES AND COLLATERAL;
RELATIONSHIP. Each Lender will be entitled to receive only the portions of the
five-sixteenths of one percent (5/16%) drawing fee for each Letter of Credit
paid by the Borrowers to Chase for the account of the Lenders referred to in
Section 3.03. Chase shall pay each Lender its share of each Letter of Credit
Fee, in arrears promptly after the end of each month.
In addition to the foregoing, each Lender hereby purchases,
and Chase hereby sells to each Lender, an undivided fractional interest equal to
such Lender's Pro Rata Share in the Facility Documents, as well as all
additional security specifically assigned to Chase to secure the Letters of
Credit, and the Letters of Indemnity, as the case may be.
The relationship between Chase (in its capacity as seller of
Participations pursuant to this Article 5) and each Lender (in its capacity as
purchaser of Participations pursuant to this Article 5) is and shall be that of
a purchaser and seller of a property interest and not a creditor-debtor
relationship or joint venture. Chase (in its capacity as seller of
Participations pursuant to this Article 5) shall owe each Lender (in its
capacity as purchaser of Participations pursuant to this Article 5) no duty
except as specifically set forth in this Article 5.
Section 5.03. PROCEDURES. Whenever a draw shall be made under
a Letter of Credit or a Letter of Indemnity and the Borrowers shall fail to
reimburse Chase therefor in accordance with this Agreement, Chase will promptly
notify each Lender regarding such draw or payment as follows: (a) the date of
such draw or payment; and (b) the amount of such draw or payment. Although Chase
shall be responsible for paying each such draw or payment on each Letter of
Credit or Letter of Indemnity, as the case may be, each Lender shall bear its
Pro Rata Share of the credit risk associated with each such draw or payment.
Accordingly, in the event that the amount of any such draw or payment is not
paid in full by or on behalf of the Borrowers when required in accordance with
the terms of this Agreement, for any reason, Chase shall give prompt notice by
telephone (promptly confirmed in writing) or facsimile to each Lender of such
event. Upon receipt of such telephone or facsimile notice, each Lender shall
cause to be transmitted to Chase, to the account set forth below an amount in
immediately available funds equivalent to its Pro Rata Share of such draw or
payment in such manner to ensure that such funds are received by Chase, and
available to Chase by 3:00 p.m., New York time, on the date demand therefor was
made by Chase to each Lender (if demand was made by 12:00 noon, New York time)
or by 10:00 a.m., New York time, on the Banking Day following the date demand
therefor was made (if demand was made after 12:00 noon, New York City time).
<PAGE> 21
ABA No: 0210002
Chase Account No.: 324-331-754
Reference: Import LC Department
Chase Address: Trade Services
One Chase Manhattan Plaza
New York, New York 10081
Section 5.04. COLLECTIONS AND REMITTANCES. Whenever Chase
receives any payment, interest, reimbursement, collection, or recovery on
account of a Letter of Credit or Letter of Indemnity whether from the Borrower,
any collateral, or otherwise, it shall allocate such receipts as follows:
(a) First, to the payment of taxes, assessments, insurance
premiums, or for similar purposes as required by the Letter of Credit or Letter
of Indemnity, as the case may be, or any other Loan Document, and, if previously
paid by Chase, such sums shall be retained by Chase; and
(b) In the event any Borrower fails to reimburse Chase for any
draw under a Letter of Credit or Letter of Indemnity, as the case may be, when
due and Chase receives a payment of or on account of such defaulted amount as to
which a Lender has paid Chase the amount of its Pro Rata Share pursuant to
Section 5.04, that portion of the amount received shall be allocated between
each such Lender and Chase pro rata, with each such Lender's percentage of the
principal amount based on its Pro Rata Share and with each such Lender's portion
of the interest and fees on its Pro Rata Share based upon the amounts set forth
above.
After Chase receives a payment on account of a Letter of
Credit or Letter of Indemnity, as the case may be, and makes the allocations
required by the preceding paragraph, it shall give notice to each Lender not
later than 11:30 a.m., New York time, by telephone and promptly remit to each
Lender (or credit to the Lender's account with Chase, if any) the amount to
which each such Lender is entitled; PROVIDED, HOWEVER, that Chase may retain and
deduct from such payment to any such Lender any amount owed Chase by such Lender
pursuant to this Article 5.
If any payment received by Chase and distributed or credited
to a Lender is later rescinded or is otherwise returned by Chase for whatever
reason (including, without limitation, settlement of an alleged claim), each
such Lender, upon demand by Chase, shall immediately pay to Chase such Lender's
Pro Rata Share of the amount so returned. The covenants contained in this
paragraph shall survive the termination of this Agreement.
Section 5.05. ADMINISTRATION STANDARD OF CARE. Chase will
administer each Letter of Credit or Letter of Indemnity in the ordinary course
of business and in accordance with its usual practices, modified from time to
time as it deems appropriate under the circumstances. Except as expressly set
forth in the second paragraph of this Section 5.05, Chase shall be entitled to
use its discretion in taking or refraining from taking any actions in connection
with any of the foregoing as if it were the sole party involved in any of the
foregoing and no Participations existed.
<PAGE> 22
Notwithstanding the provisions of the first paragraph of this
Section 5.05, Chase agrees that it will not knowingly take any of the following
actions without the written consent of each Lender: (a) waive any default by the
Borrowers involving the payment of money to Chase pursuant to any of the Letters
of Credit or Letters of Indemnity; (b) extend the time of payment of the fees to
be paid for account of the Lenders pursuant to Section 3.03 with respect to any
of the Letters of Credit; (c) extend the expiry date of any Letter of Credit
after the Revolving Credit Termination Date; or (d) reduce the fees charged on
the Letters of Credit below the amount required to be paid to Chase or to the
Lenders pursuant to the terms of this Article 5. Chase shall be fully justified
in failing or refusing to take any action under any of the Facility Documents
unless it shall first receive such advice or concurrence of the Lenders as Chase
shall deem appropriate.
Each Lender acknowledges that its Participations hereunder are
without recourse to Chase and that each such Lender expressly assumes all risk
of loss in connection with its Participation in the Letters of Credit and
Letters of Indemnity, as if such Lender had directly provided such Letters of
Credit and Letters of Indemnity. Chase shall have no liability, express or
implied, for any action taken or omitted to be taken by Chase or for any failure
or delay in exercising any right or power possessed by Chase under any of the
Facility Documents except for actual losses, if any, suffered by any Lender that
are proximately caused either by Chase's gross negligence or by Chase's willful
misconduct. Without limiting the foregoing, Chase (a) may consult with legal
counsel, independent public accountants, appraisers, and other experts, selected
by Chase, and shall not be liable for any action taken or omitted to be taken in
good faith by it in accordance with the advice of such persons, (b) shall be
entitled to rely on, and shall incur no liability by acting upon, any
conversation, notice, consent, certificate, statement, order, or any document or
other writing (including, without limitation, telegraph, telex, telecopy, TWX,
or other telecommunication device) believed by Chase to be genuine and correct
and to have been signed, sent, or made by the proper person, (c) makes no
warranty or representation of any kind or character relating to the Borrowers or
the Collateral, and shall not be responsible for any warranty or representation
made in or in connection with any of the Facility Documents, (d) makes no
warranty or representation as to, and shall not be responsible for the
correctness as to form, the due execution, legality, validity, enforceability,
genuineness, sufficiency, or collectability of any of the Facility Documents,
for any failure by any Borrower or any Person to perform its obligations
thereunder, for any Borrower's use of the proceeds therefrom, or for the
preservation of the Collateral or the loss, depreciation, or release thereof,
(e) makes no warranty or representation as to, and assumes no responsibility
for, the authenticity, validity, accuracy, or completeness of any notice,
financial statement, or other document or information received by Chase or any
Lender in connection with, or otherwise referred to in, any of the Facility
Documents, and (f) shall not be required to make any inquiry concerning the
observance or performance of any agreement contained in, or conditions of, any
of the Facility Documents, or to inspect the property, books, or records of the
Borrowers or any Person.
Any Lender may lend money to, accept deposits from, and
generally engage in any kind of business with the Borrowers as freely as though
no Participations had been granted to a Lender.
<PAGE> 23
ARTICLE 6. YIELD PROTECTION; ILLEGALITY; ETC.
Section 6.01. ADDITIONAL COSTS. (a) The Borrowers shall pay
directly to each Lender from time to time on demand such amounts as such Lender
may determine to be necessary to compensate it for any costs which such Lender
determines are attributable to its making or maintaining any Eurodollar Loans
under this Agreement or its Notes or its obligation to make any such Loans
hereunder, or any reduction in any amount receivable by such Lender hereunder in
respect of any such Loans or such obligation (such increases in costs and
reductions in amounts receivable being herein called "Additional Costs"),
resulting from any Regulatory Change which: (i) changes the basis of taxation of
any amounts payable to such Lender under this Agreement or its Notes in respect
of any of such Loans (other than taxes imposed on the overall net income of such
Lender or of its Lending Office for any of such Loans by the jurisdiction in
which such Lender has its principal office or such Lending Office); or (ii)
imposes or modifies any reserve, special deposit, deposit insurance or
assessment, minimum capital, capital ratio or similar requirements relating to
any extensions of credit or other assets of, or any deposits with or other
liabilities of, such Lender (including any of such Loans or any deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01); or
(iii) imposes any other condition affecting this Agreement or its Notes (or any
of such extensions of credit or liabilities). Each Lender will notify the
Borrowers of any event occurring after the date of this Agreement which will
entitle such Lender to compensation pursuant to this Section 6.01 (a) as
promptly as practicable after it obtains knowledge thereof and determines to
request such compensation. If any Lender requests compensation from the
Borrowers under this Section 6.01(a), or under Section 6.01(c), the Borrowers
may, by notice to such Lender (with a copy to the Agent), require that such
Lender's Loans of the type with respect to which such compensation is requested
be converted in accordance with Section 6.04.
(b) Without limiting the effect of the foregoing provisions of
this Section 6.01, in the event that, by reason of any Regulatory Change, any
Lender either (i) incurs Additional Costs based on or measured by the excess
above a specified level of the amount of a category of deposits or other
liabilities of such Lender which includes deposits by reference to which the
interest rate on Eurodollar Loans is determined as provided in this Agreement or
a category of extensions of credit or other assets of such Lender which includes
Eurodollar Loans or (ii) becomes subject to restrictions on the amount of such a
category of liabilities or assets which it may hold, then, if such Lender so
elects by notice to the Borrowers (with a copy to the Agent), the obligation of
such Lender to make or renew, and to convert Loans of any other type into, Loans
of such type hereunder shall be suspended until the date such Regulatory Change
ceases to be in effect (and all Loans of such type held by such Lender then
outstanding shall be converted in accordance with Section 6.04).
(c) Without limiting the effect of the foregoing provisions of
this Section 6.01 (but without duplication), the Borrowers shall pay directly to
each Lender from time to time on request such amounts as such Lender may
determine to be necessary to compensate such Lender for any costs which it
determines are attributable to the maintenance by it or any of its Affiliates
pursuant to any law or regulation of any jurisdiction or any interpretation,
directive or request (whether or not having the force of law and whether in
effect on the date of this Agreement or thereafter) of any court or governmental
or monetary authority of capital in respect of its Loans or participation in
Letters of Credit hereunder or its obligation to make Loans hereunder (such
compensation to include, without limitation, an amount equal to any reduction in
return on assets or equity of such Lender or such Affiliates to a level below
that which it could have achieved but for such law, regulation, interpretation,
directive or request). Each Lender will notify the Borrowers if it is entitled
<PAGE> 24
to compensation pursuant to this Section 6.01(c) as promptly as practicable
after it determines to request such compensation.
(d) Determinations and allocations by a Lender for purposes of
this Section 6.01 of the effect of any Regulatory Change pursuant to subsections
(a) or (b), or of the effect of capital maintained pursuant to subsection (c),
on its costs of making or maintaining Loans or its obligation to make Loans, or
on amounts receivable by, or the rate of return to, it in respect of Loans or
such obligation, and of the additional amounts required to compensate such
Lender under this Section 6.01, shall be conclusive, provided that such
determinations and allocations are made on a reasonable basis.
Section 6.02. LIMITATION ON TYPES OF LOANS. Anything herein to
the contrary notwithstanding, if:
(a) the Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits referred
to in the definition of "Eurodollar Base Rate" in Section 1.01 are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining the rate of interest for any type of Eurodollar Loans as provided in
this Agreement; or
(b) the Required Lenders determine (which determination shall
be conclusive) and notify the Agent that the relevant rates of interest referred
to in the definition of "Eurodollar Base Rate" in Section 1.01 upon the basis of
which the rate of interest for any type of Eurodollar Loans is to be determined
do not adequately cover the cost to the Lenders of making or maintaining such
Loans;
then the Agent shall give the Borrowers and each Lender prompt notice thereof,
and so long as such condition remains in effect, the Lenders shall be under no
obligation to make or renew Loans of such type or to convert Loans of any other
type into Loans of such type and the Borrowers shall, on the last day(s) of the
then current Interest Period(s) for the outstanding Loans of the affected type,
either prepay such Loans or convert such Loans into another type of Loans in
accordance with Section 2.06.
Section 6.03. ILLEGALITY. Notwithstanding any other provision
in this Agreement, in the event that it becomes unlawful for any Lender or its
Lending Office to (a) honor its obligation to make or renew Eurodollar Loans
hereunder or convert Loans of any type into Loans of such type, or (b) maintain
Eurodollar Loans hereunder, then such Lender shall promptly notify the Borrowers
thereof (with a copy to the Agent) and such Lender's obligation to make or renew
Eurodollar Loans and to convert other types of Loans into Loans of such type
hereunder shall be suspended until such time as such Lender may again make,
renew, or convert and maintain such affected Loans and such Lender's outstanding
Eurodollar Loans, as the case may be, shall be converted in accordance with
Section 6.04.
