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 QUARTERLY PERIOD ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 1-11226
TOMMY HILFIGER CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
BRITISH VIRGIN ISLANDS NOT APPLICABLE
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)
6/F, PRECIOUS INDUSTRIAL CENTRE, 18 CHEUNG YUE STREET,
CHEUNG SHA WAN, KOWLOON, HONG KONG
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
852-2745-7798
(REGISTRANT'S TELEPHONE NUMBER,
INCLUDING AREA CODE)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL
REPORTS REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH
SHORTER PERIOD THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH
REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS.
YES X NO
ORDINARY SHARES, $0.01 PAR VALUE PER SHARE, OUTSTANDING AS OF JUNE 30,
1996: 37,022,404<PAGE>
TOMMY HILFIGER CORPORATION
INDEX TO FORM 10-Q
June 30, 1996
PART I - FINANCIAL INFORMATION Page
Item 1 Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1996
and March 31, 1996............................................ 3
Condensed Consolidated Statements of Operations for the
three months ended June 30, 1996 and 1995..................... 4
Condensed Consolidated Statements of Cash Flows for the
three months ended June 30, 1996 and 1995..................... 5
Condensed Consolidated Statement of Changes in Shareholders'
Equity for the three months ended June 30, 1996 and the year
ended March 31, 1996.......................................... 6
Notes to Condensed Consolidated Financial Statements............ 7
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K................................ 11
Signatures............................................................. 12
-2-<PAGE>
PART I
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
TOMMY HILFIGER CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<CAPTION>
(UNAUDITED) AS OF JUNE 30, AS OF MARCH 31,
1996 1996
---- ----
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents....................... $97,058 $127,743
Accounts receivable............................. 57,102 68,402
Inventories..................................... $103,018 81,428
Other current assets............................ 13,850 13,484
------- --------
Total current assets......................... 271,028 291,057
Property and equipment, at cost, less accumulated
depreciation and amortization................... 90,415 57,845
Other assets......................................... 7,253 9,720
----- --------
Total Assets................................. $368,696 $358,622
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings........................... $15,961 $13,755
Accounts payable................................ 12,426 9,454
Accrued expenses and other current
liabilities.................................. 18,300 29,409
------ ------
Total current liabilities.................... 46,687 52,618
Other liabilities.................................... 2,397 2,877
Long-term debt....................................... 1,718 1,789
Shareholders' equity
Preference Shares, $0.01 par value-shares
authorized 5,000,000; none issued............ -- --
Ordinary Shares, $0.01 par value-shares
authorized 50,000,000, issued and
outstanding 37,022,404 and 36,879,924,
respectively................................. 370 369
Capital in excess of par value.................. 159,270 155,294
Retained earnings............................... 158,211 145,633
Cumulative translation adjustment............... 43 42
------- -------
Total shareholders' equity...................... 317,894 301,338
------- -------
Commitments and contingencies
Total Liabilities and Shareholders'
Equity..................................... $368,696 $358,622
======== ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
-3-<PAGE>
TOMMY HILFIGER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE THREE MONTHS ENDED
JUNE 30,
--------
1996 1995
---- ----
Net revenue................................... $124,129 $89,522
Cost of goods sold............................ 66,010 49,446
------- -------
Gross profit.................................. 58,119 40,076
Selling, general and administrative expenses.. 40,388 29,329
------- -------
Income from operations........................ 17,731 10,747
Interest expense.............................. 203 199
Interest income............................... 1,588 1,347
----- -------
Income before income taxes.................... 19,116 11,895
Provision for income taxes.................... 6,538 4,106
------ -------
Net income.................................... $12,578 $7,789
======= =======
Earnings per share:
Earnings per share and share equivalents...... $ .34 $ .21
======= =======
Weighted average shares and share
equivalents outstanding.................... 37,500 36,737
====== =======
See Accompanying Notes to Condensed Consolidated Financial Statements
-4-<PAGE>
<TABLE>
TOMMY HILFIGER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30,
--------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities
Net income......................................... $12,578 $7,789
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization.................. 4,347 3,112
Deferred income taxes.......................... -- (366)
Stock compensation expense..................... -- 35
Changes in operating assets and liabilities
Decrease (increase) in assets
Accounts receivable........................ 11,300 7,605
Inventories................................ (21,590) (21,302)
Other assets............................... 1,956 (1,748)
Increase (decrease) in liabilities
Accounts payable........................... 2,972 486
Accrued expenses and other liabilities..... (11,589) 4,216
------- ------
Net cash used in operating activities.......... (26) (173)
------- ------
Cash flows from investing activities
Purchases of property and equipment................ (36,772) (6,196)
Purchases of investments........................... -- --
Maturities and sales of investments................ -- 50,214
---------- ------
Net cash (used in) provided by investing
activities..................................... (36,772) 44,018
------- ------
Cash flows from financing activities
Proceeds from the exercise of employee
stock options.................................... 1,551 2,171
Tax benefit from exercise of stock options......... 2,426 1,564
Short-term bank borrowings......................... 2,206 14,025
Payments on long-term debt......................... (71) (70)
Other.............................................. 1 4
--------- --------
Net cash provided by financing activities........ 6,113 17,694
----- --------
Net (decrease) increase in cash.................. (30,685) 61,539
Cash and cash equivalents, beginning of period....... 127,743 35,817
------- ------
Cash and cash equivalents, end of period............. $97,058 $97,356
======= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
-5-<PAGE>
<TABLE>
TOMMY HILFIGER CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<CAPTION>
CAPITAL IN
EXCESS UNEARNED CUMULATIVE TOTAL
ORDINARY OF PAR RETAINED STOCK TRANSLATION SHAREHOLDERS'
SHARES VALUE EARNINGS COMPENSATION ADJUSTMENT EQUITY
------ ------ -------- ------------ ---------- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1995 $352 $124,859 $84,133 ($350) $30 $209,024
Net income 61,500 61,500
Exercise of employee
stock options 17 13,010 13,027
Tax benefits from
exercise of stock
options 17,715 17,715
Amortization of unearned
stock compensation (290) 350 60
Translation adjustment 12 12
----- -------- -------- ---- -- --------
BALANCE, MARCH 31, 1996 369 155,294 145,633 -- 42 301,338
Net income 12,578 12,578
Exercise of employee
stock options 1 1,550 1,551
Tax benefits from
exercise of stock
options 2,426 2,426
Translation adjustment 1 1
---- -------- -------- ------ ---- ------
BALANCE, JUNE 30, 1996
(UNAUDITED) $370 $159,270 $158,211 $ -- $43 $317,894
==== ======== ======== ====== === ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
-6-<PAGE>
TOMMY HILFIGER CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared by Tommy Hilfiger Corporation (the
"Registrant") in a manner consistent with that used in the
preparation of the consolidated financial statements included in
the Registrant's 1996 Annual Report as filed with the Securities
and Exchange Commission on Form 10-K (the "Form 10-K"). Certain
items contained in these statements are based on estimates. In
the opinion of management, the accompanying financial statements
reflect all adjustments, consisting of only normal and recurring
adjustments, necessary for a fair presentation of the financial
position and results of operations and cash flows for the periods
presented. All significant intercompany accounts and transactions
have been eliminated.
Operating results for the three month period ended June 30,
1996 are not necessarily indicative of the results that may be
expected for the fiscal year ended March 31, 1997. These
unaudited financial statements should be read in conjunction with
the financial statements included in the Form 10-K.
The financial statements as of and for the three month
periods ended June 30, 1996 and 1995 are unaudited. The Condensed
Consolidated Balance Sheet as of March 31, 1996, as presented, has
been prepared from the Consolidated Balance Sheet as of March 31,
1996 included in the Registrant's Form 10-K.
NOTE 2 - INVENTORIES
Inventories are summarized as follows:
June 30, 1996 March 31, 1996
------------- --------------
Finished Goods....... $101,722,000 $80,210,000
Raw Materials........ 1,296,000 1,218,000
------------ -----------
$103,018,000 $81,428,000
============ ===========
NOTE 3 - SHORT-TERM BORROWINGS
In July 1996, the Registrant entered into an amended and
restated credit agreement (the "Credit Agreement") effective April
1, 1996. The Credit Agreement provides for direct borrowings,
bankers acceptances and letters of credit of amounts ranging from
$100,000,000 in fiscal 1997 to $150,000,000 in fiscal 1999.
Available borrowings under the Credit Agreement are subject to the
timed increase of availability under the Credit Agreement and are
based upon eligible accounts receivable, inventory and open
letters of credit. Borrowings under the Credit Agreement are
collateralized by substantially all the assets of the Registrant's
U.S. operations and accrue interest at varying interest rates.
-7-<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, for the periods indicated, the
percentage relationship to net revenue of certain items in the
Registrant's Condensed Consolidated Statements of Operations:
(UNAUDITED) THREE MONTHS ENDED
JUNE 30,
--------
1996 1995
---- ----
Net revenue................................... 100.0% 100.0%
Cost of goods sold............................ 53.2 55.2
---- ------
Gross profit.................................. 46.8 44.8
Selling, general and administrative expenses.. 32.5 32.8
---- ----
Income from operations........................ 14.3 12.0
Interest expense.............................. 0.2 .2
Investment income............................. 1.3 1.5
--- ----
Income before income taxes.................... 15.4 13.3
Provision for income taxes.................... 5.3 4.6
---- ----
Net income.................................... 10.1 8.7
==== ===
Three months ended June 30, 1996 compared to three months ended
June 30, 1995
Net revenue increased to $124,129,000 in the first quarter of
fiscal 1997 from $89,522,000 in the first quarter of fiscal 1996,
an improvement of 34,607,000, or 38.7%. This increase is
primarily due to volume increases in each of the Registrant's
operating divisions.
Menswear wholesale sales increased 24.0% to $81,874,000 in
the first quarter of fiscal 1997 from $66,036,000 in the
corresponding quarter of fiscal 1996. Boyswear wholesale sales
increased 40.2% to $12,071,000 in the first quarter of fiscal 1997
from $8,607,000 in the corresponding quarter of fiscal 1996.
Wholesale sales have increased due to the continued expansion of
the in-store shop program which saw the number of men's in-store
shops increase to 911 at June 30, 1996 from 730 at June 30, 1995
and the number of boyswear fixtured areas increase to 918 at June
30, 1996 from 575 at June 30, 1995. Increased sales to existing
and new customers and new store locations also contributed to the
wholesale revenue increase. During the fall season of fiscal
1996, the Registrant introduced boys' sizes 4 through 7 which also
contributed to the increased boyswear sales.
Net revenue in the Registrant's retail division increased
97.3% to $24,843,000 during the first quarter of fiscal 1997 from
$12,589,000 in the first quarter of fiscal 1996. The increase in
the number of stores as well as an increase in sales at existing
stores contributed to the improved revenue. A total of 49 stores
were open as of June 30, 1996 compared to 33 stores as of June 30,
1995.
-8-<PAGE>
Revenue from royalties and buying agency commissions
increased 133.2% to $5,341,000 in the first quarter of fiscal 1997
from $2,290,000 in the corresponding quarter of fiscal 1996. This
increase reflects the incremental revenue associated with newly
licensed products and a general increase in sales of existing
licensed products and buying agency services.
Gross profit as a percentage of net revenue increased to
46.8% in the first quarter of fiscal 1997 from 44.8% in the first
quarter of fiscal 1996. The increase is attributable to the
relative increase in retail operations and royalties and buying
agency commissions, all of which produce higher margins than
wholesale operations and an increase in margin of the Registrant's
wholesale operations caused primarily by the change in the mix of
products sold.
Selling, general and administrative expenses increased to
$40,388,000 in the first quarter of fiscal 1997 from $29,329,000
in the corresponding period of fiscal 1996. The overall increase
is primarily due to increased volume related expenses of the
Registrant's wholesale and retail operations to support the
increased sales volume. In addition, depreciation and amortiza-
tion increased due to the greater number of in-store shops and
marketing and advertising expense increased to promote brand
awareness. As a percentage of net revenue, selling, general and
administrative expenses decreased to 32.5% in the first three
months of fiscal 1997 from 32.8% in the corresponding period of
fiscal 1996. Included in the 1996 amount was a one time charge of
$2,350,000 taken by the Registrant to reflect the current cost of
a consulting agreement with a former executive. Without this one
time charge, selling, general and administrative expenses have
increased as a percentage of net revenue due primarily to the
continued expansion of the Registrant's retail division which
operates at a higher cost structure than its wholesale operations
and increased marketing and advertising expense to promote the
brand.
The provision for income taxes decreased to 34.2% of income
before taxes in the first quarter of fiscal 1997 from 34.5% in the
corresponding period of fiscal 1996. The decrease was primarily
attributable to the relative level of earnings in the various
taxing jurisdictions to which the Registrant's earnings are
subject.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant's primary funding requirements are to finance
working capital and the continued growth of its business.
Primarily, this includes the purchase of inventory in anticipation
of increased sales of the wholesale and retail divisions as well
as capital expenditures related to the expansion of the menswear
in-store shop and boyswear fixtured area programs and additional
retail stores. The Registrant's primary sources of liquidity are
cash on hand, cash from operations and available credit.
As of June 30, 1996, the Registrant had approximately
$97,058,000 of cash and cash equivalents, a decrease of
$30,685,000 from the year-end balance of approximately
$127,743,000. The principal reason for this decrease was the
Registrant's purchase of the property which houses its executive
offices along with its primary sales, marketing and licensing
offices and its main sales and licensees' showrooms for
approximately $25,850,000.
Net cash used in operating activities during the first
quarter of fiscal 1997 was $26,000. This amount is primarily made
up of an increase in working capital offset, in part, by cash
generated from net earnings. The increase in working capital is
principally due to a higher inventory level and the satisfaction
of year-end liabilities offset by the collection of year-end
accounts receivable. The Registrant's inventories increased 26.5%
to $103,018,000 at June 30, 1996 from $81,428,000 at March 31,
1996. Higher inventory levels at June 30, 1996 were attributable
to a planned build-up of inventory in anticipation of the fall and
holiday seasons of fiscal 1997 and increased retail division
inventory due to the greater number of stores, as well as an
increase in its core inventory to meet the demands of its
replenishment business. A detailed analysis of the changes in
cash and cash equivalents is presented in the Consolidated
Statements of Cash Flows.
Capital expenditures were $36,772,000 for the three months
ended June 30, 1996, compared with $6,196,000 for the three months
ended June 30, 1995. The increase in capital expenditures is
primarily related to the purchase of the property mentioned above
as well as the expansion of the Registrant's in-store shop and
fixtured area programs. The Registrant installed 91 menswear in-
store shops and boyswear fixtured areas during the three months
ended June 30, 1996 and 161 menswear in-store shops and boyswear
fixtured areas during the corresponding period in fiscal 1996.
In July 1996, the Registrant entered into an amended and
restated revolving credit agreement (the "Credit Agreement")
effective April 1, 1996. The Credit Agreement, which expires in
June 1999, provides for direct borrowings, bankers acceptances and
letters of credit of amounts ranging from $100,000,000 in fiscal
1997 to $150,000,000 in fiscal 1999. Available borrowings under
the Credit Agreement are subject to the timed increase of
availability under the Credit Agreement and are based upon
eligible accounts receivable, inventory and open letters of
credit. As of June 30, 1996, $100,000,000 was available for
utilization under the Credit Agreement, of which $55,960,000 had
been used to open letters of credit. Obligations under the Credit
Agreement are collateralized by substantially all the assets of
the Registrant's U.S. operations. Direct borrowings under the
Credit Agreement, which were limited to $60,000,000 as of June 30,
1996, accrue interest at varying interest rates.
At June 30, 1996, total short-term borrowings of $15,961,000
consisted of $6,700,000 of borrowings under the credit agreement,
open letters of credit for inventory purchased of $8,986,000 and
the current portion of mortgage debt payable of $275,000.
Additionally, at June 30, 1996, Tommy Hilfiger U.S.A., Inc. ("TH
USA"), a wholly owned subsidiary of the Registrant, was
contingently liable for unexpired bank letters of credit of
$46,974,000 related to commitments of TH USA to suppliers for the
purchase of inventories.
-9-<PAGE>
The Credit Agreement contains various covenants and, among
other matters, includes certain restrictions upon capital
expenditures, investments, indebtedness, loans and advances and
transactions with related parties. In addition, the Credit
Agreement prohibits certain of the Registrant's operating
subsidiaries which are borrowers or guarantors under the Credit
Agreement from paying any dividends. Such dividend restrictions
are not expected to have an adverse impact on the Registrant. The
Credit Agreement also requires the maintenance of minimum tangible
net worth and interest coverage ratios. The Registrant was in
compliance with all covenants under the Credit Agreement as of,
and for the period ended, June 30, 1996.
The Registrant intends to fund its cash requirements for
fiscal 1997 and future years from available cash balances,
internally generated funds and borrowings available under the
Credit Agreement. The Registrant believes that these resources
will be sufficient to fund its cash requirements for such periods.
-10-<PAGE>
PART II
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10. Material Contracts
(a) License Agreement dated June 24, 1996 between Tommy
Hilfiger Licensing, Inc. and Novel - ITC Licensing
Limited. Portions of this exhibit have been
omitted and are the subject of a request made to
the Securities and Exchange Commission for
confidential treatment.
(b) Amended and Restated Credit Agreement dated as of
July 11, 1996 among Tommy Hilfiger U.S.A., Inc. and
Tommy Hilfiger Retail, Inc., as Borrowers, Tommy
Hilfiger Corporation, Tommy Hilfiger (Eastern
Hemisphere) Limited, Tommy Hilfiger (HK) Limited,
Tommy Hilfiger Licensing, Inc., Tommy Hilfiger
Nippon Co., Limited and Tommy Hilfiger Womenswear,
Inc., as Guarantors, Chemical Bank, as
Administrative Agent, and the Lenders named
therein.
11. Computation of Net Income Per Ordinary Share
(b) Reports on Form 8-K
The Registrant did not file any Current Reports on Form 8-K
during the three months ended June 30, 1996.
-11-<PAGE>
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:
Tommy Hilfiger Corporation
Date: August 7, 1996 By: /s/Joel J. Horowitz
Joel J. Horowitz
Chief Executive Officer and
President
Tommy Hilfiger Corporation
Date: August 7, 1996 By: /s/Steven A. Sorrillo
Steven A. Sorrillo
Principal Accounting Officer
Tommy Hilfiger Corporation
-12-<PAGE>
EXHIBIT INDEX
Exhibit Page
Number Description Number
------- ------
10(a) License Agreement dated June 24, 1996 between
Tommy Hilfiger Licensing, Inc. and Novel - ITC
Licensing Limited. Portions of this exhibit
have been omitted and are the subject of a
request made to the Securities and Exchange
Commission for confidential treatment.
10(b) Amended and Restated Credit Agreement dated as
of July 11, 1996 among Tommy Hilfiger U.S.A.,
Inc. and Tommy Hilfiger Retail, Inc., as
Borrowers, Tommy Hilfiger Corporation, Tommy
Hilfiger (Eastern Hemisphere) Limited, Tommy
Hilfiger (HK) Limited, Tommy Hilfiger
Licensing, Inc., Tommy Hilfiger Nippon Co.,
Limited and Tommy Hilfiger Womenswear, Inc., as
Guarantors, Chemical Bank, as Administrative
Agent, and the Lenders named therein.
11. Computation of Net Income Per Ordinary Share.
-13-
EXHIBIT 10(a)
LICENSE AGREEMENT
BETWEEN
TOMMY HILFIGER LICENSING, INC.
AND
NOVEL-ITC LICENSING LIMITED<PAGE>
TABLE OF CONTENTS
RECITALS.................................................... 1
ARTICLE 1. DEFINITIONS
1.1 Agreement......................................... 1
1.2 Annual Period..................................... 1
1.3 Close-Outs........................................ 2
1.4 Gross Sales....................................... 2
1.5 Index............................................. 2
1.6 Inventory......................................... 2
1.7 Inventory Schedule................................ 2
1.8 Labels............................................ 2
1.9 License........................................... 2
1.10 Licensed Products................................ 2
1.11 Manufactured Products............................ 2
1.12 Net Sales........................................ 3
1.13 Purchased Products............................... 3
1.14 Seasonal Collections............................. 3
1.15 Seconds.......................................... 3
1.16 Sublicensees..................................... 3
1.17 Term............................................. 3
1.18 Territory........................................ 3
1.19 Trade Secrets.................................... 3
1.20 Trademark........................................ 3
ARTICLE 2. GRANT
2.1 License........................................... 4
2.2 Reservations...................................... 4
2.3 Territory......................................... 4
2.4 First Refusal..................................... 4
2.5 Exclusivity....................................... 5
2.6 Definitional Disputes............................. 5
2.7 Best Efforts...................................... 5
2.7 Overseeing Sublicensees........................... 5
2.8 Sales and Deliveries.............................. 5
2.9 Use of Licensed Legend............................ 5
2.10 Showrooms......................................... 6
2.11 Purchase of Licensed Products..................... 6<PAGE>
ARTICLE 3. TERM OF THE AGREEMENT
3.1 Term.............................................. 6
3.2 Extension......................................... 7
ARTICLE 4. SALES
4.1 Minimum Sales Levels.............................. 7
4.2 Certification..................................... 7
4.3 Monitoring........................................ 8
ARTICLE 5. LICENSE FEES
5.1 Requirement of Royalties.......................... 8
5.2 Guaranteed Minimum Royalty........................ 8
5.3 Percentage Royalty................................ 8
5.4 Royalty Statements................................ 8
5.5 Books and Records................................. 9
5.6 Taxes............................................. 9
5.7 Underpayments..................................... 9
5.8 Exchange Rate..................................... 9
5.9 Interest on Late Payments......................... 10
5.10 No Set-Off........................................ 10
5.11 Purchase By Licensor.............................. 10
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
6.1 Warranties and Representations of Licensor........ 10
6.2 Warranties and Representations of Licensee........ 10
ARTICLE 7. ADVERTISING
7.1 Advertising....................................... 11
7.2 Advertising Expenditure........................... 11
7.3 Approval of Packaging, Labeling and Advertising... 12
7.4 Use of Trademark on Invoices, etc................. 12
ARTICLE 8. QUALITY AND STANDARDS
8.1 Distinctiveness and Quality of the Trademark...... 12
8.2 Shops, Stores, Retail Outlets..................... 13
8.3 Samples of Manufactured Products.................. 13
8.4 Non-Conforming Products........................... 13
8.5 Approvals......................................... 14
8.6 Approval Withdrawal............................... 14
8.7 Samples, Artwork and Know-How..................... 14
8.8 Confidentiality................................... 15
8.9 Manufacture of Licensed Products by Third Parties 15
8.10 Marking, Labeling and Packaging in Accordance
with Applicable Laws............................ 16
8.11 Inspection of Facilities.......................... 16<PAGE>
8.12 Rules and Regulations............................. 16
8.13 Disposal of Seconds and Close-Outs................ 16
8.14 Assistance By Licensor............................ 17
8.15 Design Rights..................................... 17
8.16 Pricing........................................... 17
ARTICLE 9. THE TRADEMARK
9.1 Rights to the Trademark........................... 17
9.2 Protecting the Trademark.......................... 18
9.3 Use of the Trademark in Compliance with Legal
Requirements................................... 18
9.4 Ownership of Copyright............................ 18
9.5 Infringement...................................... 19
9.6 Counterfeit Protection............................ 19
9.7 Registration of License........................... 19
9.8 Addition to the Trademarks: Registration of
Defensive Marks................................. 19
9.8 Cancellation of Registrations..................... 19
9.9 Monitoring........................................ 20
ARTICLE 10. INSOLVENCY
10.1 Effect of Proceeding in Bankruptcy, etc........... 20
10.2 Rights, Personal.................................. 20
10.3 Trustee in Bankruptcy............................. 20
ARTICLE 11. TERMINATION
11.1 Other Rights Unaffected........................... 21
11.2 Termination Procedure............................. 21
11.3 Specific Grounds for Termination.................. 21
11.4 Timing of Termination............................. 22
11.5 Effect of Termination............................. 22
11.6 Inventory Upon Termination........................ 23
11.7 Freedom to License................................ 23
11.8 Termination Without Prejudice..................... 23
11.9 Equitable Relief.................................. 23
11.9 Waiver............................................ 23
ARTICLE 12. RELATIONSHIP BETWEEN THE PARTIES
12.1 No Agency......................................... 24
ARTICLE 13. INTENTIONALLY OMITTED
ARTICLE 14. BENEFIT
14.1 Benefit........................................... 24
ARTICLE 15. ENTIRE AGREEMENT; AMENDMENT
15.1 Entire Agreement; Amendment....................... 24<PAGE>
ARTICLE 16. NON-WAIVER
16.1 Non-Waiver........................................ 24
ARTICLE 17. ASSIGNMENT
17.1 No Assignment Without Consent..................... 24
17.2 Sale of Assets.................................... 25
17.3 Sale of Stock/Interest............................ 25
17.4 Assignment by Licensor............................ 25
ARTICLE 18. INDEMNIFICATION AND INSURANCE
18.1 Indemnification by Licensee....................... 25
18.2 Notice of Suit or Claim........................... 26
18.3 Indemnification by Licensor....................... 26
ARTICLE 19. SEVERABILITY
19.1 Severability...................................... 27
ARTICLE 20. NOTICES
20.1 Notices........................................... 27
ARTICLE 21. SUSPENSION OF OBLIGATIONS
21.1 Suspension of Obligations......................... 27
ARTICLE 22. EXHIBITS
22.1 Exhibits.......................................... 28
ARTICLE 23. OTHER PROVISIONS
23.1 Headings.......................................... 28
23.2 Counterparts...................................... 28
23.3 Construction...................................... 28
23.4 Jurisdiction...................................... 28
23.5 Language.......................................... 28
23.6 Compliance with Laws.............................. 29<PAGE>
EXHIBITS
EXHIBIT A TRADEMARK REGISTRATIONS
EXHIBIT B ROYALTY STATEMENT
EXHIBIT C ADVERTISING EXPENDITURE FORM
EXHIBIT D ADVERTISING APPROVAL FORM
EXHIBIT E SAMPLE SUBMISSION FORM
EXHIBIT F THIRD PARTY MANUFACTURING AGREEMENT
EXHIBIT G LICENSED PRODUCTS<PAGE>
[G1842B.005]
LICENSE AGREEMENT
AGREEMENT entered into this 24th day of June, 1996,
by and between TOMMY HILFIGER LICENSING, INC., having an
address at 913 N. Market Street, Wilmington, Delaware 19801
(hereinafter referred to as "Licensor") and NOVEL-ITC LICENSING
LIMITED, a Japan corporation, having its offices at 5-1, Kita-
Aoyama 2-Chome, Minato-Ku, Tokyo 107-77 (hereinafter referred
to as "Licensee").
W I T N E S S E T H :
WHEREAS, the TOMMY HILFIGER trademarks, as
hereinafter defined, (collectively the "Trademark") are unique,
extraordinary and have an established, outstanding reputation
in connection with certain items of clothing and other
products; and
WHEREAS, Licensor has the right to enter into this
Agreement; and
WHEREAS, Licensee recognizes the great value and
goodwill associated with the Trademark and that all rights to
the Trademark and the associated goodwill belong exclusively to
the Licensor and that the Trademark has acquired a secondary
meaning to the public; and
WHEREAS, Licensee desires to sublicense the Trademark
for use, on and in connection with the sale and distribution of
licensed products bearing, incorporating or otherwise utilizing
the Trademark (hereinafter designated as "Licensed Products")
in the Territory; and
WHEREAS, Licensor has agreed to grant to Licensee the
right to sublicense the Trademark upon and subject to the terms
and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration
of the mutual agreements herein contained and promises herein
expressed, and for other good consideration acknowledged by
each of them to be satisfactory and adequate, do hereby agree
as follows:
ARTICLE 1. DEFINITIONS
Definitions. The following terms shall have the
following meanings when used in this Agreement:
1.1 Agreement shall mean this agreement.
1.2 Annual Period shall mean each twelve month
period commencing on January 1 and ending on December 31,
except that the first Annual Period shall be the period from
the commencement date hereof and ending on *.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.<PAGE>
1.3 Close-Outs shall mean first quality Licensed
Products which cannot reasonably be sold to regular customers.
1.4 Gross Sales shall mean the invoiced amount of
Licensed Products shipped by Sublicensees before any deductions
for discounts and returns, insurance and freight.
1.5 Index shall mean the Consumer Price Index for
the United States. If publication of the Index is
discontinued, the parties hereto shall accept comparable
statistics for the United States as computed and published by
an agency or a responsible financial periodical or recognized
authority then to be selected by the parties.
1.6 Inventory shall mean Licensee's and/or
Sublicensees' inventory of Licensed Products and of related
work in progress.
1.7 Inventory Schedule shall mean a complete and
accurate schedule of Inventory.
1.8 Labels shall mean all labels, tags, packaging
material, business supplies and advertising and promotional
materials and all other forms of identification bearing the
Trademark.
1.9 License shall mean the license and rights
granted to Licensee under this Agreement.
1.10 Licensed Products shall mean men's, women's and
children's wearing apparel, accessories and other related
products, as specified on Exhibit G, bearing the Trademark.
Upon thirty (30) days written notice to Licensee, Licensor
shall have the right to exclude from the definition of Licensed
Products any products which Licensee is not then distributing
and which Licensor intends to license to a third party. In
cases where the Licensor excludes such products from the
definition of Licensed Products and issues a license to a third
party, the Licensor shall negotiate with the Licensee in good
faith to determine appropriate compensation for the Licensee
which, under normal circumstances, shall constitute a
percentage of the royalties which the Licensor obtains from
such third party. Such compensation shall be in consideration
for the indirect benefits to be obtained by such third party
from the exploitation by the Licensee of the present License
and also in consideration for the Licensee's supervision of the
merchandising by such third party of the products which have
been excluded from the definition of Licensed Products. The
parties agree that generally speaking the royalty payable to
the Licensee in the above circumstances shall be * percent when
the Licensor is receiving a royalty from the third party of *
percent or more, and otherwise the Licensee's royalty shall be
* percent.
1.11 Manufactured Products shall mean Licensed
Products which are manufactured by or for Licensee through
sources approved by Licensor other than Tommy Hilfiger (Eastern
Hemisphere) Limited ("THEH") and Tommy Hilfiger U.S.A., Inc.
("THUSA").
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-2-<PAGE>
1.12 Net Sales shall mean the gross sales price of
Licensed Products to retailers who are not affiliates of
Licensee or Sublicensees, less returns actually allowed and
actually received by Licensee or Sublicensees, price allowances
and customary and usual trade discounts granted. No other
deductions shall be taken. Taxes on Net Sales such as value
added taxes or its equivalent shall be separately listed. For
purposes of this Agreement, affiliates of Licensee shall mean
all persons and business entities, whether corporations,
partnerships, joint ventures or otherwise, which now or
hereafter control, or are owned or controlled, directly or
indirectly by Licensee, or are under common control with
Licensee. It is the intention of the parties that royalties
will be based on the bona fide wholesale prices at which
Licensee sells Licensed Products to independent retailers in
arms' length transactions. In the event Licensee shall sell
Licensed Products to its affiliates, royalties shall be
calculated on the basis of such a bona fide wholesale price
irrespective of Licensee's internal accounting treatment of
such sale Licensee shall identify separately in the statements
of operations provided to Licensor pursuant to paragraph 5.3
hereof, all sales to affiliates.
1.13 Purchased Products shall mean Licensed Products
which are sourced through THEH and THUSA in accordance with
Paragraph 2.11(a).
1.14 Seasonal Collections shall mean at least four
(4) collections per annum.
1.15 Seconds shall mean damaged, imperfect, non-first
quality or defective goods.
1.16 Sublicensees shall mean those entities with whom
Licensee enters into sublicenses as hereinafter permitted.
1.17 Term shall have the definition given that term
in Paragraph 3.1 and shall, if not specifically excluded
herein, include any Extension hereinafter defined.
1.18 Territory shall mean Japan.
1.19 Trade Secrets shall mean information including a
formula, pattern, compilation, program, device, method,
technique, or process, that derives independent economic value,
actual or potential, from not being generally known to the
public or to other persons who can obtain economic value from
its disclosure or use; and is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
1.20 Trademark shall mean the trademark registrations
which are set forth in the annexed Exhibit A and such
trademarks in classes covering the Licensed Products, whether
or not registered in the Patent Office in Japan, and all
combinations, forms and derivatives thereof which may be
hereafter approved by Licensor for use by Licensee in
connection with the Licensed Products subject to any conditions
set forth in any written approval.
-3-<PAGE>
ARTICLE 2. GRANT
2.1 License. Licensor hereby grants to Licensee an
exclusive non-assignable license during the Term of the
Agreement, subject to all of the terms and conditions contained
in this Agreement to manufacture, distribute and sell the
Licensed Products in the Territory and to sublicense the
Trademarks on prior written notice to and with the prior
written consent of Licensor. In accordance with this Article,
Licensor hereby approves sublicensing of this License to the
following corporation, without prejudice to Licensee's right to
sublicense to any other third parties: T.H.M.J. Incorporated, a
Japanese corporation having its principal office presently
located at Nishigotanda 8-chome, Shinagawa-ku, Tokyo, Japan.
Such approval is conditioned upon the submission to Licensor of
a satisfactory business plan, and approval by Licensor of the
terms of the sublicense agreement.
2.2 Reservations. The license granted in this
Article 2 does not grant any right to Licensee to use the name
"TOMMY" or "HILFIGER" individually or derivatives of the
Trademark. Nothing contained in this Agreement shall be
construed as an assignment or grant to Licensee of any right,
title or interest in or to the Trademark, it being understood
and acknowledged by Licensee that all rights relating thereto
are reserved by Licensor except for the rights specifically
granted to Licensee in this Agreement. Licensee understands
and agrees that Licensor, and its other licensees and
sublicensees, may manufacture or authorize third parties to
manufacture Licensed Products in the Territory for ultimate
sale outside of the Territory. In addition, to the extent it
is legally permissible to do so, no license is granted
hereunder for the manufacture, sale or distribution of the
Licensed Products to be used for publicity purposes, other than
publicity of the Licensed Products, in combination sales,
premiums or giveaways, or to be disposed of under or in
connection with similar methods of merchandising, such license
being specifically reserved for Licensor.
2.3 Territory. Licensee agrees that, unless
otherwise specifically agreed by Licensor in writing, it will
neither permit Sublicensees to export Licensed Products from
the Territory nor permit Sublicensees to sell the same to any
entity which they know or have any reason to believe intends to
export Licensed Products from the Territory. To that end,
Licensee shall require its Sublicensees to include the
following legend on all invoices to their customers:
"The Purchaser is expressly prohibited from
exporting the items sold hereunder from Japan."
2.4 First Refusal. Licensor agrees that before
granting a license to any third party to use any of the
Trademarks or any other Trademark similar therein for any
products other than Licensed Products in the Territory,
Licensor shall give written notice to Licensee of its intent to
grant such license, and Licensee shall have the right of first
refusal, to be asserted within thirty (30) days in writing, to
obtain such license upon terms no less favorable than those to
be offered to the third party. In the event that Licensor and
Licensee fail to reach an agreement with respect to the
proposed license, then Licensor may enter into a license with
the third party; provided, however, that the terms and
conditions of such license with the third party shall not be
more favorable that those
-4-<PAGE>
offered to Licensee.
2.5 Exclusivity. Licensor shall neither use nor
authorize third parties to use the Trademark for the
distribution and sale of the Licensed Products in the Territory
during the Term hereof without Licensee's prior written
approval. Licensor hereby agrees that Licensee shall have the
exclusive right to import into and resell the Licensed Products
in the Territory, which includes the right to manufacture and
have manufactured the Manufactured Products in and outside the
Territory for distribution and sale in the Territory; Licensor
shall not sell or supply any products identical or similar to
the Licensed Products under any of the Trademarks or any other
trademark similar thereto to any third party who intends to
sell or supply such products in the Territory.
2.6 Definitional Disputes. Licensee acknowledges
that due to the nature of the marketplace, the definition of
Licensed Products may change or may not be amenable to precise
delineation. Licensee agrees that if there is a dispute over
the definition of Licensed Products, Licensor shall render a
reasonable written determination which shall be conclusive and
binding on Licensee without legal recourse.
2.7 Best Efforts. At all times while this Agreement
is in effect, Licensee shall use its best efforts to exploit
the License granted hereunder throughout the Territory,
including but not limited to, requiring its Sublicensees to:
sell a sufficiently representative quantity of the Licensed
Products of all styles, fabrications and colors; offer for sale
the Licensed Products so that they may be sold to the consumer
on a timely basis; maintaining a sales force sufficient to
provide effective distribution throughout all areas of the
Territory; and cooperating with Licensor's and any of its
licensees' marketing, merchandising, sales and anti-
counterfeiting programs.
2.7 Overseeing Sublicensees. It is the essence of
this Agreement that Licensee, actively and aggressively police,
monitor and oversee the activities of all of its Sublicensees
relative to the Sublicenses. Notwithstanding any sublicense
granted hereunder, Licensee shall continue to be fully liable
to Licensor with respect to all obligations of Licensee under
this Agreement.
2.8 Sales and Deliveries. Licensee acknowledges
that the availability and selection of styles, fabrications,
colors and sizes are an integral part of the high reputation
and value which the trade and consumers have come to associate
with the Trademark. Therefore, to protect that reputation and
value, Licensee agrees to make its best efforts to require that
its Sublicensees' policies of sale, distribution, and
exploitation shall be of a high standard and to the best
advantage, and that the same shall in no way adversely reflect
upon the good name, trademarks and trade names of Licensor or
any of its programs. Licensee further agrees that it will use
its best efforts to make certain that at all times no less than
* percent of the Licensed Products ordered and accepted by its
Sublicensees for shipment are shipped timely in compliance with
the shipping schedule recited in each order.
2.9 Use of Licensed Legend. Licensee and its
Sublicensees shall, with the prior written approval of
Licensor, have the right to place the legend "Licensed by Tommy
Hilfiger
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-5-<PAGE>
Licensing, Inc., or such other legend which indicates that the
Licensed Products were manufactured, sold and distributed under
the license from the Licensor, on the Licensed Products and on
all wrapping or packaging used in connection therewith, within
the Territory.
2.10 Showrooms. Licensee agrees that it shall
require each of the Sublicensees to promptly establish and
staff, a separate showroom for the presentation and sale of the
Licensed Products, which showroom shall be maintained, operated
and staffed in a manner consistent with the Trademark and with
the showrooms established in the United States for the
presentation and sale of the Licensed Products. Licensor shall
have a right of approval with respect to the design and layout
of the showroom and all expenses incurred with respect to the
design, construction, operation and maintenance of such
showroom shall be borne by Licensee and/or its Sublicensees.
2.11 Purchase of Licensed Products.
(a) Licensee hereby agrees that all Purchased
Products shall be exclusively purchased by Licensee or
Sublicensees through Licensor, its designees, or any other
sources approved by Licensor, and shall be purchased from no
other source. ITOCHU Corporation ("Itochu"), a Japanese
corporation, having its principal place of business at 5-1,
Kita-Aoyama 2-chome, Minato-ku, Tokyo, Japan shall be an
approved importer provided that Itochu shall enter into an
exclusive buying office agreement with THEH and THUSA, for the
purchases of Purchased Products. Pursuant to such buying
office agreements, ITOCHU Corporation shall pay to THEH or
THUSA a buying office commission of * percent of the F.O.B.
price of all Purchased Products.
(b) Itochu may only source Licensed Products
directly, without THEH or THUSA, if the type of approved
Licensed Product is not then being sourced by THEH or THUSA.
For example, if THEH and THUSA are, at the applicable time, not
in the business of sourcing tailored clothing through their
sources approved by Licensor, then Itochu may source the
tailored clothing through its sources approved by Licensor. In
such event, such Licensed Products shall be defined as the
Manufactured Products. In no event shall Itochu be permitted
to source Licensed Products through sources, or even through
its own factories, which have not been approved by Licensor.
ARTICLE 3. TERM OF THE AGREEMENT
3.1 Term. The initial term of this Agreement shall
commence on the date of this Agreement or the date of the
elapse of any waiting period or extension thereof imposed by
any competent ministry or agency of the Japanese government
following the filing by the parties hereto of a report
concerning the conclusion of this Agreement as required by the
Foreign Exchange and Foreign Trade Control Law (Law No.228 of
1848 as amended), whichever date is later. Licensee shall give
Licensor prompt written notice showing the commencement date
immediately after this Agreement shall become effective
pursuant to the above. The Term shall end on December 31, 2000
(the "Term").
-6-<PAGE>
3.2 Extension. Provided that Licensee is not then in
default, this Agreement shall automatically extend for five (5)
additional successive five (5) year terms (the "Extension")
unless Licensee shall give Licensor at least one (1) year prior
written notice that Licensee waives its right to such automatic
extensions (the "Waiver"). Licensee acknowledges that the one
(1) year period for notice is necessary in order to maintain
the continuity of Licensor's Licensing and Marketing programs
and the goodwill associated with the Trademark. Licensee
agrees that "time is of the essence" and that Licensee's
failure to send the Waiver in a timely fashion shall be
construed as a decision by Licensee that it has elected to
renew. If Licensee shall send the Waiver to Licensor, Licensee
shall permit Licensor to immediately replace Licensee by
executing a new License Agreement with third parties, to
commence after this Agreement has expired, without any
liability to Licensee. Expiration or termination of this
Agreement shall not affect any obligation of Licensee to make
payments hereunder accruing prior to such expiration or
termination.
ARTICLE 4. SALES
4.1 Minimum Sales Levels. During each Annual
Period, Licensee, via its Sublicensees, shall be required to
meet the following minimum levels of Net Sales of the Licensed
Products ("Minimum Sales Levels"):
Minimum Sales
Annual Period Level
First *
Second *
Third *
Fourth *
Fifth *
If this Agreement is renewed, beginning with the Sixth Annual
Period and for each Annual Period thereafter, the Minimum Sales
Levels shall be determined by multiplying the Minimum Sales
Level for the immediately preceding Annual Period by the
percentage of the increase, if any, in the Index for the month
of December of the preceding year over such Index for December
of the prior year, and adding the resulting amount to the
Minimum Sales for the immediately preceding Annual Period. The
Minimum Sales Levels set forth above shall be increased from
time to time so that at all times the same shall be at least
equal to the sum of the Minimum Sales Levels contained in the
Licensee's sublicenses for the applicable Annual Period.
4.2 Certification. Within sixty (60) days of the
end of each Annual Period, Licensee shall send to Licensor a
certification by a duly authorized officer of Licensee of the
Net Sales of Licensed Products during such Annual Period (the
"Certification"). Within one hundred twenty (120) days of the
end of each Annual Period, Licensee shall send to Licensor the
Certification further certified by Licensee's external
auditors.
-7-<PAGE>
4.3 Monitoring. Licensee shall actively monitor use
of the Trademark by Sublicensees and their customers and shall
use its best efforts to see that such use does not impair the
image or reputation heretofore or hereafter established by
Licensor for products bearing the Trademark; provided, however,
that the Licensee shall have no obligation to place any
unlawful restriction on Sublicensees or their customers.
ARTICLE 5. LICENSE FEES
5.1 Requirement of Royalties. All Licensed Products
sold by Licensee or Sublicensees, or their affiliates or
subsidiaries, require the payment of royalties by Licensee to
Licensor as set forth in this Article 5.
5.2 Guaranteed Minimum Royalty. In consideration of
the rights granted to Licensee pursuant to this Agreement,
Licensee shall, during each Annual Period or portion thereof
calculated on a pro rata basis, during the Term and any
Extension, pay Licensor Guaranteed Minimum Royalties equal to *
percent of the Minimum Sales Level for such Annual Period.
Guaranteed Minimum Royalties shall be payable in quarterly
installments in advance on the first day of each quarter during
each year during the Term hereof, except that for the First
Annual Period, the Guaranteed Minimum Royalties shall be paid
in two (2) equal installments on the date hereof and *. In the
event that during any Annual Period, Percentage Royalties paid
under Paragraph 5.3 hereof exceed the entire Guaranteed Minimum
Royalty with respect to that Annual Period, no further
Guaranteed Minimum Royalty payments need be made for such
Annual Period.
5.3 Percentage Royalty. In consideration of the
rights granted to Licensee pursuant to this Agreement, Licensee
shall, during each Annual Period or portion thereof during the
Term and any Extension, pay Licensor a royalty of * percent of
Net Sales of Licensed Products sold by Licensee or Sublicensees
during said quarter. Percentage Royalties shall be payable in
quarterly installments on January 30, April 30, July 30 and
October 30 for the immediately preceding quarter of sale, less
Guaranteed Minimum Royalty payments for such period. All
royalties shall accrue upon the sale of the Licensed Products
regardless of the time of collection by Licensee or
Sublicensees. For purposes of this Agreement, a Licensed
Product shall be considered "sold" upon the date of billing,
invoicing, shipping, or payment, whichever occurs first.
5.4 Royalty Statements. Licensee will deliver to
Licensor at the time each Percentage Royalty payment is due,
complete and accurate statements, in the form annexed hereto as
Exhibit B, signed by a duly authorized officer of Licensee and
certified by him as accurate indicating all of the following
information by month: (i) the total invoice price of all
Licensed Products sold during the period covered by such
Percentage Royalty payment; (ii) the amount of discounts and
credits from Gross Sales which properly may be deducted
therefrom, during said period; and (iii) computation of the
amount of Percentage Royalty payable hereunder for said period.
At least once annually, or more often at Licensor's request,
Licensee will also deliver to Licensor a certification from its
managing director or external auditors that the statement which
it accompanies
-8-<PAGE>
is in accordance with the requirements of this paragraph 5.4.
Receipt or acceptance by Licensor of any statement furnished,
or of any sums paid by Licensee, shall not preclude Licensor
from questioning their correctness at any time; provided,
however, that reports submitted by Licensee shall be binding
and conclusive on Licensee in the event of any termination
based on a breach by Licensee arising out of any payment or
report.
5.5 Books and Records. Licensee shall, at its sole
cost and expense, maintain complete and accurate books and
records (specifically including, without limitation, the
originals or copies of documents supporting entries in the
books of account) covering all transactions arising out of or
relating to this Agreement, including all Sublicenses. In
addition, Licensor and its duly authorized representative have
the right, during normal business hours, for the duration of
this Agreement and for three (3) years thereafter, to examine
and copy said books and records and all other documents and
materials in the possession of and under the control of
Licensee with respect to the subject matter and terms of this
Agreement. Licensee shall also obtain for Licensor the right
in all of its Sublicenses for Licensor to similarly inspect the
books and records of the Sublicensees. The exercise by Licensor
of any right to audit at any time or times or the acceptance by
Licensor of any statement, or payment shall be without
prejudice to any of Licensor's rights or remedies and shall not
bar Licensor from thereafter disputing the accuracy of any
payment or statement and Licensee shall remain fully liable for
any balance due under this Agreement.
5.6 Taxes. Licensee will bear all taxes, duties and
other governmental charges in the Territory relating to or
arising under this Agreement, including without limitation, any
income taxes (except withholding taxes on royalties), any stamp
or documentary taxes or duties, turnover, sales or use taxes,
value added taxes, excise taxes, customs or exchange control
duties or any other charges relating to or on, any royalty
payable by Licensee to Licensor. Licensor shall pay any income
tax whether imposed by the laws of the United States or a
United States state. Licensee shall obtain, at its own cost
and expense, all licenses, Reserve Bank, Commercial Bank or
other bank approvals, and any other documentation necessary for
the transmission of royalties and all other payments relevant
to Licensee's performance under this Agreement. If any tax or
withholding is imposed on royalties, Licensee shall obtain
certified proof of the tax payment or withholding and
immediately transmit it to Licensor.
5.7 Underpayments. If, upon any examination of
Licensee's books and records pursuant to Paragraph 5.5 hereof,
Licensor shall discover any royalty underpayment by Licensee,
Licensee will within ten (10) days of demand make all payments
required to be made to correct and eliminate such
underpayment. In addition, if said examination reveals a
royalty underpayment of * or more for any royalty period,
Licensee will within ten (10) days of demand reimburse Licensor
for the cost of said examination.
5.8 Exchange Rate. All payments required to be made
by Licensee hereunder shall be made to Licensor in New York in
Japanese Yen, and all references to yen shall mean Japanese
Yen. In the event that Licensee is required to withhold
certain amounts for payment to the appropriate governmental
authorities, Licensee will supply to Licensor the official
receipts
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-9-<PAGE>
evidencing payment therefor.
5.9 Interest on Late Payments. In addition to any
other remedy available to Licensor, if any payment due under
this Agreement is delayed for any reason, interest shall accrue
and be payable, to the extent legally enforceable, on such
unpaid principal amounts from the date on which the same became
due, at a per annum equal to the lower of * percentage points
above the prime rate of interest in effect from time to time at
Chase Manhattan Bank in New York, New York, U.S.A. and the
highest rate permitted by law in New York.
5.10 No Set-Off. The obligation of Licensee to pay
royalties hereunder shall be absolute notwithstanding any claim
which Licensee may assert against Licensor. Licensee shall not
have the right to set-off, compensate or make any deduction
from such royalty payments for any reason whatsoever.
5.11 Purchase By Licensor. Licensee agrees that
Licensor shall be permitted to purchase Manufactured Products
from Licensee or Sublicensees at the purchase price paid by
Licensee. No royalty shall be payable by Licensee thereon.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
6.1 Warranties and Representations of Licensor.
Licensor hereby represents, warrants and covenants that:
(a) it has the full right, power and authority
to enter into this Agreement and to license Licensee with
respect to all the rights granted hereunder;
(b) it is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation;
(c) all necessary corporate acts have been
effected by it to render this Agreement valid and binding upon
it; and
(d) in its negotiations relative to this
Agreement, it has not utilized the services of any finder,
broker or agent and it owes no commissions or fees to any such
person in relation hereto. Licensor agrees to indemnify
Licensee against, and hold it harmless from, any and all
liabilities (including, without limitation, reasonable
attorneys' fees) to any person, firm or corporation claiming
commissions or fees in connection with this Agreement or the
transactions contemplated hereby as a result of an agreement
with services rendered to Licensor.
6.2 Warranties and Representations of Licensee.
Licensee hereby represents, warrants and covenants that:
-10-<PAGE>
(a) it has the full right, power and authority
to enter into this Agreement and to perform all of its
obligations hereunder;
(b) it is financially capable of undertaking
the business operations which it conducts and of performing its
obligations hereunder;
(c) it is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation;
(d) all necessary corporate acts have been
effected by it to render this Agreement valid and binding upon
it; and
(e) in its negotiations relative to this
Agreement, it has not utilized the services of any finder,
broker or agent and it owes no commission or fees to any such
person in relation hereto. Licensee agrees to indemnify
Licensor against, and hold it harmless from, any and all
liabilities (including, without limitation, reasonable legal
fees) to any person, firm or corporation claiming commissions
or fees in connection with this Agreement or the transaction
contemplated hereby as a result of an agreement with or
services rendered to Licensee.
ARTICLE 7. ADVERTISING
7.1 Advertising. All advertising and promotion in
connection with Licensed Products, including cooperative
advertising whereby Licensee or Sublicensees provide their
customers with a contribution be it in the form of actual
monetary contribution, credit or otherwise, shall be placed
with an agency approved by Licensor. Licensee and/or its
Sublicensees will pay all advertising invoices directly as they
become due. Licensee agrees to use its best efforts,
individually and through Sublicensees to advertise and promote
the Licensed Products during each Annual Period in order to
make the Trademark a well known name within the Territory and
to maintain the high standards of the Trademark.
7.2 Advertising Expenditure. Licensee agrees that,
during each Annual Period, it shall spend at least the greater
of * Yen or * percent of Net Sales for direct media advertising
of the Licensed Products not including any cooperative
advertising, trade shows, sampling, or any other promotional or
sales material normally produced for the sale of the Licensed
Products (the "Advertising Expenditure").
If in any Annual Period of the Advertising Expenditure has not
been made, then Licensee shall spend such amount for
advertising within the first ninety (90) days of the subsequent
Annual Period. If the Advertising Expenditure has not been
expended by the end of said ninety (90) day period, then the
amount which should have been expended and which was not
expended shall be paid over to Licensor to be used by Licensor
for advertising the Trademark provided, however, that if
Advertising Expenditure has not been made prior to the
termination of this Agreement, the unexpended Advertising
Expenditure shall, within twenty (20) days, be paid over to
Licensor absolutely. Proof of expenditure shall be submitted
each quarter using
-11-<PAGE>
the Advertising Expenditure Form (Exhibit C).
7.3 Approval of Packaging, Labeling and Advertising.
No packaging, labeling or advertising, including cooperative
advertising may be used without the prior written approval of
Licensor. Before publication of any advertisement or
promotion, Licensee shall submit every element of the
advertisement or promotion to Licensor for approval using an
"Advertising Approval Form" (Exhibit D). Any approval granted
hereunder shall be limited to use during the Seasonal
Collection of the Licensed Products to which such advertising
relates and shall be further limited to use (e.g. television or
print) for which approval by Licensor was granted. Samples of
initial packaging, labeling and advertising, and samples of any
revisions, changes, modifications or substitutions thereof,
shall be submitted to Licensor sufficiently far in advance to
permit Licensee or its Sublicensees time to make such changes
as Licensor shall deem necessary. All requests for the
approval of packaging, labeling or advertising pursuant to this
Paragraph 7.3 shall be accompanied by at least two (2) samples
of the object for which approval is sought. Licensee shall use
its best efforts to ensure that all advertising and promotional
plans used by Licensee or Sublicensees in connection with the
Trademark, in any form and in any medium, shall be consistent
with the prestige of the Trademark and the quality of the
Licensed Products. All packaging, labeling and advertising of
Licensed Products shall use the Trademark, but no other
trademark or trade name shall be used except as may be required
by applicable law or permitted by Licensor. Licensee and
Sublicensees shall not be permitted to use their names on the
Licensed Products, packaging and other materials displaying the
Trademark other than as specifically approved by Licensor. Any
advertising materials provided by Licensor to Licensee shall be
so provided at Licensee's cost and the price therefor shall be
Licensor's cost of producing and providing the same.
7.4 Use of Trademark on Invoices, etc. The use of
the Trademark by Licensee or Sublicensees on invoices, order
forms, stationery and related matter and in advertising in
telephone or other directory listings is permitted only upon
Licensor's prior written approval of the format in which the
Trademark is to be so used, the juxtaposition of the Trademark
with other words and phrases, and the content of the copy prior
to the initial such use of the Trademark and prior to any
material change therein; provided, however, that each such use
of the Trademark is only in conjunction with the manufacture,
sale, distribution or advertisement of Licensed Products
pursuant to this Agreement.
ARTICLE 8. QUALITY AND STANDARDS
8.1 Distinctiveness and Quality of the Trademark.
Licensee shall maintain and shall monitor its Sublicensees to
maintain, the distinctiveness of the Trademark and the image
and high quality of the goods and merchandise bearing the mark
presently manufactured and sold by Licensor and its other
licensees, and the prestigious marketing of same as hitherto
and presently maintained by Licensor and its other licensees.
Licensee agrees that, with respect to all Licensed Products
manufactured or sold by Sublicensees, the same will be of high
quality as to workmanship, fit, design and materials used
therein, and shall be at least equal in quality, workmanship,
fit, design
-12-<PAGE>
and material to the samples of Licensed Products submitted by
Sublicensees and approved by Licensor pursuant to Paragraph 8.3
hereof. All manufacturing and production shall be of a quality
in keeping with the prestige of the Trademark. In addition,
Licensee acknowledges that in order to preserve the goodwill
attached to the Trademark, the Licensed Products should be sold
at prices and terms reflecting the prestigious nature of the
Trademark and the reputation of the Trademark as appearing on
goods of high quality and reasonable price, it being
understood, however, that Licensor is not empowered to fix or
regulate the prices for which the Licensed Products are to be
sold, either at the wholesale or retail level.
8.2 Shops, Stores, Retail Outlets. The Licensed
Products sold by Licensee and Sublicensees may be sold only to
those specialty shops, department stores and retail outlets
which carry high quality and prestige merchandise and whose
operations are consistent with Licensor's reputation and its
sales policies and with the prestige of the Trademark and only
to those customers expressly approved by Licensor. Prior to
the opening of each selling season (and whenever Licensee or
Sublicensees wish to sell Licensed Products to a customer not
previously approved by Licensor), Licensee shall submit a
written list of the proposed customers to Licensor for
Licensor's approval, which shall be given or withheld in
Licensor's discretion based upon whether the proposed customer
shall enhance the quality and prestige of the Trademarks.
Licensor shall have the right to withdraw any such approval on
written notice to Licensee. Licensee shall not, nor shall it
permit Sublicensees to, market or promote or seek customers for
the Licensed Products outside of the Territory and Licensee
shall not establish a branch, wholly owned by subsidiary,
distribution or warehouse with inventories of Licensed Products
outside of the Territory.
8.3 Samples of Manufactured Products. Before
Licensee or Sublicensees shall sell or distribute any
Manufactured Products in any Seasonal Collection, Licensee or
Sublicensee shall submit samples of each of such Manufactured
Products to Licensor for its prior written approval, which
approval may be withheld by Licensor in its sole and absolute
discretion. Any such request for approval shall be submitted to
Licensor on the form annexed hereto as Exhibit E. Such samples
shall be submitted sufficiently far in advance to permit
Sublicensee time to make such changes as Licensor deems
necessary. Any approval given hereunder shall apply only to
that Seasonal Collection for which it is submitted to
Licensor. Once samples have been approved, Licensee will
permit Sublicensees to manufacture only in accordance with such
approved samples and will not make or permit any changes for
manufacture without Licensor's prior written approval. All
samples of Manufactured Products submitted to Licensor pursuant
to this Paragraph 8.3 shall be provided at Licensee's sole cost
and expense. Licensee shall submit to Licensor additional
samples of Manufactured Products upon Licensor's reasonable
request. No Manufactured Products (including samples) shall be
distributed and/or sold by Licensee for Sublicensees pursuant
to this Agreement unless such Manufactured Products are in
substantial conformity with and at least equal in quality to
the samples previously approved by Licensor in accordance with
this Paragraph 8.3.
8.4 Non-Conforming Products. In the event that any
Licensed Product is, in the judgment of Licensor, not being
manufactured, distributed or sold with first quality
workmanship or in strict adherence to all details and
characteristics furnished by Licensor, Licensor shall notify
-13-<PAGE>
Licensee thereof in writing and Licensee shall promptly repair
or change such Licensed Product to conform thereto. If a
Licensed Product as repaired or changed does not strictly
conform after Licensor's request and such strict conformity
cannot be obtained after at least one (1) resubmission, the
Trademarks shall be promptly removed from the item, at the
option of Licensor, in which event the item may be sold by
Licensee, provided such miscut or damaged item does not contain
any labels or other identification bearing the Trademark
without Licensor's prior approval. Notwithstanding anything in
this paragraph 8.4 to the contrary, sales of any products of
Licensor's design whether or not bearing the Trademarks, shall
nonetheless be subject to royalty payments pursuant to
paragraph 5 hereof. Licensor may purchase at Licensee's
expense any Licensed Products found in the marketplace which,
in Licensor's judgment, are inconsistent with approved quality
standards and bill such costs to Licensee. Licensee must pay
all royalties due on sales of nonconforming goods. Licensor may
require Licensee to recall any Licensed Products not consistent
with approved quality standards. Licensee shall use its best
efforts to comply.
8.5 Approvals. All approvals required or permitted
by this Agreement must be in writing from Licensor to Licensee
or directly to Sublicensees. All matters requiring approval of
Licensor or the exercise of its discretion shall be at the sole
subjective discretion of Licensor. A submission for approval
shall be disapproved unless Licensor delivers a notice of
approval within twenty (20) days. Licensor shall provide an
explanation for disapprovals. Licensor has no obligation to
approve, review or consider any item which does not strictly
comply with the required submission procedures. Approval by
Licensor shall not be construed as a determination that the
approved matter complies with all applicable regulations and
laws. No disapproved item shall be manufactured, sold, used,
distributed or advertised. Licensee may revise any disapproved
item and resubmit it. Licensee must strictly comply with all
of Licensor's decisions. The parties will adjust the approval
forms as appropriate. Upon reasonable notice, Licensor may
withdraw approval of any previously approved item including
customers. In the event that it is reasonably necessary for
Licensor to do on-site approvals, Licensee will pay any and all
expenses and air-fare incurred by Licensor with respect to such
on-site approvals.
8.6 Approval Withdrawal. If the style, appearance
or quality of any Licensed Product ceases to be acceptable to
Licensor, Licensor shall have the right in the exercise of its
sole discretion to withdraw its approval of such Licensed
Product. Upon receipt of written notice from Licensor of its
election to withdraw such approval, Licensee shall immediately
cease the use of the Trademark in connection with the
promotion, advertising, sale, manufacture, distribution or use
of such Licensed Product(s). Notice of such election by
Licensor to withdraw approval shall not relieve Licensee from
its obligation to pay royalties on sales of such Licensed
Product(s) made by Licensee to the date of disapproval or
thereafter as permitted. Licensee may, however, complete work
in process and utilize materials on hand provided that it
submits proof of such work in progress and fabric inventory to
Licensor.
8.7 Samples, Artwork and Know-How. Licensor shall,
at least four (4) times during each Annual Period, make
available to Licensee certain samples, designs, colors, fabric
samples, tags, labels, packaging and artwork available to
Licensor, and the cost of providing such
-14-<PAGE>
materials shall be borne by Licensee. All right, title and
interest in and to samples, sketches, designs, and other
materials furnished to Licensee or Sublicensees by Licensor
whether created by Licensor or Licensee including any
modifications or improvements thereof which may be created by
Licensor, Licensee or Sublicensees, are hereby assigned to and
shall be the sole property of Licensor as between Licensee,
Sublicensees and Licensor, and are licensed hereunder solely
and exclusively for use in connection with the manufacture and
sale of Licensed Products in the Territory. Licensor may use
and permit others to use said designs and other materials in
any manner it desires, provided that such use does not conflict
with any rights granted Licensee hereunder. Licensee
specifically acknowledges that such designs and other materials
may be used by Licensor and other licensees on Licensed
Products in jurisdictions outside the Territory and on products
other than Licensed Products anywhere in the world. In
addition to the foregoing, for marketing purposes, Licensor
shall, upon reasonable request make available to Licensee, such
of the following which are available to Licensor: (a) reports
on marketing policy of Licensor; (b) reports on color, style
and fabric trends; (c) samples of advertising materials; (d)
display ideas; and (e) labels, hangtags and packaging.
8.8 Confidentiality. Licensee acknowledges that it
will receive from Licensor prints, designs, ideas, sketches,
and other materials or Trade Secrets which Licensor intends to
use on or in connection with lines of merchandise other than
the Licensed Products and which have not as yet found their way
into the channels of distribution. The parties recognize that
these materials are valuable property of Licensor. Licensee
acknowledges the need to preserve the confidentiality and
secrecy of these materials and agrees to take all necessary
steps to ensure that use by it, or by its contractors will in
all respects preserve such confidentiality and secrecy.
Licensee shall take all reasonable precautions to protect the
secrecy of the materials, samples, and designs described in
this Article 8 prior to their commercial distribution or the
showing of samples for sale, and shall not sell any merchandise
employing or adapted from any of said designs except under the
Trademark. Licensor shall take all reasonable precautions to
protect the secrecy of the original designs created by Licensee
or Sublicensees for Licensed Products prior to their
advertisement, commercial distribution or the showing of
samples for sale. Neither Licensor nor Licensee shall, at any
time during the term of this Agreement, disclose or use for any
purpose, other than as contemplated by this Agreement, any
revealed or otherwise acquired confidential information and
data relating to the business of the other. Licensee shall not
permit Sublicensees to so disclose.
8.9 Manufacture of Licensed Products by Third
Parties. Licensee shall not permit Sublicensees to enter into
any agreement with any third party for the manufacture of
Licensed Products without the prior written consent of
Licensor, which consent must be obtained within three (3)
months prior to commencing production. In order to maintain
Licensor's high standard of quality control and to insure that
appropriate measures are taken against counterfeiting,
Licensee's notice to Licensor shall include all of the
following information: (i) name and address of each proposed
manufacturer; (ii) type of Licensed Products to be
manufactured; (iii) quantity of Licensed Products to be
manufactured; and (iv) any other relevant information.
Licensee will also require Sublicensees to obtain the signature
of an authorized representative from each third party
manufacturer used by Sublicensee on a brief agreement, in a
form prepared by Licensor, designated to protect Licensor's
rights in the Trademark (see Exhibit F). Licensee acknowledges
that it shall remain primarily liable
-15-<PAGE>
and completely obligated under all of the provisions of this
Agreement in respect of such subcontracting arrangements.
8.10 Marking, Labeling and Packaging in Accordance
with Applicable Laws. All Licensed Products manufactured,
distributed or sold by Licensee or Sublicensees shall be
marked, labeled, packaged, advertised, distributed and sold in
accordance with this Agreement, in accordance with all
applicable laws, rules and regulations in the Territory, and in
such a manner as will not tend to mislead or deceive the
public. At the request of Licensor, Licensee shall cause to be
placed on all Licensed Products appropriate notice designating
Licensor as the copyright or design patent owner thereof, as
the case may be. The manner of presentation of said notice
shall be determined by Licensor.
8.11 Inspection of Facilities. Licensor and its duly
authorized representatives shall have the right, during normal
business hours and upon reasonable notice to inspect all
facilities utilized by Licensee or Sublicensees (and their
contractors and suppliers to the extent Licensee or
Sublicensees may do so) in connection with the manufacture,
sale, storage or distribution of Licensed Products, and to
examine the Licensed Products in process of manufacture and
when offered for sale within Licensee's, Sublicensees' and
their subcontractor's operation.
8.12 Rules and Regulations. To the extent permitted
by applicable law, Licensor may, from time to time, promulgate
rules and regulations to Licensee relating to the manner of use
of the Trademarks. Licensee shall comply with such rules and
regulations.
8.13 Disposal of Seconds and Close-Outs.
(a) Seconds. Licensee shall not sell any
Licensed Products which are Seconds without the express prior
written consent of Licensor. All Seconds approved for sale by
Licensor shall be clearly marked "Seconds" or "Irregular". The
percentage of Seconds of any of the Licensed Products which may
be disposed of pursuant to this Paragraph 8.13(a) shall not, in
any event, exceed * percent of the total number of units of
Licensed Products distributed or sold by that Sublicensee.
(b) Close-Outs. All Close-Outs shall be sold
only with Licensor's prior written approval, which Licensor may
withhold in its sole discretion, through retail outlets and
traditional and accepted dealers in such merchandise and upon
such terms and conditions as Licensee, in its reasonable
discretion, determines appropriate and shall not be sold to any
person which Licensee or Sublicensee know, or have reason to
know, will export such Close-Outs from the Territory.