Section 6.04. CERTAIN CONVERSIONS PURSUANT TO SECTIONS 6.01
AND 6.03. If the Loans of any Lender of a particular type (Loans of such type
being herein called "Affected Loans" and such type being herein called the
"Affected Type") are to be converted pursuant to Section 6.01 or 6.03, such
Lender's Affected Loans shall be automatically converted into Prime Rate Loans
on the last day(s) of the then current Interest Period(s) for the Affected Loans
(or, in the case of a conversion required by Section 6.01(b) or 6.03, on such
earlier date as such Lender may specify
<PAGE> 25
to the Borrowers with a copy to the Agent) and, unless and until such Lender
gives notice as provided below that the circumstances specified in Section 6.01
or 6.03 which gave rise to such conversion no longer exist:
(a) to the extent that such Lender's Affected Loans have been
so converted, all payments and prepayments of principal which would otherwise be
applied to such Lender's Affected Loans shall be applied instead to its Prime
Rate Loans;
(b) all Loans which would otherwise be made or renewed by such
Lender as Loans of the Affected Type shall be made instead as Prime Rate Loans
and all Loans of such Lender which would otherwise be converted into Loans of
this Affected Type shall be converted instead into (or shall remain as) Prime
Rate Loans; and
(c) if Loans of other Lenders of the Affected Type are
subsequently converted into Loans of another type (other than Prime Rate Loans),
such Lender's Prime Rate Loans shall be automatically converted on the
conversion date into Loans of such other type to the extent necessary so that,
after giving effect thereto, all Loans held by such Lender and the Lenders whose
Loans are so converted are held pro rata (as to principal amounts, types and
interest Periods) in accordance with their respective Commitments.
If such Lender gives notice to the Borrowers (with a copy to
the Agent) that the circumstances specified in Section 6.01 or 6.03 which gave
rise to the conversion of such Lender's Affected Loans pursuant to this Section
6.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Loans of the Affected Type are
outstanding, such Lender's Prime Rate Loans shall be automatically converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Loans of the Affected Type to the extent necessary so that, after giving effect
thereto, all Loans held by the Lenders holding Loans of the Affected Type and by
such Lender are held pro rata (as to principal amounts, types and Interest
Periods) in accordance with their respective Commitments.
Section 6.05. CERTAIN COMPENSATION. The Borrowers shall pay to
the Agent for the account of each Lender, upon the request of such Lender
through the Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense which such Lender determines is attributable to:
(a) any payment, prepayment, conversion or renewal of a
Eurodollar Loan made by such Lender on a date other than the last day of an
Interest Period for such Loan (whether by reason of acceleration or otherwise);
or
(b) any failure by the Borrowers to borrow, convert into or
renew a Eurodollar Loan to be made, converted into or renewed by such Lender on
the date specified therefor in the relevant notice under Section 2.05, 2.07 or
2.09, as the case may be.
Without limiting the foregoing, such compensation shall
include an amount equal to the excess, if any, of: (i) the amount of interest
which otherwise would have accrued on the principal amount so paid, prepaid,
converted or renewed or not borrowed, converted or renewed for the period from
and including the date of such payment, prepayment or conversion or failure to
borrow, convert or renew to but excluding the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or renew, to but excluding the last day of the
<PAGE> 26
Interest Period for such Loan which would have commenced on the date specified
therefor in the relevant notice) at the applicable rate of interest for such
Loan provided for herein; over (ii) the amount of interest (as reasonably
determined by such Lender) such Lender would have bid on the date of such
prepayment or failure, in the London interbank market for Dollar deposits for
amounts comparable to such principal amount and maturities comparable to such
period. A determination of any Lender as to the amounts payable pursuant to this
Section 6.05 shall be conclusive absent manifest error.
ARTICLE 7. CONDITIONS PRECEDENT.
Section 7.01. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF
THIS AGREEMENT AND THE INITIAL USE OF A CREDIT FACILITY ON OR AFTER THE THIRD
CLOSING DATE. The obligations of the Lenders on or after the Third Closing Date
to make the Revolving Credit Loans, or of Chase to issue a Letter of Credit, are
subject to the condition precedent that the Agent shall have received, with
copies to each Lender, on or before the Third Closing Date, each of the
following, in form and substance satisfactory to the Lenders, the Agent, the
Servicing Agent and its counsel:
(a) the Notes duly executed by the Borrowers;
(b) good standing certificates for each Borrower, dated
reasonably near the Third Closing Date, from the Secretary of State (or other
appropriate official) of the jurisdiction of incorporation of each Borrower
certifying as to due incorporation and good standing of such Borrower and
certificates dated reasonably near the Third Closing Date, from the Secretary of
State (or other appropriate official) of each other jurisdiction where such
Borrower is required to be qualified to conduct business, certifying that such
Borrower is qualified to do business in such jurisdiction;
(c) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Third Closing Date, attesting to all corporate action
taken by each Borrower including resolutions of its Board of Directors
authorizing the execution, delivery and performance of the Facility Documents to
which it is a party and each other document to be delivered pursuant to this
Agreement;
(d) a certificate of the Secretary or Assistant Secretary of
each Borrower, dated the Third Closing Date, certifying the names and true
signatures of the officers of such Borrower authorized to sign the Facility
Documents to which it is a party and the other documents to be delivered by such
Borrower under this Agreement;
(e) a certificate of a duly authorized officer of each
Borrower, dated the Third Closing Date, stating that the representations and
warranties in Article 8 are true and correct on such date as though made on and
as of such date and that no event has occurred and is continuing which
constitutes a Default or Event of Default;
(f) a schedule of the chief place of business for each
Borrower and a schedule of any Borrower's collateral locations;
<PAGE> 27
(g) a favorable opinion of counsel for the Borrowers, dated
the Third Closing Date, in substantially the form of Exhibit E hereto and as to
such other matters as the Agent, the Servicing Agent or any Lender may
reasonably request;
(h) a borrowing base certificate (calculated as of the Third
Closing Date) in form and substance satisfactory to the Required Lenders which
certificate shall include specific information as to the Eligible Accounts of
Andy Johns and Varon; and
(i) evidence that (1) all insurance required to be maintained
under the Facility Documents is in full force and effect, and (2) to the extent
required under the Facility Documents, the Agent has been designated a loss
payee and additional insured.
Section 7.02. ADDITIONAL CONDITIONS PRECEDENT. The obligations
of the Lenders to provide any Revolving Credit Loan, or of Chase to issue a
Letter of Credit, on or after the Third Closing Date, shall be subject to
further conditions precedent that on the date of providing such Credit Facility:
(a) after the making of such Revolving Credit Loan or issuance
of such Letter of Credit (i) the Revolving Credit Loans shall be, and shall
reasonably be expected to continue to be through the time period that any
outstanding Letters of Credit may be drawn upon (based upon projections prepared
by the Borrowers and provided to the Lenders that are in form and substance
satisfactory to the Required Lenders) equal to or less than the lesser of (A)
the Revolving Credit Loan Borrowing Base, and (B) the Revolving Credit
Commitment, and (ii) the Outstanding Working Capital Obligations shall be and
shall reasonably be expected to continue to be through the time period that any
outstanding Letters of Credit may be drawn upon (based upon projections prepared
by the Borrowers and provided to the Lenders that are in form and substance
satisfactory to the Required Lenders) equal to or less than the Revolving Credit
Commitment;
(b) in the case of a Letter of Credit, there shall be orders
for goods to be imported under such Letter of Credit in an aggregate amount and
on terms satisfactory to the Required Lenders;
(c) the following statements shall be true:
(i) the representations and warranties
contained herein and in the Security Documents, are true and
correct in all material respects on and as of the date of
making such Revolving Credit Loans or issuance of such Letter
of Credit as though made on and as of such date; and
(ii) no Default or Event of Default has
occurred and is continuing, or would result from such Loans or
issuing such Letter of Credit, as the case may be; and
(d) the Agent or Servicing Agent shall have received such
approvals, opinions or documents as either of such Agents or any Lender may
reasonably request.
Section 7.03. DEEMED REPRESENTATIONS. Each request for a
Revolving Credit Loan, or Letter of Credit hereunder and acceptance by the
Borrowers of the proceeds of such Loan or the issuance of such Letter, as the
case may be, shall constitute a representation and warranty
<PAGE> 28
that, except to the extent that they relate expressly to a given date, the
statements contained in Section 7.02(a), (b) and (c) are true and correct in all
material respects both on the date of such request and, unless the Borrowers
otherwise notify both the Agent and the Servicing Agent prior to such borrowing
or issuance, as of the date of such borrowing or issuance, as the case may be.
Section 7.04 WAIVER. Upon the execution of this Agreement and
satisfaction of all the conditions precedent set forth in Section 7.01 each
Lender and each Agent waive the Borrower's failure to comply with each of the
following provisions: (1) Events of Default resulting from the fact that the
aggregate outstanding principal amount of the Revolving Credit Loans made to BAI
for Varon was not less than the Eligible Accounts of Varon by an amount
specified in the 1996 Credit Agreement relied on in computing the Collateral
Borrowing Base as set forth in the Reconciliation Report for the months ended
October 31, 1996, November 30, 1996 and December 31, 1996, (2) Events of Default
resulting from the fact that the aggregate outstanding principal amount of the
Revolving Credit Loans made to BAI for Andy Johns was not less than the Eligible
Accounts of Andy Johns by an amount specified in the 1996 Credit Agreement
relied on in computing the Collateral Borrowing Base as set forth in the
Reconciliation Report for the month ended December 31, 1996, (3) Events of
Default resulting from the Revolving Credit Loans and the Letter of Credit
Obligations exceeding the Working Capital Borrowing Base (as such term is
defined in the 1996 Credit Agreement) during the period from January 1, 1997
through the Third Closing Date and (4) Events of Default resulting from failure
to be in compliance with each of the following Financial Covenants as of
December 31, 1996: Section 11.02 "Minimum Tangible Net Worth", and Section 11.04
"Net Income".
No Lender waives any future noncompliance by any Borrower with
any of the above-referenced Sections.
The execution and delivery of this Agreement shall not, except
as specifically provided above, constitute a waiver of any right, power or
remedy of either Agent or any Lender under this Agreement or any Facility
Document, and, except as specifically provided above, this Agreement and each
Facility Document shall remain in full force and effect and are hereby ratified
and confirmed.
ARTICLE 8. REPRESENTATIONS AND WARRANTIES.
Each Borrower hereby represents and warrants that:
Section 8.01. INCORPORATION, GOOD STANDING AND DUE
QUALIFICATION. Each Borrower and its Subsidiaries is duly incorporated, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own its assets and to
transact the business in which it is now engaged or proposed to be engaged, and
is duly qualified as a foreign corporation and in good standing under the laws
of each other jurisdiction in which such qualification is required.
Section 8.02. CORPORATE POWER AND AUTHORITY; NO CONFLICTS. The
execution, delivery and performance by each Borrower of the Facility Documents
to which it is a party have been duly authorized by all necessary corporate
action and do not and will not: (a) require any consent or approval of its
stockholders; (b) contravene its charter or by-laws; (c) violate any provision
of, or require any filing other than the filing of the financing statements
contemplated by the Security Agreement), registration, consent or approval
under, any law, rule, regulation (including, without
<PAGE> 29
limitation, Regulation U), order, writ, judgment, injunction, decree,
determination or award presently in effect having applicability to such Borrower
or any of its Subsidiaries or Affiliates; (d) result in a breach of or
constitute a default or require any consent under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which such
Borrower is a party or by which it or its properties may be bound or affected;
(e) result in, or require, the creation or imposition of any Lien (other than as
created under the Security Agreement or the Trademark Assignment), upon or with
respect to any of the properties now owned or hereafter acquired by such
Borrower; or (f) cause such Borrower (or any Subsidiary or Affiliate, as the
case may be) to be in default under any such law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award or any such indenture,
agreement, lease or instrument.
Section 8.03. LEGALLY ENFORCEABLE AGREEMENTS. Each Facility
Document to which a Borrower is a party is, or when delivered under this
Agreement will be, a legal, valid and binding obligation of such Borrower
enforceable against such Borrower in accordance with its terms, except to the
extent that such enforcement may be limited by applicable bankruptcy, insolvency
and other similar laws affecting creditors' rights generally.
Section 8.04. LITIGATION. There are no actions, suits or
proceedings pending or, to the knowledge of any Borrower, threatened, against or
affecting such Borrower or any of its Subsidiaries before any court,
governmental agency or arbitrator, which may, in any one case or in the
aggregate, materially adversely affect the financial condition, operations,
properties or business of such Borrower or any such Subsidiary or of the ability
of such Borrower to perform its obligations under the Facility Documents to
which it is a party.
Section 8.05. FINANCIAL STATEMENTS. The consolidated and
consolidating balance sheet of Apparel and its consolidated subsidiaries as at
December 31, 1995, and the related consolidated and consolidating statement of
operations and statements of cash flows and changes in stockholders' equity of
Apparel and its consolidated subsidiaries for the fiscal year then ended, and
the accompanying footnotes, and as to the consolidated statements, together with
the opinion thereon, of Coopers & Lybrand, independent certified public
accountants, and the annual consolidated and consolidating balance sheet of
Apparel and its consolidated subsidiaries as at December 31, 1995 and the
related consolidated and consolidating statement of operations and statements of
cash flows for the twelve month period then ended, copies of which have been
furnished to each of the Lenders, are complete and correct and fairly present
the financial condition of Apparel and its consolidated subsidiaries as at such
dates and the results of the operations of Apparel and its consolidated
subsidiaries for the periods covered by such statements, all in accordance with
GAAP consistently applied. There are no liabilities of Apparel or any of its
consolidated subsidiaries, fixed or contingent, which are material but are not
reflected in the financial statements or in the notes thereto (except as set
forth in Schedule 8.05), other than liabilities arising in the ordinary course
of business since December 31, 1995. No information, exhibit or report furnished
by any Borrower to the Lenders in connection with the negotiation of this
Agreement contained any material misstatement of fact or omitted to state a
material fact or any fact necessary to make the statements contained therein not
materially misleading. Since December 31, 1995, there has been no material
adverse change in the condition (financial or otherwise), business, operations
or prospects of any of the Borrowers or any of their Subsidiaries other than the
Borrowers' 1996 write-off of goodwill, impairment of long-lived assets, and
restructuring charges disclosed to the Lenders in the press release dated March
7, 1997.