(c) Other Plans. Any plan of Licensee or
Sublicensees for the disposition of Seconds or Close-Outs which
varies from the foregoing requirements of Article 8 shall
require the prior approval of Licensor.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-16-<PAGE>
8.14 Assistance By Licensor. Licensee shall have the
right to cause its personnel and the personnel of Sublicensees
to reasonably visit Licensor's offices, factories, showroom,
and other places of business, and also to attend Licensor's
sales meetings in order to obtain additional know-how and
assistance. The scheduling of such visits shall be at times
mutually convenient to the parties hereto. In connection with
such visits, Licensee shall bear all air-fare to and from, and
subsistence expenses of Licensee's representatives. Licensee
shall be entitled to request Licensor to send a representative
selected by Licensor to Licensee and/or Sublicensees in order
to obtain the know-how at times mutually convenient to the
parties hereto, but not more than once per year. In connection
with such visits as may be requested by Licensee, Licensee
shall bear the cost of round trip air-tickets (business class)
to and from the United States and/or Hong Kong and reasonable
expenses for lodging and meals and domestic transportation in
Japan in connection with work for Licensee.
8.15 Design Rights. Licensee acknowledges and agrees
that Licensor owns or shall own all design rights, regardless
of whether such designs were created by Licensor or by or on
behalf of Licensee. Licensee agrees to make, procure and
execute all assignments necessary to vest ownership of design
rights in Licensor. Licensee shall place appropriate notices,
including notice of copyright, reflecting ownership of design
rights by Licensor, on all the Licensed Products, packaging,
tags, labels and advertising and promotional materials.
Licensee shall not do or allow to be done anything which may
adversely affect any of Licensor's design rights. All designs
used by Licensee for the Licensed Products shall be used
exclusively for the Licensed Products and may not be used under
any other trademark or private label without the prior written
consent of Licensor. Licensee shall disclose and freely make
available to Licensor any and all developments or improvements
it may make relating to the Licensed Products and to their
manufacture, promotion and sales, including, without
limitation, developments and improvements in any machine,
process or product design, that may be disclosed or suggested
by Licensor or regarding any patent or trademark which Licensee
is entitled to utilize.
8.16 Pricing. Licensee acknowledges that in order to
preserve the goodwill attached to the Trademark, the Licensed
Products should be sold at prices and terms reflecting the
prestigious nature of the Trademark, it being understood,
however, that Licensor is not empowered to fix or regulate the
prices for which the Licensed Products are to be sold, either
at the wholesale or retail level.
ARTICLE 9. THE TRADEMARK
9.1 Rights to the Trademark. Licensee acknowledges
the great value of the goodwill associated with the Trademark,
and acknowledges that the Trademark and all the rights therein,
and goodwill attached thereto, belong exclusively to Licensor.
Licensee will not, at any time, do, permit Sublicensees to do,
or otherwise suffer to be done any act or thing which may at
any time, in any way adversely affect any rights of Licensor in
and to the Trademark or any registrations thereof or which,
directly or indirectly, may reduce the value of the Trademark
or detract from its
-17-<PAGE>
reputation. Nothing contained in this Agreement shall be
construed as an assignment or grant to Licensee of any right,
title or interest in or to the Trademark, or any of Licensor's
other trademarks, it being understood that all rights relating
thereto are reserved by Licensor, except for the License
hereunder to Licensee of the right to use and utilize the
Trademark only as specifically and expressly provided herein.
Licensee shall not file or prosecute a trademark or service
mark application or applications to register the Trademark in
respect of the Licensed Products or any other goods or
services. Licensee shall not, during the term of this Agreement
or thereafter, (a) attack Licensor's title or right in and to
the Trademark in any jurisdiction or attack the validity of
this License or the Trademark or (b) contest the fact that
Licensee's rights under this Agreement (i) are solely those of
a manufacturer and distributor and, (ii) subject to the
provisions of Article 11 hereof, cease upon termination of this
Agreement. The provisions of this paragraph 9.1 shall survive
the termination of this Agreement.
9.2 Protecting the Trademark. Licensee shall
cooperate fully and in good faith with Licensor for the purpose
of securing, preserving and protecting Licensor's rights in and
to the Trademark and shall demand that the Sublicensees
similarly cooperate with Licensor. At the request of Licensor,
Licensee shall execute and deliver, or require Sublicensees to
execute and deliver, to Licensor any and all documents and do
all other acts and things which Licensor deems necessary or
appropriate to make fully effective or to implement the
provisions of this Agreement relating to the ownership or
registration of the Trademark.
9.3 Use of the Trademark in Compliance with Legal
Requirements. Licensee will use the Trademark, and shall
require Sublicensees to use the Trademark in the Territory, for
the purposes permitted hereunder, strictly in compliance with
the legal requirements obtaining therein. Whenever any
Trademark is used on any item of packaging or labeling or in
any advertisement, it must be followed, in the case of a
registered trademark by the registration symbol, i.e.,
Registered, and in the case of all other trademarks by the
symbol TM, or other appropriate symbols of similar import
acceptable to Licensor. Licensee shall duly display, and
require Sublicensees to display, all other notices with respect
to the Trademark, on the Licensed Products and otherwise, as
are or may be required by the trademark laws and regulations
applicable within the Territory. Upon expiration or
termination of this Agreement for any reason whatsoever,
Licensee will execute and deliver, and require Sublicensees to
execute and deliver, to Licensor any and all documents required
by Licensor terminating any and all trademark registrations,
Registered User agreements and other documents regarding this
Trademark.
9.4 Ownership of Copyright. Any copyright which may
be created in any sketch, design, print, package, label, tag or
the like designed or approved or used with the Trademark by
Licensor will be the property of Licensor. Licensee will not,
at any time, do, permit Sublicensees to do, or otherwise suffer
to be done any act or thing which may adversely affect any
rights of Licensor in such sketches, designs, prints, packages,
labels, tags and the like and will, at Licensor's request, do,
and require its Sublicensees to do, all things reasonably
required by Licensor to preserve and protect said rights.
-18-<PAGE>
9.5 Infringement. Licensee shall notify, and shall
require Sublicensees to notify, Licensor in writing of any
infringement or imitation of the Trademark or the use by any
person of any trademarks or tradenames confusingly similar to
the Trademark promptly as same may come to the attention of
Licensee and/or Sublicensees. Licensor will thereupon take
such action as it deems advisable for the protection of the
Trademark and its rights therein and Licensee shall assist, and
shall require Sublicensees to assist, Licensor in the
prosecution of any such suit, as Licensor may reasonably
request, at Licensor's expense. In no event, however, will
Licensor be required to take any action if it deems it
inadvisable to do so and Licensee and Sublicensees will have no
right to take any action with respect to the Trademark without
the prior written consent of Licensor. In the event a third
party infringes the use of the Trademark in the Territory on
items similar to the Licensed Products, Licensor shall take all
advisable and necessary measures to protect the Trademark and
Licensee agrees that at Licensor's request, it will pay the
costs in excess of * incurred therefor in any Annual Period,
including judicial expenses and legal fees.
9.6 Counterfeit Protection. Licensee shall use its
best efforts to prevent counterfeiting. All Licensed Products
shall bear and use any reasonable counterfeit preventive
system, devices or labels designated by Licensor. At its
option, Licensor may supply the system, devices or labels
(provided that they are supplied on a timely basis), which
Licensee and its Sublicensees must use and for which Licensee
shall pay all reasonable costs in advance. If Licensee,
despite instructions from Licensor (via approval or any other
method) fails to apply the required trademark, patent and
copyright notice, then upon receipt of written notice from the
Licensor, Licensee shall immediately discontinue any and all
manufacture, sale, advertising, promotion, shipment and
distribution of Licensed Products which do not have the
requisite notice.
9.7 Registration of License. Licensee shall have
the right at any time to request that Licensor register this
license (and to maintain such registration thereafter) as an
exclusive user (senyo siyokensha) in Japan with respect to all
or any of the Trademarks under the Trademark Law (Law No. 127
of 1959, as amended), and upon such request, Licensor shall
promptly and fully cooperate with Licensee to accomplish such
registration. Expenses for such registration shall be borne by
Licensee.
9.8 Addition to the Trademarks: Registration of
Defensive Marks. Licensor agrees upon the reasonable request
of Licensee, which may be made from time to time, to apply for
registration of new trademarks created by or for Licensee which
are similar to the Trademarks including associated trademarks
(rengoshohyo), in the patent office of Japan. Such new
trademarks, after application therefor has been made, shall
automatically be the property of Licensor and shall be included
within the definition of the Trademarks. Expenses for such
registration shall be borne by Licensor. Licensor also agrees
upon the reasonable request of Licensee, which may be made from
time to time, to apply for registration of defensive marks
(bogyoshohyo) under the Trademark Law in Japan, which shall,
upon registration, be the property of Licensor. Expenses for
such registration shall be borne by Licensor.
9.8 Cancellation of Registrations. Upon termination
or expiration of this
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-19-<PAGE>
Agreement, Licensee agrees to cancel any applicable
registration or identification to it of the Trademarks which
may have been secured.
9.9 Monitoring. Licensee shall actively monitor use
of the Trademark by Licensee and its customers and shall use
its best efforts to see that such use does not impair the image
or reputation heretofore or hereafter established by Licensor
for products bearing the Trademark; provided, however, that the
Licensee shall have no obligation to place any unlawful
restriction on its customers.
ARTICLE 10. INSOLVENCY
10.1 Effect of Proceeding in Bankruptcy, etc. If
either party institutes for its protection or is made a party
subject to any proceeding under bankruptcy, insolvency,
reorganization or receivership law, or if either party is
placed in receivership or makes an assignment for benefit of
creditors or is unable to meet its debts in the regular course
of business, the other party may elect to terminate this
Agreement immediately by written notice to the other party
without prejudice to any right or remedy the terminating party
may have, including, but not limited to, damages for breach to
the extent that the same may be recoverable.
10.2 Rights, Personal. The license and rights
granted hereunder are personal to Licensee. No assignee for
the benefit of creditors, receiver, trustee in bankruptcy,
sheriff or any other officer or court charged with taking over
custody of Licensee's assets or business, shall have any right
to continue performance of this Agreement or to exploit or in
any way use the Trademark if this Agreement is terminated
pursuant to Paragraphs 11.1 and 11.2, except as may be required
by law.
10.3 Trustee in Bankruptcy. Notwithstanding the
provisions of Paragraph 10.2 above, in the event that, pursuant
to the applicable bankruptcy law (the "Code"), a trustee in
bankruptcy, receiver or other comparable person, of Licensee,
or Licensee, as debtor, is permitted to assume this Agreement
and does so and, thereafter, desires to assign this Agreement
to a third party, which assignment satisfies the requirements
of the Code, the trustee or Licensee, as the case may be, shall
notify Licensor of same in writing. Said notice shall set
forth the name and address of the proposed assignee, the
proposed consideration for the assignment and all other
relevant details thereof. The giving of such notice shall be
deemed to constitute an offer to Licensor to have this
Agreement assigned to it or its designee for such
consideration, or its equivalent in money, and upon such terms
as are specified in the notice. The aforesaid offer may be
accepted by Licensor only by written notice given to the
trustee or Licensee, as the case may be, within fifteen (15)
days after Licensor's receipt of the notice to such party. If
Licensor fails to deliver such notice within the said fifteen
(15) days, such party may complete the assignment referred to
in its notice, but only if such assignment is to the entity
named in said notice and for the consideration and upon the
terms specified therein. Nothing contained herein shall be
deemed to preclude or impair any rights which Licensor may have
as a creditor in any bankruptcy proceeding.
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ARTICLE 11. TERMINATION
11.1 Other Rights Unaffected. It is understood and
agreed that termination by Licensor on any ground shall be
without prejudice to any other or remedies which Licensor may
have.
11.2 Termination Procedure. If Licensee breaches any
of its obligations under this Agreement, Licensor may terminate
this Agreement by giving Notice of Termination to Licensee.
Termination will become effective automatically unless Licensee
completely cures the breach within twenty (20) days of the
giving of such Notice. If the notice relates to royalties or
to product quality, pending cure Licensee shall ship no
Licensed Products; if Licensee does ship, it shall
automatically forfeit its right to cure and the License shall
be terminated. Upon the giving or a Notice of Termination for
the third time, for any reason, Licensee shall no longer have
the right to cure any violation, and termination shall be
effective upon the giving of the Notice.
11.3 Specific Grounds for Termination.
(a) If any installment of royalty payments is
not paid when due and such default continues for more than ten
(10) days after written notice thereof to Licensee;
(b) If Licensee shall fail to timely present
for sale to the trade a broadly representative and fair
collection of each Seasonal Collection of Licensed Products
designed by Licensor or Licensee shall fail to timely ship to
its customers a material portion of the orders of Licensed
Products it has accepted;
(c) If Licensee shall use the Trademarks in an
unauthorized manner and/or if Licensee shall make an
unauthorized disclosure of confidential information, Trade
Secrets, or materials given or loaned to Licensee by Licensor;
(d) If Licensee institutes proceedings seeking
relief under a bankruptcy act or any similar law, or otherwise
violates the provisions of paragraph 10.1 thereof;
(e) If Licensee transfers or agrees to transfer
substantially all of its property, its shares of stock or, this
Agreement in violation of Article 17 thereof;
(f) If Licensee shall make a sale to unapproved
customer(s) in violation of paragraph 8.2 hereof;
(g) If Licensee shall sell unapproved
merchandise in violation of paragraph 8.3 hereof;
(h) If Licensee shall use the Trademark in
connection with another trademark or name; and/or
-21-<PAGE>
(i) If Licensee and its Sublicensees shall fail
to achieve the Minimum Sales Levels as required in paragraph
5.2 hereof; and/or
11.4 Timing of Termination. If any grounds for
termination described in paragraphs 11.3 (c), (d), (e), (g),
and/or (h), shall occur, this Agreement shall thereupon
forthwith terminate and come to an end without any need for
notice from Licensor. If any ground for termination described
in paragraphs 11.3 (a), (b), or (f) shall occur, Licensor shall
have the right, exercisable in its sole discretion, to
terminate this Agreement upon thirty (30) days written notice
to Licensee of its intention to do so, and upon expiration of
such thirty (30) day period, if the Licensee shall fail to cure
such breach, this Agreement and the License shall terminate and
come to an end. As to paragraphs 11.3 (a) and (f)
specifically, the right of Licensor to cure shall not be
permitted if the Licensee has received two prior notices for a
breach of the same paragraph during the previous two (2) years.
Termination based upon paragraph 11.4 (i) shall require sixty
(60) days notice to Licensee.
11.5 Effect of Termination. On the termination of
this Agreement for any reason whatsoever: all of the rights of
Licensee under this Agreement, and the rights of the
Sublicensees which are subject hereto, shall forthwith
terminate and immediately revert to Licensor; all royalties on
sales theretofore made shall become immediately due and
payable; Licensee shall forthwith discontinue all use of the
Trademark, except that Licensee may permit Sublicensees to have
a period of one hundred eighty (180) days after such
termination to consummate all sales of Licensed Products which
were firm upon the delivery of the Inventory Schedule in
accordance with Paragraph 11.6 hereof and to sell the balance
of the Inventory not purchased by Licensor, and royalties with
respect thereto shall be due on such ninetieth day. Licensor
shall have the right to conduct a physical inventory of the
Licensed Products in Licensee's or Sublicensees possession or
control. Licensee will, where possible, require Sublicensees
to completely remove the Trademark from Licensed Products and
destroy all hangtags and labeling attached to such Licensed
Products. Licensee and Sublicensees shall, at Licensee's
expense, either return to Licensor all remaining Inventory
after such one hundred eightieth (180th) day or destroy all
remaining Inventory under the supervision of Licensor.
Licensee and Sublicensees shall no longer use the Trademarks,
any variation, imitation or simulation thereof, or any
Trademarks similar thereto; Licensee will, and will require
Sublicensees to, promptly transfer to Licensor, free of charge,
all registrations, filings and rights with regard to the
Trademark which it may have possessed at any time; and Licensee
shall thereupon deliver to Licensor, free of charge, all
sketches, designs, colors and the like in its possession or
control, designed or approved by Licensor, and all Labels
supplied by Licensor in Licensee's and Sublicensees possession
or control. Licensor shall have the option, exercisable upon
notice to Licensee within thirty (30) days of termination, to
negotiate the purchase of the Labels which have not been
supplied by Licensor. If such negotiations do not result in
the purchase of the Labels not supplied by Licensor, Licensee
shall destroy the Labels under the supervision of Licensor, and
Licensee, shall supply to Licensor a certificate of destruction
thereof signed by a duly authorized officer of Licensee.
Anything to the contrary notwithstanding, Licensor may upon
termination, require Licensee to assign to Licensor all of
Licensee's rights under any or all of the Sublicensees and may
revoke its termination of such assigned Sublicense(s).
-22-<PAGE>
11.6 Inventory Upon Termination. Upon the
termination of this Agreement for any reason whatsoever,
Licensee shall obtain from Sublicensees and immediately deliver
to Licensor an Inventory Schedule. The Inventory Schedule
shall be prepared as of the close of business on the date of
such termination and shall reflect each Sublicensee's direct
cost of each such item (not including overhead or any general
or administrative expenses). Licensor thereupon shall have the
option, exercisable by notice in writing delivered to Licensee
within thirty (30) days after its receipt of the complete
Inventory Schedule, to purchase any or all of the Inventory for
an amount equal to the price as determined as follows: (i) as
to Manufactured Products, the price shall be Licensee's
standard cost (the actual manufacturing cost); and (ii) as to
Purchased Products, the price shall be Licensee's landed costs,
which shall, for the purposes hereof, mean the F.O.B. price
together with customs, duties, brokerage, freight and
insurance. In the event such notice is sent by Licensor,
Licensor may collect from any Sublicensee the Inventory
referred to therein within ninety (90) days after Licensor's
said notice. Licensor will pay such Sublicensee for such
Inventory upon such collection. In the event such notice is
not sent, Licensee may allow the Sublicensees the right to
dispose of the Licensed Products within ninety (90) days of the
date of termination; provided, however, that any advertising
used during such period shall be subject to Licensor's prior
written approval and such disposition of the Licensed Products
shall be subject to Licensee's obligations hereunder,
including, but not limited to payments to be made to Licensor.
At the end of such one ninety (90) day period, any Licensed
Products remaining in Licensee's or Sublicensees' possession
shall, at the request of Licensor, be destroyed.
11.7 Freedom to License. In the event of termination
of this Agreement or the receipt by Licensor of a notice of
termination from Licensee (pursuant to Paragraph 3.2
hereunder), Licensor shall be free to license to others the use
of the Trademark in connection with the manufacture and sale of
Licensed Products in the Territory, but only if the sale of
such Licensed Products in the Territory produced pursuant to
such third party agreement is prohibited until after the
termination of this Agreement.
11.8 Termination Without Prejudice. Termination of
this Agreement pursuant to the terms and conditions hereof
shall be without prejudice to the terminating party's other
rights and remedies at law or in equity.
11.9 Equitable Relief. Licensee acknowledges and
admits that Licensor would have no adequate remedy at law in
the event of Licensee's unlawful or unauthorized use of the
Trademark. Licensee therefore agrees that in the event of
Licensee's or Sublicensees' continued unlawful or unauthorized
use of the Trademark, Licensor shall be entitled to equitable
relief by way of temporary and permanent injunction and such
other and further relief as any court with jurisdiction may
deem just and proper.
11.9 Waiver. It is expressly understood that under
no circumstances shall Licensee be entitled, directly or
indirectly, to any form of compensation or indemnity from
Licensor as a consequence to the termination of this Agreement,
whether as a result of the passage of time, or as the result of
any other cause of termination referred to in this Agreement.
Without limiting the
-23-<PAGE>
generality of the foregoing, by its execution of the present
Agreement, Licensee hereby waives any claim which it has or
which it may have in the future against Licensor arising from
any alleged goodwill created by the Licensee for the benefit of
any or all of the said parties or from the alleged creation or
increase of a market for Licensed Products.
ARTICLE 12. RELATIONSHIP BETWEEN THE PARTIES
12.1 No Agency. Licensee shall not represent itself,
nor permit Sublicensees to represent themselves, as the agent
or legal representative of Licensor, Licensor's affiliates or
Tommy Hilfiger for any purpose whatsoever and shall have no
right to create or assume any obligation of any kind, express
or implied, for or on behalf of them in any way whatsoever.
ARTICLE 13. INTENTIONALLY OMITTED
ARTICLE 14. BENEFIT
14.1 Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and, subject
to Article 17 hereof, their successors and assigns.
ARTICLE 15. ENTIRE AGREEMENT; AMENDMENT
15.1 Entire Agreement; Amendment. This Agreement
constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and this Agreement may not
be amended or modified, except in a writing signed by both
parties hereto.
ARTICLE 16. NON-WAIVER
16.1 Non-Waiver. The failure of either party to
enforce at any time any term, provision or condition of this
Agreement, or to exercise any right or option herein, shall in
no way operate as a waiver thereof, nor shall any single or
partial exercise preclude any other right or option herein; and
no waiver whatsoever shall be valid unless in writing, signed
by the waiving party, and only to the extent herein set forth.
ARTICLE 17. ASSIGNMENT
17.1 No Assignment Without Consent. The license and
rights granted to Licensee
-24-<PAGE>
hereunder are personal in nature, and except as specifically
set forth herein, Licensee may not and shall not sell,
transfer, lease, sublicense or assign this Agreement or its
rights and interest hereunder, or any part hereof, by operation
of law or otherwise, without the prior written consent of
Licensor, which consent may be withheld by Licensor in its sole
and absolute discretion, except that Licensee shall have the
right, upon written notice to Licensor, to assign this
Agreement to a corporation, subsidiary or affiliate under the
same control as Licensee; provided, however, that in such event
Licensee agrees to guarantee the performance and obligations of
such corporation, subsidiary or affiliate under this Agreement.
17.2 Sale of Assets. A sale or other transfer of all
or substantially all of the assets of Licensee or a change in
the control of Licensee other than as permitted under Paragraph
17.1 shall be deemed an assignment of Licensee's rights and
interests under this Agreement to which the terms and
conditions of Paragraph 17.1 of this Agreement shall apply.
17.3 Sale of Stock/Interest. Any transfer, by
operation of law or otherwise, of Licensee's interest in this
Agreement (in whole or in part), a * percent or greater
interest in one or in a series of transactions in Licensee
(whether stock, partnership, interest or otherwise) or any
interest directly or indirectly to a competitor of Licensor
shall be deemed an assignment of Licensee's rights and interest
under this Agreement to which the terms and conditions of
Paragraph 17.1 of this Agreement shall apply. * If there has
been a previous transfer of less than a * percent interest in
Licensee, then any other transfer of an interest in Licensee
which when added to the total percentage previously transferred
totals a transfer of greater than * percent interest of
Licensee, shall be deemed an assignment of Licensee's interest
in this Agreement within the meaning of this Paragraph to which
the terms and conditions of Paragraph 20.1 shall apply.
17.4 Assignment by Licensor. Licensor shall have a
complete and unrestricted right to sell, transfer, lease or
assign its rights and interests in this Agreement to any
domestic or foreign corporation or other business entity,
providing that such transferee agrees to be bound by all of the
terms hereof and is the holder of the Trademark in the
Territory. When Licensor wishes to sell, transfer, lease or
assign its rights and interests in this Agreement, Licensor
shall do so on prior notice to Licensee.
ARTICLE 18. INDEMNIFICATION AND INSURANCE
18.1 Indemnification by Licensee. Licensee does
hereby indemnify and hold harmless Licensor, Tommy Hilfiger,
and their directors, officers, employees, agents, officials and
related companies from and against any and all losses,
liability, damages and expenses (including reasonable
attorneys' fees and expenses) which they or any of them may
incur or be obligated to pay in any action, claim or proceeding
against them or any of them, for or by reason of any acts,
whether of omission or commission, that may be committed or
suffered by Licensee, Sublicensees, or any
-25-<PAGE>
of their servants, agents or employees in connection with
Licensee's performance of this Agreement, including but not
limited to:
18.1.1. any alleged defect in any Licensed
Product, regardless of whether the action is based upon
negligence or strict liability, and regardless of whether the
alleged negligence of Licensor is characterized as "passive" or
"active";
18.1.2. the manufacture, labeling, sale,
distribution or advertisement of any Licensed Product by or for
Licensee;
18.1.3. any violation of any warranty,
representation or agreement made by Licensee pertaining to a
Licensed Product;
18.1.4. the claim of any broker, finder or
agent in connection with the making of this Agreement or any
transactions contemplated by this Agreement.
The provisions of this paragraph and Licensee's obligations
hereunder shall survive any termination or rescission of this
Agreement.
18.2 Notice of Suit or Claim. Licensee shall
promptly inform, and shall require Sublicensees to inform,
Licensor by written notice of any suit or claim against
Licensee relating to Licensee's performance under this
Agreement, whether such suit or claim is for personal injury,
involves alleged defects in the Licensed Products manufactured,
sold or distributed hereunder, or otherwise.
18.3 Indemnification by Licensor. Licensor does
indemnify and hold harmless Licensee, against any and all
liabilities, damages and expense (including reasonable
attorneys' fees, costs and expenses) which Licensee may incur
or be obligated to pay in any action or claim against Licensee
for infringement of any other person's claimed right to use a
trademark in the Territory, but only where such action or claim
results from Licensee's or a Sublicensee's use of the Trademark
in the Territory in accordance with the terms of this Agreement
and where Licensee is not at fault. Licensee shall give, and
shall require Sublicensees to give, Licensor prompt written
notice of any such claim or action and thereupon Licensor shall
undertake and conduct the defense of any suit so brought. It
is understood, however, that if there is a dispute between
Licensor and Licensee as to whether the suit was brought as a
result of Licensee's and/or Sublicensees' failure to use the
mark in accordance with the terms of this Agreement, Licensee
may be required to conduct such defense unless and until it is
determined that no such misuse of the Trademark occurred and
that Licensee and Sublicensees are not at fault. In the event
appropriate action is not taken by Licensor within thirty (30)
days of its receipt of notice from Licensee, Licensee shall
have the right to defend such claim or action in its own name,
but no settlement or compromise of any such claim or action may
be made without the prior written approval of Licensor. In
either case, Licensor and Licensee shall keep each other fully
advised of all developments and shall cooperate fully with each
other and in all respects in connection with any such defense
is made. Such indemnification shall be deemed to
-26-<PAGE>
apply solely to the amount of the judgment, if any, against
Licensee, and sums paid by Licensee in connection with its
defense. Such indemnification shall not apply to any damages
sustained by Licensee by reason of such claimed infringement
other than those specified above.
ARTICLE 19. SEVERABILITY
19.1 Severability. If any provision or any portion
of any provision of this Agreement shall be construed to be
illegal, invalid, or unenforceable, such shall be deemed
stricken and deleted from this Agreement to the same extent and
effect as if never incorporated herein, but all other
provisions of this Agreement and any remaining portion of any
provision which is not deemed illegal, invalid or
unenforceable in part shall continue in full force and effect.
ARTICLE 20. NOTICES
20.1 Notices. All reports, approvals and notices
required or permitted to be given under this Agreement shall,
unless specifically provided otherwise in this Agreement, be
deemed to have been given if personally delivered or if mailed
by certified or registered mail, if to Licensor, to:
TOMMY HILFIGER LICENSING, INC.
913 N. Market Street
Wilmington, Delaware 19801
Attention: Mr. Joel Horowitz
President
Copy to: Steven R. Gursky, Esq.
Gursky & Associates, P.C.
21 East 40th Street
New York, New York 10016
and if to Licensee, to the address set forth above. The
parties may change their address for receipt of notices at any
time upon notice to the other party.
ARTICLE 21. SUSPENSION OF OBLIGATIONS
21.1 Suspension of Obligations. If Licensee shall be
prevented from performing any
-27-<PAGE>
of its obligations because of governmental regulation or order,
or by strike or war, declared or undeclared, or other
calamities such as fire, earthquake, or similar acts of God, or
because of other similar or dissimilar cause beyond the control
of Licensee, Licensee's obligations shall be suspended during
the period of such conditions. If such condition continues for
a period of more than ninety (90) days, Licensor shall have the
right to terminate this Agreement. If the act of force majeure
consists of a fire, earthquake, flood, hurricane, tornado, or
nuclear war and if the act prevents Licensee from manufacturing
and/or delivering the Licensed Products, whether due to an
inability to obtain fabric or other materials, destruction of
manufacturing facilities, inability to deliver finished
product, or otherwise, Licensee shall have a period of not to
exceed one hundred eighty (180) days to find alternate sources
and Licensee shall advise Licensor on a weekly basis of the
progress it has made in that regard. If, in Licensor's
reasonable opinion, Licensee shall fail to diligently proceed
to obtain alternate sources, or if the condition shall continue
to exist for a period of one hundred eighty (180) days,
Licensor shall have the right to terminate this Agreement.
ARTICLE 22. EXHIBITS
22.1 Exhibits. All Exhibits are incorporated into
this Agreement. The forms of Licensor may be revised by
Licensor at any time.
ARTICLE 23. OTHER PROVISIONS
23.1 Headings. The headings of the Articles and
Paragraphs of this Agreement are for convenience only and in no
way limit or affect the terms or conditions of this Agreement.
23.2 Counterparts. This Agreement may be executed in
two (2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
23.3 Construction. This Agreement shall be
interpreted and construed in accordance with the laws of the
State of New York with the same force and effect as if fully
executed and to be performed therein.
23.4 Jurisdiction. The parties hereby consent to the
jurisdiction of the United States District Court for the
Southern District of New York and of any of the courts of the
State of New York in dispute arising under this Agreement and
agree further that service of process or notice in any such
action, suit or proceeding shall be effective if in writing and
delivered in person or sent as provided in Paragraph 20.1
hereof.
23.5 Language. All communications relating to this
Agreement shall be in English. If Licensee transmits any
information to Licensor in any other language, Licensor may
have such
-28-<PAGE>
documents translated; Licensee shall pay all costs of such
translation. Should Licensee have this Agreement translated
for the purpose of submitting it to any local, provincial or
national government or official body, Licensor shall have the
right to review and correct the translation prior to submission
to any government or official body. The English original shall
control the relation between Licensor and Licensee. All
hearings related to any dispute concerning this Agreement shall
be in English.
23.6 Compliance with Laws. Licensee shall comply
with all laws, rules, regulations and requirements of any
governmental body which may be applicable to the operations of
License contemplated hereby, including, without limitation, as
they relate to the manufacture, distribution, sale or promotion
of Licensed Products, notwithstanding the fact that the
Licensor may have approved such item or conduct.
IN WITNESS WHEREOF, the parties have executed this
Agreement.
TOMMY HILFIGER LICENSING, INC.
By: /s/ Joel Horowitz
Title: Chief Executive Officer
NOVEL-ITC LICENSING LIMITED
By: /s/ Kazuo Kojima
Title: President
[G1842B.005]
-29-<PAGE>
<PAGE>
TOMMY HILFIGER LICENSING, INC.
TRADEMARK REGISTRATIONS
IN JAPAN IN CLASS 25
TRADEMARK REGISTRATION NUMBER
TOMMY HILFIGER Reg. No. 2607371
FLAG/LOGO DESIGN Reg. No. 2206060
CREST DESIGN Reg. No. 2668456
[G1842B.005]
EXHIBIT A<PAGE>
TOMMY HILFIGER LICENSING, INC. STATEMENT OF ROYALTIES
FOR_______________TO______________19__
(QUARTER)
Sublicensee NAME____________________________________________
Sublicensee ADDRESS_________________________________________
___________________________________________________________
Sublicensee PRODUCT(S)______________________________________
NUMBER GROSS
CUSTOMER INVOICE ITEM UNIT WHOLESALE SOLD LESS LESS
NAME NUMBER STYLE NO. PRICE SALES ALLOWANCES
LESS LESS NET SALES NET ROYALTY
MARKDOWNS TRADE RETURNS AMOUNT
DISCOUNTS
TOTALS
SEND STATEMENT TO: TOMMY HILFIGER LICENSING, INC.
913 N. Market Street
Wilmington, Delaware 19801
__________________________________________________
U.S.A.
I CERTIFY THAT THE ABOVE IS ACCURATE
SIGNATURE
___________________________________________________
[G1842B]
EXHIBIT B<PAGE>
TOMMY HILFIGER LICENSING, INC. PAGE_______OF ______
DATE________________
FORM MUST BE SUBMITTED COMPLETED SUBMIT TO THE ATTENTION OF:
TOMMY HILFIGER LICENSING, INC.
913 N. MARKET STREET
WILMINGTON, DELAWARE 19801
NAME OF Sublicensee___________________________________________________
LICENSED
PRODUCT_______________________________________________________________
Sublicensee'S
ADDRESS_______________________________________________________________
EXPENDITURES REFLECT THE PERIOD _____ / _____ / _____ TO _____ /_____
/_____, ALL TEARSHEETS AND ADVERTISING BILLS MUST ACCOMPANY THIS FORM.
DATE OF PUBLICATION OF DOLLAR AMOUNT
ADVERTISING TYPE OF ADVERTISING Sublicensee SPENT
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
EXHIBIT C<PAGE>
TOMMY HILFIGER LICENSING, INC. Page________of_____________
Date_______________________
FORM MUST BE SUBMITTED COMPLETED SUBMITTED TO THE ATTENTION OF:
TOMMY HILFIGER LICENSING, INC.
913 N. MARKET STREET
WILMINGTON, DELAWARE 19801
ADVERTISING APPROVAL FORM
NAME OF LICENSEE______________________________________________________
LICENSED PRODUCT______________________________________________________
LICENSEE'S ADDRESS____________________________________________________
CIRCLE THE FORM OF ADVERTISING WHICH IS BEING SUBMITTED: LABEL,
HANGTAG, BUSINESS CARDS, BUSINESS FORMS, RADIO SPOT, TV, FULL PAGE AD,
1/2 PAGE AD, PACKAGING, DISPLAY, OTHER.
PLACE ADVERTISING TO BE SUBMITTED HERE
OR AFFIX TO THIS PAGE
1) USE PERIOD FROM______________________ TO ____________________
2) IF SUBMISSION IS LABELS OR HANGTAGS, PLEASE GIVE NAME & ADDRESS OF
SUPPLIER
______________________________________________________________________
3) IF AD IS TO RUN IN A PUBLICATION, PLEASE GIVE NAME OF PUBLICATION
______________________________________________________________________
APPROVED__________________________ DISAPPROVED___________________
COMMENTS______________________________________________________________
______________________________________________________________________
______________________________________________________________________
_________________________________ ______________________________
SIGNATURE OF LICENSEE SIGNATURE OF LICENSOR
DATE RETURNED TO LICENSEE___________________________________
[G1842B.005]
EXHIBIT D<PAGE>
TOMMY HILFIGER LICENSING, INC. Page________of_____________
Date__________________
FORM MUST BE SUBMITTED COMPLETE SUBMITTED TO THE ATTENTION OF:
TOMMY HILFIGER LICENSING, INC.
25 WEST 39TH STREET
NEW YORK, NEW YORK 10018
SAMPLE APPROVAL FORM
(ALL SAMPLES SUBMITTED FOR APPROVAL MUST BE IN CORRECT FABRIC)
NAME OF Sublicensee __________________________________________________
LICENSED PRODUCT _____________________________________________________
Sublicensee'S ADDRESS ________________________________________________
SEASON____________ STYLE NUMBER_____________ FABRICATION____________
WHOLESALE PRICE ____________________________ COLORS _________________
SIZES ___________________________ FACTORY ___________________________
START TAKING ORDERS ______________ END TAKING ORDERS _________________
START SHIP ______________________ END SHIP ___________________________
APPROVED _______________________ DISAPPROVED __________________
COMMENTS _____________________________________________________________
______________________________________________________________________
______________________________________________________________________
__________________________________ ______________________________
SIGNATURE OF Sublicensee SIGNATURE OF Sublicensor
DATE RETURNED TO Sublicensee _______________________
[G1842B]
EXHIBIT E <PAGE>
[G1842B.005]
MANUFACTURING AGREEMENT
THIS AGREEMENT made this ___ day of ________ 1996, by and
between ___________________________, a ________ corporation,
having an office at __________________________________________
(hereinafter referred to as the "Company") and _______________
having an office at __________________________________________
(hereinafter referred to as the "Manufacturer").
W I T N E S S E T H :
WHEREAS the Manufacturer is engaged in the manufacture of
garments and/or other items of apparel;
WHEREAS, the Company wishes to contract with the
Manufacturer for manufacture of certain garments and/or other
items of apparel from time to time, which garments and/or other
items of apparel (the "Products") will bear the trademark Tommy
Hilfiger, the trade name Tommy Hilfiger, all related logos,
crests, emblems or symbols, and all combinations, form and
derivatives thereof as are from time to time used by the
Company or any of its affiliates, whether registered or
unregistered as shown in the attached Exhibit A (the
"Trademarks"); and
WHEREAS, the Company has been licensed by Tommy Hilfiger
Licensing, Inc. ("THLI"), a Delaware corporation, to use the
Marks. THLI is the owner of all rights, title and interests in
and to the Trademarks.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereby agree as follows:
1. THE PRODUCTS. Company and THLI have created certain
designs and patterns from which the Manufacturer will create
three dimensional samples. The Company shall advise the
Manufacturer if the samples meet the Company's quality
requirement within twenty-one (21) days of receipt. The
Manufacturer shall make any modifications to the samples as
required by the Company. Samples accepted by the Company shall
be designated as prototypes for the purposes of this Agreement.
2. TERM.
(a) The term of this Agreement shall be for one (1)
year commencing on the ____ day of __________, 1996 and
terminating on the ____ day of __________________.
EXHIBIT F<PAGE>
(b) In the event that the Manufacturer shall have
faithfully performed each and every obligation of this
Agreement during the Term referred to in paragraph 2(a) above,
then this Agreement shall automatically renew from month to
month commencing immediately upon expiration of the term,
unless either party has given the other thirty (30) days
written notice of its intention to terminate the Agreement.
3. MANUFACTURE.
(a) Manufacturer shall only produce the specific
number of products as requested by the Company and at no time
shall produce excess goods or overruns. Manufacturer shall not
sell any products bearing the Trademarks to any third parties
without the express written consent of the Company.
(b) Manufacturer shall manufacture the Products and
Packaging to conform in quality and specifications to the
prototypes as defined in Paragraph 1 above and as outlined in
the Quality Assurance Manual developed by the Company.
(c) All Products and Packaging manufactured by
Manufacturer shall be delivered to locations specified by the
Company or directly to the Company, whichever the Company may
direct.
(d) Manufacturer shall not enter into any agreement
with any third party for the manufacture of the Products
without the prior written consent of the Company, which consent
may be withheld in the Company's sole discretion. In order to
maintain the Company's high standard of quality control and to
insure that appropriate measures are taken against
counterfeiting, the Manufacturer will advise the Company of the
following information prior to obtaining the Company's written
consent: (i) name and address of each proposed manufacturer;
(ii) type and style of the Products to be manufactured; (iii)
quantity of the Products to be manufactured; and (iv) any other
relevant information. The Manufacturer will also obtain the
signature of an authorized representative from each third
party manufacturer approved by the Company on an agreement, in
a form substantially similar to this Agreement, designated to
protect the Company's and THLI's rights in the Trademarks. The
Manufacturer acknowledges that it shall remain primarily liable
and completely obligated under all of the provisions of this
Agreement in respect of such subcontracting arrangement.
(e) Manufacturer shall adhere to all federal, state
and local laws which pertain to the manufacture of clothing and
apparel, including the Flammable Fabrics Act, as amended, and
regulations thereunder and Manufacturer guarantees, that with
regard to all products, fabrics or related materials used for
the manufacture of the Products, which are to be sold by the
Company for which flammability standards have been issued,
amended or continued in effect under the Flammable Fabrics Act,
as amended, reasonable and representative tests, as prescribed
by the Consumer Product Safety Commission have been performed
which show that the Products at the time of their shipment or
delivery conform to the above-referenced flammability standards
as are applicable.<PAGE>
4. INSPECTION.
(a) Company shall have the right to send any
representative or agent to inspect Manufacturer's premises or
its subcontractors' premises to the extent the Manufacturer may
have subcontractors as provided in 3(c) above.
(b) Such rights of inspection shall include the
right to inspect, test, and take samples of the Products,
whether finished or semi-finished, at any time during the
manufacturing process.
(c) Company shall have the right to reject any
Products or Packaging as not meeting the standards described in
Paragraph 1 above.
(d) Manufacturer shall not have the right to sell or
otherwise distribute any rejected Products or Packaging. All
such products shall be destroyed according to methods and
procedures provided by the Company.
5. NOTICES.
(a) Manufacturer warrants and represents that the
Trademarks will appear on all of the Products in the manner set
forth in the attached Exhibit A. The Trademarks shall appear
on the Packaging in the form shown in Exhibit A.
(b) No other trademarks or notices shall appear on
Products or Packaging without the Company's prior written
consent in each instance.
6. USE OF TRADEMARKS.
(a) Manufacturer shall not at any time use, promote,
advertise, display or otherwise commercialize the Trademarks or
any material utilizing or reproducing the Trademarks in a
manner that will adversely affect any rights of ownership of
the Company therein or in a manner that would derogate or
detract from its repute. Manufacturer shall not use the
Trademarks, in any manner whatsoever (including, without
limitation, for advertising, promotion and publicity purposes),
without obtaining the prior written approval of the Company.
(b) The Trademarks shall be used in the form as
shown in attached Exhibit A.
(c) The Company assumes no liability to Manufacturer
or third parties with respect to Manufacturer's use of the
Trademarks other than in strict conformity with the
specifications set forth in this Agreement.
(d) Manufacturer's use of the Trademarks on the
Products and/or Packaging shall inure to the benefit of the
Company. Manufacturer shall take any and all steps required by
the Company and the law to perfect the Company's rights
therein.<PAGE>
7. PROPERTY OF OWNER.
(a) Manufacturer recognizes the great value of the
goodwill associated with the Trademarks and the identification
of the Products with the Trademarks and acknowledges that the
Trademarks and all rights therein and goodwill pertaining
thereto belong exclusively to the Company. Manufacturer further
recognizes and acknowledges that a breach by Manufacturer of
any of its covenants, agreements or other undertakings
hereunder will cause the Company irreparable damage, which
cannot be adequately remedied in damages in an action at law,
and may, in addition thereto, constitute an infringement of the
Company's rights in the Trademarks, thereby entitling the
Company to equitable remedies, costs and reasonable attorney's
fees.
(b) To the extent any rights in and to the
Trademarks are deemed to accrue to Manufacturer, Manufacturer
hereby assigns any and all such rights, at such time as they
may be deemed to accrue, including the related goodwill, to the
Company.
(c) Manufacturer shall (i) never challenge the
validity or the Company's ownership of the Trademarks or any
application for registration thereof, or any trademark
registration thereof and (ii) never contest the fact that
Manufacturer's rights under this Agreement are solely those of
a manufacturer and terminate upon expiration or termination of
this Agreement. Manufacturer shall, at any time, whether
during or after the term of the Agreement, execute any
documents reasonably requested by the Company to confirm the
Company's ownership rights. All rights in the Trademarks other
than those specifically granted herein are reserved by the
Company for its own use and benefit.
(d) Without limiting the generality of any other
provision of this Agreement, Manufacturer shall not (i) use the
Trademarks, in whole or in part, as a corporate or trade name
or (ii) join any name or names with the Trademarks so as to
form a new trademark. Manufacturer agrees not to register, or
attempt to register, the Trademarks in its own name or any
other name, anywhere in the world.
(e) All provisions of this paragraph shall survive
the expiration or termination of this Agreement.
8. TRADEMARK PROTECTION.
(a) In the event that Manufacturer learns of any
infringement or imitation of the Trademarks or of any use by
any person or entity of a trademark similar to the Trademarks,
it shall promptly notify the Company. The Company thereupon
shall take such action as it deems advisable for the protection
of its rights in and to the Trademark and, if requested to do
so by the Company, Manufacturer shall cooperate with the
Company in all respects. In no event, however, shall the
Company be required to take any action if it deems it
inadvisable to do so.
(b) Company shall have the right to defend, at its
cost and expense, and with counsel of its own choice, any
action or proceeding brought against Manufacturer for alleged
trademark infringement arising out of Manufacturer's use of the
Trademarks in accordance with the provisions of this Agreement.<PAGE>
(c) Manufacturer shall cooperate with the Company in
the execution, filing and prosecution of any trademark,
copyright or design patent applications that the Company may
desire to file and for that purpose Manufacturer shall supply
to the Company from time to time such samples as may be
reasonably required.
(d) All provisions of this paragraph shall survive
the expiration or termination of this Agreement.
9. TRANSSHIPMENT. Manufacturer hereby acknowledges the
Company's strict policy against transshipment of the Products.
Transshipment includes any products sewn or otherwise
manufactured in one country and then shipped to the United
States with a second company's "country of origin" labels and
export licenses to avoid adverse trade restrictions and import
quotas. Transshipment can involve both the raw materials used
to manufacture the Products and the finished Products. The
Manufacturer further acknowledges that transshipment in any
form violates U.S. federal law and the Company reserves the
right to immediately terminate this agreement according to the
terms contained herein, upon receipt of proof of transshipment
of the Products by the Manufacturer.
10. SECONDS, THIRDS OR EXCESS GOODS. Manufacturer shall
not have the right to sell any Products or Packaging which are
determined to be seconds, thirds or are in excess of the amount
of the products requested by the Company. All seconds or
excess products, including trims, shall be purchased by the
Company at the reasonable fair market price. Thirds shall be
destroyed by the Manufacturer and Manufacturer shall not have
the right to sell any such products. The Company shall have
the right to inspect any seconds or excess products to ensure
that they comply with the terms of this Agreement.
11. STOLEN GOODS OR DAMAGED GOODS. Manufacturer will
provide the Company with immediate notice of any stolen
Products or damaged Products including Products that are in
production. With regard to damaged Products (i.e., Thirds),
Manufacturer shall not have the right to sell any damaged
Products and all damaged Products (i.e., Thirds) will be
destroyed by the Manufacturer. With regard to stolen Products,
Manufacturer shall cooperate with the Company with respect to
any action regarding the stolen Products.
12. DESIGN OWNERSHIP. All rights, including without
limitation, copyright, trade secret and design patent, to
designs for the Products including, without limitation,
artwork, prints patterns, package designs, labels advertising
or promotional materials or any other designs using or used on
or affixed thereto, and to any package design, bearing the
Trademarks shall be the property of the Company. All Products
manufactured from designs submitted by Manufacturer and
approved by the Company, shall bear the Trademarks.
13. CONFIDENTIALITY. During the term of this Agreement
and thereafter, each party shall keep strictly secret and
confidential any and all information acquired from the other
party hereto or its designee and shall take all necessary
precautions to prevent unauthorized disclosure of such
information. The Manufacturer acknowledges that it will
receive from the Company prints, designs, ideas, sketches, and
other materials which the Company intends to use on or in
connection <PAGE>
with lines of merchandise which have not yet been put into the
channels of distribution. The parties recognize that these
materials are valuable property of the Company. The
Manufacturer acknowledges the need to preserve the
confidentiality and secrecy of these materials and agrees to
take all necessary steps to ensure that use by it or by its
employees and/or agents will in all respects preserve such
confidentiality and secrecy. The Manufacturer shall take all
reasonable precautions to protect the secrecy of the materials,
samples, and designs prior to their commercial distribution or
the showing of samples for sale, and shall not manufacture any
merchandise employing or adapted from any of said designs
except for the Company or its affiliates or designees.
14. FORCE MAJEURE.
(a) No failure or omission by either of the parties
to perform any of its obligations under this Agreement shall be
deemed a breach of this Agreement if such failure or omission
is the result of acts of God, war, riot, accidents, compliance
with any action or restriction of any government or agency
thereof, strikes or labor disputes, inability to obtain
suitable raw materials, fuel, power or transportation, or any
other factor or circumstance beyond the control of the party,
which is not attributable to the negligence of such party.
(b) Any suspension of performance by reason of this
paragraph shall be limited to the period during which such
cause of failure exists, but such suspension shall not affect
the running of the term of this Agreement. However, if the
suspension of performance by reason of this paragraph exceeds
six months, either party may give written notice of termination
of this Agreement.
15. MANUFACTURER'S WARRANTIES AND REPRESENTATIONS.
Manufacturer warrants and represents that:
(a) It has and will have throughout the Term of this
Agreement, the full power, authority and legal right to execute
and deliver, and to perform fully and in accordance with all of
the terms of, this Agreement.
(b) The entering of this Agreement by Manufacturer
does not violate any agreements, rights or obligations existing
between Manufacturer and any other person, entity, or
corporation.
(c) It is not engaged in and will not engage in any
activities which are in violation of any applicable Domestic,
Foreign or International Laws, Rules or Regulations, including
without limitation Laws, Rules or Regulations governing labor,
the environment, the sale of goods, U.S. Customs Laws or
illegal transshipment. The Company maintains a policy against
engaging in any illegal activities and will not buy or sell
products provided throughout the use of any unlawful or
unethical practices.
16. THE COMPANY'S WARRANTIES AND REPRESENTATIONS.
Company warrants and represents that:<PAGE>
(a) It has, and will have throughout the Term of
this Agreement, the right to authorize use of the Trademark to
Manufacturer in accordance with the terms and provisions of
this Agreement; and
(b) The entering of this Agreement by the Company
does not violate any agreements, rights or obligations existing
between the Company and any other person, entity, or
corporation.
17. INDEMNIFICATIONS.
(a) Company hereby indemnifies Manufacturer and
shall hold it harmless from any loss, liability, damage, cost
or expense (including reasonable attorneys fees) arising out of
any claims or suits which may be brought against Manufacturer
by reason of the breach by the Company of the warranties or
representations as set forth in Paragraph 16, provided that
Manufacturer gives prompt written notice, and full cooperation
and assistance to the Company relative to any such claim or
suit, and that the Company shall have the option to undertake
and conduct the defense of any suit so brought. The
Manufacturer shall cooperate fully in all respects with the
Company in the conduct and defense of said suit and/or
proceedings.
(b) Manufacturer indemnifies and agrees to hold the
Company harmless from any loss, liability, damage, cost or
expense (including reasonable attorneys fees), arising out of
(i) any claims or suits by reason of any unauthorized use by
Manufacturer in connection with the Products or the Trademarks
covered by this Agreement; (ii) Manufacturer's non-compliance
with any applicable federal, state, or local law or with any
other applicable governmental regulations; and (iii) any
alleged defects and or inherent dangers in Products or use
thereof.
18. TERMINATION.
(a) Company shall have the right to terminate this
Agreement, if Manufacturer breaches any of its obligations
under this Agreement or such other occurrences as outlined
below.
(i) If any governmental agency or other body or office or
official vested with appropriate authority finds that the
Products are harmful or defective in any way, manner or
form, or are being sold or distributed in contravention of
applicable laws and regulations or in a manner likely to
cause harm; or
(ii) If Manufacturer manufactures the Products without
the prior written approval of the Company as provided
herein or in direct contradiction to the Purchase Order;
or
(iii) If Manufacturer is unable to pay its debts when
due, or makes any assignment for the benefit of creditors,
or files any petition under the bankruptcy or insolvency
laws of any jurisdiction, country or place, or has or
suffers a receiver or trustee to be appointed for its
business or property, or is adjudicated a bankrupt or an
insolvent; or<PAGE>
(iv) If Manufacturer fails to make timely delivery of the
Products.
(b) In the event any of these defaults occur, the
Company shall give notice of termination in writing to
Manufacturer by certified mail. The Manufacturer shall have
ten (10) days from the date of giving notice in which to
correct any of these defaults or at the Owner's sole
discretion, Manufacturer may be given additional time to
correct such defaults and failing such, this Agreement shall
thereupon immediately terminate.
19. ACTS UPON EXPIRATION OR TERMINATION AT THIS
AGREEMENT.
(a) Upon and after the expiration or termination of
this Agreement, Manufacturer agrees not to make reference in
its advertising or its business materials as having been
formerly associated with the Company or the Trademarks.
(b) Upon and after the expiration or termination of
this Agreement, all rights granted to Manufacturer hereunder
shall forthwith revert to the Company, who shall be free to
transfer any and all rights to others to use the Trademarks in
connection with the manufacture of the Products.
(c) Upon and after the expiration or termination of
this Agreement, Manufacturer and its Affiliates will refrain
from further use of the Trademarks or any further reference to
it, directly or indirectly, or of anything confusingly similar
thereto, in connection with the manufacture or sale of any
products. Additionally, all sketches, patterns, prototypes,
samples or other materials relating to the Products shall be
returned by Manufacturer to the Company.
(d) In the event of expiration or termination of
this Agreement, as herein provided, with the exception of the
Products which Manufacturer must ship to satisfy any unfilled,
confirmed orders for the current season it had received prior
to said expiration or termination, the Company shall have the
prior right and option to purchase any or all of the Products
and Packaging Materials, as then in Manufacturer's possession
or carried on its books of account. Upon such termination or
expiration Manufacturer shall immediately cause physical
inventories to be taken of (i) Products on hand; (ii) Products
in the process of manufacture; and (iii) all Packaging
Materials, which inventories shall be reduced to writing and a
copy thereof shall be delivered to Company not later than
fifteen (15) days from such termination or expiration. Written
notice of the taking of each inventory shall be given the
Company at least forty-eight (48) hours prior thereto. The
Company shall have the right to be present at such physical
inventory or to take its own inventory, and to exercise all
rights it has available with respect to the examination of
Manufacturer's books and records. If Manufacturer does not
allow the Company to take such inventory it shall have no right
to sell the remaining Products as provided in paragraph 19(f)
below.
(e) Manufacturer recognizes that any sale of the
Products upon termination or expiration, would cause
irreparable damage to the prestige of the Company and to the
Trademark, and to the goodwill pertaining thereto.
(f) Upon expiration or termination of this
Agreement, Manufacturer shall cease the manufacture of
Products. All the Products set forth on the inventories
referred to in subdivision (i)<PAGE>
and (ii) of paragraph 19(f) which are not purchased by the
Company pursuant to such paragraph may be sold subject to the
Company's prior right to approve the customers and the terms
and conditions of each sale. Such sale shall otherwise be
strictly in accordance with the terms, covenants and conditions
of this Agreement as though the Agreement had not expired or
terminated.
20. NOTICES. All notices which either party hereto is
required or may desire to give shall be given by addressing the
same to the address hereinafter in this paragraph, or at such
other address as may be designated in writing by any party in a
notice to the other given in the manner prescribed in this
paragraph. All such notices shall be sufficiently given when
mailed by registered or certified mail. The address to which
any such notices, shall be given are the following:
TO COMPANY: TO MANUFACTURER:
ATTENTION: ATTENTION:
21. NO PARTNERSHIP, ETC. This Agreement does not
constitute and shall not be construed to create a partnership
or joint venture between the Company and Manufacturer. Neither
party shall have any right to obligate or bind the other party
in any manner whatsoever, and nothing herein contained shall
give, or is intended to give, any rights of any kind to any
third persons.
22. NON-ASSIGNABILITY, ETC. This Agreement shall bind
and inure to the benefit of the Company and its successors and
assigns. This Agreement is personal to Manufacturer, and
Manufacturer shall not franchise its rights hereunder and
neither this Agreement nor any of the rights of Manufacturer
hereunder shall be sold, transferred or assigned by
Manufacturer and no rights hereunder shall devolve by operation
of law or otherwise upon any receiver, liquidator, trustee or
other party.
23. SEVERABILITY. If any provision or any portion of any
provision of this Agreement shall be construed to be illegal,
invalid, or unenforceable, such shall be deemed stricken and
deleted from this Agreement to the same extent and effect as if
never incorporated herein, but all other provisions of this
Agreement and remaining portion of any provision which is not
found to be illegal, invalid or unenforceable in part shall
continue in full force and effect.
24. HEADINGS. The headings of the Paragraphs of this
Agreement are for convenience only and shall in no way limit or
affect the term or conditions of this Agreement.
25. COUNTERPARTS. This Agreement may be executed in two
(2) or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
26. CONSTRUCTION. This Agreement shall be construed in
accordance with the laws of<PAGE>
the State of New York of the United States of America.
27. WAIVER, MODIFICATION, ETC. No waiver, modification
or cancellation of any term or condition of this Agreement
shall be effective unless executed in writing by the party
charged therewith. No written waiver shall excuse the
performance of any acts other than those specifically referred
to herein. The fact that the Company has not previously
insisted upon Manufacturer expressly complying with any
provision of this Agreement shall not be deemed to be a waiver
of the Company's future right to require compliance in respect
thereof and Manufacturer specifically acknowledges and agrees
that the prior forbearance in respect of any act, term or
condition shall not prevent the Company from subsequently
requiring full and complete compliance thereafter.
28. ARBITRATION. Any controversy or claim arising out of
or relating to this Agreement or the breach or claimed breach
thereof shall be determined and settled by arbitration in New
York, New York, in accordance with the Rules of the American
Arbitration Association, and judgment upon the award rendered
by the Arbitrator(s) may be entered in any court having
jurisdiction thereof. In the event that a court action becomes
necessary the Company and Manufacturer consent to the
jurisdiction of the courts of the State of New York, including
all New York Courts and all Federal Courts of the State of New
York.
IN WITNESS WHEREOF, the parties hereto have signed this
Agreement as of the date first written above.
COMPANY: MANUFACTURER:
By:_____________________________
By:____________________________
Name:___________________________
Name:__________________________
Title:__________________________
Title:_________________________
EXHIBIT F<PAGE>
LICENSED PRODUCTS
(1) Men's, Women's and Children's Clothes and Hosiery
Including:
Suits, Uniform, Working Wear, Trousers, Shorts, Formal
Wear, Blazer, Jacket, Overcoat, Raincoat, Mantle, Cape,
Sportscoat, Sweater, Cardigan, Vest, Dress Shirt, Sport
shirt, Jersey and Knit Shirts, T-shirts, Knitted
Underwear, Woven Underwear, Pajamas, Bathing Suits,
Swimwear, Socks and Other Hosiery.
(2) Accessory, Button, Luggage and Bag and Jewelry Including:
Belt and Band, Suspender, Necklace, Earring, Pendant,
Bracelet, Broach, (Finger) Ring, Locket, Badge, Buckle,
Insignia, Medal, Order, Necktie Pin, Handkerchief, Scarf,
Muffler. Button, Cuff Link, Hook, Snap Fastener, Zipper,
Comb, Hairbrush, Hairpin, Hairnet, Hair Ribbon, Wig and
Other Artificial Hair, Hair Accessory, Suitcase,
Briefcase, Handbag, Shoulderbag, Trunk, Garment Bag and
Other Luggage, Rucksack, Knapsack, Wallet, Purse, Card
Holder and Other Small Leather Goods, Gem Stone, Crystal,
Pearl, Coral, Other Precious Gems and Artificial Jewelry.
(3) Footwear, Umbrella, Cane and Related Accessories
Including:
Shoes, Overshoes, Boots, Sneakers, Slippers, Shoe String,
Sandal, Umbrella, Cane (Walking) Stick.
(4) Watch, Clock and Optics Including:
Wrist Watch, Stop Watch, Pocket Watch, Clock and Other
Timing Devices, Optical Glasses, Contact Lens, Sunglasses,
Swimming Goggles and Other Optics.
EXHIBIT G
EXHIBIT 10(b)
EXECUTION COPY
AMENDED AND RESTATED CREDIT AGREEMENT
dated as of July 11, 1996
among
TOMMY HILFIGER U.S.A., INC.
and
TOMMY HILFIGER RETAIL, INC.
as Borrowers
TOMMY HILFIGER CORPORATION,
TOMMY HILFIGER (EASTERN HEMISPHERE) LIMITED,
TOMMY HILFIGER (HK) LIMITED,
TOMMY HILFIGER LICENSING, INC. and
TOMMY HILFIGER NIPPON CO., LTD.
TOMMY HILFIGER WOMENSWEAR, INC.
as Guarantors
CHEMICAL BANK
as Administrative Agent
and
THE LENDERS NAMED HEREIN<PAGE>
TABLE OF CONTENTS
SECTION PAGE
SECTION 1. DEFINITIONS
1.1 Defined Terms........................................
1.2 Use of Defined Terms...........................
1.3 Accounting Terms...............................
SECTION 2. AMOUNT AND TERMS OF CREDIT....................
2.1 The Commitments................................
2.2 The Advances...................................
2.3 Letters of Credit..............................
2.4 Acceptances....................................
2.5 Termination or Reduction of Commitments........
2.6 Prepayments....................................
2.7 Fees; Commissions..............................
2.8 Computation of Interest, Commissions and
Fees...........................................
2.9 Pro Rata Treatment and Payments................
2.16 Conversion Options.............................
2.11 Indemnity......................................
2.12 Authorization to Charge Account................
2.13 Increased Costs................................
2.14 Payments Free and Clear of Taxes. Etc..........
2.15 Inability to Determine Rate....................
2.16 Illegality.....................................
2.17 Use of Proceeds................................
2.18 Obligations Absolute...........................
SECTION 3. CONDITIONS OF BORROWING.......................
3.1 Conditions of Initial Extension of Credit........
3.2 Conditions of All Extensions of Credit...........
3.3 Obligations in Respect of Existing Agreement.....
SECTION 4. REPRESENTATIONS AND WARRANTIES................
4.1 Corporate Existence..............................
4.2 Corporate Power; Authorization; Enforceable......
4.3 No Legal Bar.....................................
4.4 No Material Litigation...........................
4.5 No Default.......................................
4.6 Ownership of Properties; Liens...................
4.7 Taxes............................................
4.8 Financial Condition..............................
4.9 Filing of Statements and Reports.................
4.10 ERISA...........................................
-i-<PAGE>
4.11 Environmental Matters...........................
4.12 Security Interests..............................
4.13 Margin Stock....................................
SECTION 5. AFFIRMATIVE COVENANTS.........................
5.1 Financial Statements.............................
5.2 Payment of Obligations...........................
5.3 Maintenance of Properties; Insurance.............
5.4 Notices..........................................
5.5 Conduct of Business and Maintenance of
Existence........................................
5.6 Inspection of Property, Books and Records........
5.7 Compliance with Laws.............................
5.8 Hazardous Material Indemnity.....................
5.9 Factoring Agreement..............................
5.10 Guarantees of Subsidiaries......................
SECTION 6. NEGATIVE COVENANTS............................
6.1 Limitation on Indebtedness.......................
6.2 Limitation on Liens..............................
6.3 Limitation on Contingent Obligations.............
6.4 Limitation on Capital Expenditures...............
6.5 Prohibition of Fundamental Changes...............
6.6 Limitations on Dividends and Stock
Acquisitions.....................................
6.7 Limitation on Investments, Loans and
Advances.........................................
6.8 Prohibition of Certain Prepayments...............
6.9 Sale and Leaseback...............................
6.10 Prohibitions Regarding Subordinated Debt........
6.11 Transactions with Affiliates....................
6.12 Compliance with ERISA...........................
6.13 Financial Covenants.............................
SECTION 7. EVENTS OF DEFAULT.............................
SECTION 8. THE AGENT....................................
8.1 Appointment......................................
8.2 Delegation of Duties.............................
8.3 Exculpatory Provisions...........................
8.4 Reliance by Agent................................
8.5 Notice of Default................................
8.6 Non-Reliance on Agent and Other Banks............
-ii-<PAGE>
8.7 Indemnification..................................
8.8 Agent in Its Individual Capacity.................
8.9 Successor Agent..................................
SECTION 9. GUARANTY......................................
9.1 Guaranty.........................................
9.2 Guaranty Absolute................................
9.3 Waiver...........................................
9.4 Waiver of Right of Subrogation...................
9.5 No Waiver; Remedies..............................
9.6 Continuing Guaranty; Transfer of Notes...........
SECTION 10. MISCELLANEOUS................................
10.1 Waivers, Amendments, etc........................
10.2 Limited Role of Banks...........................
10.3 Choice of Law; Construction.....................
10.4 Consent to Jurisdiction.........................
10.5 Notices.........................................
10.6 Entire Agreement; Setoff........................
10.7 Equitable Adjustment Among Banks................
10.8 Reference to Subsidiaries and Guarantors........
10.9 Captions.......................................
10.10 Payment of Costs and Expenses.................
10.11 Indemnification...............................
10.12 Execution in Counterparts, Effectiveness, etc.
10.13 Successors and Assigns; Participation.........
10.14 Survival of Agreements........................
10.15 WAIVER OF JURY TRIAL..........................
SCHEDULES
Schedule I Existing Letters of Credit
Schedule II Lending Offices
Schedule 4.1 Direct and Indirect Subsidiaries of THC
Schedule 4.6 Existing Liens
Schedule 4.11 Environmental Matters
Schedule 4.12 Jurisdictions for UCC Filings
Schedule 6.1 Existing Subordinated Debt
-iii-<PAGE>
SECTION
EXHIBITS
A Form of Note
B Form of Acceptance Agreement
C Form of Assignment of Factoring Agreement
D Form of Borrowing Base Certificate
E Form of Continuing Letter of Credit Security Agree-
ment
F-1 - F-6 Forms of Guarantees of each Guarantor
G Form of Limited Trademark License Agreement
H Form of Monthly Factor's Report
I-1 - I-2 Forms of Security Agreements
J Form of Request for Acceptance
K Form of Subordination Agreement
L-1 - L-2 Forms of Secretary's Certificate and Corporate
Resolutions - each Borrower and each Guarantor
M-1 - M-2 Forms of Legal Opinion of Counsel to each Borrower
and each Guarantor
-4-<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
July 11, 1996, among TOMMY HILFIGER U.S.A., INC., a Delaware
corporation ("THUSA"), TOMMY HILFIGER RETAIL, INC., a Delaware
corporation ("Retail"; THUSA and Retail individually, a "Bor-
rower" and collectively, the "Borrowers"), TOMMY HILFIGER COR-
PORATION, a British Virgin Islands corporation ("THC"), TOMMY
HILFIGER (EASTERN HEMISPHERE) LIMITED, a British Virgin Islands
corporation ("THEH"), TOMMY HILFIGER (HK) LIMITED, a Hong Kong
corporation ("THHK"), TOMMY HILFIGER LICENSING, INC. a Delaware
corporation ("THL"), TOMMY HILFIGER NIPPON CO., LTD., a British
Virgin Islands corporation ("Nippon") and TOMMY HILFIGER WOM-
ENSWEAR, INC., a Delaware corporation ("THW"); (THC, THEH,
THHK, THL, Nippon and THW individually, a "Guarantor" and col-
lectively, the "Guarantors"), the several Lenders parties here-
to (the "Lenders") and CHEMICAL BANK ("Chemical") as adminis-
trative agent (in such capacity, the "Agent") for the Lenders.
W I T N E S S E T H
WHEREAS, THUSA, Retail, each Guarantor, Chemical and
certain other lenders (the "Existing Lenders") entered into a
Credit Agreement, dated as of June 5, 1991, as amended and
restated by the Amended and Restated Credit Agreement, dated as
of August 6, 1992 and as further amended and restated by the
Amended and Restated Credit Agreement dated as of July 15, 1994
(the "Existing Agreement").
WHEREAS, THUSA, Retail and each Guarantor have
requested that the total amount of the Commitments be
increased, that the term of the facility be extended and that
certain other changes be made in the terms and conditions of
the Existing Agreement; and
WHEREAS, certain of the Existing Lenders are willing
to make the changes requested by THUSA, Retail and each Guaran-
tor and, with Century Business Credit Corporation, Israel Dis-
count Bank of New York and The Bank of New York, to enter into
an amended and restated credit agreement;
NOW, THEREFORE, in consideration of the premises and
mutual agreements contained herein, each of THUSA, Retail, each<PAGE>
Guarantor, the Agent and each Lender hereby agrees that the
Existing Agreement is hereby amended and restated in its
entirety as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the
following terms shall have the following meanings, unless the
context otherwise requires:
"Acceptance": each acceptance of Drafts by the Issu-
ing Lender pursuant to Subsection 2.4.