<PAGE> 30
Section 8.06. OWNERSHIP AND LIENS. Each of the Borrowers and
its Subsidiaries has title to, or valid leasehold interests in, all of its
properties and assets, real and personal, including the properties and assets,
and leasehold interests reflected in the financial statements referred to in
Section 8.05 (other than any properties or assets disposed of in the ordinary
course of business), and none of the properties and assets owned by such
Borrower or any of its Subsidiaries and none of its leasehold interests is
subject to any Lien, except as disclosed in such financial statements or as may
be permitted hereunder and except for the Lien created by the Security Agreement
and Trademark Assignments.
Section 8.07. TAXES. Each of the Borrowers and its
Subsidiaries has filed all federal and state income tax returns required to be
filed and has paid all taxes, assessments and governmental charges and levies
thereon to be due, including interest and penalties where the failure to pay
would have a material adverse effect on the Borrowers' business, operations or
prospects. There has been no audit of the federal income tax liability of any of
the Borrowers since the taxable year ended 1991.
Section 8.08. ERISA. Each Plan, and, to the best knowledge of
the Borrowers, each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other applicable
Federal or state law, and no event or condition is occurring or exists
concerning which the Borrowers would be under an obligation to furnish a report
to the Agent in accordance with Section 9.09(h) hereof. As of the most recent
valuation date for each Plan, each Plan was "fully funded," which for purposes
of this Section 8.08 shall mean that the fair market value of the assets of the
Plan is not less than the present value of the accrued benefits of all
participants in the Plan, computed on a Plan termination basis. To the best
knowledge of the Borrowers, no Plan has ceased being fully funded as of the date
these representations are made with respect to any Loan under this Agreement.
Section 8.09. SUBSIDIARIES AND OWNERSHIP OF STOCK. Schedule
8.09 is a complete and accurate list of the subsidiaries of each of the
Borrowers and each other Person in which the Borrowers owned an equity interest,
showing the jurisdiction of incorporation or organization of each Person and
showing the percentage of such Borrower's ownership of the outstanding stock or
other interest of each such Person. All of the outstanding capital stock or
other interest of each such Person owned by any Borrower has been validly
issued, is fully paid and nonassessable and is owned by such Borrower free and
clear of all Liens.
Section 8.10. CREDIT ARRANGEMENTS. Schedule 8.10 is a complete
and correct list of all credit agreements, indentures, purchase agreements,
guaranties, Capital Leases and other investments, agreements and arrangements
presently in effect providing for or relating to extensions of credit (including
agreements and arrangements for the issuance of letters of credit or for
acceptance financing) in respect of which the Borrowers or any of their
Subsidiaries is in any manner directly or contingently obligated; and the
maximum principal or face amounts of the credit in question, outstanding and
which can be outstanding, are correctly stated, and all Liens of any nature
given or agreed to be given as security therefor are correctly described or
indicated in such Schedule.
Section 8.11. OPERATION OF BUSINESS. Each of the Borrowers and
their Subsidiaries possesses all licenses, permits, franchises, patents,
copyrights, trademarks and trade names, or rights thereto, necessary to conduct
its business substantially as now conducted and
<PAGE> 31
as presently proposed to be conducted, and to the best of their knowledge none
of the Borrowers nor any of their Subsidiaries is in violation of any valid
rights of others with respect to any of the foregoing.
Section 8.12. HAZARDOUS MATERIALS. The Borrowers and each of
their Subsidiaries have obtained all permits, licenses and other authorizations
which are required under all Environmental Laws, except to the extent failure to
have any such permit, license or authorization would not have a material adverse
effect on the consolidated financial condition, operations, business or
prospects of the Borrowers and the Consolidated Subsidiaries. Each Borrower and
each of its Subsidiaries are in compliance with the terms and conditions of all
such permits, licenses and authorizations, and are also in compliance with all
other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply would not have a material
adverse effect on the consolidated financial condition, operations, business or
prospects of such Borrower.
In addition, except as set forth in Schedule 8.12 hereto:
(a) No notice, notification, demand, request for information,
citation, summons or order has been issued, no complaint has been filed, no
penalty has been assessed and no investigation or review is pending or
threatened by any governmental or other entity with respect to any alleged
failure by any Borrower or any of its Subsidiaries to have any permit, license
or authorization required in connection with the conduct of the business of such
Borrower or any of its Subsidiaries or with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or any
release as defined in 42 U.S.C. ss. 9601(22) ("Release"), of any substance
regulated under Environmental Laws ("Hazardous Materials") generated by such
Borrower or any of its Subsidiaries.
(b) None of the Borrowers nor any of their Subsidiaries has
handled any Hazardous Material, other than as a generator, on any property now
or previously owned or leased by any Borrower or any of their Subsidiaries to an
extent that it has, or may reasonably be expected to have, a material adverse
effect on the consolidated financial condition, operations, business or
prospects of such Borrower; and
(i) no polychlorinated biphenyl is or has
been present at any property now or previously owned or leased
by the Borrowers or any of their Subsidiaries;
(ii) no asbestos is or has been present at
any property now or previously owned or leased by the
Borrowers or any of their Subsidiaries;
(iii) there are no underground storage tanks
for Hazardous Materials, active or abandoned, at any property
now or previously owned or leased by the Borrowers or any of
their Subsidiaries; and
(iv) no Hazardous Materials have been Released, in a
reportable quantity, where such a quantity has been
established by statute, ordinance, rule, regulation or
order, at, on or under any property now or previously owned by
the Borrowers or any of their Subsidiaries.
<PAGE> 32
(c) None of the Borrowers nor any of their Subsidiaries has
transported or arranged for the transportation of any Hazardous Material to any
location which is listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") listed for possible inclusion on the National Priorities List by the
Environmental Protection Agency in the Comprehensive Environmental Response and
Liability Information System as provided by 40 C.F.R. ss. 300.5 ("CERCLIS") or
on any similar state list or which is the subject of federal, state or local
enforcement actions or other investigations which may lead to claims against any
Borrower or any of its Subsidiaries for clean-up costs, remedial work, damages
to natural resources or for personal injury claims, including, but not limited
to, claims under CERCLA.
(d) No Hazardous Material generated by the Borrowers or any of
their Subsidiaries has been recycled, treated, stored, disposed of or released
by any Borrower or any of its Subsidiaries at any location other than those
listed in Schedule III hereto.
(e) No oral or written notification of a Release of a
Hazardous Material has been filed by or on behalf of any Borrower or any of its
Subsidiaries and no property now or previously owned or leased by any Borrower
or any of its Subsidiaries is listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA, on CERCLIS or on any similar
state list of sites requiring investigation or clean-up.
(f) There are no Liens arising under or pursuant to any
Environmental Laws on any of the real property or properties owned or leased by
the Borrowers or any of their Subsidiaries, and no government actions have been
taken or are in process which could subject any of such properties to such Liens
and none of the Borrowers nor any of their Subsidiaries would be required to
place any notice or restriction relating to the presence of Hazardous Materials
at any property owned by it in any deed to such property.
(g) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or which are in the
possession of the Borrowers or any of their Subsidiaries in relation to any
property or facility now or previously owned or leased by the Borrowers or any
of their Subsidiaries which have not been made available to the Lenders.
Section 8.13. NO DEFAULT ON OUTSTANDING JUDGMENTS OR ORDERS.
Each of the Borrowers and its Subsidiaries has satisfied all judgments
applicable to them and none of the Borrowers nor any of their Subsidiaries is in
default with respect to any judgment, writ, injunction or decree of any court,
arbitrator or federal, state, municipal or other governmental authority,
commission, board, bureau, agency or instrumentality, domestic or foreign.
Section 8.14. NO DEFAULTS ON OTHER AGREEMENTS. None of the
Borrowers nor any of their Subsidiaries is a party to any indenture, loan or
credit agreement or any lease or other agreement or instrument or subject to any
charter or corporate restriction which could have a material adverse effect on
the business, properties, assets, operations or conditions, financial or
otherwise, of such Borrower or any of its Subsidiaries, or the ability of such
Borrower to carry out its obligations under the Facility Documents to which it
is a party. None of the Borrowers nor any of their Subsidiaries is in default in
any respect in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or instrument
material to its business to which it is a party, except for defaults which would
not have a material adverse
<PAGE> 33
effect on the business, properties, assets, operations or conditions, financial
or otherwise, of such Borrower or any of its Subsidiaries.
Section 8.15. LABOR DISPUTES AND ACTS OF GOD. Neither the
business nor the properties of any of the Borrowers or of any of their
Subsidiaries are affected by any fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy or other casualty (whether or not covered by insurance)
materially and adversely affecting such business or properties or the operation
of any of the Borrowers or such Subsidiaries.
Section 8.16. GOVERNMENTAL REGULATION. None of the Borrowers
nor any of their Subsidiaries is subject to regulation under the Public Utility
Holding Company Act of 1935, the Investment Company Act of 1940, the Interstate
Commerce Act, the Federal Power Act or any statute or regulation limiting its
ability to incur indebtedness for money borrowed as contemplated hereby.
Section 8.17 PARTNERSHIPS. None of the Borrowers nor any of
their Subsidiaries is a general partner in any partnership.
Section 8.18 NO FORFEITURE. None of the Borrowers nor any of
their Subsidiaries or Affiliates is engaged in or proposes to be engaged in the
conduct of any business or activity which could result in a Forfeiture
Proceeding and no Forfeiture Proceeding against any of them is pending or to the
best of their knowledge, threatened.
Section 8.19. SOLVENCY.
(a) The present fair saleable value of the assets of the
Borrowers and their Subsidiaries after giving effect to all the transactions
contemplated by the Facility Documents and the funding of the Revolving Credit
Commitments hereunder exceeds the amount that will be required to be paid on or
in respect of the existing debts and other liabilities (including contingent
liabilities) of the Borrowers and their Subsidiaries as they mature.
(b) The property of the Borrowers does not constitute
unreasonably small capital for the Borrowers to carry out their business as now
conducted and as proposed to be conducted including the capital needs of the
Borrowers.
(c) The Borrowers do not intend to, nor do they believe they
will, incur debts beyond their ability to pay such debts as they mature (taking
into account the timing and amounts of cash to be received by them, and of
amounts to be payable on or in respect of debt of the Borrowers). The cash
available to the Borrowers after taking into account all other anticipated uses
of the cash of the Borrowers, is anticipated to be sufficient to pay all such
amounts on or in respect of debt of the Borrowers when such amounts are required
to be paid.
(d) No Borrower believes that final judgments against it in
actions for money damages will be rendered at a time when, or in an amount such
that, such judgment will be unable to be satisfied promptly in accordance with
its terms (taking into account the maximum reasonable amount of such judgments
in any such actions and the earliest reasonable time at which such judgments
might be rendered). The cash available to the Borrowers after taking into
account all other anticipated uses of the cash of the Borrowers (including the
payments on or in respect of debt
<PAGE> 34
referred to in paragraph (c) of this Section 8.19) is anticipated to be
sufficient to pay all such judgments promptly in accordance with their terms.
ARTICLE 9. AFFIRMATIVE COVENANTS.
So long as any of the Loans shall remain unpaid or any
Outstanding Working Capital Obligation shall remain outstanding or any Lender
shall have a Revolving Credit Commitment under this Agreement, or any amount is
owing by any Borrower to any Lender hereunder or under any other Facility
Document, each Borrower shall:
Section 9.01. MAINTENANCE OF EXISTENCE. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence and good standing in the jurisdiction of its incorporation, and
qualify and remain qualified, and cause each of its Subsidiaries to qualify and
remain qualified, as a foreign corporation in each jurisdiction in which such
qualification is required.
Section 9.02. CONDUCT OF BUSINESS. Continue, and cause each of
its Subsidiaries to continue, to engage in an efficient and economical manner in
a business of the same general type as conducted by it on the date of this
Agreement.
Section 9.03. MAINTENANCE OF PROPERTIES. Maintain, keep and
preserve, and cause each of its Subsidiaries to maintain, keep and preserve, all
of its properties, (tangible and intangible) necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted.
Section 9.04. MAINTENANCE OF RECORDS. Keep, and cause each of
its Subsidiaries to keep, adequate records and books of account, in which
complete entries will be made (except as to Subsidiaries domiciled outside the
United States) in accordance with GAAP, reflecting all financial transactions of
such Borrower and its Subsidiaries.
Section 9.05. MAINTENANCE OF INSURANCE. Maintain, and cause
each of its Subsidiaries to maintain, insurance with financially sound and
reputable insurance companies or associations, reasonably acceptable to the
Required Lenders, in such amounts and covering such risks as are usually carried
by companies engaged in the same or a similar business and similarly situated,
which insurance may provide for reasonable deductibility from coverage thereof.
Section 9.06. COMPLIANCE WITH LAWS. Comply, and cause each of
its Subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property, except to the extent such are
being contested in good faith by appropriate proceedings and for which
appropriate reserves have been established.
Section 9.07. RIGHT OF INSPECTION. At any reasonable time and
from time to time upon reasonable notice, permit the Agent, the Servicing Agent
or any Lender or any agent or representative thereof, to examine and make copies
and abstracts from the records and books of account of, and visit the properties
of, such Borrower and any of its Subsidiaries, and to discuss
<PAGE> 35
the affairs. finances and accounts of such Borrower and any such Subsidiary with
any of their respective officers and directors and such Borrower's independent
accountants.
Section 9.08. ASSET BASED AUDIT. From time to time, upon
reasonable notice, at the request of the Required Lenders (but absent a Default
or Event of Default, not more often than once every fiscal year), permit an
asset based audit to be performed at the Borrowers' expense, and at any time at
the request of any Lender at such Lender's expense.