"Acceptance Agreement": each Acceptance and Security
Agreement dated as of the date hereof between each Borrow-
er and the Issuing Lender, in the form of Exhibit B here-
to, as amended, modified or supplemented from time to
time.
"Acceptance Amount": as to each Acceptance, the face
amount of such Acceptance less the discount deducted from
such face amount, as provided in Subsection 2.4(a)(iii).
"Acceptance Documents": the collective reference to
the Drafts, the Acceptances, the Acceptance Agreements and
the other documents arising out of or in connection with
the creation of Acceptances hereunder.
"Acceptance Draft": a form of draft acceptable to
the Issuing Lender to be used in connection with Acceptan-
ces created pursuant to Subsection 2.4, provided that no
such draft shall be payable more than 180 days after the
shipment of goods referred to in the Request for Accep-
tance for such draft or later than five days prior to the
Termination Date, whichever is earlier.
"Acceptance Obligation": at any particular time, all
liabilities of a Borrower on or with respect to Acceptan-
ces, whether for reimbursement obligations due or to
become due to the Issuing Lender for payments of Acceptan-
ces and whether or not such liability is contingent or
unmatured, including the sum of (a) the then outstanding
Acceptance
-2-<PAGE>
Reimbursement Loans plus (b) the aggregate face amount of
all unmatured Acceptances then outstanding.
"Acceptance Participating Interest": with respect to
any Acceptance, (a) in the case of the Issuing Lender, its
undivided interest in such Acceptance after giving effect
to the granting of any participating interest therein and
(b) in the case of any Participating Lender, its undivided
participating interest in such Acceptance.
"Acceptance Reimbursement Loan": as defined in Sub-
section 2.4(c)(ii).
"Acceptance Reimbursement Obligations": the obliga-
tion of a Borrower to pay the Issuing Lender in accordance
with Subsection 2.4 in respect of any Acceptance created
by the Issuing Lender for the account of such Borrower.
"Accumulated Funding Deficiency": as set forth in
Section 302(a)(2) of ERISA.
"Adjusted LIBOR Rate": with respect to any LIBOR
Advance for any Interest Period, an interest rate per
annum equal to the product of (a) the LIBOR Rate in effect
for such Interest Period and (b) Statutory Reserves.
"Advance": an advance by a Lender to a Borrower pur-
suant to Subsection 2.2, which shall be an Alternate Base
Rate Advance, a LIBOR Advance or a Quoted Rate Advance.
"Affiliate Debt": indebtedness of the Borrowers to
THC or THEH.
"Aggregate Outstanding Extensions of Credit": on any
date, the sum of (a) the aggregate amount of Letter of
Credit Obligations on such date, (b) the aggregate princi-
pal amount of all Advances outstanding on such date and
(c) the aggregate Acceptance Obligations outstanding on
such date.
"Agreement": this Amended and Restated Credit Agree-
ment, as amended, modified or supplemented from time to
time.
-3-<PAGE>
"Alternate Base Rate": a fluctuating rate per annum
as shall be in effect from time to time, which rate per
annum shall at all times be equal to the higher, for any
day, of (a) Prime Rate or (b) 1/2 of one percent per annum
above the Federal Funds Rate.
"Alternate Base Rate Advances": Advances at such
time as they bear interest at the Alternate Base Rate.
"Assignment of Factoring Agreement": the Amended and
Restated Assignment of Factoring Agreement made by THUSA
to the Agent in the form of Exhibit C hereto, as amended,
modified or supplemented from time to time.
"Borrowing Base": at the time any determination
thereof is to be made, the sum of (a) 85% of Eligible
Accounts Receivable of the Borrowers plus (b) 50% of Eli-
gible Inventory of the Borrowers plus (c) 50% of L/C
Availability of the Borrowers.
"Borrowing Base Certificate": a certificate in the
form of Exhibit D attached hereto and made a part hereof.
"Business Day": any day other than a Saturday, Sun-
day or other day on which a Lender (other than Century) is
authorized or required by law or regulation to close, and,
with respect to the making, continuing, prepaying or
repaying of any LIBOR Advance, a day on which dealings in
dollars are carried on in the interbank eurodollar market
in which Chemical's Lending Office for LIBOR Advances cus-
tomarily deals.
"Buying Agreement": the Buying Agency Agreement,
dated April 1, 1992 between THUSA and THEH, as amended,
supplemented or modified, from time to time.
"Cash Equivalents": investments of the type
described in clauses (a) and (b) of Subsection 6.7.
"Century": Century Business Credit Corporation.
"Code": the Internal Revenue Code of 1986, as
amended from time to time.
-4-<PAGE>
"Commercial Letter of Credit": commercial documen-
tary letters of credit denominated in Dollars, issued by
the Issuing Lender for the account of a Borrower for the
purchase of inventory by such Borrower in the ordinary
course of its business.
"Commercial Letter of Credit Application": as
defined in Subsection 2.3(b)(i).
"Commercial Letter of Credit Documents": the collec-
tive reference to the Commercial Letter of Credit Applica-
tions and the Commercial Letters of Credit and any other
documents arising out of or in connection with the issu-
ance of and participation in Commercial Letters of Credit
hereunder.
"Commitments": as defined in Subsection 2.1.
"Commitment Percentage": as to any Lender, the ratio
(expressed as a percentage) which (a) the Commitment of
such Lender bears to (b) the aggregate amount of the Com-
mitments.
"Commitment Period": the period from and including
the date hereof to but not including the Termination Date
or such earlier date as the Commitments shall terminate as
provided herein.
"Commonly Controlled Entity": an entity, whether or
not incorporated, which is under common control with any
Borrower or Guarantor, as the case may be, within the
meaning of Section 4001 of ERISA.
"Consolidated Tangible Capital Funds": Consolidated
Tangible Net Worth plus Subordinated Debt.
"Consolidated Tangible Net Worth": on any date, the
amount by which (a) without duplication, the par value (or
value stated on the books) of all classes of the capital
stock of THUSA, plus (or minus in the case of deficit) the
amount of the consolidated surplus, whether capital or
earned, of THUSA and its Subsidiaries, plus paid in capi-
tal exceeds (b) the aggregate amount carried as assets on
the
-5-<PAGE>
books of THUSA and its Subsidiaries for goodwill,
licenses, patents, trademarks, treasury stock, unamortized
debt discount and expense, leasehold improvements and
other intangibles, for the cost of investments in excess
of net assets at the time of acquisition by THUSA or any
Subsidiary, for any write-up in the book value of any
assets of THUSA or any Subsidiary resulting from re-eval-
uation thereof subsequent to the date hereof.
"Continuing Letter of Credit Security Agreement":
each Continuing Letter of Credit Security Agreement, LCPC
License Agreement, Continuing Indemnity Agreement and Sup-
plemental Letter of Credit Agreement dated as of July 15,
1994 between each Borrower and the Issuing Lender, in the
forms set forth in Exhibit E hereto, as amended, modified
or supplemented from time to time.
"Default": any of the events specified in Section 7
hereof, whether or not any requirement for notice or lapse
of time or any other condition has been satisfied.
"Drafts": the collective reference to Time Drafts
and Acceptance Drafts.
"Distributable Amount": as defined in Subsection
6.7(e).
"EBIRTDA": on any date, gross earnings before deduc-
tions for interest, rental expense, Stock Option Expense,
taxes, depreciation and amortization on such date less
repayments of Stock Option Debt.
"Eligible Accounts Receivable": (a) at any time when
a Factoring Agreement is in effect, all accounts (as such
term is defined in the New York Uniform Commercial Code,
as in effect from time to time) collected or purchased by
a Factor pursuant to a Factoring Agreement and (b) all
accounts (as such term is defined in the New York Uniform
Commercial Code, as in effect from time to time) other
than (i) accounts due from Subsidiaries or from Persons
affiliated with a Borrower by common ownership (direct or
indirect) and (ii) accounts which are more than 90 days
past due.
-6-<PAGE>
"Eligible Inventory": all inventory of every nature
and description, now owned or hereafter acquired and
wherever located (including without limitation goods and
supplies) that is determined by the Agent in its discre-
tion to be (a) genuine, merchantable and saleable in the
ordinary course of business and (b) owned free and clear
of all mortgages, liens, security interests, encumbrances,
claims or rights of others, except liens and security
interests in favor of the Lenders.
"ERISA": the Employee Retirement Income Security Act
of 1974, as amended from time to time.
"Event of Default": any of the events specified in
Section 7 hereof, provided that any requirement for notice
or lapse of time or any other condition has been satis-
fied.
"Existing Letters of Credit": the letters of credit
outstanding on the date hereof and listed in Schedule I
hereto.
"Factor": Century and, so long as Century continues
to be a Factor, one or more additional factors acceptable
to the Agent, or, if Century is no longer a Factor, one or
more replacement factors acceptable to the Majority Lend-
ers.
"Factoring Agreement": the letter agreement dated
September 16, 1994, as amended on April 9, 1996, between
Century and THUSA, as amended from time to time, and any
agreement with any additional or replacement Factor to the
extent such additions and replacements are permitted here-
under.
"Federal Funds Rate": for any day, the weighted
average of the rates on overnight Federal funds transac-
tions with members of the Federal Reserve System arranged
by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day
on such transactions received by Chemical from three Fed-
eral funds brokers of recognized standing selected by it.
-7-<PAGE>
"Funded Capital Expenditures": capital expenditures
funded with Affiliate Debt.
"GAAP": generally accepted accounting principles, as
in effect from time to time.
"Guarantee": each Amended and Restated Guarantee in
the form of Exhibit F-1 through Exhibit F-6 hereto entered
into by each of THL, THC, THEH, THHK, Nippon and THW, in
each case as amended, modified or supplemented from time
to time (collectively, the "Guarantees").
"Insolvency": with respect to any Multiemployer
Plan, the condition that such Plan is insolvent within the
meaning of such term as used in Section 4245 of ERISA.
"Insolvent": the condition of Insolvency.
"Interest Payment Date": (a) as to any LIBOR
Advance, the last day of each Interest Period for such
LIBOR Advance and, with respect to each LIBOR Advance hav-
ing an Interest Period of six months, the day which is
three months after the first day of such Interest Period,
(b) as to any Alternate Base Rate Advance, the first day
of each month and upon the repayment or conversion thereof
and (c) as to any Quoted Rate Advance, the last day of
each Quoted Rate Interest Period for such Quoted Rate
Advance.
"Issuing Lender": Chemical, in its capacity as issu-
er of the Letters of Credit and creator of the Accep-
tances.
"Junior Subordinated Debt": Subordinated Debt which
bears interest at the Prime Rate plus 2% per annum and
which cannot be prepaid except as set forth in Subsection
6.10(b).
"L/C Availability": with respect to each Borrower,
the aggregate undrawn amount of outstanding Commercial
Letters of Credit issued by the Issuing Lender hereunder
for the account of such Borrower (including without limi-
tation any such Commercial Letters of Credit which have
expired not more than 30 days prior to any date of deter-
mination).
-8-<PAGE>
"Lending Office": for each Lender, such Lender's
office at the address set forth on Schedule II, or such
other office as a Lender may from time to time specify.
"Letter of Credit Applications": the collective ref-
erence to the Commercial Letter of Credit Applications and
the Standby Letter of Credit Applications.
"Letter of Credit Documents": the collective refer-
ence to the Commercial Letter of Credit Documents, the
Standby Letter of Credit Documents and the Continuing Let-
ter of Credit Security Agreements.
"Letter of Credit Obligations": at any particular
time, all liabilities of a Borrower with respect to Let-
ters of Credit, whether or not such liabilities are con-
tingent or unmatured, including the sum of (a) the then
outstanding Letter of Credit Reimbursement Loans plus (b)
the then aggregate undrawn face amount of all then out-
standing Letters of Credit.
"Letter of Credit Participating Interest": with
respect to any Letter of Credit (a) in the case of the
Issuing Lender, its undivided interest in such Letter of
Credit and the related Letter of Credit Application, after
giving effect to the granting of any participating inter-
ests therein and (b) in the case of any Participating
Lender, its undivided participating interest in such Let-
ter of Credit and the related Letter of Credit Applica-
tion.
"Letter of Credit Reimbursement Loan": as defined in
Subsection 2.3(f)(ii).
"Letter of Credit Reimbursement Obligation": the
obligation of each Borrower to reimburse the Issuing Lend-
er in accordance with Subsection 2.3(f)(i) for any payment
made by the Issuing Lender under any Letter of Credit
issued for the account of such Borrower.
"Letters of Credit": the collective reference to the
Commercial Letters of Credit, the Standby Letters of Cred-
it and the Existing Letters of Credit.
-9-<PAGE>
"LIBOR Rate": with respect to any LIBOR Advance for
any LIBOR Interest Period, the rate (rounded upwards, if
necessary, to the next 1/16 of 1%) at which dollar depos-
its approximately equal in principal amount to such LIBOR
Advance and for the maturity equal to the applicable LIBOR
Interest Period are offered to Chemical's Lending Office
for LIBOR Advances at 10:00 A.M. New York City time two
Business Days prior to the first day of such LIBOR Inter-
est Period in the interbank eurodollar market in which
such Lending Office customarily deals for delivery on the
first day of such LIBOR Interest Period.
"LIBOR Advance": any Advance at such time as it is
made or maintained at a rate of interest based upon the
Adjusted LIBOR Rate.
"LIBOR Interest Period" shall mean, with respect to
each LIBOR Advance,
(a) initially, the period commencing on, as the
case may be, the date of borrowing or conversion with
respect to such LIBOR Advance and ending one, two, three
or six months thereafter, as selected by a Borrower in its
notice of borrowing as provided in subsection 2.2 or its
notice of conversion as provided in subsection 2.10, as
the case may be; and
(b) thereafter, each period commencing on the
last day of the next preceding LIBOR Interest Period
applicable to such LIBOR Advance and ending one, two,
three or six months thereafter, as selected by a Borrower
by irrevocable notice to the Agent not less than three
Business Days prior to the last day of the then current
LIBOR Interest Period with respect to such LIBOR Advance;
provided that, all of the foregoing provisions relating to
LIBOR Interest Periods are subject to the following:
(A) if any LIBOR Interest Period pertaining to
a LIBOR Advance would otherwise end on a day which is not
a Business Day, that LIBOR Interest Period shall be
extended to the next succeeding Business Day unless the
result of such extension would be to carry such LIBOR
Interest Period
-10-<PAGE>
into another calendar month in which event such LIBOR
Interest Period shall end on the immediately preceding
Business Day; and
(B) any LIBOR Interest Period pertaining to a
LIBOR Advance that begins on the last Business Day of a
calendar month (or on a day for which there is no numeri-
cally corresponding day in the calendar month in which the
end of such LIBOR Interest Period falls) shall end on the
last Business Day of a calendar month.
"Limited Trademark License Agreement": the Amended
and Restated Limited Trademark License Agreement made by
THL to the Agent in the form of Exhibit G hereto, as
amended, modified or supplemented from time to time.
"Loan Documents": this Agreement, the Notes, the
Assignment of Factoring Agreement, the Guarantees, the
Security Agreements, the Subordination Agreement, the Lim-
ited Trademark License Agreement, the Acceptance Docu-
ments, the Letter of Credit Documents, any other agreement
or document referred to in Section 3 hereof and all other
documents and instruments executed in connection herewith
or therewith.
"Majority Lenders": on any date, Lenders having in
the aggregate at least 66-2/3% of the Aggregate Outstand-
ing Extensions of Credit (giving effect to each Partici-
pating Lender's participations in Letters of Credit and
Acceptances) or, if the Aggregate Outstanding Extensions
of Credit is zero, Lenders having at least 66-2/3% of the
Commitments.
"Maximum Availability": the amount set forth in the
Borrowing Base Certificate opposite such term.
"Monthly Factor's Report": a report delivered by the
Factor to THUSA at the end of each month in the form of
Exhibit H attached hereto and made a part hereof.
"Multiemployer Plan": a Plan which is a multiemploy-
er plan as defined in Section 4001(a)(3) of ERISA.
-11-<PAGE>
"Notes": as defined in Subsection 2.2(d) hereof.
"Obligations": the unpaid principal of and interest
on, and any amounts due with respect to (including inter-
est accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorga-
nization or like proceeding, relating to either Borrower
or any of their respective Subsidiaries, whether or not a
claim for post-filing or post-petition interest is allowed
in such proceeding) the Notes, the Letter of Credit Obli-
gations, the Acceptance Obligations, and all other obliga-
tions and liabilities of either Borrower to the Agent, the
Issuing Lender or the Lenders, whether direct or indirect,
absolute or contingent, due or to become due, now existing
or hereafter incurred, which may arise under, out of, or
in connection with, this Agreement, the Notes, the Letter
of Credit Documents, the Acceptance Documents, or any
other Loan Document, and any other amount owed to Chemi-
cal, whether on account of principal, interest, reimburse-
ment obligations, fees, indemnities, costs, expenses or
otherwise.
"Participating Lenders": collectively, the Lenders
(other than the Issuing Lender), each in its capacity as
an acquirer and holder of a Letter of Credit Participating
Interest and as an acquirer and holder of an Acceptance
Participating Interest.
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation,
business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or
other entity of whatever nature.
"Plan": any employee benefit plan which is covered
by ERISA and in respect of which any Borrower or Guaran-
tor, or a Commonly Controlled Entity, is (or, if such plan
were terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer", as defined in Sec-
tion 3(5) of ERISA.
-12-<PAGE>
"Prime Rate": the rate announced by Chemical from
time to time at its main office in New York City as its
prime rate.
"Prohibited Transaction": any transaction described
in Section 406 of ERISA or Section 4975 of the Code.
"Quoted Rate": a rate of interest offered by Chemi-
cal to a Borrower and accepted by such Borrower for a
Quoted Rate Advance.
"Quoted Rate Advances": Advances at such time as
they bear interest at the Quoted Rate.
"Quoted Rate Interest Period": for each borrowing of
Quoted Rate Advances, the term of such Advances, which
shall be overnight or one, two, three or four weeks, as
offered by Chemical and accepted by a Borrower at the time
of each request by such Borrower for Quoted Rate Advances.
"Real Property": any real estate or portion thereof now
or hereafter owned or leased by any Borrower or Guarantor or by
any of their respective Subsidiaries.
"Request for Acceptance": each Request for Accep-
tance in the form of Exhibit I hereto.
"Reorganization": with respect to any Multiemployer
Plan, the condition that such Plan is in reorganization
within the meaning of such term as used in Section 4241 of
ERISA.
"Reportable Event": any of the events set forth in
Section 4043(b) of ERISA, other than those events as to
which the thirty-day notice period is waived under subsec-
tions .13, .14, .16, .18, .19 or .20 of PBGC Reg. 2615.
"Reserve Determination": as defined in Subsection
2.4(d).
"Security Agreement": the Amended and Restated Secu-
rity Agreement made by THUSA in favor of the Agent, in
-13-<PAGE>
the form of Exhibit J-1 hereto, and the Amended and
Restated Security Agreement made by Retail in favor of the
Agent in the form of Exhibit J-2 hereto, in each case as
amended, modified or supplemented from time to time
(collectively, the "Security Agreements").
"Senior Subordinated Debt": Subordinated Debt which
bears interest at the Prime Rate plus 1% and which may be
prepaid.
"Sight Draft Letter of Credit": a Commercial Letter
of Credit providing for payment of sight drafts when pre-
sented for honor thereunder in accordance with the terms
thereof and when accompanied by documents complying with
the terms thereof.
"Single Employer Plan": any Plan which is covered by
Title IV of ERISA, but which is not a Multiemployer Plan.
"Standby Letter of Credit": an irrevocable letter of
credit under which the Issuing Lender agrees to make pay-
ments in Dollars for the account of a Borrower, in respect
of obligations of such Borrower incurred pursuant to con-
tracts made or performances undertaken or to be undertaken
or like matters relating to the working capital needs of
such Borrower in the ordinary course of its business.
"Standby Letter of Credit Application": as defined
in Subsection 2.3(c)(i).
"Standby Letter of Credit Documents": the collective
reference to the Standby Letter of Credit Applications and
the Standby Letters of Credit and any other documents
arising out of or in connection with the issuance of and
participation in Standby Letters of Credit hereunder.
"Statutory Reserves": a fraction (expressed as a
decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate
of the maximum reserve percentages, expressed as a decimal
(including, without limitation, any marginal, special,
emergency or supplemental reserves) from time to time in
-14-<PAGE>
effect under Regulation D or as otherwise established by
the Board of Governors of the Federal Reserve System and
any other banking authority to which a Lender is subject,
for Eurocurrency Liabilities (as defined in Regulation D).
LIBOR Advances shall be deemed to constitute Eurocurrency
Liabilities and as such shall be deemed to be subject to
such reserve requirements without benefit of or credit for
proration, exceptions or offsets which may be available
from time to time to a Lender under Regulation D. Statu-
tory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percent-
age.
"Stock Option Debt": indebtedness of THUSA to THC
incurred by THUSA to purchase the stock of THC in connec-
tion with THUSA's 1992 Stock Incentive Plan, as amended.
"Stock Option Expense": for any fiscal period, the
amount of expense, if any, related to THUSA's 1992 Stock
Incentive Plan, as amended, incurred during such period.
"Subordinated Debt": indebtedness of THUSA to THEH or
THC outstanding on the date hereof and set forth on Sched-
ule 6.1 hereto and any future indebtedness of either Bor-
rower to any Guarantor or other affiliate which (a) is
subordinate in right of payment to all indebtedness of
such Borrower to the Lenders pursuant to a subordination
agreement substantially in the form of Exhibit K hereto
and (b) provides for no principal payments prior to Sep-
tember 30, 1999. Subordinated Debt shall be either Senior
Subordinated Debt or Junior Subordinated Debt. All Subor-
dinated Debt shall be Junior Subordinated Debt except as
provided in Subsection 6.10(b).
"Subordination Agreement": the Amended and Restated
Subordination Agreement dated as of the date hereof made
by THEH and THUSA in favor of the Agent, in the form of
Exhibit K hereto, as amended, modified or supplemented
from time to time.
"Subsidiary": of any Person, any corporation more
than 50% of whose issued and outstanding voting stock
(except directors' qualifying shares, if required by law)
at the time is owned by such Person, directly or through
one or more Subsidiaries, provided that the Unrestricted
Subsidiary
-15-<PAGE>
shall not be deemed to be a "Subsidiary" until such time
as THUSA's management makes the election described in the
definition of "Unrestricted Subsidiary".
"Termination Date": the earlier of June 30, 1999 and
the date the Commitments are terminated.
"Time Draft Letter of Credit": a Commercial Letter
of Credit providing for acceptance by the Issuing Lender
of drafts when presented for honor thereunder in accor-
dance with the terms thereof, provided that no such draft
shall be payable more than 180 days after sight or later
than five days prior to the Termination Date, whichever is
earlier, and provided, further, that each such draft is
accompanied by documents complying with the terms of such
Letter of Credit.
"Time Drafts": as defined in Subsection 2.4(a)(i).
"Unavailable Step-Up Commitment": that portion of the
Commitments which is unavailable to the Borrowers pursuant
to the provisions of Subsection 2.1(a).
"Unfunded Capital Expenditures": capital expenditures
funded with the Borrowers' funds, including without limi-
tation the proceeds of borrowings hereunder.
"Uniform Customs": the Uniform Customs and Practice
for Documentary Credits (1993 Revision) International
Chamber of Commerce Publication No. 500, as the same may
be amended from time to time.
"Unrestricted Subsidiary": a wholly owned Subsidiary
of THUSA, to be designated by THUSA, which Subsidiary
shall not be considered a "Subsidiary" for any purpose of
this Agreement (including, without limitation, with
respect to any of the representations, warranties or cov-
enants contained in this Agreement) unless and until such
time as THUSA's management elects, which election may not
thereafter be revoked, to include such Subsidiary for pur-
poses of determining compliance with the covenants set
forth in Subsection 6.13.
-16-<PAGE>
1.2 Use of Defined Terms. All terms defined in this
Agreement shall have the defined meanings when used in any
other Loan Document and all certificates, reports or other doc-
uments made or delivered pursuant hereto or thereto unless the
context shall otherwise require.
1.3 Accounting Terms. All accounting terms not spe-
cifically defined herein shall be construed in accordance with
GAAP.
SECTION 2. AMOUNT AND TERMS OF CREDIT
2.1 The Commitments. Each Lender severally agrees,
upon the terms and conditions of this Agreement, to extend
credit to each Borrower from time to time on and after the date
hereof to the Termination Date by making Advances to each Bor-
rower and, in the case of the Issuing Lender, opening or creat-
ing or, in the case of each Participating Lender, participating
in Letters of Credit and Acceptances, in an amount and to such
extent that such Lender's Commitment Percentage of the Aggre-
gate Outstanding Extensions of Credit does not exceed at any
one time outstanding the amount set forth opposite such Lend-
er's signature below (collectively, the "Commitments" and as to
each Lender, its "Commitment"), provided, however, that:
(a) no Advance shall be made or Acceptance created or
Letter of Credit issued if, as a result thereof, the
Aggregate Outstanding Extensions of Credit shall exceed
the amount set forth below during the time periods set
forth below:
Time Period Available Commitment
Closing Date-5/31/97 $100,000,000
6/1/97-5/31/98 125,000,000
6/1/98-6/30/99 150,000,000;
(b) no Advance shall be made, Acceptance created or
Letter of Credit issued if, as a result thereof, the
Aggregate Outstanding Extensions of Credit shall exceed
the Maximum Availability as shown on the most recent Bor-
rowing Base Certificate;
-17-<PAGE>
(c) the Commitments may be voluntarily reduced from
time to time pursuant to Subsection 2.5 hereof;
(d) the Commitments shall be subject to mandatory
reduction from time to time in accordance with the provi-
sions of Subsection 2.6;
(e) no Letter of Credit shall expire later than the
Termination Date and no Acceptance shall be created which
has a maturity date beyond the Termination Date; and
(f) the sum of (i) the aggregate principal amount of
all Advances outstanding and (ii) the aggregate face
amount of all Acceptance Obligations outstanding shall not
exceed the amount set forth below during the time periods
set forth below:
Time Period Direct Debt Limit
Closing Date-5/31/97 $60,000,000
6/1/97-5/31/98 75,000,000
6/1/98-6/30/99 90,000,000.
During the aforesaid period ending on the Termination Date,
each Borrower may use the Commitments by borrowing and prepay-
ing Advances in whole or ratably in part, and reborrowing, and
causing Letters of Credit to be issued or Acceptances to be
created, all in accordance with the terms and conditions of
this Agreement.
2.2 The Advances. (a) Advances. Each Lender sever-
ally agrees, on the terms and conditions hereinafter set forth,
to make Advances to each Borrower from time to time on any
Business Day during the period from the date hereof until the
Termination Date. Within the limits of each Lender's Commit-
ment, each Borrower may borrow, prepay Advances and reborrow
under this Section 2.2. Each borrowing of Advances shall be
made ratably in accordance with each Lender's Commitment Per-
centage.
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(b) Notice and Method of Borrowing.
(i) Each Borrower wishing to borrow Alternate Base
Rate Advances shall give the Agent prior telephonic notice
(to be confirmed in writing), or written notice (effective
upon receipt) of its intention to borrow under this Agree-
ment, which notice must be received on or prior to 10:00
A.M. New York City time on the date such borrowing is
requested, specifying the date and amount thereof and that
the Advances shall bear interest at the Alternate Base
Rate. Upon receipt of such notice, the Agent shall prompt-
ly notify each Lender.
(ii) Each Borrower wishing to borrow Quoted Rate
Advances shall request such Quoted Rate Advances by giving
the Agent prior telephonic notice (to be confirmed in
writing), or written notice (effective upon receipt) of
the date and amount of such requested borrowing of Quoted
Rate Advances, which notice must be received on or prior
to 10:00 A.M. New York City time on the date such borrow-
ing is requested. Upon receipt of such notice the Agent
shall notify the Borrower of the Quoted Rate and Quoted
Rate Interest Period offered to such Borrower by Chemical
and such Borrower shall either accept or reject such Quot-
ed Rate and Quoted Rate Interest Period. Upon acceptance
by such Borrower of the terms of the Quoted Rate Advances
for such borrowing, the Agent shall promptly notify each
Lender.
(iii) Each Borrower wishing to borrow LIBOR Advances
shall request such LIBOR Advances by giving the Agent
irrevocable written notice (effective upon receipt) which
notice must be received by the Agent prior to 10:00 A.M.,
New York City time, three Business Days prior to the
requested borrowing date specifying (a) the amount to be
borrowed, (b) the requested borrowing date and (c) the
requested LIBOR Interest Period. Upon receipt of such
notice, the Agent shall promptly notify each Lender. If a
Borrower shall not timely notify the Agent that it wishes
to continue a LIBOR Advance as such prior to the expira-
tion of the then-current LIBOR Interest Period relating to
any LIBOR Advance, then such Advance shall bear interest
at the Alternate Base Rate minus 1%.
-19-<PAGE>
(iv) Each Alternate Base Rate Advance shall be in a
principal amount equal to $500,000 or any integral multi-
ple of $500,000 in excess thereof. Each LIBOR Advance and
Quoted Rate Advance shall be in a principal amount of at
least $5,000,000 or any integral multiple of $1,000,000 in
excess thereof.
(v) Each Lender shall, before 1:00 P.M. (New York
City time) on the date of each borrowing, make available
to the Agent at its address set forth with its signature
hereto and in immediately available funds, such Lender's
Commitment Percentage of such borrowing. Upon fulfillment
of the applicable conditions set forth in Section 3, the
Agent will make such funds available to the relevant Bor-
rower no later than 3:00 P.M. (New York City time) on the
date of such borrowing by credit to such Borrower's
account at the Agent's aforesaid address.
(vi) Unless the Agent shall have been notified in
writing by a Lender prior to a borrowing that such Lender
will not make the amount that would constitute its share
of such borrowing available to the Agent, the Agent may
assume that such Lender is making such amount available to
the Agent, and the Agent may, in reliance upon such
assumption, make available to the relevant Borrower a cor-
responding amount. If such amount is not made available
to the Agent by the required time on the borrowing date
therefor, such Lender shall pay interest on such amount to
the Agent, payable on demand, at a rate equal to the daily
average Federal Funds Rate for the period, until such
Lender makes such amount available to the Agent. A cer-
tificate of the Agent submitted to such Lender with
respect to any amounts owing under this Subsection 2.2
shall be conclusive in the absence of manifest error. If
such Lender's share of such borrowing is not made avail-
able to the Agent by such Lender within three Business
Days of such borrowing date, the Agent shall be entitled
to recover such amount from the relevant Borrower, with
interest thereon at the rate applicable to such Advance
hereunder, payable on demand. No Lender's obligation to
make Advances shall be affected by any other Lender's
failure to make any Advances.
-20-<PAGE>
(c) Interest. Each Advance shall bear interest from
the date thereof on the unpaid principal amount owing thereun-
der from time to time until paid in full at (i) the Alternate
Base Rate minus 1%, (ii) the Quoted Rate plus 1.5%, or (iii)
the LIBOR Rate plus 1%, as selected by the relevant Borrower in
its notice of borrowing, provided that whenever any unpaid
principal amount of or interest on such Advance shall become
due and payable (whether at the stated maturity, by accelera-
tion or otherwise) interest on such overdue amount shall there-
after be payable at a rate per annum equal to the Alternate
Base Rate plus 3% until such amount is paid. Interest on
Alternate Base Rate Advances shall be payable monthly on the
last day of each month, and upon the Termination Date. Inter-
est on LIBOR Advances and Quoted Rate Advances shall be payable
on the Interest Payment Date for such Advance. All payments of
interest hereunder shall be made to the Agent for the account
of the Lenders.
(d) Notes. Advances made by each Lender to a Bor-
rower pursuant to its Commitment shall be evidenced by a prom-
issory note of such Borrower, substantially in the form of
Exhibit A hereto, representing the obligation of such Borrower
to pay the amount of the Commitment of such Lender or, if less,
the aggregate unpaid principal amount of all Advances made by
such Lender to such Borrower pursuant to its Commitment, plus
interest thereon as herein provided (such promissory notes, as
amended, modified or supplemented from time to time, the
"Notes"). Each Lender is authorized to record the date,
amount, type, interest rate and LIBOR Interest Period or Quoted
Rate Interest Period with respect to each Advance made by such
Lender under its Commitment and the date and amount of each
payment of principal of such Advances on the schedules annexed
to its Notes, which recordation shall constitute prima facie
evidence of the accuracy of the information endorsed, provided
that the failure to make any such recordation shall not affect
the obligations of a Borrower hereunder in respect of such
Advance. Each Note shall (i) be dated the date of the execu-
tion and delivery of this Agreement, (ii) bear interest at the
rates specified in paragraph (c) of this Subsection 2.2, and
(iii) be stated to mature on the Termination Date.
2.3 Letters of Credit.
(a) Letters of Credit. Subject to the terms and con-
ditions
-21-<PAGE>
hereof, the Issuing Lender and each Participating Lender agree
to extend credit by the Issuing Lender's issuing Letters of
Credit in the form of Commercial Letters of Credit or Standby
Letters of Credit for the account of each Borrower, and each
Participating Lender's acquiring its Letter of Credit Par-
ticipating Interest in each such Letter of Credit issued by the
Issuing Lender, from time to time during the Commitment Period,
provided that no Letter of Credit shall be issued hereunder if,
after giving effect thereto, any of the provisions of Subsec-
tion 2.1 would be violated. Each Borrower may use the Commit-
ments in this manner by having the Issuing Lender issue Letters
of Credit, having such Letters of Credit expire undrawn upon
or, if drawn upon, reimbursing the Issuing Lender for such
drawing, and having the Issuing Lender issue new Letters of
Credit, all in accordance with the terms and conditions hereof.