Section 9.09. REPORTING REQUIREMENTS. Furnish directly to each
of the Lenders (or as otherwise specifically provided for below):
(a) as soon as available and in any event within 90 days after
the end of each fiscal year of Apparel, a consolidated and consolidating balance
sheet of Apparel and its consolidated subsidiaries as of the end of such fiscal
year and a consolidated and consolidating statement of operations and statements
of cash flows and changes in stockholders' equity of Apparel and its
consolidated subsidiaries for such fiscal year, all in reasonable detail
(including all operating divisions of the Borrowers) and stating in comparative
form the respective consolidated figures for the corresponding date and period
in the prior fiscal year, and with respect to the consolidated financial
statements accompanied by an opinion thereon acceptable to the Agent and each of
the Lenders by Coopers & Lybrand or other independent certified public
accountants of national standing selected by Apparel, which opinion shall state
that said financial statements fairly present the consolidated financial
condition and results of operations of Apparel and its consolidated subsidiaries
as at the end of, and for, such fiscal year in accordance with generally
accepted accounting principles then in effect; provided, however, if there is a
change in generally accepted accounting principles after December 31, 1995,
which affects the presentation of the financial statements noted above in this
Section 9.09(a), then, in addition to the financial statements required above,
Apparel will furnish to each Lender all adjustments to such financial statements
required under this Section 9.09(a) that would be required if they were prepared
in accordance with GAAP at the same time it provides the financial statements
noted above in this Section 9.09(a);
(b) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of Apparel, a
consolidated and consolidating balance sheet of Apparel and its consolidated
subsidiaries as of the end of such quarter and a consolidated and consolidating
statement and statements of cash flows, of Apparel and its consolidated
subsidiaries for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, all in reasonable detail (including all
operating divisions of the Borrowers) and stating in comparative form the
respective consolidated figures for the corresponding date and period in the
previous fiscal year and all prepared in accordance with GAAP and certified by
the chief financial officer of Apparel (subject to standard year-end audit
adjustments); provided, however, if there is a change in generally accepted
accounting principles after December 31, 1995, which affects the presentation of
the financial statements noted above in this Section 9.09(b), then, in addition
to the financial statements required above, Apparel will furnish to each Lender
all adjustments to such financial statements required under this Section 9.09(b)
that would be required if they were prepared in accordance with GAAP at the same
time it provides the financial statements noted above in this Section 9.09(b);
(c) as soon as available and in any event within 60 days after
the end of each January, 45 days after the end of each February, and 30 days
after the end of each other month
<PAGE> 36
of the calendar year, a consolidated and consolidating balance sheet of Apparel
and its consolidated subsidiaries as of the end of such month and a consolidated
and consolidating statement of operations and statements of cash flows, of
Apparel and its consolidated subsidiaries for such month and for the period
commencing at the end of the previous fiscal year and ending with the end of
such month, all in reasonable detail (including all operating divisions of the
Borrowers) and all prepared in accordance with GAAP and certified by the chief
financial officer of Apparel (subject to standard year-end audit adjustments);
provided, however, if there is a change in generally accepted accounting
principles after December 31, 1995, which affects the presentation of the
financial statements noted above in this Section 9.09(c), then, in addition to
the financial statements required above, Apparel will furnish to each Lender all
adjustments to such financial statements required under this Section 9.09(c)
that would be required if they were prepared in accordance with GAAP at the same
time it provides the financial statements noted above in this Section 9.09(c);
(d) promptly upon receipt thereof, copies of any reports
submitted to the Borrowers or any of their Subsidiaries by independent certified
public accountants in connection with examination of the financial statements of
Apparel or any such Subsidiary made by such accountants or in connection with
any analysis of the Borrower's operations and business practices;
(e) simultaneously with the delivery of the financial
statements referred to above, a certificate of the chief financial officer of
Apparel (i) certifying that to the best of his knowledge no Default or Event of
Default has occurred and is continuing or, if a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof and the action
which is proposed to be taken with respect thereto, and (ii) with respect to the
financial statements under Section 9.09(a) with computations demonstrating
compliance with the covenants contained in Article 11;
(f) promptly after the commencement thereof, notice of all
actions, suits, and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting any Borrower or any of its Subsidiaries which, if determined adversely
to such Borrower or such Subsidiary, could have a material adverse effect on the
financial condition, properties, or operations of such Borrower or such
Subsidiary;
(g) as soon as possible and in any event within 5 days after
the occurrence of each Default or Event of Default a written notice setting
forth the details of such Default or Event of Default and to the extent
practicable the action which is proposed to be taken by the Borrowers with
respect thereto;
(h) as soon as possible, and in any event within ten days
after any Borrower knows or has reason to know that any of the events or
conditions specified below with respect to any Plan or Multiemployer Plan have
occurred or exist, a statement signed by a senior financial officer of such
Borrower setting forth details respecting such event or condition and the
action, if any, which such Borrower or its ERISA Affiliate proposes to take with
respect thereto (and a copy of any report or notice required to be filed with or
given to PBGC by such Borrower or an ERISA Affiliate with respect to such event
or condition):
(i) any reportable event, as defined in Section
4043(b) of ERISA, with respect to a Plan, as to which
PBGC has not by regulation waived the requirement of Section
4043(a) of ERISA that it be notified within 30 days of the
occurrence of
<PAGE> 37
such event (provided that a failure to meet the minimum
funding standard of Section 412 of the Code or Section 302 of
ERISA including, without limitation, the failure to make on or
before its due date a required installment under Section
412(m) of the Code or Section 302(e) of ERISA, shall be a
reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code) and any request
for a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of
ERISA of a notice of intent to terminate any Plan or any
action taken by a Borrower or an ERISA Affiliate to terminate
any Plan;
(iii) the institution by PBGC of proceedings
under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by a Borrower or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by PBGC
with respect to such Multiemployer Plan;
(iv) the complete or partial withdrawal from
a Multiemployer Plan by a Borrower or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA
(including the obligation to satisfy secondary liability as a
result of a purchaser default) or the receipt of a Borrower or
any ERISA Affiliate of notice from a Multiemployer Plan that
it is in reorganization or insolvency pursuant to Section 4241
or 4245 of ERISA or that it intends to terminate or has
terminated under Section 4041A of ERISA;
(v) the institution of a proceeding by a
fiduciary or any Multiemployer Plan against a Borrower or any
ERISA Affiliate to enforce Section 515 of ERISA, which
proceeding is not dismissed within 30 days;
(vi) the adoption of an amendment to any
Plan that pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA would result in the loss of tax-exempt
status of the trust of which such Plan is a part if a Borrower
or an ERISA Affiliate fails to timely provide security to the
Plan in accordance with the provisions of said Sections;
(vii) any event or circumstance exists which
may reasonably be expected to constitute grounds for a
Borrower or any ERISA Affiliate to incur liability under Title
IV of ERISA or under Sections 412(c)(11) or 412(n) of the Code
with respect to any Plan; and
(viii) the Unfunded Benefit Liabilities of
one or more Plans increase after the date of this Agreement in
an amount which is material in relation to the financial
condition of the Borrowers;
(i) promptly after the request of any Lender, copies of each
annual report filed pursuant to Section 104 of ERISA with respect to each Plan
(including, to the extent required by Section 104 of ERISA, the related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information referred to in Section 103) and each
annual report filed with respect to each Plan under Section 4065 of ERISA;
PROVIDED,
<PAGE> 38
HOWEVER, that in the case of a Multiemployer Plan, such annual reports shall be
furnished only if they are available to a Borrower or an ERISA Affiliate;
(j) promptly after the furnishing thereof, copies of any
statement or report furnished to any other party pursuant to the terms of any
indenture, loan or credit or similar agreement and not otherwise required to be
furnished to the Lenders pursuant to any other clause of this Section 9.09;
(k) promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports which any Borrower or any
of its Subsidiaries sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements which Apparel
files with the Securities and Exchange Commission or any governmental authority
which may be substituted therefor, or with any national securities exchange;
(l) promptly after the commencement thereof or promptly after
any Borrower knows of the commencement or threat thereof, notice of any
Forfeiture Proceeding;
(m) as soon as available and in any event not later than 15
days after the end of each fiscal quarter (or if requested by any Lender in
writing, within 15 days after the end of each month), a detailed aging report
with respect to the Accounts of each Borrower, in form satisfactory to the
Servicing Agent and the Required Lenders;
(n) as soon as available and in any event within 5 days of
each month, an "availability to sell" report for each Borrower and each division
of each Borrower, in form satisfactory to the Servicing Agent and the Required
Lenders;
(o) as soon as available and in any event not later than 10
days prior to the end of each month, a consolidating three (3) month cash flow
projection of Apparel and its consolidated subsidiaries, including, without
limitation, sales, collections, cash requirements, accounts receivable balance,
inventory balance, and accounts payable balance of Apparel and its consolidated
subsidiaries for the following three months;
(p) each week, the Borrowers shall provide to the Servicing
Agent a detailed open item aging report with respect to the Accounts of the
Borrowers, showing aggregate current Accounts by operating unit and aging in 30
day increments, in form satisfactory to the Servicing Agent and the Required
Lenders;
(q) each week, internally prepared "flash" reports
substantially in the form attached hereto as Exhibit C, certified by the chief
financial officer of Apparel;
(r) from time to time at the request of the Servicing Agent or
any Lender, but not less frequently than twice each week, the Borrowers shall
provide to the Servicing Agent (i) sales journals describing all Accounts
created by the Borrowers, by operating unit, in form and substance satisfactory
to the Required Lenders and the Servicing Agent; and (ii) cash receipts
journals, in form and substance satisfactory to the Required Lenders and the
Servicing Agent;
(s) not later than November 30 of each fiscal year, a budget
for the succeeding fiscal year, in form and substance satisfactory to the
Required Lenders;
<PAGE> 39
(t) simultaneously with the delivery of the annual financial
statements referred to above, and within 60 days of any material changes in
coverage, copies of certificates of insurance from each insurance carrier
evidencing the coverage required by Section 9.05; and
(u) such other information or documents respecting the
condition, assets or operations, financial or otherwise, of the Borrowers or any
of their Subsidiaries as the Agent, the Servicing Agent or any Lender may from
time to time reasonably request.
ARTICLE 10. NEGATIVE COVENANTS.
So long as any of the Loans shall remain unpaid or any
Outstanding Working Capital Obligation shall remain outstanding or any Lender
shall have a Revolving Credit Commitment under this Agreement, or any amount is
owing by any Borrower to any Lender hereunder or under any other Facility
Document, none of the Borrowers shall:
Section 10.01. DEBT. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Debt, except:
(a) Debt of such Borrower under this Agreement or the Notes;
(b) Debt described in Schedule 10.01, but no renewals,
extensions or refinancings thereof;
(c) the Subordinated Debt and any other Debt of the Borrowers
subordinated on terms satisfactory to the Lenders to the Borrowers' obligations
under this Agreement and the Notes;
(d) Debt of the Borrowers to any other Borrower or a
Subsidiary or of any Subsidiary to the Borrowers or another such Subsidiary:
(e) Debt, including Capital Leases, of the Borrowers or any
such Subsidiary secured by purchase money Liens or Liens in connection with
Capital Leases permitted by Section 10.03(i).
Section 10.12. GUARANTIES, ETC. Assume, guarantee, endorse or
otherwise be or become directly or contingently responsible or liable, or permit
any of its Subsidiaries to assume, guarantee, endorse or otherwise be or become
directly or indirectly responsible or liable (including, but not limited to, an
agreement to purchase any obligation, stock, assets, goods or services or to
supply or advance any funds, asset, goods or services, or an agreement to
maintain or cause such Person to maintain a minimum working capital or net worth
or otherwise to assure the creditors of any Person against loss), for the
obligations of any Person, except: (a) guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary
course of business; and (b) guaranties of domestic suppliers of the Borrowers,
not exceeding One Million Dollars ($1,000,000) in the aggregate, given in
connection with the purchase of raw materials.
<PAGE> 40
Section 10.03. LIENS. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any Lien, upon or with respect to any of its properties, now owned or
hereafter acquired, except:
(a) Liens in favor of the Agent on behalf of the Lenders
securing the Loans hereunder;
(b) Liens for taxes or assessments or other government charges
or levies if not yet due and payable or if due and payable if they are being
contested in good faith by appropriate proceedings and for which appropriate
reserves are maintained;
(c) Liens imposed by law, such as mechanic's, materialmen's,
landlord's, warehousemen's and carrier's Liens, and other similar Liens,
securing obligations incurred in the ordinary course of business which are not
past due for more than 45 days, or which are being contested in good faith by
appropriate proceedings and for which appropriate reserves have been
established;
(d) Liens under workmen's compensation, unemployment
insurance, social security or similar legislation (other than ERISA);
(e) Liens, deposits or pledges to secure the performance of
bids, tenders, contracts (other than contracts for the payment of money), leases
(permitted under the terms of this Agreement), public or statutory obligations,
surety, stay, appeal, indemnity, performance or other similar bonds, or other
similar obligations arising in the ordinary course of business;
(f) judgment and other similar Liens arising in connection
with court proceedings; provided that the execution or other enforcement of such
Liens is effectively stayed and the claims secured thereby are being actively
contested in good faith and by appropriate proceedings;
(g) easements, rights-of-way, restrictions and other similar
encumbrances which, in the aggregate, do not materially interfere with the
occupation, use and enjoyment by the Borrowers or any such Subsidiary of the
property or assets encumbered thereby in the normal course of its business or
materially impair the value of the property subject thereto;
(h) Liens securing obligations of such a Subsidiary to a
Borrower or another such Subsidiary; or
(i) purchase money Liens on any property hereafter acquired or
the assumption of any Lien on property existing at the time of such acquisition,
or a Lien incurred in connection with any conditional sale or other title
retention agreement or a Capital Lease; provided that:
(i) any property subject to any of the
foregoing is acquired by a Borrower or any such Subsidiary in
the ordinary course of its business and the Lien on any such
property is created contemporaneously with or in existence at
the time of, such acquisition;
(ii) the obligation secured by any Lien so
created, assumed or existing shall not exceed 100% of the
lesser of cost or fair market value as of the time of
<PAGE> 41
acquisition of the property covered thereby to such Borrower
or such Subsidiary acquiring the same;
(iii) each such Lien shall attach only to
the property so acquired and fixed improvements thereon; and
(iv) the obligations secured by such Lien
are permitted by the provisions of Sections 10.01 and 11.01.