The Existing Letters of Credit shall be deemed to be Letters of
Credit for all purposes under this Agreement and the other Loan
Documents.
(b) Issuance of Commercial Letters of Credit.
(i) Each Borrower may request the Issuing Lender to
issue a Commercial Letter of Credit in favor of sellers of
goods to such Borrower on any Business Day during the Com-
mitment Period by delivering to the Issuing Lender at its
address set forth with its signature hereto, a commercial
letter of credit application in the Issuing Lender's then
standard form (a "Commercial Letter of Credit Applica-
tion"), completed to the satisfaction of the Issuing Lend-
er, together with such other certificates, documents and
other papers and information as the Issuing Lender may
reasonably request. Each Borrower hereby agrees to
observe and perform its covenants, duties and obligations
under each Commercial Letter of Credit Document.
(ii) Each Commercial Letter of Credit issued hereun-
der shall, among other things, (A) be a Sight Draft Letter
of Credit or a Time Draft Letter of Credit and (B) have an
expiry date occurring not later than six months after the
date of issuance of such Commercial Letter of Credit and
in no event later than 5 days prior to the Termination
Date. Each Commercial
-22-<PAGE>
Letter of Credit Application and each Commercial Letter of
Credit shall be subject to the Uniform Customs and, to the
extent not inconsistent therewith, the laws of the State
of New York.
(iii) The Issuing Lender shall not at any time be
obligated to issue any Commercial Letter of Credit hereun-
der if such issuance would conflict with, or cause the
Issuing Lender or any Participating Lender to exceed any
limits imposed by, any applicable requirements of law.
(c) Issuance of Standby Letters of Credit.
(i) Each Borrower may request the Issuing Lender to
issue a Standby Letter of Credit on any Business Day dur-
ing the Commitment Period by delivering to the Issuing
Lender at its address set forth with its signature hereto,
a standby letter of credit application in the Issuing
Lender's then standard form (a "Standby Letter of Credit
Application"), completed to the satisfaction of the Issu-
ing Lender, together with such other certificates, docu-
ments and other papers and information as the Issuing
Lender may reasonably request. Each Borrower hereby
agrees to observe and perform its covenants, duties and
obligations under each Standby Letter of Credit Document.
(ii) Each Standby Letter of Credit issued hereunder
shall, among other things, (A) be in such form requested
by a Borrower as shall be acceptable to the Issuing Lender
in its sole discretion, and (B) have an expiry date occur-
ring not later than one year (without giving effect to any
provision which automatically extends such expiry date)
after the date of issuance of such Standby Letter of Cred-
it and in no event later than 5 days prior to the Termina-
tion Date. Each Standby Letter of Credit Application and
each Standby Letter of Credit shall be subject to the Uni-
form Customs and, to the extent not inconsistent there-
with, the laws of the State of New York.
-23-<PAGE>
(iii) The Issuing Lender shall not at any time be
obligated to issue any Standby Letter of Credit hereunder
if such issuance would conflict with, or cause the Issuing
Lender or any Participating Lender to exceed any limits
imposed by, any applicable requirements of law.
(d) Participating Interests. Effective in the case
of each Letter of Credit as of the date of the issuance there-
of, the Issuing Lender agrees to allot and does allot, to
itself and each Participating Lender, and each Participating
Lender irrevocably agrees to take and does take a Letter of
Credit Participating Interest in each Letter of Credit, the
related Letter of Credit Application and all obligations of the
Borrower for the account of which such Letter of Credit is
issued with respect thereto (other than fees payable to the
Issuing Lender pursuant to Subsection 2.7(b)(iv)) in a percent-
age equal to such Lender's Commitment Percentage. Each Partic-
ipating Lender hereby agrees that its participation obligations
described in the immediately preceding sentence shall be irre-
vocable and unconditional. Effective as of the date hereof,
Chemical agrees to allot, and does allot, to each Participating
Lender, and each Participating Lender severally and irrevocably
agrees to take and does take, in the Existing Letters of Credit
and the related Letter of Credit Documents and all drafts drawn
thereunder, a Letter of Credit Participating Interest in a per-
centage equal to such Participating Lender's Commitment Per-
centage.
(e) Procedure for Opening Letters of Credit. Upon
receipt of any Letter of Credit Application from a Borrower,
the Issuing Lender will process such Letter of Credit Applica-
tion and the other certificates, documents and other papers
delivered to the Issuing Lender in connection therewith, in
accordance with its customary procedures and shall promptly
open such Letter of Credit by issuing the original of such Let-
ter of Credit to the beneficiary thereof and by furnishing a
copy thereof to such Borrower.
(f) Payments.
(i) Each Borrower agrees to reimburse the Issuing
-24-<PAGE>
Lender in Dollars and in immediately available funds,
forthwith upon the Issuing Lender's demand and otherwise
in accordance with the terms of the Letter of Credit
Application relating thereto, for any payment made by the
Issuing Lender under any Letter of Credit issued for its
account. The Issuing Lender is hereby authorized to
charge the accounts maintained by each Borrower at Chemi-
cal for all amounts payable pursuant to this Subsection
2.3(f).
(ii) The failure by any Borrower on any day to have
sufficient aggregate Dollar funds on deposit in its
accounts maintained at Chemical to pay all Letter of Cred-
it Reimbursement Obligations due on such day in accordance
with Subsection 2.3(f)(i) (such deficiency being hereinaf-
ter referred to as a "Letter of Credit Reimbursement Defi-
ciency") shall constitute the making by the Issuing Lender
of a loan to such Borrower (a "Letter of Credit Reimburse-
ment Loan") in a principal amount equal to the amount of
the Letter of Credit Reimbursement Deficiency as of such
day; provided, however, that no Letter of Credit Reim-
bursement Loan shall be made if, after giving effect
thereto, the aggregate principal amount of all Advances,
Letter of Credit Reimbursement Loans and Acceptance Reim-
bursement Loans then outstanding would exceed the amount
set forth in Subsection 2.1(a) during each time period set
forth in such Subsection. Each Letter of Credit Reim-
bursement Loan shall (x) be payable on demand, (y) be evi-
denced by a loan account maintained on the books and
records of the Issuing Lender (the "Letter of Credit Reim-
bursement Loan Account") and (z) bear interest from the
date of the creation of the applicable Letter of Credit
Reimbursement Obligation until paid in full at a rate per
annum equal to the interest rate then applicable to Alter-
nate Base Rate Advances. Interest on each Letter of Cred-
it Reimbursement Loan shall be payable on demand. The
entries in the Letter of Credit Reimbursement Loan Account
shall constitute prima facie evidence of the accuracy of
the information set forth therein.
-25-<PAGE>
(iii) In the event that the Issuing Lender makes a
Letter of Credit Reimbursement Loan in accordance with
Subsection 2.3(f)(ii), the Issuing Lender will promptly
notify each Participating Lender. Forthwith upon its
receipt of any such notice, each Participating Lender will
transfer to the Issuing Lender, in Dollars and in immedi-
ately available funds, an amount equal to such Participat-
ing Lender's pro rata share of such Letter of Credit Reim-
bursement Loan. Each Participating Lender agrees that the
Issuing Lender shall have full authority and responsibil-
ity for enforcing all claims against the applicable Bor-
rower with respect to Letters of Credit and Letter of
Credit Reimbursement Loans and exercising all rights and
remedies with respect thereto.
(iv) Whenever, at any time after the Issuing Lender
has made payment under any Letter of Credit and has
received from each Participating Lender its pro rata share
of any Letter of Credit Reimbursement Loan in accordance
with Subsection 2.3(f)(iii), the Issuing Lender receives
any payments related to such Letter of Credit Reimburse-
ment Loan (whether received directly from a Borrower or
otherwise, including proceeds of collateral applied there-
to by the Issuing Lender), or any payment of interest on
account thereof, the Issuing Lender will distribute to
each Participating Lender its pro rata share thereof; pro-
vided, however, that in the event that any such payments
or such payment of interest (as the case may be) is
required to be returned by the Issuing Lender, each Par-
ticipating Lender will return to the Issuing Lender the
portion thereof previously distributed by the Issuing
Lender to it.
(v) Within ten days after the end of each calendar
month, the Issuing Lender will notify each Participating
Lender of each payment made by the Issuing Lender during
such calendar month under any Letter of Credit and each
payment made by each Borrower during such calendar month
to the Issuing Lender in reimbursement of amounts paid by
the Issuing Lender under any such Letter of Credit.
-26-<PAGE>
(g) Further Assurances. Each Borrower hereby
agrees, from time to time, to do and perform any and all acts
and to execute any and all further instruments reasonably
requested by the Issuing Lender more fully to effect the pur-
poses of this Agreement and the issuance of the Letters of
Credit opened hereunder for its account, and further agrees to
execute any and all instruments reasonably requested by the
Issuing Lender in connection with obtaining or maintaining any
insurance coverage applicable to any products purchased under
such Letters of Credit in accordance with the related Letter of
Credit Application.
(h) Letter of Credit Applications. The provisions
of this Section 2.3 in respect of any Letters of Credit are
supplemental to, and not in derogation of, any rights and rem-
edies of the Issuing Lender and the Lenders under the Continu-
ing Letter of Credit Security Agreements and the Letter of
Credit Applications related to such Letters of Credit and under
other applicable law. In the event of any conflict between the
terms of this Agreement and the terms of the Letter of Credit
Applications, the terms set forth in this Agreement shall con-
trol.
(i) Use of Proceeds. The Commercial Letters of
Credit opened for the account of each Borrower shall be used to
finance purchases of inventory, equipment or other assets by
such Borrower in the ordinary course of its business, and the
Standby Letters of Credit shall be used to provide credit sup-
port for each Borrower or any of their respective Subsidiaries
in the ordinary course of their businesses.
2.4 Acceptances. (a) Acceptances.
(i) The Issuing Lender and each Participating Lender
confirm that the Issuing Lender's issuance of Time Draft
Letters of Credit pursuant to Commercial Letter of Credit
Applications made by a Borrower hereunder and each Par-
ticipating Lender's acquisition of Letter of Credit Par-
ticipating Interests therein constitutes an agreement by
the Issuing Lender and the Participating Lenders to extend
credit by the Issuing Lender's accepting drafts ("Time
Drafts") for the account of such Borrower that are pre-
sented
-27-<PAGE>
for honor under Time Draft Letters of Credit in compliance
with the terms thereof and each Participating Lender's
acquiring its Acceptance Participating Interest in such
Acceptance created by the Issuing Lender, from time to
time during the period from the date hereof to and
including the Termination Date.
(ii) In addition, within two Business Days after a
draft is presented under any Sight Draft Letter of Credit,
the Issuing Lender and the Participating Lenders agree
that, subject to the terms and conditions hereof, the
Issuing Lender will, upon the request of a Borrower, cre-
ate Acceptances in respect of Acceptance Drafts drawn on
the Issuing Lender by such Borrower in respect of the
goods financed by such Sight Draft Letter of Credit, pro-
vided, that such Borrower shall request the creation of
such Acceptances by submitting to the Issuing Lender at
least two Business Days prior to the requested date of the
creation of such Acceptance: (A) a Request for Acceptance,
specifying the date, maturity and amount of the Acceptance
Draft to be accepted and describing the goods to be
financed thereby; (B) an Acceptance Draft to be drawn on
such Issuing Lender and (C) such other certificates, docu-
ments and other papers as the Issuing Lender may reason-
ably request and provided further that no such Acceptance
shall be created if, after giving effect to such Accep-
tance, the provisions of Subsection 2.1 would be violated.
(iii) On any date on which an Acceptance is created
hereunder, the Issuing Lender will discount such Accep-
tance at its discount rate (as hereinafter defined), by
making available to the Borrower for the account of which
such Acceptance is being created an amount in immediately
available funds equal to the face amount of such Accep-
tance less such discount. The Issuing Lender's "discount
rate" shall mean the discount rate determined from time to
time by the Issuing Lender, in its sole and absolute dis-
cretion, as generally available to other customers of the
Issuing Lender for bankers' acceptances.
(iv) Each Time Draft and Acceptance Draft shall be
denominated in Dollars and shall be stated to mature on a
Business Day which is 30, 60, 90 or 180 days after the
date
-28-<PAGE>
thereof and which shall be no later than 5 days prior to
the Termination Date. No Acceptance Draft created
hereunder shall (i) have a term in excess of the period of
time which is usually and reasonably necessary to finance
transactions of a similar character or (ii) be in a face
amount of less than $50,000 or (iii) be in face amount
which exceeds the fair market value of the shipment of
goods related to such Acceptance Draft.
(b) Participating Interests.
(i) Effective in the case of each Acceptance as of
the date of the creation thereof the Issuing Lender agrees
to allot and does allot, to itself and each Participating
Lender, and each Participating Lender irrevocably agrees
to take and does take an Acceptance Participating Interest
in each Acceptance, the related Draft and all obligations
of the Borrower for the account of which such Acceptance
is being created with respect thereto (other than fees
payable to the Issuing Lender pursuant to Subsection
2.7(c)(ii)) in a percentage equal to such Lender's Commit-
ment Percentage. Each Participating Lender hereby agrees
that its participation obligations described in the imme-
diately preceding sentence shall be irrevocable and uncon-
ditional.
(ii) If the Issuing Lender determines, in its sole
discretion, that each Participating Lender shall fund its
pro rata portion of any Acceptance, the Issuing Lender
will notify each Participating Lender of such determina-
tion by 10:00 A.M. on the date on which such Acceptance is
to be created. Upon receipt of such notice, each Partici-
pating Lender will make the amount of its Commitment Per-
centage of each Acceptance Amount available to the Issuing
Lender at the office of the Issuing Lender set forth with
its signature hereto not later than 12:00 Noon, New York
City time, on the date such Acceptance is to be created,
in funds immediately available to the Issuing Lender.
Each Participating Lender shall indemnify and hold harm-
less the Issuing Lender from and against any and all loss-
es, liabilities (including liabilities for penalties),
actions, suits, judgments, demands, costs and expenses
(including, without limitation, reasonable attorneys' fees
and expenses) resulting from any failure on the part of
such Participating
-29-<PAGE>
Lender to provide, or from any delay in providing, the
Issuing Lender with such Participating Lender's Commitment
Percentage of any Acceptance Amount in accordance with
this Subsection 2.4(b)(ii). If a Participating Lender
does not make available to the Issuing Lender when due
such Participating Lender's Commitment Percentage of any
Acceptance Amount, such Participating Lender shall be
required to pay interest to the Issuing Lender on such
Participating Lender's Commitment Percentage of such
Acceptance Amount at a rate of interest per annum equal to
the Federal Funds Rate from the date such Participating
Lender's payment is due until the date it is received by
the Issuing Lender.
(c) Payments.
(i) Each Borrower shall be obligated, and hereby
unconditionally agrees, to pay to the Issuing Lender the
face amount of each Acceptance created for the account of
such Borrower by the Issuing Lender hereunder on the matu-
rity thereof, or such earlier date on which the obliga-
tions of such Borrower under this Agreement become due and
payable. The Issuing Lender is hereby authorized to
charge the accounts maintained by each Borrower at Chemi-
cal for all amounts payable pursuant to this Subsection
2.4(c)(i). Whenever, at any time after the Issuing Lender
has received from each Participating Lender its pro rata
share of any Acceptance Amount in accordance with Subsec-
tion 2.4(b)(ii), the Issuing Lender receives any payments
related to such Acceptance, the Issuing Lender will dis-
tribute to such Participating Lender its pro rata share
thereof; provided, however, that in the event that any
such payment is required to be returned by the Issuing
Lender, each Participating Lender will return to the Issu-
ing Lender the portion thereof previously distributed by
the Issuing Lender to it.
(ii) The failure by a Borrower on any day to have
sufficient aggregate Dollar funds on deposit in its
accounts maintained at Chemical to pay all Acceptance
Reimbursement Obligations due on such day in accordance
with Subsection 2.4(c)(i) (such deficiency being
hereinafter referred to as an "Acceptance Reimbursement
Deficiency") shall constitute the making by the Issuing
Lender of a loan to such Borrower
-30-<PAGE>
(an "Acceptance Reimbursement Loan") in a principal amount
equal to the amount of the Acceptance Reimbursement
Deficiency as of such day; provided, however, that no
Acceptance Reimbursement Loan shall be made if, after
giving effect thereto, the aggregate principal amount of
all Advances, Letter of Credit Reimbursement Loans and
Acceptance Reimbursement Loans then outstanding would
exceed the amount set forth in Subsection 2.1(a) during
each time period set forth in such Subsection. Each
Acceptance Reimbursement Loan shall (x) be payable on
demand, (y) be evidenced by a loan account maintained on
the books and records of the Issuing Lender (the
"Acceptance Reimbursement Loan Account"), and (z) bear
interest from the date of the creation of the applicable
Acceptance Reimbursement Obligation until paid in full at
a rate per annum equal to the interest rate then
applicable to Alternate Base Rate Advances. Interest on
each Acceptance Reimbursement Loan shall be payable on
demand. The entries in the Acceptance Reimbursement Loan
Account shall constitute prima facie evidence of the
accuracy of the information set forth therein.
(iii) If the Issuing Lender makes an Acceptance
Reimbursement Loan in accordance with Subsection
2.4(c)(ii), the Issuing Lender will promptly notify each
Participating Lender. Forthwith upon receipt of such
notice, each Participating Lender will transfer to the
Issuing Lender, in Dollars and in immediately available
funds, and the Issuing Lender shall acquire a claim
against each Participating Lender for, such Participating
Lender's pro rata share of such Acceptance Reimbursement
Loan.
(iv) Upon each Participating Lender's payment in full
to the Issuing Lender of its pro rata share of any
Acceptance Reimbursement Loan for the account of a
Borrower in accordance with Subsection 2.4(c)(iii), such
Participating Lender shall acquire the Issuing Lender's
claim against such Borrower in respect of such Acceptance
Reimbursement Loan to the extent of the amount paid by
such Participating Lender. Each Participating Lender
agrees that the Issuing Lender shall have full authority
and responsibility for enforcing all claims against each
Borrower with respect to Acceptances and Acceptance
-31-<PAGE>
Reimbursement Loans and exercising all rights and remedies
with respect thereto.
(v) Whenever, at any time after the Issuing Lender
has received from each Participating Lender its pro rata
share of any Acceptance Reimbursement Loan in accordance
with Subsection 2.4(c)(iv) the Issuing Lender receives any
payments related to such Acceptance Reimbursement Loan
(whether received directly from a Borrower or otherwise,
including proceeds of collateral applied thereto by the
Issuing Lender), or any payment of interest on account
thereof, the Issuing Lender will distribute to each
Participating Lender its pro rata share thereof; provided,
however, that in the event that any such payments or such
payment of interest (as the case may be) is required to be
returned by the Issuing Lender, each Participating Lender
will return to the Issuing Lender the portion thereof pre-
viously distributed by the Issuing Lender to it.
(vi) Within ten days after the end of each calendar
month the Issuing Lender will notify each Participating
Lender of (A) each creation of an Acceptance by the Issu-
ing Lender during such calendar month and (B) each payment
made by a Borrower to the Issuing Lender during such cal-
endar month on account of any Acceptance Reimbursement
Obligation.
(d) Termination of Acceptance Commitments. In the
event that (i) there is a determination made by any regulatory
body or instrumentality thereof (including without limitation,
any Federal Reserve Bank or any bank examiner), or there is a
change in, or change in interpretation of, any applicable law,
rule or regulation (such determination or such change, a
"Reserve Determination"), in either case to the effect that
bankers' acceptances created hereunder or in connection with a
substantially similar facility (whether or not a Borrower or
any Lender is directly involved as parties) will be ineligible
for reserve-free treatment (or if already discounted, should
have been ineligible for reserve-free treatment) with Federal
Reserve Banks, and as a result any Lender is required to main-
tain, or determines as a matter of prudent banking practice
that it is appropriate for it to maintain, additional reserves,
or (ii) any restriction is imposed on any Lender (including,
without limitation, any change in acceptance limits imposed on
any
-32-<PAGE>
Lender) which would prevent such Lender from creating or
purchasing participating interests in bankers' acceptances, as
the case may be, or otherwise performing its obligations in
respect of Acceptances, then, with the consent of the Partici-
pating Lenders, the Issuing Lender may, or upon the direction
of any Participating Lender, the Issuing Lender shall, by
notice to each Borrower at its address specified in Subsection
10.5 terminate the obligation of the Issuing Lender to issue
Time Draft Letters of Credit or Sight Draft Letters of Credit
and to create Acceptances, effective on the date on which the
Issuing Lender gives such notice, and the Issuing Lender shall
have no further obligation to issue Time Draft Letters of Cred-
it and Sight Draft Letters of Credit or to create Acceptances.
(e) Mandatory Prepayment. Each Borrower shall,
within three Business Days of its receipt of a notice of termi-
nation from the Issuing Lender pursuant to Subsection 2.4(d),
prepay the Acceptance Obligation with respect to each Accep-
tance then outstanding by paying to the Issuing Lender the face
amount of each Acceptance less a prepayment discount calculated
by the Issuing Lender based upon the then prevailing rate for
U.S. Treasury Bills maturing on or about the maturity date of
such Acceptance (and communicated to the Borrowers in its
notice of termination pursuant to Subsection 2.4(d)).
(f) Acceptance Documents. The provisions of this
Section 2.4 in respect of any Acceptance are supplemental to,
and not in derogation of, any rights and remedies of the Issu-
ing Lender and the Lenders under the Acceptance Documents
related to such Acceptance and under other applicable law. In
the event of any conflict between the terms of this Agreement
and the terms of the Acceptance Agreements, the terms set forth
in this Agreement shall control.
(g) Use of Proceeds. The proceeds of the Acceptan-
ces shall be used solely to refinance drawings made under Time
Draft Letters of Credit or Sight Draft Letters of Credit in
transactions which fulfill the requirements of regulations of
the Board of Governors of the Federal Reserve System of the
United States governing the creation and discounting of, and
the maintenance of reserves with respect to, bankers' accep-
tances.
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2.5 Termination or Reduction of Commitments. The
Borrowers shall have the right upon not less than three Busi-
ness Days' prior written notice (effective upon receipt) to the
Agent (which shall promptly notify each Lender) from both Bor-
rowers to terminate or, from time to time, reduce the Commit-
ments; provided, however, that any partial reduction of the
Commitments shall be in the amount of $5,000,000 or any inte-
gral multiple thereof. Each partial reduction of the Commit-
ments shall cause a permanent reduction in the Commitments and
shall be applied ratably among the Lenders according to the
amounts of their respective Commitment Percentages. Each
reduction pursuant to this Subsection 2.5 shall be accompanied
by prepayment of the Alternate Base Rate Advances of each Lend-
er, together with accrued interest on the amount prepaid to and
including the date of prepayment, to the extent that such Lend-
er's Commitment Percentage of the Aggregate Outstanding Exten-
sions of Credit exceeds the amount of the Commitment of such
Lender as so reduced. The Borrowers may not reduce the Commit-
ments to an amount less than the sum of the Letter of Credit
Obligations plus the Acceptance Obligations plus the principal
amount of all LIBOR Advances and all Quoted Rate Advances then
outstanding unless such Obligations and Advances are simulta-
neously reduced.
2.6 Prepayments. (a) Voluntary. Each Borrower may
prepay its Alternate Base Rate Advances, in whole or ratably in
part, on prior telephonic notice (confirmed in writing) to the
Agent (which shall promptly notify the Lenders) prior to 10:00
A.M. on the date of such prepayment, specifying the date and
amount of prepayment. Partial prepayment shall be in the prin-
cipal amount of $250,000 or an integral multiple thereof.
LIBOR Advances and Quoted Rate Advances may not be prepaid
except on the last day of the LIBOR Interest Period or Quoted
Rate Interest Period, as the case may be, with respect thereto.
(b) Mandatory. Subject to the indemnification provi-
sions of Subsection 2.11 with respect to any payment of a LIBOR
Advance on a day other than the last day of the LIBOR Interest
Period for such LIBOR Advance or of a Quoted Rate Advance on a
day other that the last day of the Quoted Rate Interest Period
for such Quoted Rate Advance, each Borrower shall prepay its
Note on the date of delivery to the Lenders of any Borrowing
Base Certificate which indicates that the Aggregate Outstanding
Extensions of Credit are in excess of the Maximum Availability,
in an amount
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equal to such Borrower's pro rata portion of the difference
between such Maximum Availability and the Aggregate Outstanding
Extensions of Credit; provided, however, that if the aggregate
outstanding principal balances of the Borrowers' Notes is less
than the prepayment required above, each Borrower shall
promptly deliver and pledge to the Agent for the benefit of the
Lenders (pursuant to such documents, instruments and agreements
as the Agent may require) cash collateral in an amount equal to
such Borrower's pro rata portion of the difference between the
required prepayment and the outstanding principal balance of
such Notes; provided, further, that THUSA may make the payments
and provide the cash collateral which Retail is required to
make and deliver pursuant to this Subsection 2.6(b). Each
prepayment pursuant to this Subsection 2.6 shall be accompanied
by payment of accrued interest on the amount prepaid to and
including the date of such prepayment.
2.7 Fees; Commissions. (a) Commitment Fee. The
Borrowers agree to pay to the Agent, for the account of each
Lender, a commitment fee for the period from the date hereof to
and including the Termination Date, or such earlier date upon
which the Borrowers shall terminate the Commitments, (i) com-
puted on the daily average unused portion of the Commitment of
such Lender in effect during the period for which payment is
made at a rate per annum equal to 3/16 of 1% plus (ii) computed
on the Unavailable Step-Up Commitment for the period for which
payment is made at a rate per annum equal to 1/16 of 1%. The
commitment fee shall be payable to the Agent quarterly in
arrears on the last day of each March, June, September and
December in each year, commencing on the first of such days to
occur after the date hereof, and on the Termination Date or
such other date upon which the Commitments shall be terminated.
(b) Letter of Credit Commissions.
(i) Each Borrower agrees that it will pay to the
Issuing Lender a letter of credit commission for each
Standby Letter of Credit issued for the account of such
Borrower equal to 1-1/2% per annum of the aggregate amount
available to be drawn under each such Standby Letter of
Credit on the date of issuance of such Standby Letter of
Credit payable, in the case of each Standby Letter of
Credit expiring no more than six months after the date of
issuance,
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in full on the date of issuance and, in the case of each
Standby Letter of Credit expiring more than six months
after the date of issuance of such Standby Letter of
Credit, semiannually in advance on the date of the
issuance of such Standby Letter of Credit and on the date
which is six months after such date of issuance.
(ii) Each Borrower agrees that it will pay to the
Issuing Lender a letter of credit commission for each Com-
mercial Letter of Credit issued for the account of such
Borrower equal to 1/10 of 1% of the amount of each drawing
under such Commercial Letter of Credit, payable on the
date of each such drawing.
(iii) The Issuing Lender will allocate and pay to each
Participating Lender such Participating Lender's pro rata
share of letter of credit commissions received during each
calendar month by the Issuing Lender pursuant to Subsec-
tion 2.7(b)(i) or (ii) within ten Business Days after the
end of each such calendar month.
(iv) In addition to the commissions set forth in
clauses (i) and (ii) of this Subsection 2.7(b), each Bor-
rower agrees to pay to the Issuing Lender for its own
account the respective customary fees charged by the Issu-
ing Lender in connection with its issuance and administra-
tion of Commercial Letters of Credit and Standby Letters
of Credit.
(c) Acceptance Fees.
(i) Each Borrower agrees that on the date of the
creation by the Issuing Lender of an Acceptance for such
Borrower, it will pay to the Issuing Lender an acceptance
commission equal to 1 1/2% per annum of the face amount of
such Acceptance, payable in full on the date of creation
of such Acceptance for the period from the date of cre-
ation of such Acceptance until the maturity date thereof.
The Issuing Lender will allocate and pay to each Partici-
pating Lender such Participating Lender's pro rata share
of all acceptance commissions received by the Issuing
Lender as soon as practicable after receipt of such com-
missions.
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(ii) In addition to the commissions set forth in
clause (i) of this Subsection 2.7(c), each Borrower agrees
to pay to the Issuing Lender for its own account the
respective customary fees charged by the Issuing Lender in
connection with its creation and administration of bank-
ers' acceptances.
(d) Agent's Fee. The Borrowers agree to pay to the
Agent, for such Agent's own account, an agent's fee in the
amount and on the dates set forth in the fee letter entered
into among the Borrowers and Chemical.
2.8 Computation of Interest, Commissions and Fees.
Interest, Letter of Credit commissions and commitment fees
shall be calculated on the basis of a year of 360 days for the
actual number of days elapsed. Any change in the interest rate
resulting from a change in the Alternate Base Rate shall become
effective as of the opening of business on the day on which
such change in the Alternate Base Rate occurs. The Agent shall
notify the Borrowers and the Lenders in writing of the effec-
tive date and the amount of each change in the Alternate Base
Rate. Each determination by the Agent of an interest rate
hereunder shall be conclusive and binding for all purposes,
absent manifest error.
2.9 Pro Rata Treatment and Payments. (a) Each bor-
rowing by a Borrower hereunder shall be made on a pro rata
basis from each Lender. Each payment (including each prepay-
ment) to each Lender hereunder and under the Notes, or pursuant
to any other Loan Document, shall be made by each Borrower on a
pro rata basis to the Agent for the account of Lender entitled
to receive such payment. Each reduction of the Commitments
shall be made a pro rata basis. As used herein with respect to
a Lender, the term pro rata shall refer to such Lender's Com-
mitment Percentage.
(b) Each payment by a Borrower shall be made in U.S.
dollars in immediately available funds to the Agent at its
address set forth with its signature hereto and shall be
received by the Agent by not later than 12:00 noon (New York
City time) on the day when due.
(c) The Agent will as soon as practicable after
receipt of any payment retain or cause to be distributed like
funds to the Lenders as the various parties' interests shall
appear, in
-37-<PAGE>
each case to be applied in accordance with the terms of this
Agreement; provided, however, that (i) the Agent shall have up
to five Business Days in which to distribute to the Lenders any
payments made by a Borrower with respect to commitment fees and
(ii) Letter of Credit and Acceptance commissions will be
distributed as set forth in Subsection 2.7(b)(iii) and
2.7(c)(i).
(d) Except as otherwise set forth in this Agreement,
if any payment hereunder or any other Loan Document becomes due
and payable on a day other than a Business Day, such payment
shall be extended to the next succeeding Business Day, and
interest thereon shall be payable at the then applicable rate
during such extension.
2.10 Conversion Options. A Borrower may elect to
convert any Alternate Base Rate Advance into a LIBOR Advance
hereunder and to convert any LIBOR Advance to a Alternate Base
Rate Advance hereunder, by giving the Agent irrevocable notice
of such election no later than 10:00 A.M. three Business Days
prior to the requested conversion date; provided, however, that
a conversion of a LIBOR Advance into a Alternate Base Rate
Advance shall be made only on the last day of the then current
LIBOR Interest Period for such LIBOR Advance and a conversion
of a Alternate Base Rate Advance into a LIBOR Advance shall be
in the minimum principal amount of $5,000,000. No Alternate
Base Rate Advance may be converted to a LIBOR Advance when any
Default or Event of Default has occurred and is continuing.
2.11 Indemnity. Each Borrower agrees to indemnify
each Lender and to hold such Lender harmless from any loss or
expense which such Lender may sustain or incur as a consequence
of (a) default by such Borrower in the payment of the principal
of or interest on a LIBOR Advance or a Quoted Rate Advance, (b)
default by such Borrower in making a borrowing of a LIBOR
Advance or a Quoted Rate Advance after such Borrower has given
a notice in accordance with Subsection 2.2 hereof and, in the
case of a Quoted Rate Advance, has accepted the Quoted Rate
quoted to such Borrower by the Agent, or (c) a prepayment of a
LIBOR Advance or a Quoted Rate Advance (including without limi-
tation under Subsection 2.6(b)) on a day which is not the last
day of the LIBOR Interest Period or Quoted Rate Interest Period
with respect thereto, including, but not limited to, any such
loss or expense arising from interest or fees payable by such
Lender to lenders
-38-<PAGE>
of funds obtained by it in order to maintain its LIBOR Advances
or Quoted Rate Advances. This covenant shall survive
termination of this Agreement and payment of the Notes.
2.12 Authorization to Charge Account. Each Borrower
hereby authorizes and directs the Agent to charge any account
of such Borrower maintained with the Agent at any of its offic-
es with the amount of any payment of any principal, Acceptance
Obligations, Letter of Credit Obligations, interest, fees or
any other charges hereunder when the same becomes due and pay-
able under the terms of this Agreement or any other Loan Docu-
ment and with respect to any voluntary prepayments.