Section 10.04. LEASES. Create, incur, assume or suffer to
exist, or permit any of its Subsidiaries to create, incur, assume or suffer to
exist, any obligation as lessee for the rental or hire of any real or personal
property, except: (a) leases existing on the date of this Agreement and any
extensions or renewals thereof; (b) leases (other than Capital Leases) which do
not in the aggregate require the Borrowers to make payments (including taxes,
insurance, maintenance and similar expense which the Borrowers are required to
pay under the terms of any lease) in any fiscal year of the Borrowers in excess
of $2,500,000; and (c) Capital Leases permitted by Section 10.01.
Section 10.05. INVESTMENTS. Make, or permit any of its
Subsidiaries to make, any loan or advance to any Person or purchase or otherwise
acquire, or permit any such Subsidiary to purchase or otherwise acquire, any
capital stock, assets, obligations or other securities of, make any capital
contribution to, or otherwise invest in, or acquire any interest in, any Person,
except: (a) direct obligations of the United States of America or any agency
thereof with maturities of one year or less from the date of acquisition; (b)
commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's
Corporation or "P-1" by Moody's Investors Service, Inc.; (c) certificates of
deposit with maturities of one year or less from the date of acquisition issued
by any commercial bank operating within the United States of America having
capital and surplus in excess of $100,000,000; (d) for stock, obligations or
securities received in settlement of debts (created in the ordinary course of
business) owing to the Borrower or any such Subsidiary; (e) advances by M & L
International, Inc. to M & L International (H.K.) Ltd. not exceeding $750,000
outstanding at any time; and (f) Apparel may make an investment of up to
$500,000 in Amy Industries de Honduras, S.A. de C.V.
Section 10.06. DIVIDENDS. Declare or pay any dividends,
purchase, redeem, retire or otherwise acquire for value any of its capital stock
now or hereafter outstanding, or make any distribution of assets to its
stockholders as such whether in cash, assets or in obligations of such Borrower,
or allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption or retirement of any shares of
its capital stock, or make any other distribution by reduction of capital or
otherwise in respect of any shares of its capital stock or permit any of its
Subsidiaries to purchase or otherwise acquire for value any stock of such
Borrower or another such Subsidiary, except that a Borrower may declare and
deliver dividends and make distributions payable solely in its common stock.
Section 10.07. SALE OF ASSETS. Sell, lease, assign, transfer
or otherwise dispose of, or permit any of its Subsidiaries to sell, lease,
assign, transfer or otherwise dispose of, any of its now owned or hereafter
acquired assets (including, without limitation, shares of stock and indebtedness
of such Subsidiaries, receivables and leasehold interests), except: (a) for
inventory disposed of in the ordinary course of business; (b) the sale or other
disposition of assets no longer used or useful in the conduct of its business;
and (c) that any such Subsidiary may sell, lease, assign, or otherwise transfer
its assets to a Borrower.
<PAGE> 42
Section 10.08. STOCK OF SUBSIDIARIES, ETC. Sell or otherwise
dispose of any shares of capital stock of any of its Subsidiaries, except in
connection with a transaction permitted under Section 10.10, or permit any such
Subsidiary to issue any additional shares of its capital stock, except
directors' qualifying shares.
Section 10.09. TRANSACTIONS WITH AFFILIATES. Enter into any
transaction, including, without limitation, the purchase, sale or exchange of
property or the rendering of any service, with any Affiliate or permit any of
its Subsidiaries to enter into any transaction, including, without limitation,
the purchase, sale or exchange of property or the rendering of any service, with
any Affiliate, except (a) in the ordinary course of and pursuant to the
reasonable requirements of the Borrowers' or such Subsidiary's business and upon
fair and reasonable terms no less favorable to the Borrowers or such Subsidiary
than would obtain in a comparable arm's length transaction with a Person not an
Affiliate, and (b) payment of fees to Trivest, Inc. pursuant to the Trivest
Letter Agreement.
Section 10.10. MERGERS, ETC. Merge or consolidate with, or
sell, assign, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, any Person, or acquire all or substantially all
of the assets or the business of any Person (or enter into any agreement to do
any of the foregoing), or permit any of its Subsidiaries to do so except that:
(a) any such Subsidiary may merge into or transfer assets to a Borrower; (b) any
Subsidiary may merge into or consolidate with or transfer assets to any other
Subsidiary: and (c) any Borrower may merge into or consolidate with another
Borrower.
Section 10.11. NO ACTIVITIES LEADING TO FORFEITURE. None of
the Borrowers nor any of their Subsidiaries or Affiliates shall engage in the
conduct of any business or activity which could result in a Forfeiture
Proceeding.
Section 10.12. NO MODIFICATION OF SIGNIFICANT AGREEMENTS.
Except as set forth in the Trivest Letter Agreement, none of the Borrowers will
amend or agree to modify any Significant Agreement in any manner which will have
a material adverse effect on such Borrowers rights or benefits thereunder.
Section 10.13. OTHER NEGATIVE PLEDGE AGREEMENTS. Enter into
any agreement with any Person pursuant to which they agree not to create, incur,
assume or suffer to exist, or permit any of its Subsidiaries to create, incur,
assume or suffer to exist, any Lien, upon or with respect to any of its
properties, now owned or hereafter acquired.
Section 10.14. ACCOUNTS PAYABLE TO TRADE CREDITORS. Permit
accounts payable to trade creditors for goods or services and current operating
liabilities (other than for borrowed money) to be more than 90 days past due,
unless such are being contested in good faith and by appropriate proceedings;
Section 10.15. CHANGE IN FISCAL YEAR. Change their fiscal year
end from December 31.
<PAGE> 43
ARTICLE 11. FINANCIAL COVENANTS.
So long as any of the Loans shall remain unpaid or any Outstanding
Working Capital Obligation shall remain outstanding or any Lender shall have a
Revolving Credit Commitment under this Agreement, or any amount is owing by any
Borrower to any Lender hereunder or under any other Facility Document:
Section 11.01. MINIMUM SUBORDINATED DEBT. Subordinated Debt
shall not be less than Six Million Four Hundred Forty-Three Thousand Five
Hundred Dollars ($6,443,500) at any time.
Section 11.02. MINIMUM TANGIBLE NET WORTH. Consolidated
Tangible Net Worth shall not be less than the amounts specified below for the
date specified below:
Date Amount
---- ------
March 31, 1997 $ 8,300,000
June 30, 1997 $ 6,800,000
September 30, 1997 $11,050,000
December 31, 1997 $12,050,000
March 31, 1998 $ 9,800,000
In addition, Consolidated Tangible Net Worth shall not be less
than $8,000,000 for the period from October 1, 1997 through and including
December 30, 1997 and at no time may Consolidated Tangible Net Worth be less
than $5,000,000.
Section 11.03. FUNDED DEBT TO TANGIBLE NET WORTH. The ratio of
Consolidated Funded Debt to Consolidated Tangible Net Worth shall not be more
than .80 to 1.00 at December 31, 1997.
Section 11.04. NET INCOME. Net Income shall not be less than
$1.00 for fiscal year ended December 31, 1997.
Section 11.05. CAPITAL EXPENDITURES. The Borrowers shall not
make or permit to be made Consolidated Capital Expenditures during the period
from January 1, 1997 to December 31, 1997 to exceed $750,000.
ARTICLE 12. EVENTS OF DEFAULT.
Section 12.01. EVENTS OF DEFAULT. Any of the following events
shall be an "Event of Default":
(a) any Borrower shall: (i) fail to pay the principal of any
Note as and when due and payable; (ii) fail to pay interest on any Note or any
fee or other amount due hereunder, including but not limited to a failure to
make any mandatory prepayment as required hereunder, as and when due and
payable; (iii) fail to reimburse Chase on a Letter of Credit or Letter of
Indemnity as and when due and payable;
<PAGE> 44
(b) any representation or warranty made or deemed made by a
Borrower in this Agreement or in any other Facility Document or by any Guarantor
in any Facility Document to which it is a party or which is contained in any
certificate, document, opinion, financial or other statement furnished at any
time under or in connection with any Facility Document shall prove to have been
incorrect in any material respect on or as of the date made or deemed made;
(c) any Borrower shall: (i) fail to perform or observe any
term, covenant or agreement contained in Section 2.04, Section 9.09(a) or (g) or
Articles 10 or 11 or in any other Facility Document; (ii) fail to perform any
term covenant or agreement contained in Section 9.09 other than Section 9.09(a)
or (g), and such failure shall continue for 5 days; or (iii) fail to perform or
observe any term, covenant or agreement on its part to be performed or observed
(other than the obligations specifically referred to elsewhere in this Section
12.01) and such failure shall continue for 30 consecutive days;
(d) any Borrower, any Guarantor or any of their respective
Subsidiaries shall: (i) fail to pay any indebtedness, including but not limited
to indebtedness for borrowed money (other than the payment obligations described
in (a) above), of the Borrowers, such Guarantor or such Subsidiary, as the case
may be, or any interest or premium thereon, when due (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise); or (ii) fail
to perform or observe any term, covenant or condition on its part to be
performed or observed under any agreement or instrument relating to any such
indebtedness, when required to be performed or observed, if the effect of such
failure to perform or observe is to accelerate, or to permit the acceleration
of, after the giving of notice or passage of time, or both, the maturity of such
indebtedness, whether or not such failure to perform or observe shall be waived
by the holder of such indebtedness; or any such indebtedness shall be declared
to be due and payable, or required to be prepaid (other than by a regularly
scheduled required prepayment), prior to the stated maturity thereof;
(e) any Borrower, any Guarantor or any of their respective
Subsidiaries: (i) shall generally not, or be unable to, or shall admit in
writing its inability to, pay its debts as such debts become due; or (ii) shall
make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for it or a
substantial part of its assets; or (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect; or (iv) shall have had any such petition or application filed or any
such proceeding shall have been commenced, against it, in which an adjudication
or appointment is made or order for relief is entered, or which petition,
application or proceeding remains undismissed for a period of 30 days or more;
or shall be the subject of any proceeding under which its assets may be subject
to seizure, forfeiture or divestiture (other than a proceeding in respect of a
Lien permitted under Section 10.03 (b)); or (v) by any act or omission shall
indicate its consent to, approval of or acquiescence in any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or trustee for all or any substantial part of its property; or (vi)
shall suffer any such custodianship, receivership or trusteeship to continue
undischarged for a period of 30 days or more;
(f) one or more judgments, decrees or orders for the payment
of money in excess of $100,000 in the aggregate shall be rendered against any
Borrower, any Guarantor or any of their respective Subsidiaries and such
judgments, decrees or orders shall continue unsatisfied
<PAGE> 45
and in effect for a period of 45 consecutive days without being vacated,
discharged, satisfied or stayed or bonded pending appeal;
(g) any event or condition shall occur or exist with respect
to any Plan or Multiemployer Plan concerning which any Borrower is under an
obligation to furnish a report to the Lenders in accordance with Section 9.09(9)
hereof and as a result of such event or condition, together with all other such
events or conditions, any Borrower or any ERISA Affiliate has incurred or in the
opinion of the Lender is reasonably likely to incur a liability to a Plan, a
Multiemployer Plan, the PBGC, or a Section 4042 Trustee (or any combination of
the foregoing) which is material in relation to the financial position of any
Borrower; provided, however, that any such amount shall not be deemed to be
material so long as all such amounts do not exceed in the aggregate during any
consecutive two year period $100,000;
(h) The Unfunded Benefit Liabilities of one or more Plans have
increased after the date of this Agreement in an amount in excess of $100,000;
(i)(A) any Forfeiture Proceeding shall have been commenced or
the Borrowers shall have given any Lender written notice of the commencement of
any Forfeiture Proceeding as provided in Section 9.09 (k) or (B) any Lender has
a good faith basis to believe that a Forfeiture Proceeding has been threatened
or commenced;
(j) the Subordinated Notes shall at any time after their
execution and delivery and for any reason cease to be in full force and effect
or shall be declared null and void, or the validity or enforceability thereof
shall be contested by the holder of such Subordinated Notes, the holder of such
Subordinated Notes shall deny it has any further liability or obligation
thereunder or shall fail to perform its obligations thereunder or the
Subordinated Notes shall be declared due and payable prior to the stated
maturity thereof;
(k) any Security Document shall at any time after its
execution and delivery and for any reason cease: (A) to create a valid and
perfected first priority security interest in and to the property purported to
be subject to such Document; or (B) to be in full force and effect or shall be
declared null and void, or the validity or enforceability thereof shall be
contested by the Grantor or the Grantor shall deny it has any further liability
or obligation under such Security Document or the Grantor shall fail to perform
any of its obligations thereunder;
(l) any change shall occur in the management of the Borrowers,
including any of their operating divisions, which in the judgment of the
Required Lenders could reasonably be expected to have a material adverse effect
upon the business or prospects of the Borrowers;
(m) if the information contained in the audited consolidated
and consolidating balance sheet of Apparel and its consolidated subsidiaries as
of the fiscal year ended December 31, 1996 and the consolidated and
consolidating statement of operations and statements of cash flows and changes
in stockholders' equity of Apparel and its consolidated subsidiaries for such
fiscal year is materially different from the information contained in the press
release of the Borrowers dated March 7, 1997;
(n) Article 14 shall, at any time after the execution and
delivery of this Agreement and for any reason, cease to be in full force and
effect or shall be declared null and void, or the validity or enforceability
thereof shall be contested by any Guarantor or any Guarantor
<PAGE> 46
shall deny it has any further liability or obligation under or shall fail to
perform its obligations under Article 14; or
(o) if by April 30, 1997 a detailed outline or draft of the
strategic business plan for the Borrowers is not received by the Lenders or if
such outline or draft is not in form and substance satisfactory to the Lenders
in their sole discretion; or if by June 15, 1997 a strategic business plan for
the Borrowers is not received by the Lenders or if such plan is not in form and
substance satisfactory to the Lenders in their sole discretion; provided that
each such plan shall cover the period of time from the date of delivery of such
plan to December 31, 1998.