2.13 Increased Costs. (a) In the event that any
law, regulation, treaty or directive, or any change of any of
them or in the interpretation or application of any of them, by
any governmental authority charged with the administration of
any of them or compliance by any Lender with any request or
directive from any central bank or other governmental author-
ity, agency or instrumentality;
(i) does or shall subject any Lender to any tax of
any kind whatsoever with respect to this Agreement, or
change the basis of taxation of payments to such Lender of
principal, interest, fees or any other amount payable to
such Lender (except for imposition of, or changes in the
rate of, tax on the overall net income of such Lender,
other than a tax imposed solely or primarily on United
States branches);
(ii) does or shall impose, modify or make applicable
any reserve (other than reserve requirements included in
the determination of the LIBOR Rate), special deposit,
compulsory loan, assessment or similar requirement against
assets held by, or advances or loans by, or letters of
credit issued or participated in by, or other credit
extended by, or any other acquisition of funds by, any
office of any Lender; or
(iii) does or shall impose on any Lender any other
condition; and the result of any of the foregoing is to
increase the cost to such Lender of making, creating,
issuing, renewing, continuing or maintaining the Advances,
-39-<PAGE>
Letters of Credit or Acceptances under this Agreement or
the other Loan Documents or to reduce any amount receiv-
able under this Agreement or the other Loan Documents,
then, in any such case, each Borrower agrees promptly to
pay to the Agent for the account of such Lender, within 30
days of the date of demand by such Lender (with a copy of
such demand to the Agent), its pro rata portion of any
additional amounts necessary to compensate such Lender for
such additional cost or reduction in such amount receiv-
able which such Lender deems to be material, as reasonably
determined by such Lender, with respect to this Agreement,
the other Loan Documents or any payments made hereunder or
thereunder. A statement setting forth the calculation of
any additional amount payable pursuant to the foregoing
sentence submitted by such Lender to a Borrower (with a
copy to the Agent) shall be conclusive, except as herein-
after provided, in the absence of manifest error. A Bor-
rower may contest any such statement by a written state-
ment submitted to such Lender (with a copy to the Agent)
not later than 15 days after receipt of such Lender's
statement, provided that such Borrower's statement shall
be accompanied by the payment in full to the Agent for the
account of such Lender of any amount not in dispute.
(b) If either (i) the introduction of, or any change
in any law or regulation or in the interpretation of any of
them by any governmental authority charged with the administra-
tion of any of them, or (ii) compliance with any directive,
guideline or request from any central bank or other United
States or governmental authority (whether or not having the
force of law) (including the Risk-Based Capital Guidelines of
the Federal Reserve Board or of the Comptroller of the Currency
or any foreign equivalent thereof) affects or would affect the
amount of capital required or expected to be maintained by any
Lender, or any Person directly or indirectly owing or control-
ling such Lender, and such Lender shall have determined that
such introduction, change or compliance has or would have the
effect of reducing the rate of return on its capital as a con-
sequence, directly or indirectly, of its obligations under this
Agreement or the other Loan Documents to a level below that
which such Lender could have achieved but for such introduc-
tion, change or compliance (after taking into account such
Lender's policies regarding capital adequacy) by an amount rea-
sonably deemed by
-40-<PAGE>
such Lender to be material, then, upon demand by such Lender
(with a copy of such demand to the Agent), each Borrower agrees
promptly to pay to the Agent for the account of such Lender its
pro rata portion of such additional amount or amounts as shall
be sufficient to compensate such Lender for such reduction in
its rate of return. A statement setting forth the calculation
of any additional amount payable pursuant to the foregoing
sentence submitted by such Lender to a Borrower (with a copy to
the Agent) shall be conclusive in the absence of manifest
error. A Borrower may contest any such statement by a written
statement specifying the basis for such dispute submitted to
such Lender (with a copy to the Agent) not later than 15 days
after receipt of such Lender's statement, provided that such
Borrower's statement shall be accompanied by the payment in
full to the Agent for the account of such Lender of any amount
not in dispute.
(c) In the event that any Acceptance created hereun-
der is not, for any reason, a bankers' acceptance with respect
to which no reserves are required to be maintained by the Issu-
ing Lender or any Participating Lender under Regulation D of
the Board of Governors of the Federal Reserve System in effect
from time to time or under any other law or regulation (an
"Eligible Acceptance"), each Borrower shall, within five Busi-
ness Days after demand by the Agent on behalf of any Lender,
pay to the Agent for the account of such Lender, such addi-
tional amounts as are sufficient to indemnify such Lender
against any additional costs, as reasonably determined by such
Lender and notified in writing to the Agent, incurred by such
Lender (including, without limitation, costs resulting from any
Reserve Determination, or reserve requirements, or premium
liability to the Federal Deposit Insurance Corporation, or a
higher discount rate) resulting from such Acceptance not con-
stituting an Eligible Acceptance hereunder.
2.14 Payments Free and Clear of Taxes. Etc.
(a) Any and all payments made by any Borrower or Guarantor
hereunder or under any other Loan Document shall be made free
and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withhold-
ings, and all liabilities with respect thereto, excluding, in
the case of the Agent and each Lender, taxes imposed on its
income, and franchise taxes imposed on it, by the jurisdiction
under the laws of which the Agent or such Lender (as the case
may be) is organized or any
-41-<PAGE>
political subdivision thereof and, in the case of each Lender,
taxes imposed on its income, and franchise taxes imposed on it,
by the jurisdiction of such Lender's Lending Office or any
political subdivision thereof (all of such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and
liabilities being hereunder referred to as "Taxes"). If any
Borrower shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder or under any other Loan
Document to the Agent or any Lender (i) the sum payable shall
be increased as may be necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Subsection), the Agent or
such Lender (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been
made; provided, however, that no Borrower shall be required to
increase any such amounts payable to any Lender that is not
organized under the laws of the United States of America or a
state thereof if such Lender fails to comply with the
requirements of Subsection 2.14(e), (ii) such Borrower shall
make such deductions and (iii) such Borrower shall pay the full
amount deducted to the relevant taxation authority or other
authority in accordance with applicable law.
(b) In addition, each Borrower agrees to pay any
present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies arising
from any payment made hereunder or under any other Loan Docu-
ment or from the execution, delivery, or registration of, or
otherwise with respect to, this Agreement or any other Loan
Document (such taxes being "Other Taxes").
(c) Each Borrower will upon demand indemnify the
Agent and each Lender for the full amount of Taxes or Other
Taxes (including, without limitation, any Taxes or Other Taxes
imposed by any jurisdiction on amounts payable under this Sub-
section), whether or not such Taxes or Other Taxes were cor-
rectly or legally asserted, paid by the Agent or such Lender
(as the case may be) and any liability (including penalties,
interest and expenses) in connection therewith plus interest
thereon, to the fullest extent permitted by law, for the period
from the day on which such Taxes or Other Taxes shall be paid
by the Agent or such Lender (as the case may be) until the day
on which such Borrower shall indemnify the Agent or such Lender
(as the case may be) for such payment, at the Alternate Base
Rate plus 3%.
-42-<PAGE>
(d) Without prejudice to the survival of any other
agreements of the Borrowers hereunder, the agreements and obli-
gations of the Borrowers contained in this Subsection 2.14
shall survive the payment in full of the Aggregate Outstanding
Extensions of Credit and interest thereon.
(e) Each Lender that is not incorporated under the
laws of the United States of America or a state thereof shall:
(i) on the date it becomes a Lender, deliver to each
Borrower and the Agent (A) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224,
or successor applicable form, as the case may be, and
shall certify that it is entitled to receive payments
under this Agreement without deduction or withholding (or
at a reduced rate of deduction or withholdings) of any
United States Federal income taxes and (B) an Internal
Revenue Service Form W-8 or W-9, or successor applicable
form, as the case may be and shall certify that it is
entitled to an exemption from United States backup with-
holding tax; and
(ii) deliver to each Borrower and the Agent two fur-
ther copies of any such form or certification on or before
the date that any such form or certification described
above expires or becomes obsolete and after the occurrence
of any event requiring a change in the most recent form
previously delivered by it to such Borrower or the Agent;
except that the forms and certificates described in clause (ii)
above shall not be required if any change in any requirement of
law has occurred prior to the date on which any such delivery
would otherwise be required which renders all such forms inap-
plicable or which would prevent such Lender from duly complet-
ing and delivering any such form with respect to it and such
Lender so advises each Borrower and the Agent. If the form
provided by a Lender at the time such Lender first becomes a
party to this Agreement indicates a United States federal with-
holding tax rate on any payments under this Agreement in excess
of zero, then withholding tax at such rate or any subsequent
lower rate shall not be treated as "Taxes" as defined in Sub-
section 2.14(a) at such time or any time thereafter with
respect to such Lender and the relevant Borrower or the Agent
-43-<PAGE>
shall withhold such tax from payments to such Lender at the
applicable rate.
2.15 Inability to Determine Rate. If with respect
to any LIBOR Advance, the Agent determines that extraordinary
circumstances affecting the relevant market make it impracti-
cable to ascertain the LIBOR Rate applicable for any future
LIBOR Interest Period for such LIBOR Advance, the Agent shall
promptly notify each Borrower and each Lender of such determi-
nation and no additional LIBOR Advances shall be made nor shall
there be any conversions thereto until such notice is with-
drawn. If any LIBOR Advance is outstanding on the date of such
notice and such notice has not been withdrawn, a Borrower may
on the last day of such LIBOR Interest Period either convert
such LIBOR Advance to a Alternate Base Rate Advance or prepay
the outstanding principal balance thereof and accrued interest
thereon in full.
2.16 Illegality. Notwithstanding any other provi-
sions herein, if any law, regulation, treaty or directive or
any change therein or in the interpretation or application
thereof, shall make it unlawful for a Lender to make or main-
tain LIBOR Advances as contemplated by this Agreement, a Bor-
rower's right hereunder to borrow LIBOR Advances or to convert
Alternate Base Rate Advances into LIBOR Advances shall forth-
with be canceled and outstanding LIBOR Advances, if any, shall
be converted to Alternate Base Rate Advances on the last day of
the then current LIBOR Interest Period applicable thereto or
within such earlier period as required by law.
2.17 Use of Proceeds. THUSA may use the proceeds of
extensions of credit under the Commitments (a) as set forth in
Subsections 2.3(i) and 2.4(g), (b) for working capital purposes
and Unfunded Capital Expenditures for THUSA and its Subsidiar-
ies to the extent permitted by the provisions of this Agreement
and (c) to capitalize the Unrestricted Subsidiary to the extent
permitted by the provisions of this Agreement. Retail may use
the proceeds of extensions of credit under the Commitments as
set forth in Subsections 2.3(i) and 2.4(g) and for working cap-
ital purposes and Unfunded Capital Expenditures to the extent
permitted by the provisions of this Agreement.
2.18 Obligations Absolute. (a) Each Borrower's
payment obligations under Subsections 2.3 and 2.4 shall be
unconditional
-44-<PAGE>
and irrevocable and shall be paid strictly in accordance with
the terms of this Agreement under all circumstances, including,
without limitation, the existence of any claim, set-off,
defense or other right which such Borrower may have at any time
against the Issuing Lender, any Participating Lender or the
Agent, or against any beneficiary of any Letter of Credit or
any holder of any Acceptance, or any transferee from any such
beneficiary or holder (or any Person for whom any such
beneficiary, holder or transferee may be acting), or against
any other Person, whether in connection with the Loan
Documents, the transactions contemplated thereby, or any unre-
lated transaction. Each Borrower assumes all risks of the acts
or omissions of the beneficiaries of the Letters of Credit and
Acceptances and all risks of the misuse of the Letters of Cred-
it and Acceptances. Neither the Issuing Lender, any of its
correspondents, any Participating Lender or the Agent shall be
responsible: (i) for the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document specified in any of
the Letter of Credit Applications, even if it should in fact
prove to be in any or all respects invalid, insufficient, inac-
curate, fraudulent, or forged; (ii) for the validity or suffi-
ciency of any instrument transferring or assigning or purport-
ing to transfer or assign any of the Letters of Credit or any
of the rights or benefits thereunder or proceeds thereof in
whole or in part, which may prove to be invalid or ineffective
for any reason; (iii) for failure of any draft to bear any ref-
erence or adequate reference to any of the Letters of Credit,
or failure of anyone to note the amount of any draft on the
reverse of any of the Letters of Credit or to surrender or to
take up any of the Letters of Credit or to send forward any
such document apart from drafts as required by the terms of any
of the Letters of Credit, each of which provisions, if con-
tained in a Letter of Credit itself, it is agreed, may be
waived by the Issuing Lender; (iv) for errors, omissions,
interruptions or delays in transmission or delivery of any mes-
sages, by mail, cable, telegraph, telex or otherwise, whether
or not they be in cipher; (v) for any error, neglect, default,
suspension or insolvency of any correspondent of the Issuing
Lender; (vi) for errors in translation or in interpretation of
technical terms; (vii) for any loss or delay, in the transmis-
sion or otherwise, of any such document or draft or the pro-
ceeds thereof; or (viii) for any other circumstances whatsoever
in making or failing to make payment under a Letter of Credit,
except only that each Borrower shall have a claim against the
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Issuing Lender, and the Issuing Lender shall be liable to such
Borrower, to the extent, but only to the extent, of any direct,
as opposed to consequential, damages suffered by such Borrower
which such Borrower proves were caused by the Issuing Lender's
willful misconduct or gross negligence in determining whether
documents presented under a Letter of Credit comply with the
terms of such Letter of Credit. None of the above shall
affect, impair or prevent the vesting of any of the rights or
powers of the Issuing Lender, the Agent or any of the Partici-
pating Lenders. The Issuing Lender or the Agent shall have the
right to transmit the terms of the Letter of Credit involved
without translating them.
(b) In furtherance and extension and not in limita-
tion of the specific provisions hereinabove in this Subsection
2.18 set forth, (i) any action taken or omitted by the Issuing
Lender, the Agent, any Participating Lender, or by any of their
respective correspondents under or in connection with any of
the Letters of Credit, if taken or omitted in good faith, shall
be binding upon each Borrower and shall not put the Issuing
Lender, the Agent, any Participating Lender, or their respec-
tive correspondents under any resulting liability to such Bor-
rower and (ii) the Issuing Lender may accept documents that
appear on their face to be in order, without responsibility for
further investigation, provided that, if the Issuing Lender
shall receive written notification from both the beneficiary of
a Letter of Credit and the Borrower for the account of which
such Letter of Credit was issued that sufficiently identifies
(in the opinion of the Issuing Lender) documents to be pre-
sented to the Issuing Lender which are not to be honored, the
Issuing Lender agrees that it will not honor such documents.
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SECTION 3. CONDITIONS OF BORROWING
3.1 Conditions of Initial Extension of Credit. The
obligation of the Lenders to make the initial extension of
credit under the Commitments shall be subject to the fulfill-
ment of the following conditions precedent:
(a) Documents. The Agent shall have received, with
a counterpart for each Lender, duly executed by the par-
ties thereto, the following documents:
(i) each Borrower's Note to each Lender;
(ii) each Guarantee;
(iii) each Security Agreement;
(iv) the Assignment of Factoring Agreement,
together with a copy of the Factoring
Agreement;
(v) the Subordination Agreement;
(vi) each Letter of Credit Document required by
the Issuing Lender;
(vii) each Borrower's Acceptance Agreement dated
as of the date hereof and each other Accep-
tance Document required by the Issuing
Lender;
(viii) the Limited Trademark License Agreement;
and
(ix) acknowledgment copies of proper financing
statements duly filed under the Uniform
Commercial Code, including (A) financing
statements on form UCC-1 naming THUSA and
Retail, respectively, as debtors and the
Agent as secured party in each jurisdiction
listed on Schedule 4.12, (B) financing
statements on form UCC-1 naming THUSA and
Retail, respectively, as debtors and the
Issuing Lender as secured party and (C)
such other filings as the Lenders may deem
necessary or desirable in order to perfect
or continue the perfection of the
-47-<PAGE>
security interests created by the Security
Agreements, the Assignment of Factoring
Agreement, the Letter of Credit Documents
and the Acceptance Agreements.
(b) Corporate Proceedings. Each Borrower and Guar-
antor shall have furnished to the Agent, with a copy for
each Lender, a Secretary's Certificate, dated as of the
date hereof, certifying as to the resolutions of the Board
of Directors of such Borrower or Guarantor, as the case
may be, and other corporate documents attached thereto,
substantially in the form of Exhibit L-1, in the case of
each Borrower or Exhibit L-2, in the case of each Guaran-
tor.
(c) Legal Opinion. There shall have been delivered
to the Agent, with a copy for each Lender, an opinion of
Gursky & Associates, P.C., counsel to each Borrower, THL
and THW, substantially in the form of Exhibit M-1 hereto
dated the date hereof.
(d) Borrowing Base Certificate. There shall have
been delivered to the Agent, with a copy for each Lender,
a Borrowing Base Certificate, dated as of a recent date
acceptable to the Agent.
(e) Fees. The Agent and each Lender shall have
received the fees referred to in Subsection 2.7 hereof
which are due and payable on the date hereof.
(f) Additional Matters. All corporate and other pro-
ceedings and all other documents and all legal matters in
connection with the transactions contemplated by this
Agreement and the other Loan Documents shall be reasonably
satisfactory in form and substance to the Agent.
3.2 Conditions of All Extensions of Credit. The
obligation of the Lenders to make any extension of credit
(including the initial extension of credit) shall be subject to
the following conditions precedent:
(a) Representations and Warranties; No Default. The
representations and warranties contained in Section 4
hereof shall be true and correct on the date thereof
(except the representations and warranties contained in
(i) Subsections
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4.4, 4.5 (other than clause (b) thereof), 4.7 and 4.9,
which shall be true and correct solely with respect to
each Borrower and (ii) Subsection 4.6, which shall be true
and correct solely with respect to each Borrower and THL),
and no Default or Event of Default shall have occurred and
be continuing on such date. Each receipt of an extension
of credit by a Borrower hereunder shall constitute a
representation by such Borrower as of the date thereof
that the conditions contained in the foregoing sentence
have been satisfied. Receipt by a Borrower of the proceeds
of each Advance made or an Acceptance created hereunder
and the issuance of each Letter of Credit for the account
of a Borrower shall constitute a representation by such
Borrower as of the date thereof that, after giving effect
to the making of such Advance or the creation of such
Acceptance or the issuance of such Letter of Credit, the
statements set forth in the preceding sentence are true
and the Aggregate Outstanding Extensions of Credit do not
exceed the Maximum Availability as shown on the most
recent Borrowing Base Certificate.
(b) Legal Matters. All other instruments and legal
and corporate proceedings in connection with the transac-
tions contemplated by this Agreement shall be satisfactory
in form and substance to the Lenders, the Agent and their
respective counsel, and such counsel shall have received
copies of all documents which they may have reasonably
requested in connection therewith.
3.3 Obligations in Respect of Existing Agreement.
The parties hereto acknowledge and agree that on the date on
which the conditions set forth in this Article III are satis-
fied, (i) the obligations and commitments of those Existing
Lenders who are not Lenders hereunder shall be terminated and
have no further force and effect, (ii) the Agent shall cause
the accounts of, and the interest, fees and other amounts owing
to each Lender to be adjusted to properly reflect each Lender's
Commitment hereunder, and (iii) the Lenders shall make avail-
able to the Agent, and the Agent shall distribute to the Exist-
ing Lenders, such funds as the Agent shall specify to properly
reflect each Lender's Commitment hereunder and the termination
of the commitments under the Existing Agreement.
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SECTION 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this
Agreement, each Borrower and each Guarantor (as appropriate)
hereby represents and warrants to the Lenders that:
4.1 Corporate Existence. Each Borrower, each Guar-
antor and each Subsidiary of each of them is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power to
own its assets and to transact the business in which it is
presently engaged, and is duly qualified as a foreign corpora-
tion and in good standing under the laws of each jurisdiction
where its ownership or lease of property or the conduct of its
business requires such qualification. Since July 15, 1994,
there has been no amendment of the Articles of incorporation of
either Borrower, except for amendments copies of which have
been delivered to each Lender. Set forth in Schedule 4.1 here-
to is a list of all direct and indirect Subsidiaries of THC.
4.2 Corporate Power; Authorization; Enforceable
Obligations. Each Borrower and each Guarantor has the corpo-
rate power, authority and legal right to make, deliver and per-
form each Loan Document to which it is a party, to borrow and
obtain other extensions of credit (in the case of each Borrow-
er), to issue its Guarantee (in the case of each Guarantor) and
to take any other actions contemplated by the Loan Documents to
which such Borrower or Guarantor is a party. Each Borrower and
each Guarantor has taken all necessary corporate action to
authorize the actions contemplated by, and on the terms and
conditions set forth in, the Loan Documents to which it is a
party. No consent of any other party (including stockholders),
and no consent, license, approval or authorization of, or reg-
istration or declaration with, any governmental authority,
bureau or agency is required in connection with the execution,
delivery, performance, validity or enforceability of any Loan
Document to which it is a party. This Agreement and each other
Loan Document to which any Borrower or Guarantor is a party has
been duly executed and delivered on behalf of such Borrower or
Guarantor, as the case may be, and constitutes a legal, valid
and binding obligation of such Borrower or Guarantor, as the
case may be, in accordance with its terms.
-50-<PAGE>
4.3 No Legal Bar. The execution, delivery and per-
formance of each Loan Document to which any Borrower or Guaran-
tor is a party will not violate any provision of any existing
law or regulation or of any order or decree of any court or
governmental instrumentality, or of the Certificate of Incorpo-
ration or By-Laws of such Borrower or Guarantor, or of any
mortgage, indenture, contract or other agreement to which such
Borrower or Guarantor is a party or by which such Borrower or
Guarantor and any of their respective property or assets may be
bound, and will not result in the creation or imposition of any
lien, charge or encumbrance on, or security interest in, any of
their respective properties pursuant to the provisions of such
mortgage, indenture, contract or other agreement.
4.4 No Material Litigation. No litigation or admin-
istrative proceedings of or before any court, tribunal or gov-
ernmental body is presently pending, or, to the knowledge of
such Borrower or Guarantor, threatened against such Borrower or
Guarantor or any of its Subsidiaries, or any of their respec-
tive properties or with respect to any Loan Documents to which
such Borrower or Guarantor is a party, which, if adversely
determined, would, in the opinion of such Borrower or Guaran-
tor, have a material adverse effect on the business, assets or
financial condition of such Borrower, Guarantor or Subsidiary.
4.5 No Default. (a) No Borrower or Guarantor is in
default in any manner in the payment or performance of any of
its material obligations or in the performance of any material
contract, agreement or other instrument to which it is a party
or by which it or any of its assets may be bound and (b) no
Default hereunder has occurred and is continuing.
4.6 Ownership of Properties; Liens; Trademarks.
(a) Each Borrower and each of their respective Subsidiaries
has good and marketable title to all of their respective prop-
erties and assets, real and personal; (b) each other Guarantor
and each of their respective Subsidiaries has good and market-
able title to all of their respective material properties and
assets, real and personal; (c) none of the properties and
assets of each Borrower, each Guarantor and their respective
Subsidiaries is subject to any mortgage, lien, pledge, charge,
encumbrance, security interest or title retention or other
security agreement or
-51-<PAGE>
arrangement of any nature whatsoever except as set forth in
Schedule 4.6 hereto and as permitted in Subsection 6.2 hereof;
and (d) the Tommy Hilfiger trademarks (the name, flag logo and
crest) are owned by THL.
4.7 Taxes. Each Borrower, each Guarantor and each
of their respective Subsidiaries has filed or caused to be
filed all tax returns which to the knowledge of such Borrower
or Guarantor are required to be filed, and has paid all taxes
shown to be due and payable on said returns or on any assess-
ments made against them (other than those being contested in
good faith by appropriate proceedings for which adequate
reserves have been provided on the books of such Borrower, such
Guarantor or such Subsidiary, as the case may be), and no tax
liens have been filed and, to the best knowledge of such Bor-
rower or Guarantor, no claims are being asserted with respect
to any taxes.
4.8 Financial Condition. The audited balance sheets
of THUSA and its Subsidiaries as of March 31, 1996 and the
related audited statements of income, shareholders' equity and
cash flows for the fiscal year ended on said date, certified by
independent certified public accountants, heretofore furnished
to the Lenders, present fairly the financial condition of THUSA
and its Subsidiaries as at the date of said balance sheet, and
the results of their operations for such period. The audited
balance sheets of THC and its Subsidiaries as of March 31, 1996
and the related audited statements of income, shareholders'
equity and cash flows for the fiscal year ended on said date,
to be certified by independent certified public accountants,
heretofore furnished to the Lenders, present fairly the finan-
cial condition of THC and its Subsidiaries as at the date of
said balance sheet, and the results of their operations for
such period. All such financial statements have been prepared
in accordance with GAAP applied on a basis consistent with that
of the preceding year. Since March 31, 1996, there has been no
material adverse change in the condition, financial or other-
wise, of THUSA and its Subsidiaries taken as a whole. Since
March 31, 1996, there has been no material adverse change in
the condition, financial or otherwise, of THC and its Subsid-
iaries taken as a whole. Neither THC nor any of its Subsidiar-
ies had any material obligation, liability or commitment,
direct or contingent, which is not reflected in the foregoing
statements (and the related notes thereto) as of said dates.
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4.9 Filing of Statements and Reports. Each Borrow-
er, each Guarantor and each Subsidiary of each of them has
filed copies of all statements and reports which, to the knowl-
edge of such Borrower or Guarantor, are required to be filed
with any governmental authority, agency, commission, board or
bureau, unless the failure to file the same would not have a
material adverse effect on the financial condition or business
affairs of such Borrower, Guarantor or Subsidiary.
4.10 ERISA. No Borrower or Guarantor or any Com-
monly Controlled Entity has, at any time, had any obligation or
liability in respect of any Plan which is subject to Title IV
of ERISA.
4.11 Environmental Matters. Except as set forth on
Schedule 4.11,
(a) To the best knowledge of each Borrower and Guar-
antor, no Real Property contains or has previously contained,
any hazardous or toxic substances or waste or underground stor-
age tanks.
(b) To the best knowledge of each Borrower and Guar-
antor, the Real Property is in compliance with all applicable
federal, state and local environmental laws, regulations, stan-
dards and other requirements affecting such Real Property, and
there are no environmental conditions which could interfere
with the continued use of the Real Property or with the conduct
of the business of such Borrower or Guarantor.
(c) No Borrower or Guarantor, nor any of their
respective Subsidiaries, has received any notices of violations
or advisory action by regulatory agencies regarding any viola-
tion, noncompliance or other failure on such entity's part with
respect to environmental control matters or compliance with
permits or other requirements relating to hazardous or toxic
substances or waste.
(d) To the best knowledge of each Borrower and Guar-
antor, hazardous or toxic substances or waste have not been
transferred from any of the Real Property to any other location
-53-<PAGE>
in any manner which is not in compliance with all applicable
environmental laws, regulations or permit requirements.
(e) There are no governmental administrative actions
or judicial proceedings pending or, to the best knowledge of
each Borrower and Guarantor, contemplated under any federal,
state or local law affecting the discharge, use or possession
of hazardous or toxic substances or waste or underground stor-
age tanks, to which a Borrower or Guarantor is named as a
party.
4.12 Security Interests. The provisions of each
Security Agreement, each Continuing Letter of Credit Security
Agreement and each Acceptance Agreement are effective to create
in favor of the Agent for the benefit of the Lenders a legal,
valid and enforceable security interest in all right, title and
interest of each Borrower in the collateral described therein;
the Agent, for the benefit of the Lenders, has a fully perfect-
ed first priority lien on, and security interest in, all right,
title and interest of each Borrower in the collateral described
therein, subject only to prior liens, if any, described in the
Security Agreements. The Assignment of Factoring Agreement, and
the Factor's consent to such Assignment, is in full force and
effect for the benefit of the Lenders. The Limited Trademark
License Agreement is in full force and effect for the benefit
of the Lenders.
4.13 Margin Stock. Neither Borrower is engaged
principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or
carrying any "margin stock" as such term or terms of similar
purport and effect shall be defined in Regulation U of the
Board of Governors of the Federal Reserve System as now and
from time to time hereafter in effect. No part of the proceeds
of any borrowing hereunder will be used to purchase or carry
any such margin stock or to extend credit to others for the
purpose of purchasing or carrying any such margin stock. If
requested by any Lender, each Borrower will furnish to the
Agent and each Lender a statement in conformity with the
requirements of Federal Reserve Form U-1 referred to in said
Regulation U to the foregoing effect. No part of the proceeds
of the loans hereunder will be used for any purpose which vio-
lates, or which is inconsistent with, the provisions of Regula-
tion X of said Board of Governors.
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SECTION 5. AFFIRMATIVE COVENANTS
Each Borrower and each Guarantor (to the extent
applicable to such Guarantor as set forth below) hereby agrees
that so long as the Commitments remain in effect, any Note,
Acceptance Obligation or Letter of Credit Obligation remains
unpaid, or any other amount is owing to the Agent, the Issuing
Lender or any other Lender under this Agreement or any other
Loan Document, it shall:
5.1 Financial Statements. Furnish to the Lenders:
(a) as soon as available, but in any event not later
than 90 days after the close of each fiscal year of THUSA,
a copy of the annual audit report for such year for THUSA
and its Subsidiaries, including therein consolidated and
consolidating balance sheets of THUSA and its Subsidiaries
as at the end of such fiscal year, and related consolidat-
ed and consolidating statements of income, shareholders'
equity and cash flows of THUSA and its Subsidiaries for
such fiscal year, setting forth in each case in compara-
tive form the corresponding figures for the preceding fis-
cal period, all in reasonable detail, prepared in accor-
dance with GAAP applied consistently throughout the period
involved and with prior periods, such financial statements
being certified by Price Waterhouse or other independent
certified public accountants of recognized standing
selected by THUSA and acceptable to the Majority Lenders;
(b) as soon as available, but in any event not later
than 60 days after the end of each of the first and third
quarterly periods of each fiscal year of THUSA, unaudited
consolidated balance sheets of THUSA and its Subsidiaries
as at the end of such fiscal quarter, and unaudited con-
solidated statements of income, shareholders' equity and
cash flows of THUSA and its Subsidiaries for the period
from the beginning of such fiscal year to the end of such
fiscal quarter, setting forth in comparative form the cor-
responding figures for the preceding fiscal period, all in
reasonable detail, prepared in accordance with GAAP
applied consistently throughout the period involved and
with prior periods, in a form acceptable to the Majority
Lenders and
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certified by the chief financial officer of THUSA (subject
to normal year-end audit adjustment);
(c) as soon as available, but in any event not later
than 60 days after the end of each semi-annual period of
each fiscal year of THUSA, unaudited consolidated and con-
solidating balance sheets of THUSA and its Subsidiaries as
at the end of such semi-annual period, and unaudited con-
solidated and consolidating statements of income, share-
holders' equity and cash flows of THUSA and its Subsidiar-
ies for the period from the beginning of such fiscal year
to the end of such semi-annual period, setting forth in
comparative form the corresponding figures for the preced-
ing semi-annual period, all in reasonable detail, prepared
in accordance with GAAP applied consistently throughout
the period involved and with prior periods, in a form
acceptable to the Majority Lenders and certified by the
chief financial officer of THUSA (subject to normal year-
end audit adjustment);
(d) concurrently with the delivery of the financial
statements referred to in clause (a) above, a certificate
of such independent certified public accountants stating
that in performing the audit of such financial statements
no knowledge was obtained of any noncompliance with the
provisions of Subsections 6.1, 6.4, 6.7(c) and (e), 6.10,
6.11 or 6.13 and, if any knowledge is obtained of any
Events of Default or Defaults hereunder in performing the
audit of such financial statements, specifically indicat-
ing such information;
(e) concurrently with the delivery of the financial
statements referred to in clauses (a), (b) and (c) above,
a certificate of the chief financial officer of each Bor-
rower stating that, to the best of his knowledge, such
Borrower during such period has kept, observed, performed
and fulfilled each and every covenant and condition con-
tained in this Agreement (setting forth the calculations
necessary to determine compliance with Subsections 6.1,
6.4, 6.7(c) and (e), 6.10, 6.11 and 6.13 and each other
Loan Document to which such Borrower is a party and that
he has obtained no knowledge of any Events of Default or
Defaults hereunder except as specifically indicated;
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(f) as soon as available, but in any event not later
than 90 days after the close of each fiscal year of THC, a
copy of the annual audit report for such year for THC and
its Subsidiaries, including therein the consolidated bal-
ance sheet and the related consolidated statement of
income, shareholders' equity and cash flows of THC and its
Subsidiaries for such fiscal year and consolidating sched-
ules for THC and its Subsidiaries for such fiscal year,
setting forth in each case in comparative form the corre-
sponding figures for the preceding fiscal period, all in
reasonable detail, prepared in accordance with GAAP
applied consistently throughout the period involved and
with prior periods, such financial statements being certi-
fied by Price Waterhouse or other independent certified
public accountants of recognized standing selected by THC
and acceptable to the Majority Lenders;
(g) as soon as available, but in any event not later
than 60 days after the end of each of the first, second
and third quarterly periods of each fiscal year of THC,
unaudited consolidated and consolidating balance sheets of
THC and its Subsidiaries as at the end of such fiscal
quarter, and unaudited consolidated and consolidating
statements of income, shareholders' equity and cash flows
of THC and its Subsidiaries for the period from the begin-
ning of such fiscal year to the end of such fiscal quar-
ter, setting forth in comparative form the corresponding
figures for the preceding fiscal period, all in reasonable
detail, prepared in accordance with GAAP applied consis-
tently throughout the period involved and with prior
periods, in a form acceptable to the Majority Lenders and
certified by the chief financial officer of THC (subject
to normal year-end audit adjustment);
(h) concurrently with the delivery of the financial
statements referred to in clause (f) above, a certificate
of such independent certified public accountants stating
that in performing the audit of such financial statements
no knowledge was obtained of any noncompliance with the
provisions of Subsections 6.1 or 6.11 and, if any knowl-
edge is obtained of any Events of Default or Defaults
hereunder
-57-<PAGE>
in performing the audit of such financial statements,
specifically indicating such information;
(i) concurrently with the delivery of the financial
statements referred to in clauses (f) and (g) above, a
certificate of the chief financial officer of THC stating
that, to the best of his knowledge, each Borrower and
Guarantor during such period has kept, observed, performed
and fulfilled each and every covenant and condition con-
tained in this Agreement (setting forth the calculations
necessary to determine compliance with Subsections 6.1 and
6.11) and each other Loan Document to which such Borrower
or Guarantor, as the case may be, is a party and that he
has obtained no knowledge of any Events of Default or
Defaults hereunder except as specifically indicated;
(j) as soon as available, but in any event not later
than 30 days after the end of each month a monthly con-
troller's report including an income statement for such
month for each Borrower and its Subsidiaries;
(k) as soon as available, but in any event not later
than 30 days after the end of each fiscal quarter of each
Borrower, an inventory aging and accounts receivable aging
for such Borrower, together with a certificate of the
chief financial officer of such Borrower, certifying that
all inventory is not obsolete and is valued at the lower
of cost or market, except as otherwise noted;
(l) as soon as available, but in any event not later
than April 1 of each year, the annual projections of each
Borrower for the fiscal year beginning on such date;
(m) as soon as available, but in any event not later
than 25 days after the end of each month, a Borrowing Base
Certificate, certified by the chief financial officer of
each Borrower;
(n) promptly, after receipt thereof from the Factor,
a copy of the Monthly Factor's Report for each month;
(o) promptly after the same are sent, copies of all
financial statements and reports which any Borrower or
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Guarantor sends to its stockholders, and promptly after
the same are filed, copies of all financial statements and
reports which any Borrower or Guarantor may make to, or
file with, any governmental authority, agency, commission,
board or bureau (including without limitation the Securi-
ties and Exchange Commission);
(p) as soon as possible and in any event within 30
days after THC or any Borrower knows or has reason to know
of the following events: (i) the occurrence or expected
occurrence of any Reportable Event with respect to any
Plan or any withdrawal from, or the termination, Reorgani-
zation or Insolvency of, any Multiemployer Plan or (ii)
the institution of proceedings or the taking of any other
action by the PBGC, any Borrower or Guarantor or any Com-
monly Controlled Entity, or any Multiemployer Plan with
respect to the withdrawal from, or the terminating, Reor-
ganization or Insolvency of, any Plan, a certificate of
the chief financial officer of such Borrower or Guarantor,
as the case may be, setting forth the details thereof and
the action that such Borrower or Guarantor or Commonly
Controlled Entity proposes to take with respect thereto;
and
(q) promptly, such additional financial and other
information as any Lender may from time to time reasonably
request.