Section 12.02. REMEDIES. If any Event of Default shall occur
and be continuing, the Agent shall, upon request of the Required Lenders, by
notice to the Borrowers, (a) declare the Revolving Credit Commitment to be
terminated, whereupon the same shall forthwith terminate, (b) terminate the
obligation of Chase to issue Letters of Credit, whereupon the same shall
forthwith terminate, (c) declare the outstanding principal of the Notes, all
interest thereon and all other amounts payable under this Agreement and the
Notes to be forthwith due and payable, whereupon the Notes, all such interest
and all such amounts shall become and be forthwith due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Borrowers, and (d) require each Borrower to
provide cash collateral in the aggregate amount of all outstanding Letters of
Credit and Letters of Indemnity; provided that, in the case of an Event of
Default referred to in Section 12.01(e) above, the Revolving Credit Commitment
and the obligation of Chase to issue Letters of Credit shall be immediately
terminated, and the Notes, all interest thereon and all other amounts payable
under this Agreement shall be immediately due and payable without notice,
presentment, demand, protest or other formalities of any kind, all of which are
hereby expressly waived by the Borrowers.
ARTICLE 13. THE AGENTS; RELATIONS AMONG LENDERS AND BORROWERS.
Section 13.01. APPOINTMENT, POWERS AND IMMUNITIES OF AGENT.
Each Lender hereby irrevocably (but subject to removal by the Required Lenders
pursuant to Section 13.10) appoints and authorizes Chase to act as its Agent
hereunder and under any other Facility Document with such powers as are
specifically delegated to the Agent by the terms of this Agreement and any other
Facility Document, together with such other powers as are reasonably incidental
thereto. The Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement and any other Facility Document, and shall
not by reason of this Agreement be a trustee for any Lender. The Agent shall not
be responsible to the Lenders for any recitals, statements, representations or
warranties made by the Borrowers or any officer or official of the Borrowers or
any other Person contained in this Agreement or any other Facility Document, or
in any certificate or other document or instrument referred to or provided for
in, or received by any of them under, this Agreement or any other Facility
Document, or for the value, legality, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or any other Facility Document
or any other document or instrument referred to or provided for herein or
therein, for the perfection or priority of any Collateral for the Loans or for
any failure by any Borrower to perform any of its obligations hereunder or
thereunder. The Agent may employ agents and attorneys-in-fact and shall not be
responsible, except as to money or securities received by it or its authorized
agents, for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable or responsible for any action
taken or omitted to be taken by it or them hereunder or under any other Facility
Document or in connection herewith or therewith, except for its or their own
gross
<PAGE> 47
negligence or willful misconduct. The Borrowers shall pay any fee agreed to by
the Borrowers and the Agent with respect to the Agent's services hereunder.
Section 13.02. APPOINTMENT, POWERS AND IMMUNITIES OF SERVICING
AGENT. Each Lender hereby irrevocably (but subject to removal by the Required
Lenders pursuant to Section 13.10) appoints and authorizes Milberg to act as its
Servicing Agent hereunder and under any other Facility Document with such powers
as are specifically delegated to the Servicing Agent by the terms of this
Agreement and any other Facility Document, together with such other powers as
are reasonably incidental thereto. The Servicing Agent shall have no duties or
responsibilities except those expressly set forth in this Agreement, and shall
not by reason of this Agreement be a trustee or fiduciary for any Lender. The
Servicing Agent shall not be responsible to the Lenders for any recitals,
statements, representations or warranties made by the Borrowers or any officer
or official of the Borrowers or any other Person contained in this Agreement or
any other Facility Document, or in any certificate or other document or
instrument referred to or provided for in, or received by any of them under,
this Agreement or any other Facility Document, or for the value, legality,
validity, effectiveness, genuineness, enforceability or sufficiency of this
Agreement or any other Facility Document or any other document or instrument
referred to or provided for herein or therein, for the perfection or priority of
any Collateral for the Loans or for any failure by any Borrower to perform any
of its obligations hereunder or thereunder. The Servicing Agent may employ
agents and attorneys-in-fact and shall not be responsible, except as to money or
securities received by it or its authorized agents, for the negligence or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. Neither the Servicing Agent nor any of its directors, officers,
employees or agents shall be liable or responsible for any action taken or
omitted to be taken by it or them hereunder or under any other Facility Document
or in connection herewith or therewith, except for its or their own gross
negligence or willful misconduct.
Section 13.03. RELIANCE BY EACH OF THE AGENT AND THE SERVICING
AGENT. Each of the Agent and the Servicing Agent shall be entitled to rely upon
any certification, notice or other communication (including any thereof by
telephone, telex, telegram or cable) believed by it to be genuine and correct
and to have been signed or sent by or on behalf of the proper Person or Persons,
and upon advice and statements of legal counsel, independent accountants and
other experts selected by such Agent. Each of the Agent and the Servicing Agent
may deem and treat each Lender as the holder of the Loans made by it for all
purposes hereof unless and until a notice of the assignment or transfer thereof
satisfactory to each of the Agent and the Servicing Agent signed by such Lender
shall have been furnished to such Agent but neither the Agent nor the Servicing
Agent shall be required to deal with any Person who has acquired a participation
in any Loan from a Lender. As to any matters not expressly provided for by this
Agreement or any other Facility Document, each of the Agent and the Servicing
Agent shall in all cases be fully protected in acting, or in refraining from
acting, hereunder in accordance with instructions signed by the Required
Lenders, and such instructions of the Required Lenders and any action taken or
failure to act pursuant thereto shall be binding on all of the Lenders and any
other holder of all or any portion of any Loan.
Section 13.04. DEFAULTS. The Agent shall not be deemed to have
knowledge of the occurrence of a Default or Event of Default (other than the
non-payment of principal of or interest on the Loans to the extent the same is
required to be paid to the Agent for the account of the Lenders) unless the
Agent has received notice from a Lender or a Borrower specifying such Default or
Event of Default and stating that such notice is a "Notice of Default". In the
event that the Agent receives such a notice of the occurrence of a Default or
Event of Default, the Agent shall give
<PAGE> 48
prompt notice thereof to the Lenders (and shall give each Lender prompt notice
of each such non-payment). The Agent shall (subject to Section 13.09) take such
action with respect to such Default or Event of Default which is continuing as
shall be directed by the Required Lenders; provided that, unless and until the
Agent shall have received such directions, the Agent may take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders; and
provided further that the Agent shall not be required to take any such action
which it determines to be contrary to law.
Section 13.05. RIGHTS OF EACH OF THE AGENT AND THE SERVICING
AGENT AS A LENDER. With respect to its Revolving Credit Commitment and the Loans
made by it, each of the Agent and the Servicing Agent in its capacity as a
Lender hereunder shall have the same rights and powers hereunder as any other
Lender and may exercise the same as though it were not acting as an Agent, and
the term "Lender" or "Lenders" shall, unless the context otherwise indicates,
include each of the Agent and the Servicing Agent in its capacity as a Lender.
Each of the Agent and the Servicing Agent and its Affiliates may (without having
to account therefor to any Lender) accept deposits from, lend money to (on a
secured or unsecured basis), and generally engage in any kind of banking, trust
or other business with, the Borrowers (and any of its Affiliates) as if it were
not acting as an Agent, and each of the Agent and the Servicing Agent may accept
fees and other consideration from the Borrowers for services in connection with
this Agreement or otherwise without having to account for the same to the
Lenders. Although the Agent, the Servicing Agent and their Affiliates may in the
course of such relationships and relationships with other Persons acquire
information about the Borrowers, their Affiliates and such other Persons,
neither the Agent nor the Servicing Agent shall have a duty to disclose such
information to the Lenders.
Section 13.06. INDEMNIFICATION OF AGENTS. The Lenders agree to
indemnify each of the Agent and the Servicing Agent (to the extent not
reimbursed under Section 15.03 or under the applicable provisions of any other
Facility Document, but without limiting the obligations of the Borrowers under
Section 15.03 or such provisions), ratably in accordance with the aggregate
unpaid principal amount of the Loans made by the Lenders (without giving effect
to any participations, in all or any portion of such Loans, sold by them to any
other Person) (or, if no Loans are at the time outstanding, ratably in
accordance with their respective Revolving Credit Commitment), for any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or asserted against either the Agent or the Servicing
Agent in any way relating to or arising out of the performance or
non-performance of such Agent's duties under this Agreement, any other Facility
Document or any other documents contemplated by or referred to herein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses which the Borrowers are obligated to pay under Section 15.03
or under the applicable provisions of any other Facility Document including,
after a Default or Event of Default has occurred, extraordinary administrative
costs and expenses incident to the performance of its agency duties hereunder)
or the enforcement of any of the terms hereof or thereof or of any such other
documents or instruments; provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Agent to be indemnified.
Section 13.07. DOCUMENTS. Each of the Agent and the
Servicing Agent will forward to each Lender, promptly after such Agent's receipt
thereof, a copy of each report, notice or other document required by this
Agreement or any other Facility Document to be delivered to such Agent for the
Lenders, other than reports specified in paragraphs (q) and (s) of Section 9.09.
<PAGE> 49
Section 13.08. NON-RELIANCE ON THE AGENTS AND OTHER LENDERS.
Each Lender agrees that it has, independently and without reliance on the Agent,
the Servicing Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Borrowers and their Subsidiaries and decision to enter into this Agreement and
that it will, independently and without reliance upon the Agent, the Servicing
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 analysis and
decisions in taking or not taking action under this Agreement or any other
Facility Document. Neither the Agent nor the Servicing Agent shall be required
to keep itself informed as to the performance or observance by the Borrowers of
this Agreement or any other Facility Document or any other document referred to
or provided for herein or therein or to inspect the properties or books of the
Borrowers or any Subsidiary. Except for notices, reports and other documents and
information expressly required to be furnished to the Lenders by the Agent or
the Servicing Agent hereunder, neither the Agent nor the Servicing Agent shall
have any duty or responsibility to provide any Lender with any credit or other
information concerning the affairs, financial condition or business of the
Borrowers or any Subsidiary (or any of their Affiliates) which may come into the
possession of such Agent or any of its Affiliates. Neither the Agent nor the
Servicing Agent shall be required to file this Agreement, any other Facility
Document or any document or instrument referred to herein or therein, for record
or give notice of this Agreement, any other Facility Document or any document or
instrument referred to herein or therein, to anyone.
Section 13.09. FAILURE OF EITHER THE AGENT OR THE SERVICING
AGENT TO ACT. Except for action expressly required of the Agent or the Servicing
Agent hereunder, each of the Agent and the Servicing Agent shall in all cases be
fully justified in failing or refusing to act hereunder unless it shall have
received further assurances (which may include cash collateral) of the
indemnification obligations of the Lenders under Section 13.04 in respect of any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action.
Section 13.10. RESIGNATION OR REMOVAL OF EITHER THE AGENT OR
THE SERVICING AGENT. Subject to the appointment and acceptance of a successor
Agent as provided below, each of the Agent and the Servicing Agent may resign at
any time by giving written notice thereof to the Lenders and the Borrowers, and
each of the Agent and the Servicing Agent may be removed at any time with or
without cause by the Required Lenders; provided that (i) the Borrowers and the
other Lenders shall be promptly notified thereof and (ii) in the case of the
removal of the Servicing Agent by the Required Lenders, upon its request, all
Loans made by the Servicing Agent in its capacity as Lender shall immediately be
repaid in full and the Servicing Agent in its capacity as Lender shall be
released and discharged from its duties and obligations hereunder. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent from among the Lenders. If no such successor Agent shall have
been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after such retiring Agent's giving of notice of
resignation or the Required Lenders' removal of such retiring Agent, then such
retiring Agent may, on behalf of the Lenders, appoint a successor Agent from
among the Lenders. The Required Lenders or such retiring Agent, as the case may
be, shall upon the appointment of a successor Agent promptly so notify the
Borrowers and the other Lenders. Upon the acceptance of any appointment as Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation or removal
hereunder as Agent, the
<PAGE> 50
provisions of this Article 13 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
an Agent.
Section 13.11. AMENDMENTS CONCERNING AGENCY FUNCTION. Neither
the Agent nor the Servicing Agent shall be bound by any waiver, amendment,
supplement or modification of this Agreement or any other Facility Document
which expands its duties or increases its costs hereunder or thereunder unless
it shall have given its prior consent thereto.
Section 13.12. LIABILITY OF EACH OF THE AGENT AND THE
SERVICING AGENT. The Servicing Agent shall have no liabilities or
responsibilities whatsoever to the Borrowers, it being understood and agreed
that the duties and responsibilities of the Servicing Agent are intended solely
and exclusively for the benefit of the Lenders. Neither the Agent nor the
Servicing Agent shall have any liabilities or responsibilities to the Borrowers
on account of the failure of any Lender to perform its obligations hereunder or
to any Lender on account of the failure of any Borrower to perform its
obligations hereunder or under any other Facility Document.
Section 13.13. TRANSFER OF AGENCY FUNCTION. Without the
consent of the Borrowers or any Lender, each of the Agent and the Servicing
Agent may at any time or from time to time transfer its functions as Agent
hereunder to any of its offices wherever located, provided that such Agent shall
promptly notify the Borrowers and the Lenders thereof.
Section 13.14. NON-RECEIPT OF FUNDS BY THE AGENT. Unless the
Agent shall have been notified by a Lender or a Borrower (either one as
appropriate being the "Payor") prior to the date on which such Lender is to make
payment hereunder to the Agent of the proceeds of a Loan or a Borrower is to
make payment to the Agent, as the case may be (either such payment being a
"Required Payment"), which notice shall be effective upon receipt, that the
Payor does not intend to make the Required Payment to the Agent, the Agent may
assume that the Required Payment has been made and may, in reliance upon such
assumption (but shall not be required to), make the amount thereof available to
the intended recipient on such date and, if the Payor has not in fact made the
Required Payment to the Agent, the recipient of such payment (and, if such
recipient is a Borrower and the Payor Lender fails to pay the amount thereof to
the Agent forthwith upon demand), the Borrowers shall, on demand, repay to the
Agent the amount made available to it together with interest thereon for the
period from the date such amount was so made available by the Agent until the
date the Agent recovers such amount at a rate per annum equal to the average
daily Federal Funds Rate for such period.
Section 13.15. WITHHOLDING TAXES. Each Lender represents that
it is entitled to receive any payments to be made to it hereunder without the
withholding of any tax and will furnish to the Agent such forms, certifications,
statements and other documents as the Agent may request from time to time to
evidence such Lender's exemption from the withholding of any tax imposed by any
jurisdiction or to enable the Agent to comply with any applicable laws or
regulations relating thereto. Without limiting the effect of the foregoing, if
any Lender is not created or organized under the laws of the United States of
America or any state thereof, in the event that the payment of interest by the
Borrowers is treated for U.S. income tax purposes as derived in whole or in part
from sources from within the U.S., such Lender will furnish to the Agent Form
4224 or Form 1001 of the Internal Revenue Service, or such other forms,
certifications, statements or documents, duly executed and completed by such
Lender as evidence of such Lender's exemption from the withholding of U.S. tax
with respect thereto. The Agent shall not be obligated to make any payments
hereunder to such Lender in respect of any Loan or such Lender's Revolving
Credit
<PAGE> 51
Commitment until such Lender shall have furnished to the Agent the requested
form, certification, statement or document and all successor forms as may be
required on the expiration of any of the foregoing.
Section 13.16. SEVERAL OBLIGATIONS AND RIGHTS OF LENDERS. The
failure of any Lender to make any Loan to be made by it on the date specified
therefor shall not relieve any other Lender of its obligation to make its Loan
on such date, but no Lender shall be responsible for the failure of any other
Lender to make a Loan to be made by such other Lender. The amounts payable at
any time hereunder to each Lender shall be a separate and independent debt, and
each Lender shall be entitled to protect and enforce its rights arising out of
this Agreement, and it shall not be necessary for any other Lender to be joined
as an additional party in any proceeding for such purpose.
Section 13.17. PRO RATA TREATMENT OF LOANS, ETC. Except to the
extent otherwise provided: each borrowing under Sections 2.04 or 2.05 shall be
made from the Lenders, each reduction or termination of the amount of the
Revolving Credit Commitment under Section 2.09 shall be applied to the Revolving
Credit Commitment of the Lenders, and each payment of commitment fee accruing
under Section 2.13 shall be made for the account of the Lenders, pro rata
according to the amounts of their respective unused Revolving Credit Commitment.
Section 13.18. SHARING OF PAYMENTS AMONG LENDERS. If a Lender
shall obtain payment of any principal of or interest on any Loan made by it
through the exercise of any right of setoff, banker's lien, counterclaim, or by
any other means (including any payment obtained from or charged against any
Third Party), it shall promptly purchase from the other Lenders participations
in (or, if and to the extent specified by such Lender, direct interests in) the
Loans made by the other Lenders in such amounts, and make such other adjustments
from time to time as shall be equitable to the end that all the Lenders shall
share the benefit of such payment (net of any expenses which may be incurred by
such Lender in obtaining or preserving such benefit) pro rata in accordance with
the unpaid principal and interest on the Loans held by each of them. To such end
the Lenders shall make appropriate adjustments among themselves (by the resale
of participations sold or otherwise) if such payment is rescinded or must
otherwise be restored. The Borrowers agree that any Lender so purchasing a
participation (or direct interest) in the Loans made by other Lenders may
exercise all rights of setoff, banker's lien, counterclaim or similar rights
with respect to such participation (or direct interest). Nothing contained
herein shall require any Lender to exercise any such right or shall affect the
right of any Lender to exercise, and retain the benefits of exercising, any such
right with respect to any other indebtedness of the Borrowers.
Section 13.19. APPLICATION OF PROCEEDS OF COLLATERAL. Any
proceeds received on liquidation of any of the Collateral under the provisions
of the Security Documents shall be applied after a Default as follows: first, to
costs and expenses in connection with the collection of such amounts; second, to
any unpaid fees under the Facility Documents; third to accrued and unpaid
interest on the Borrowers' obligations under the Facility Documents; third, to
unreimbursed drawings under Letters of Credit; fourth, to the principal amount
of Loans outstanding; fifth, to the amount of any Letters of Indemnity
outstanding; and sixth, to be held as cash collateral until the Borrowers'
obligations under the Facility Documents have been finally paid in full and the
Lenders shall have no remaining commitment under any of the Facility Documents.
<PAGE> 52
ARTICLE 14. GUARANTY.
Section 14.01. GUARANTY. Each Guarantor hereby jointly and
severally irrevocably, absolutely and unconditionally guarantees to each Lender
and its successors, endorsees, transferees and assigns the prompt and complete
payment by each Borrower (other than such Guarantor), as and when due and
payable (whether at stated maturity or by required prepayment, acceleration,
demand or otherwise), of all Outstanding Total Debt Obligations; and agrees to
pay on demand any and all expenses (including counsel fees and expenses) which
may be paid or incurred by any Lender in collecting any or all of the
Outstanding Total Debt Obligations and/or enforcing any rights under any of the
Facility Documents or under the Outstanding Total Debt Obligations (the
"Guaranty").
Section 14.02. GUARANTY OBLIGATIONS UNCONDITIONAL. Each
Guarantor hereby guarantees that the Outstanding Total Debt Obligations will be
paid strictly in accordance with the terms of the Facility Documents, regardless
of any Law now or hereafter in effect in any jurisdiction affecting any such
terms or the rights of any Lender with respect thereto. The obligations and
liabilities of each Guarantor under its Guaranty shall be absolute and
unconditional irrespective of: (1) any lack of validity or enforceability of any
of the Outstanding Total Debt Obligations, any Facility Documents, or any
agreement or instrument relating thereto; (2) any change in the time, manner or
place of payment of, or in any other term in respect of, all or any of the
Outstanding Total Debt Obligations, or any other amendment or waiver of or
consent to any departure from any Facility Documents or any other documents or
instruments executed in connection with or related to the Outstanding Total Debt
Obligations; (3) any exchange or release of, or non-perfection of any Lien on or
in, any Collateral, or any release or amendment or waiver of or consent to any
departure from any other guaranty, for all or any of the Outstanding Total Debt
Obligations; or (4) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, any Borrower or any other guarantor in
respect of the Outstanding Total Debt Obligations or any Guarantor in respect of
this Guaranty.
The Guaranty is a continuing guaranty and shall remain in full
force and effect until: (1) the payment in full of all the Outstanding Total
Debt Obligations (after the Maturity Date), and (2) the payment of the other
expenses to be paid by the Guarantors pursuant hereto. This Guaranty shall
continue to be effective or shall be reinstated, as the case may be, if at any
time any payment, or any part thereof, of any of the Outstanding Total Debt
Obligations are rescinded or must otherwise be returned by any Lender upon the
insolvency, bankruptcy, dissolution, liquidation or reorganization of any
Borrower or otherwise, all as though such payment had not been made.
The obligations and liabilities of each Guarantor under this
Guaranty shall not be conditioned or contingent upon the pursuit by any Lender
or any other Person at any time of any right or remedy against any Borrower or
any other Person which may be or become liable in respect of all or any part of
the Outstanding Total Debt Obligations or against any Collateral or security or
guarantee therefor or right of setoff with respect thereto.
Each Guarantor hereby consents that, without the necessity of
any reservation of rights against any Guarantor and without notice to or further
assent by any Guarantor, any demand for payment of any of the Outstanding Total
Debt Obligations made by any Lender may be rescinded by such Lender and any of
the Outstanding Total Debt Obligations continued after such rescission.
<PAGE> 53
Section 14.03. WAIVERS. To the extent permitted by applicable
Law, each Guarantor hereby waives: (1) promptness and diligence; (2) notice of
or proof of reliance by any Lender upon this Guaranty or acceptance of this
Guaranty; (3) notice of the incurrence of any Outstanding Total Debt Obligation
or the renewal, extension or accrual of any Outstanding Total Debt Obligation;
(4) notice of any actions taken by any Lender or any other party under any Loan
Document, or any other agreement or instrument relating to the Outstanding Total
Debt Obligations; (5) all other notices, demands and protests, and all other
formalities of every kind in connection with the enforcement of the Outstanding
Total Debt Obligations or of the obligations of any Guarantor hereunder, the
omission of or delay in which, but for the provisions of this Section 14.03,
might constitute grounds for relieving any Guarantor of its obligations
hereunder; and (6) any requirement that any Lender protect, secure, perfect or
insure any Lien on any property subject thereto or exhaust any right or take any
action against any Borrower or any other Person or any Collateral.
Section 14.04. SUBROGATION. Each Guarantor agrees that it
hereby waives and releases any rights which it may acquire by way of subrogation
under this Guaranty, whether acquired by any payment made hereunder, by any
setoff or application of funds of such Guarantor by any Lender or otherwise.
Section 14.05. CONTRIBUTION. Each Guarantor agrees that it
will contribute its proportionate share to any other Guarantor that makes
payment of an Outstanding Total Debt Obligation guaranteed by such Guarantor
under this Agreement.
Section 14.06. LIMITATION OF LIABILITY. The obligations of
each Guarantor under this Article 14 shall (unless a greater amount can be paid
under its applicable Law) be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the United State Bankruptcy Code or any comparable
provision of any applicable state Law.
ARTICLE 15. MISCELLANEOUS.
Section 15.01. AMENDMENTS AND WAIVERS. Except as otherwise
expressly provided in this Agreement, any provision of this Agreement may be
amended or modified only by an instrument in writing signed by the Borrowers,
the Agent, the Servicing Agent and the Required Lenders, or by the Borrowers and
the Agent acting with the consent of the Required Lenders and the Servicing
Agent and any provision of this Agreement may be waived by the Required Lenders
or by the Agent acting with the consent of the Required Lenders; PROVIDED that
no amendment, modification or waiver shall, unless by an instrument signed by
all of the Lenders or by the Agent acting with the consent of all of the
Lenders: (a) increase or extend the term, or extend the time or waive any
requirement for the reduction or termination, of the Revolving Credit
Commitment; (b) extend any date fixed for the payment of principal of or
interest on any Loan (including without limitation any date for repayment of the
Term Loan or any mandatory prepayment required under Section 2.08) or
reimbursement obligation on a Letter of Credit or any fee payable hereunder; (c)
reduce the amount of any payment of principal on any Loan or the rate at which
interest is payable thereon or any fee payable hereunder; (d) alter the terms of
this Section 15.01; (e) amend the definition of the term "Required Lenders"; (f)
waive any of the documentary conditions precedent set forth in Section 7.01
hereof; (g) release any Borrower or Guarantor from its liability under any of
the Facility Documents; (h) change the percentage used in determining the
Collateral Borrowing Base; (i) amend the definition of the term "Eligible
Account"; or (j) release any material portion of
<PAGE> 54
the Collateral, and PROVIDED, FURTHER, that any amendment of Article 13 hereof
shall require the consent of both Agents, and any amendment which increases the
obligations of either the Agent or the Servicing Agent hereunder shall require
the consent of such Agent. No failure on the part of the Agent, the Servicing
Agent or any Lender to exercise, and no delay in exercising, any right hereunder
shall operate as a waiver thereof or preclude any other or further exercise
thereof or the exercise of any other right. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
Section 15.02. USURY. Anything herein to the contrary
notwithstanding, the obligations of the Borrowers under this Agreement and the
Notes shall be subject to the limitation that payments of interest shall not be
required to the extent that receipt thereof would be contrary to provisions of
law applicable to a Lender limiting rates of interest which may be charged or
collected by such Lender.
Section 15.03. EXPENSES. The Borrowers shall pay the Agent,
the Servicing Agent and the Lenders on demand for all costs, expenses, and
charges (including, without limitation, costs in connection with the asset based
audits under Section 9.08, fees and charges of external legal counsel for the
Agent, the Servicing Agent, and each Lender, costs allocated by their respective
internal legal departments, and reasonable costs and expenses (including,
without limitation, travel and lodging expenses relating to any field visits or
examinations) incurred by the Agent, the Servicing Agent, or the Lenders in
connection with the preparation, performance, or enforcement of this Agreement
or the Notes. The Borrowers agree to indemnify the Agent, the Servicing Agent,
and each Lender and their respective directors, officers, employees, agents and
Affiliates from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses (each an "Indemnified Liability")
incurred by any of them arising out of or by reason of any investigation or
litigation or other proceedings (including any threatened investigation or
litigation or other proceedings) relating to or arising out of this Agreement or
any actual or proposed use by the Borrowers or any Subsidiary of the proceeds of
the Loans, including without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any Indemnified Liability, incurred by reason
of the gross negligence or willful misconduct of the Person to be indemnified).
The Borrowers agree that any Indemnified Liability will be promptly paid to the
Person to be indemnified upon the written demand of such Person.
Section 15.04. SURVIVAL. The obligations of the Borrowers
under Sections 6.01 and 15.03 shall survive the repayment of the Loans and the
termination of the Revolving Credit Commitment.
Section 15.05. ASSIGNMENT: PARTICIPATIONS. (a) This Agreement
shall be binding upon, and shall inure to the benefit of, the Borrowers, the
Agents, the Lenders and their respective successors and assigns, except that the
Borrowers may not assign or transfer their rights or obligations hereunder. Each
Lender may assign, or sell participations in, all or any part of its commitment
or any Loan to a bank or other entity, in which event (i) in the case of an
assignment, upon notice thereof by the Lender to the Borrowers with a copy to
each of the Agent and the Servicing Agent, the assignee shall have, to the
extent of such assignment (unless otherwise provided therein), the same rights,
benefits and obligations as it would have if it were a Lender hereunder; and
(ii) in the case of a participation, the participant shall have no rights under
the Facility Documents and all amounts payable by the Borrowers under Article 3
shall be determined as if such Lender had not sold such participation. The
agreement executed by such Lender in
<PAGE> 55
favor of the participant shall not give the participant the right to require
such Lender to take or omit to take any action hereunder except action directly
relating to (i) the extension of the Revolving Credit Termination Date or the
Maturity Date, (ii) the extension of a payment date with respect to any portion
of the principal of or interest on any amount outstanding hereunder allocated to
such participant, (iii) the reduction of the principal amount outstanding
hereunder or (iv) the reduction of the rate of interest payable on such amount
or any amount of fees payable hereunder to a rate or amount, as the case may be,
below that which the participant is entitled to receive under its agreement with
such Lender. Such Lender may furnish any information concerning the Borrowers in
the possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants); provided that such Lender
shall require any such prospective assignee or such participant (prospective or
otherwise) to agree in writing to maintain the confidentiality of such
information. In connection with any assignment pursuant to this paragraph (a),
an administrative fee shall be paid to the Agent for processing such assignment
in the amount of $2,500.00.
(b) In addition to the assignments and participations
permitted under paragraph (a) above, any Lender may assign and pledge all or any
portion of its Loans and Notes to (i) any Affiliate of such Lender or (ii) any
Federal Reserve Lender as collateral security pursuant to Regulation A of the
Board of Governors of the Federal Reserve System and any Operating Circular
issued by such Federal Reserve Lender. No such assignment shall release the
assigning Lender from its obligations hereunder.
Section 15.06. NOTICES. Unless the party to be notified
otherwise notifies the other party in writing as provided in this Section, and
except as otherwise provided in this Agreement, notices shall be given to each
of the Agent and the Servicing Agent by telephone, confirmed by telex, telecopy
or other writing, and to the Lenders and to the Borrowers by ordinary mail,
independent courier or telex addressed to such party at its address on the
signature page of this Agreement. Notices shall be effective: (a) if given by
mail, 72 hours after deposit in the mails with first class postage prepaid,
addressed as aforesaid; and (b) if given by telecopy, courier or telex, when
transmitted as aforesaid; provided that notices to the Agents and the Lenders
shall be effective upon receipt. Except for notices specifically required to be
given to or by an applicable Borrower, notices to or from any Borrower are
effective as if given to or by all Borrowers.
Section 15.07. SETOFF. The Borrowers agree that, in addition
to (and without limitation of) any right of setoff, banker's lien or
counterclaim a Lender may otherwise have, each Lender shall be entitled, at its
option, to offset balances (general or special, time or demand, provisional or
final) held by it for the account of the Borrowers at any of such Lender's
offices, in Dollars or in any other currency, against any amount payable by the
Borrowers to such Lender under this Agreement or such Lender's Notes which is
not paid when due (regardless of whether such balances are then due to the
Borrowers), in which case it shall promptly notify the Borrowers and the Agents
thereof; provided that such Lender's failure to give such notice shall not
affect the validity thereof. Each Lender agrees that to the extent any such
payment is received by it as the result of a set-off or otherwise and such
payment results in such Lender receiving a greater payment than it would have
been entitled to, had the total amount of such payment been paid directly to the
Agent for disbursement to the Lenders, then such Lender shall immediately
purchase for cash from the other Lenders participations in the Loans and/or
Participation in the Letters of Credit and/or the Letters of Indemnity
sufficient in amount so that such payment shall effectively be shared pro rata
with the other Lenders in accordance with the amount, and to the extent, of
their respective interests in all the Loans, Participation in the Letters of
Credit, and the Letters of
<PAGE> 56
Indemnity; provided, however, that if all or any portion of such payment is
thereafter recovered from such Lender at any time, the purchase shall be
rescinded and the purchase price returned to the extent of such recovery, but
without interest or other return thereof.
In addition, the Borrowers further agree that any Lender shall
be authorized to debit any account (general or special, time or demand,
provisional or final) held by it for the account of the Borrowers at any of such
Lender's offices, in Dollars or in any other currency, against any amount
payable by the Borrowers to any other Lender under this Agreement.
Payments by the Borrowers hereunder shall be made without
setoff or counterclaim.
Section 15.08. JURISDICTION; IMMUNITIES. THE BORROWERS HEREBY
IRREVOCABLY SUBMIT TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES
FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR THE NOTES, AND THE BORROWERS HEREBY
IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. THE BORROWERS
IRREVOCABLY CONSENT TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO THE BORROWERS AT THE
ADDRESSES SPECIFIED IN SECTION 15.06. THE BORROWERS AGREE THAT A FINAL JUDGMENT
IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. THE BORROWERS FURTHER WAIVE ANY OBJECTION TO VENUE IN SUCH STATE AND ANY
OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON
CONVENIENS. THE BORROWERS FURTHER AGREE THAT ANY ACTION OR PROCEEDING BROUGHT
AGAINST EITHER THE AGENT OR THE SERVICING AGENT SHALL BE BROUGHT ONLY IN NEW
YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY. THE
BORROWERS WAIVE ANY RIGHT THEY MAY HAVE TO JURY TRIAL.
(b) Nothing in this Section 15.08 shall affect the right of
the Agent, the Servicing Agent or any Lender to serve legal process in any other
manner permitted by law or affect the right of the Agent, the Servicing Agent or
any Lender to bring any action or proceeding against any Borrower or its
property in the courts of any other jurisdictions.
(c) To the extent that any Borrower has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether from service or notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) with respect to itself or its property,
such Borrower hereby irrevocably waives such immunity in respect of its
obligations under this Agreement and the Notes.
Section 15.09. TABLE OF CONTENTS; HEADINGS. Any table of
contents and the headings and captions hereunder are for convenience only and
shall not affect the interpretation or construction of this Agreement.
Section 15.10. SEVERABILITY. The provisions of this Agreement
are intended to be severable. If for any reason any provision of this Agreement
shall be held invalid or unenforceable in whole or in part in any jurisdiction,
such provision shall, as to such jurisdiction, be ineffective to
<PAGE> 57
the extent of such invalidity or unenforceability without in any manner
affecting the validity or enforceability thereof in any other jurisdiction or
the remaining provisions hereof in any jurisdiction.
Section 15.11. COUNTERPARTS. This Agreement may be executed in
any number of counterparts, all of which taken together shall constitute one and
the same instrument, and any party hereto may execute this Agreement by signing
any such counterpart.
Section 15.12. INTEGRATION. The Facility Documents set forth
the entire agreement among the parties hereto relating to the transactions
contemplated thereby and supersede any prior oral or written statements or
agreements with respect to such transactions.
Section 15.13. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH
STATE.
Section 15.14. CONFIDENTIALITY. Each Lender, the Agent, and
the Servicing Agent agrees (on behalf of itself and each of its Affiliates,
directors, officers, employees and representatives) to use reasonable
precautions to keep confidential, in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrowers pursuant
to this Agreement which is identified by the Borrowers as being confidential at
the time the same is delivered to the Lenders or the Agents, provided that
nothing herein shall limit the disclosure of any such information (i) to the
extent required by statute, rule, regulation or judicial process, (ii) to
counsel for any of the Lenders or the Agents, (iii) to bank examiners, auditors
or accountants, (iv) in connection with any litigation to which any one or more
of the Lenders is a party or (v) to any assignee or participant (or prospective
assignee or participant) so long as such assignee or participant (or prospective
assignee or participant) first executes and delivers to the respective Lender a
Confidentiality Agreement in substantially the form of Exhibit D hereto;
provided, further, that, unless specifically prohibited by applicable law or
court order, each Lender shall, prior to disclosure thereof, notify the
Borrowers of any request for disclosure of any such non-public information (x)
by any governmental agency or representative thereof (other than any such
request in connection with an examination of the financial condition of such
Lender by such governmental agency) or (y) pursuant to legal process; and
provided finally that in no event shall any Lender or either the Agent or the
Servicing Agent be obligated or required to return any materials furnished by
the Borrowers.
Section 15.15. TREATMENT OF CERTAIN INFORMATION. Each Borrower
(a) acknowledges that services may be offered or provided to it (in connection
with this Agreement or otherwise) by each Lender or by one or more of their
respective subsidiaries or Affiliates and (b) acknowledges that any information
delivered to each Lender or its subsidiaries or Affiliates regarding the
Borrowers may be shared among such Lender and such subsidiaries and Affiliates.
This Section 15.16 shall survive the repayment of the Loans and the termination
of the Revolving Credit Commitment.
Section 15.16. COLLECTION OF ACCOUNTS. Notwithstanding any
provision of any Facility Document, each Borrower hereby agrees that upon the
request of the Required Lenders, the Required Lenders can require that the
Accounts of each of the Borrowers no longer be collected by the Borrowers, but,
rather by a Person designated by the Required Lenders, such as the
<PAGE> 58
Servicing Agent. In such event such Person will collect such Accounts in
accordance with Section 3.04(b) of each of the Security Agreements.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
BISCAYNE APPAREL, INC.
By:
--------------------------------
Name: Peter Vandenberg, Jr.
Title: Executive Vice President
Address for Notices:
1373 Broad Street, 3rd Floor
Clifton, N.J. 07458
Attn: Peter Vandenberg, Jr.
With a Copy to:
Trivest, Inc.
2665 S. Bayshore Drive, Suite 800
Miami, Fl. 33133
Attn: Peter Klein
BISCAYNE APPAREL INTERNATIONAL, INC.
By:
--------------------------------
Name: Peter Vandenberg, Jr.
Title: President
Address for Notices:
c/o Biscayne Apparel, Inc.
1373 Broad Street, 3rd Floor
Clifton, N.J. 07458
Attn: Peter Vandenberg, Jr.
With a Copy to:
Trivest, Inc.
2665 S. Bayshore Drive, Suite 800
Miami, Fl. 33133
Attn: Peter Klein
<PAGE> 59
MACKINTOSH OF NEW ENGLAND CO.
By:
--------------------------------
Name: Peter Vandenberg, Jr.
Title: President
Address for Notices:
c/o Biscayne Apparel, Inc.
1373 Broad Street, 3rd Floor
Clifton, N.J. 07458
Attn: Peter Vandenberg, Jr.
With a Copy to:
Trivest, Inc.
2665 S. Bayshore Drive, Suite 800
Miami, Fl. 33133
Attn: Peter Klein
M&L INTERNATIONAL, INC.
By:
--------------------------------
Name: Peter Vandenberg, Jr.
Title: Vice President
Address for Notices:
c/o Biscayne Apparel, Inc.
1373 Broad Street, 3rd Floor
Clifton, N.J. 07458
Attn: Peter Vandenberg, Jr.
With a Copy to:
Trivest, Inc.
2665 S. Bayshore Drive, Suite 800
Miami, Fl. 33133
Attn: Peter Klein
<PAGE> 60
AGENT:
THE CHASE MANHATTAN BANK
(successor by merger with
The Chase Manhattan Bank, N.A.)
By:
--------------------------------
Name: John T. Murphy
Title: Vice President
Address for Notices:
Loan and Agency Services Department
One Chase Manhattan Plaza
8th Floor
New York, New York 10081
Telecopy: (212) 552-5777
SERVICING AGENT:
MILBERG FACTORS, INC.
By:
--------------------------------
Name: David J. Milberg
Title: Vice President
Address for Notices:
99 Park Avenue
New York, New York 10016
Attn: Harold H. Oertell
Telecopier: (212) 661-7063
<PAGE> 61
LENDER:
THE CHASE MANHATTAN BANK
(successor by merger with
The Chase Manhattan Bank, N.A.)
By:
--------------------------------
Name: John T. Murphy
Title: Vice President
Lending Office and Address for Notices:
1411 Broadway, 5th Floor
New York, New York 10018
Attn: John T. Murphy
Telecopy: (212) 391-7118
LENDER:
MILBERG FACTORS, INC.
By:
--------------------------------
Name: David J. Milberg
Title: Vice President
Address for Notices:
99 Park Avenue
New York, New York 10016
Attn: Harold H. Oertell
Telecopier: (212) 661-7063
<PAGE> 62
LENDER:
CORESTATES BANK, N.A.
By:
--------------------------------
Name: John A. Ginter
Title: Assistant Vice President
Lending Office and Address for Notices:
FC 1-8-8-12
Broad and Chestnut Streets
PO Box 13866
Philadelphia, PA. 19101
Attn:
LENDER:
THE FIRST NATIONAL BANK OF BOSTON
By:
--------------------------------
Name: David F. Eusden
Title: Director
Lending Office and address for notices:
100 Federal Street
Boston, Massachusetts 02110
Attention:
LENDER:
FLEET BANK, N.A.
(formerly known as NatWest Bank N.A.)
By:
--------------------------------
Name: Anthony Santoro
Title: Vice President
Lending Office, and Address for Notices:
1185 Avenue of the Americas
New York, N.Y. 10036
Attention: Anthony Santoro,
Vice President
<PAGE> 1
EXHIBIT 11
Biscayne Apparel, Inc.
Computation of Per Share Earnings
(Dollars in Thousands, Except
Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
Net loss............................................ $ (1,110) $ (1,413)
=========== ===========
PRIMARY:
- -------
Common and common equivalent shares:
Weighted average common shares outstanding......... 10,741,819 10,741,407
Potential dilution upon exercise of stock
options and warrants.............................. - -
---------- -----------
Shares used in computing net loss
per common share.................................. 10,741,819 10,741,407
========== ===========
PER SHARE AMOUNTS:
- -----------------
Net loss per share.................................. $ (0.10) $ (0.13)
=========== ===========
FULLY DILUTED:
- -------------
Common and common equivalent shares:
Weighted average common shares outstanding......... 10,741,819 10,741,407
Potential dilution upon exercise of stock
options and warrants.............................. - -
---------- -----------
Shares used in computing net loss
per common share.................................. 10,741,819 10,741,407
========== ===========
PER SHARE AMOUNTS:
- -----------------
Net loss per share.................................. $ (0.10) $ (0.13)
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF MARK VII, INC. FOR THE THREE MONTHS ENDED MARCH 29, 1997
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-START> DEC-28-1996
<PERIOD-END> MAR-29-1997
<CASH> 7,680
<SECURITIES> 0
<RECEIVABLES> 64,243
<ALLOWANCES> 1,736
<INVENTORY> 0
<CURRENT-ASSETS> 75,771
<PP&E> 8,514
<DEPRECIATION> 4,119
<TOTAL-ASSETS> 86,265
<CURRENT-LIABILITIES> 54,275
<BONDS> 0
0
0
<COMMON> 497
<OTHER-SE> 85,768
<TOTAL-LIABILITY-AND-EQUITY> 86,265
<SALES> 0
<TOTAL-REVENUES> 145,914
<CGS> 0
<TOTAL-COSTS> 127,379
<OTHER-EXPENSES> 16,408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43
<INCOME-PRETAX> 2,127
<INCOME-TAX> 893
<INCOME-CONTINUING> 1,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,234
<EPS-PRIMARY> .25
<EPS-DILUTED> 0
</TABLE>