5.2 Payment of Obligations. Pay and discharge, and
cause its Subsidiaries to pay and discharge, at or before matu-
rity, all of their respective material obligations and liabil-
ities, including without limitation tax liabilities, except
where the same may be contested in good faith, and maintain,
and cause its Subsidiaries to maintain, in accordance with
GAAP, appropriate reserves for the accrual of any of the same.
5.3 Maintenance of Properties; Insurance. Maintain
and cause its Subsidiaries to maintain:
(a) in good repair, working order and condition all
properties used or useful in the business of such Borrower
or Guarantor, as the case may be, and from time to time
make or cause to be made all appropriate repairs, renewal
and replacements of such properties as reasonably neces-
sary;
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(b) with insurers of recognized standing, insurance
with respect to the business and all properties useful and
necessary in the business of such Borrower or Guarantor,
as the case may be, against loss or damage or risks of
such types and in such amounts as are customarily insured
against by corporations of established reputation engaged
in the same or a similar business and which would prevent
such Borrower or Guarantor, as the case may be, from
becoming a co-insurer of such properties or business; and
(c) insurance for the benefit of the Agent against
each risk customarily insured against by corporations of
established reputation engaged in the same or a similar
business, to which such properties may from time to time
be subject (including, but not limited to, fire, vandalism
and risks covered by extended coverage). Such insurance
shall be provided in such amounts, for such periods, in
such form, with such special endorsements, on such terms
and by such companies as shall be satisfactory to the
Agent. The Lenders do not in any way represent that such
insurance, whether in scope or coverage or limits of cov-
erage, is adequate or sufficient to protect the business
or interest of such Borrower or Guarantor, as the case may
be.
(d) This Subsection 5.3 shall not apply to the Guar-
antors, except that the provisions of clauses (b) and (c)
shall apply to THL.
5.4 Notices. Promptly give notice in writing to
each Lender of (a) the occurrence of any Default under this
Agreement or of any default under any material instrument or
other agreement of such Borrower or Guarantor or any of their
respective Subsidiaries, (b) any litigation, proceeding, inves-
tigation or dispute which may exist at any time between such
Borrower or Guarantor or any of their respective Subsidiaries
and any governmental regulatory body which might substantially
interfere with the normal business operations of such Borrower
or Guarantor or any of their respective Subsidiaries, and (c)
all litigation and proceedings affecting (i) a Borrower or any
of their respective Subsidiaries in which the amount involved
is $250,000 or more and (ii) any other Guarantor or any of
their respective Subsidiaries in which the amount involved is
$500,000
-60-<PAGE>
or more and, in each such case, is not covered by insurance or
in which injunctive or similar relief is sought.
5.5 Conduct of Business and Maintenance of Exist-
ence. Continue, and cause its Subsidiaries to continue, to
engage in business of the same general type as now conducted by
such Borrower or Guarantor or any of their respective Subsid-
iaries, and preserve, renew and keep in full force and effect
their corporate existence and take all reasonable action to
maintain their rights, privileges and franchises necessary or
desirable in the normal conduct of business; provided that
nothing herein contained shall prevent any such Borrower or
Guarantor or Subsidiary from discontinuing a part of its busi-
ness which is not a substantial part of the business of such
Borrower or Guarantor or Subsidiary, if such discontinuance is,
in the opinion of the Board of Directors of such Borrower,
Guarantor or Subsidiary, in the interest of such Borrower,
Guarantor or Subsidiary and not disadvantageous to the Lenders.
This Subsection 5.5 shall not apply to the Guarantors other
than a Subsidiary of a Borrower.
5.6 Inspection of Property, Books and Records. Per-
mit, and cause its Subsidiaries to permit, any representatives
of the Lenders to (a) visit and inspect any of the respective
properties of each Borrower and Guarantor and their respective
Subsidiaries, (b) examine and make abstracts from any of the
books and records of each Borrower and Guarantor and their
respective Subsidiaries and (c) discuss the business, opera-
tions, properties and financial and other condition of each
Borrower and Guarantor with officers and employees of such Bor-
rower or Guarantor and with its independent certified public
accountants, in each case at any reasonable time and on reason-
able notice and as often as may reasonably be desired.
5.7 Compliance with Laws. (a) Comply, and cause its
Subsidiaries to comply, in all respects with all laws, rules,
regulations, and orders of all federal, state, county, munici-
pal and other governments, departments, commissions, boards,
courts and authorities applicable to it, (i) related to any
environmental matters affecting any Real Property or (ii)
required for the performance or conduct of its operations, such
compliance to include, without limitation, paying before the
same become delinquent all taxes, assessments, and governmental
charges imposed upon any Borrower, Guarantor, or any of their
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respective Subsidiaries or upon any of their respective proper-
ties, unless the failure to comply would not have a material
adverse impact on the financial condition or business affairs
of the Borrowers and the Guarantors, taken as a whole, the
ability of any Borrower or Guarantor to comply with the terms
of this Agreement or any other Loan Document, or the ability of
the Borrowers and the Guarantors, taken as a whole, to comply
with the provisions of any of the other Loan Documents; and
(b)immediately notify the Lenders in writing of any request
from any governmental agency or other entity for information on
releases of hazardous substances or wastes or petroleum prod-
ucts from, affecting or related to any Real Property; notify
the Lenders of any actual, proposed or threatened testing or
other investigation by any governmental agency or other entity
concerning the environmental condition of, or discharges from
any Real Property.
5.8 Hazardous Material Indemnity. Indemnify the
Agent and each Lender against any liability, loss, cost, dam-
age, or expense (including, without limitation, reasonable
attorneys' fees) arising from (a) the imposition or recording
of a lien by any local, state, or federal government or govern-
mental agency or authority pursuant to any federal, state or
local statute or regulation relating to hazardous or toxic
wastes or substances or the removal thereof ("Cleanup Laws");
(b) claims of any governmental authority or private parties
regarding violations of Cleanup Laws; and (c) fees, costs and
expenses (including, without limitation, reasonable attorneys'
fees) incurred by the Agent or any Lender in connection with
the removal of any such lien or in connection with compliance
by any Borrower or Guarantor or the Agent or any Lender with
any Cleanup Laws or order issued pursuant thereto by any local,
state or federal government or governmental agency or author-
ity.
5.9 Factoring Agreement. Maintain the Factoring
Agreement with Century and each other Factor approved by the
Agent or the Majority Lenders, as the case may be, in full
force and effect.
5.10 Guarantees of Subsidiaries. Promptly upon its
incorporation, cause the Unrestricted Subsidiary, and each
other Subsidiary of a Borrower created after the date hereof to
enter into a Guarantee of the obligations of each Borrower
hereunder in form and substance satisfactory to the Majority
Lenders.
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5.11 Operating Accounts. Maintain an operating
account with Chemical.
5.12 Legal Opinions. As soon as possible but in no
event more than 30 days after the Closing Date, an opinion of
counsel for each Guarantor other than THL and THW (which shall
be Harney, Westwood & Riegels with respect to THC, THEH and
Nippon and Willie Chang with respect to THHK) substantially in
the form of Exhibit M-2 hereto.
SECTION 6. NEGATIVE COVENANTS
Each Borrower and each Guarantor (to the extent
applicable to such Guarantor as set forth below and excluding
the Unrestricted Subsidiary) hereby agrees that so long as the
Commitments remain in effect, any Note, Acceptance Obligation
or Letter of Credit Obligation remains unpaid, or any other
amount is owing to the Agent, the Issuing Lender or any other
Lender under this Agreement or any other Loan Document, it will
not, nor will it permit any Subsidiary to, directly or indi-
rectly:
6.1 Limitation on Indebtedness. Create, incur,
assume or suffer to exist, any indebtedness for borrowed money
or the deferred purchase price of property or assets ("Indebt-
edness") except (a) the Obligations; (b) accounts payable
(other than for borrowed money) incurred in the ordinary course
of business as presently conducted, provided that the same
shall not be overdue or, if overdue, are being contested in
good faith and by appropriate proceedings; (c) Indebtedness
with respect to leases required to be capitalized under gener-
ally accepted accounting principles, as in effect on the date
hereof, ("Capital Leases"), provided that the payments required
to be made on such Capital Leases shall not exceed $10,000,000
in the aggregate in any one fiscal year; (d) Subordinated Debt;
(e) Indebtedness between Guarantors where neither the lender
nor the borrower is a Subsidiary of a Borrower; (f) Indebted-
ness of THEH in an amount up to $4,500,000 secured by real
property located at 6/F, Precious Industrial Centre, 18 Cheung
Yue Street, Cheung Sha Wan, Kowloon, Hong Kong; (g) Affiliate
Debt; provided, however, that, immediately after giving effect
to the incurrence of any such Affiliate Debt, no Default or
Event of Default would exist; (h) Indebtedness of Retail to
THUSA; and (i) for so long as it is not
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the Unrestricted Subsidiary, Indebtedness of either THW or THL
to THUSA, provided that any such Indebtedness consisting of
indebtedness for borrowed money shall not exceed $1,500,000
aggregate principal amount at any one time outstanding, it
being understood that payments by THUSA on behalf of THW and
THL for taxes, salaries and similar payables shall not be
included in such amount.
6.2 Limitation on Liens. Create, incur, assume or
suffer to exist, any mortgage, pledge, lien, charge, security
interest or encumbrance of any kind upon any of its property or
assets, income or profits, whether now owned or hereafter
acquired, except (a) the liens and security interests existing
as of the date of this Agreement referred to in the financial
statements referred to in Subsection 4.8 hereof, provided that
such liens and security interests are not spread to cover other
or additional indebtedness or property; (b) liens for taxes not
yet due or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of such Borrower or Guaran-
tor or such Subsidiary, as the case may be, in accordance with
GAAP; (c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like liens arising in the ordinary course
of business for sums which are not overdue for a period of more
than 30 days or which are being contested in good faith and by
appropriate proceedings; (d) pledges or deposits in connection
with worker's compensation, unemployment insurance and other
social security legislation; (e) deposits to secure the perfor-
mance of bids, trade contracts (other than for borrowed money),
leases, statutory obligations, surety and appeal bonds, perfor-
mance bonds and other obligations of a like nature incurred in
the ordinary course of business; (f) easements, rights-of-way,
restrictions and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not
substantial in amount, and which do not in any case materially
detract from the value of the property subject thereto or
interfere with the ordinary conduct of the business such Bor-
rower or Guarantor or Subsidiary; (g) security interests and
liens covering real or personal property in existence at the
time of acquisition thereof by such Borrower or Guarantor or
Subsidiary, and purchase money mortgages and purchase money
security interests (including the lien or retained security
title of a conditional vendor) covering real or personal prop-
erty hereafter acquired by such Borrower or
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Guarantor or Subsidiary in the ordinary course of business,
provided that no such lien, mortgage or security interest
covers, or is extended to cover, any other property owned by
such Borrower or Guarantor or any such Subsidiary; (h) liens on
the property located at 25 West 39th Street, New York, provided
that such liens and security interests are not spread to cover
other or additional indebtedness or property and (i) liens,
mortgages and security interests in favor of the Agent for the
benefit of the Lenders and in favor of the Issuing Lender.
6.3 Limitation on Contingent Obligations. Assume,
guarantee, indorse or otherwise in any way be or become respon-
sible or liable for the obligations of any Person, firm, corpo-
ration or other entity (all such transactions being herein
called "guarantees"), whether by agreement to purchase or
repurchase obligations, or by agreement to supply funds for the
purpose of paying, or enabling such entity to pay, any obliga-
tions (whether by purchasing stock, making a loan, advance or
capital contribution, entering into any interest rate swap
arrangement, agreeing to maintain or cause such entity to main-
tain, a minimum working capital or net worth of any such enti-
ty, or otherwise), except (a) guarantees by indorsement of
instruments for deposit or collection in the ordinary course of
business, (b) guarantees between Guarantors other than Subsid-
iaries of a Borrower, (c) guarantees by THUSA of the obliga-
tions of Retail under leases of real property entered into in
connection with the operation of retail stores and outlet
stores and (d) guarantees of the Obligations.
6.4 Limitation on Capital Expenditures. Make (a)
any Unfunded Capital Expenditures if, after giving effect
thereto, the aggregate amount of Unfunded Capital Expenditures
by the Borrowers and their Subsidiaries would exceed
$27,500,000 in any fiscal year of THUSA or (b) any Funded Capi-
tal Expenditures if, after giving effect thereto, the aggregate
amount of Unfunded Capital Expenditures and Funded Capital
Expenditures by the Borrowers and their Subsidiaries would
exceed $75,000,000 in any fiscal year of THUSA. Any unused
amount may be carried forward into all subsequent years and
shall be in addition to the amount permitted in each such sub-
sequent year. This Subsection 6.4 shall not apply to the Guar-
antors other than each Guarantor which is a Subsidiary of a
Borrower.
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6.5 Prohibition of Fundamental Changes. Enter into
any transaction of merger or consolidation or liquidate or dis-
solve itself (or suffer any liquidation or dissolution) or con-
vey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of related transactions, all or a sub-
stantial part of its property, business, or assets, including
its accounts receivable, or stock or securities convertible
into stock of any Subsidiary, and including any conveyance,
sale, transfer or other disposition of securities (or other
securities convertible into such securities) representing 49%
or more of the combined voting power of all securities entitled
to vote in the election of directors of Retail, other than
securities having such power only by reason of the happening of
a contingency, or make any material change in the present meth-
od of conducting business, except that: (a) any Subsidiary of a
Borrower may be voluntarily liquidated or dissolved, or may be
merged into, or consolidated with, such Borrower (provided that
such Borrower shall be the continuing or surviving corporation)
or with any one or more Subsidiaries of such Borrower and (b)
any Subsidiary of a Borrower may sell, lease, transfer or
otherwise dispose of any of its assets to such Borrower or
another Subsidiary of such Borrower. This Subsection 6.5 shall
not apply to the Guarantors other than each Guarantor which is
a Subsidiary of a Borrower.
6.6 Limitations on Dividends and Stock Acquisitions.
Declare or pay any dividends or make any other distribution
(whether in cash or property) on any shares of its capital
stock now or hereafter outstanding, or purchase, redeem, retire
or otherwise acquire for value any shares of its capital stock
or warrants or options therefor now or hereafter outstanding
(all such dividends, distributions, purchases and other actions
being hereinafter collectively called "Stock Payments") except
that (a) a Subsidiary of a Borrower may make Stock Payments to
such Borrower; (b) any Borrower or Guarantor may declare stock
splits and pay dividends payable solely in shares of any class
of its capital stock; and (c) a Borrower may redeem shares of
its capital stock with the proceeds received from the issuance
of new shares. This Subsection 6.6 shall not apply to the Guar-
antors other than THEH and each Guarantor which is a Subsidiary
of a Borrower.
6.7 Limitation on Investments, Loans and Advances.
Make or suffer to exist any advances or loans to, or invest-
ments (by way
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of transfers of property, contributions to capital,
acquisitions of stock, or securities or evidences of
indebtedness, acquisitions of businesses or acquisitions of
assets other than in the ordinary course of business, or other-
wise) in, any person, firm, corporation or other business enti-
ty, except (a) investments in certificates of deposit issued by
any domestic commercial Lender with a capital and surplus of at
least $100,000,000; provided, however, that such certificates
of deposit shall have a maturity of one year or less from the
date of purchase; (b) investments in direct obligations of the
United States of America or any agency thereof, or marketable
obligations directly and fully guaranteed by the United States
of America, or commercial paper; provided, however, that any
such obligations or commercial paper shall have a maturity of
one year or less from the date of purchase and any such commer-
cial paper is issued by a Lender, any Subsidiary of a Lender or
any Person affiliated with a Lender by common ownership or a
Person rated "A-1" by Standard & Poor's Corporation (or which
has a similar rating by any similar organization which rates
commercial paper); (c) loans and advances by THUSA to (i)
Retail, (ii) for so long as it is not the Unrestricted Subsid-
iary, THW or THL in an aggregate principal amount at any one
time outstanding for both THW and THL not to exceed $1,500,000
and (iii) any employees, officers and directors of THUSA, but
not to exceed at any time outstanding the amount of $500,000
for all such Persons in the aggregate; (d) investments by THUSA
in the stock of any Subsidiary of THUSA existing on the date
hereof; (e) an investment by THUSA in the Unrestricted Subsid-
iary in an amount up to $7,500,000 and additional investments
in such Unrestricted Subsidiary in each fiscal year commencing
with the fiscal year beginning April 1, 1996 calculated as fol-
lows: an amount (the "Distributable Amount") equal to 100% of
THUSA's net income for the preceding fiscal year less that por-
tion of the Distributable Amount applied to prepay Subordinated
Debt pursuant to Subsection 6.10; (f) stock or obligations
issued in settlement of claims against any other person by rea-
son of an event of bankruptcy or composition or readjustment of
indebtedness or reorganization of any debtor of any Borrower or
Guarantor or any of their respective Subsidiaries; and (g) in
connection with THUSA's obligations under its 1992 Stock Incen-
tive Plan, as amended, purchases by THUSA of the number of
Ordinary Shares of capital stock of THC, par value $0.01 per
share, set forth below:
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Number of Shares Fiscal Year Ending
400,000 March 31, 1997
700,000 March 31, 1998
500,000 March 31, 1999
400,000 March 31, 2000
Any unused amount under clauses (e) or (g) may be carried for-
ward into all subsequent years and shall be in addition to the
amount permitted in each such subsequent year. This Subsection
6.7 shall not apply to the Guarantors other than each Guarantor
which is a Subsidiary of a Borrower.
6.8 Prohibition of Certain Prepayments. Make any
payment of principal of any indebtedness for borrowed money, or
for the deferred purchase price of property or services, having
a maturity of more than one year (other than the Obligations)
except (a) at the stated maturity of such indebtedness, (b) as
required by any mandatory prepayment provisions relating there-
to (subject to any subordination provisions applicable thereto)
and (c) as permitted by Subsection 6.10.
6.9 Sale and Leaseback. Enter into any arrangement
with any Person whereby any Borrower or Guarantor or any of
their respective Subsidiaries shall sell or transfer any prop-
erty, real or personal, whether now owned or hereafter
acquired, and thereafter rent or lease such property or other
property which such Borrower or Guarantor or such Subsidiary
intends to use for substantially the same purpose or purposes
as the property being sold or transferred.
6.10 Prohibitions Regarding Subordinated Debt. (a)
Make any payment or prepayment of, or purchase, redeem or
otherwise acquire, or amend any provisions pertaining to the
subordination or the terms of payment of, any Subordinated
Debt, except that, in each fiscal year commencing with the fis-
cal year beginning April 1, 1996, THUSA may prepay Senior Sub-
ordinated Debt in an amount equal to the Distributable Amount
less that portion of the Distributable Amount invested in the
Unrestricted Subsidiary pursuant to Subsection 6.7(e); provid-
ed, however, that, both before and after giving effect to any
such payment, no Default or Event of Default would exist. Any
portion of the Distributable Amount which is not used as per-
mitted by this Subsection 6.10(a)
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may be carried forward into all subsequent years and shall be
in addition to the amount permitted in each such subsequent
year.
(b) If, on or prior to June 30 of each year, THUSA
has not delivered to the Agent a written notice (the "Non-Pre-
payment Notice") that it does not intend to prepay Subordinated
Debt in an amount equal to the Distributable Amount less the
portion, if any, of such Distributable Amount invested in the
Unrestricted Subsidiary (the "Available Distributable Amount"),
that portion of the principal of the outstanding Subordinated
Debt equal to the Available Distributable Amount shall be
deemed to be Senior Subordinated Debt and shall bear interest
at the Prime Rate plus 1% from June 30 of such year, provided
that, regardless of the giving of any Non-Prepayment Notice,
THUSA may prepay any Junior Subordinated Debt which is the sub-
ject of such Non-Prepayment Notice, in an amount not greater
than the Available Distributable Amount, if the holder of such
Junior Subordinated Debt refunds to THUSA interest calculated
at the rate of 1% on the amount of the Junior Subordinated Debt
which is prepaid, accruing from the effective date of the Non-
Prepayment Notice pertaining to such Debt to the date of such
prepayment.
(c) THUSA shall notify the Agent of each prepayment
of Subordinated Debt.
6.11 Transactions with Affiliates. Except to the
extent permitted by the terms of any other provision of this
Agreement:
(a) Be or become obligated to any Person affiliated
with a Borrower by common ownership (direct or indirect)
for any fees or charges, including expenses, for services
rendered in an amount in excess of $5,000,000 in the
aggregate in any fiscal year of such Borrower, except that
THUSA may make payments to (i) THEH required by the Buying
Agreement, so long as such payments do not exceed 10% of
the net f.o.b. price of Covered Merchandise (as defined in
the Buying Agreement) as more specifically set forth in
paragraph 3 of the Buying Agreement and (ii) Novel Enter-
prises Limited and its affiliates (so long as the amount
of such payments is (A) not greater than is customary and
usual for companies of similar size engaged in the same
business and market as Novel Enterprises Limited and its
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affiliates and (B) negotiated in good faith on an arm's
length basis) for goods manufactured for THUSA.
(b) Permit the Buying Agreement to be amended, modi-
fied or supplemented (i) so as to increase the limitation
of 10% of the net f.o.b. price of Covered Merchandise
without the prior written consent of the Majority Lenders
or (ii) in any other way unless each of the Majority Lend-
ers shall have received a copy of such amendment, modifi-
cation or change.
6.12 Compliance with ERISA. (a) Terminate any Plan
so as to result in any material liability to the PBGC, (b)
engage in or permit any Person to engage in any Prohibited
Transaction involving any Plan which would subject a Borrower
or any Subsidiary of a Borrower to any material tax, penalty,
or other liability, (c) incur or suffer to exist any material
Accumulated Funding Deficiency, whether or not waived, involv-
ing any Plan, or allow or permit to exist any event or condi-
tion which presents a material risk of incurring a material
liability to the PBGC.
6.13 Financial Covenants.
(a) Consolidated Tangible Capital Funds. On any
date permit Consolidated Tangible Capital Funds of THUSA
and its Subsidiaries to be less than $60,000,000; provid-
ed, however, that on any date that the Commitments exceed
$100,000,000, Consolidated Tangible Capital Funds shall be
65% of the amount of the Commitments.
(b) Fixed Charge Coverage. On the last day of each
fiscal quarter, permit the ratio of EBIRTDA of THUSA and
its Subsidiaries less Unfunded Capital Expenditures divid-
ed by interest and rent payable by THUSA and its Subsid-
iaries for the period consisting of the four fiscal quar-
ters ending on such last day of such fiscal quarter to be
less than 2.75:1.
(c) Ratio of Senior Liabilities to Consolidated Tan-
gible Capital Funds. On any date, permit the ratio of (i)
all liabilities of THUSA and its Subsidiaries minus cash
on hand, Stock Option Debt, Subordinated Debt and Affili-
ate Debt which, by its terms, has no principal payment due
prior
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to the Termination Date and which may not be prepaid to
(ii) Consolidated Tangible Capital Funds to be greater
than 1:1.
(d) No Losses. In any fiscal quarter, permit income
from operations plus Stock Option Expense, minus interest
expense, for THUSA and its Subsidiaries on a consolidated
basis, to be negative.
In calculating compliance with the financial covenants set
forth in this Subsection, GAAP shall be applied as in effect on
the date hereof, provided that the Unrestricted Subsidiary
shall not be treated as a "subsidiary" under GAAP for purposes
of such compliance until such time as THUSA's management
elects, which election may not thereafter be revoked, to
include the Unrestricted Subsidiary for purposes of determining
compliance with such covenants.
SECTION 7. EVENTS OF DEFAULT
Upon the occurrence of any of the following:
(a) a Borrower shall fail to pay (i) any principal
of any Note, Acceptance Obligation or Letter of Credit
Obligation when due, or (ii) any interest on any Note,
Acceptance Obligation or Letter of Credit Obligation, or
any other amount required to be paid hereunder or under
any other Loan Document within five days after any such
amount becomes due;
(b) any representation or warranty made or deemed
made by any Borrower or Guarantor in this Agreement or any
other Loan Document to which it is a party or in any cer-
tificate, financial or other statement furnished at any
time under or in connection with this Agreement shall
prove to have been untrue or misleading in any material
respect on or as of the date made or deemed made;
(c) any Borrower or Guarantor shall default in the
observance or performance of any agreement contained in
Section 6 of this Agreement;
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(d) any Borrower or Guarantor shall default in the
observance or performance of any other agreement contained
in this Agreement or any other Loan Document to which it
is a party, and such default shall continue unremedied for
15 days after notice of such default is given to such Bor-
rower or Guarantor by the Agent;
(e) any Borrower or Guarantor, or any Subsidiary of
any Borrower shall (i) default in the payment of principal
or interest on any obligation for borrowed money (other
than the Obligations) in a principal amount in excess of
$500,000, or for the deferred purchase price of property
(other than trade debt incurred in the ordinary course of
business), beyond the period of grace, if any, provided
with respect thereto or (ii) default in the performance or
observance of any other term, condition or agreement con-
tained in any such obligation or in any agreement relating
thereto if the effect thereof is to cause, or permit the
holder or holders of such obligation (or a trustee on
behalf of such holder or holders) to cause, such obliga-
tion to become due prior to its stated maturity;
(f) (i) any Borrower or Guarantor, or any Subsidiary
of any Borrower, shall commence any case, proceeding or
other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking
to have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seek-
ing reorganization, arrangement, adjustment, liquidation,
dissolution, composition or other relief with respect to
it or its indebtedness, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its property, any
Borrower or Guarantor, or any Subsidiary of any Borrower,
shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against any
Borrower or Guarantor, or any Subsidiary of any Borrower,
any case, proceeding or other action of a nature referred
to in clause (i) above or seeking issuance of a warrant of
attachment, execution, distraint or similar process
against all or any substantial part of its property, which
case, proceeding or other action (x) results in the entry
of an
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order for relief or (y) remains undismissed, undischarged
or unbonded for a period of 60 days; or (iii) any Borrower
or Guarantor, or any Subsidiary of any Borrower, shall
take any action indicating its consent to, approval of, or
acquiescence in, or in furtherance of, any of the acts set
forth in clause (i) or (ii) above; or (iv) any Borrower or
Guarantor, or any Subsidiary of any Borrower, shall
generally not, or shall be unable to, pay any indebtedness
as it becomes due or shall admit in writing its inability
to pay its indebtedness;
(g) (i) any Person shall engage in any Prohibited
Transaction involving any Plan, (ii) any Accumulated Fund-
ing Deficiency, whether or not waived, shall exist with
respect to any Plan, (iii) a Reportable Event shall occur
with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to
administer or to terminate, any Single Employer Plan,
which Reportable Event or commencement of proceedings or
appointment of a trustee is, in the reasonable opinion of
the Majority Lenders, likely to result in the termination
of such Plan for purposes of Title IV of ERISA, (iv) any
Single Employer Plan shall terminate for purposes of Title
IV of ERISA, (v) a Borrower or any Commonly Controlled
Entity shall, or is, in the reasonable opinion of the
Majority Lenders, likely to, incur any liability in con-
nection with a withdrawal from, or the Insolvency or Reor-
ganization of, a Multiemployer Plan or (vi) any other
event or condition shall occur or exist with respect to a
Plan; and in each case in clauses (i) through (vi) above,
such event or condition, together with all other such
events or conditions, if any, could subject a Borrower or
any of their respective Subsidiaries to any tax, penalty
or other liabilities in the aggregate material in relation
to the business, operations, property or financial or
other condition of such Borrower or Subsidiary;
(h) any Guarantor shall default upon its Guarantee
pursuant to the terms thereof or any such Guarantee shall
cease to be in full force and effect or shall be declared
to be null and void, or the validity or enforceability
thereof shall be contested by any Guarantor or any Guaran-
tor shall
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deny that it has any further liability to the Lenders with
respect thereto;
(i) final judgment for the payment of money in
excess of $500,000 shall be rendered against any Borrower
or Guarantor or any Subsidiary of a Borrower, and the same
shall remain undischarged for a period of 30 days during
which execution of such judgment shall not be effectively
stayed;
(j) either Security Agreement, any Continuing Letter
of Credit Security Agreement, either Acceptance Agreement
or the Assignment of Factoring Agreement shall cease for
any reason to be in full force and effect in accordance
with its terms or the relevant Borrower shall so assert in
writing or any of the liens purported to be granted pursu-
ant to either Security Agreement, any Continuing Letter of
Credit Security Agreement, either Acceptance Agreement or
the Assignment of Factoring Agreement shall cease for any
reason to be legal, valid and enforceable liens on the
collateral purported to be covered thereby or to have the
priority purported to be granted therein, or the Limited
Trademark License Agreement shall cease for any reason to
be in full force and effect in accordance with its terms
or THL shall so assert in writing;
(k) in the reasonable opinion of the Majority Lend-
ers, a material adverse change in the financial condition
or business affairs of a Borrower shall have occurred; or
(l) (i) any Person or two or more Persons acting in
concert shall have acquired, by contract or otherwise, or
shall have entered into a contract or arrangement that
upon the consummation will result in, beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and
Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, of securities of THUSA (or
other securities convertible into such securities) repre-
senting 25% or more of the combined voting power of all
securities entitled to vote in the election of directors
of THUSA (other than securities having such power only by
reason of the happening of a contingency); or (ii) any
Person or two or more Persons acting in concert shall have
acquired, by contract or otherwise, or shall have entered
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into a contract or arrangement that upon consummation,
will result in, its or their acquisition of, the power to
exercise, directly or indirectly, a controlling influence
over the management or policies of THUSA; or (iii) Tommy
Hilfiger or Joel Horowitz shall at any time for any reason
cease to be active in the management of THUSA;
then, and in any such event, (1) if such event is an Event of
Default specified in paragraph (f) above, automatically the
Commitments shall immediately terminate and the Advances made,
and all Acceptance Obligations and Letter of Credit Obligations
(with accrued interest thereon), and all other amounts owing
under this Agreement, the Notes or any other Loan Document
shall immediately become due and payable, and each Borrower for
the account of which a Letter of Credit shall have been issued
or an Acceptance shall have been created by the Issuing Lender
shall thereupon deposit with the Issuing Lender at once and in
full, all sums sufficient to reimburse the Issuing Lender for
all payments present or future, contingent or otherwise, that
may be required to be made by the Issuing Lender on account of
each such Letter of Credit and Acceptance and such sums shall
be deposited in a non-interest bearing cash collateral account
maintained by the Issuing Lender and such amounts shall be held
by the Issuing Lender and applied by the Issuing Lender in
reduction of any obligations of the Issuing Lender arising out
of each such Letter of Credit or Acceptance; and (2) if such
event is any other Event of Default, one or more of the follow-
ing actions may be taken: (y) upon the request of the Majority
Lenders, the Agent shall, by notice of default to each Borrow-
er, declare the Commitments to be terminated forthwith, where-
upon the Commitments shall immediately terminate; (z) upon the
request of the Majority Lenders, the Agent shall, by notice of
default to each Borrower, declare the Advances made, all Accep-
tance Obligations and Letter of Credit Obligations (with
accrued interest thereon) and all other amounts owing under
this Agreement, the Notes and any other Loan Document to be due
and payable forthwith, whereupon the same shall immediately
become due and payable and require that each Borrower for the
account of which a Letter of Credit shall have been issued or
an Acceptance shall have been created by the Issuing Lender
deposit with the Issuing Lender at once and in full, all sums
sufficient
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to reimburse the Issuing Lender for all payments present or
future, contingent or otherwise, that may be required to be
made by the Issuing Lender on account of each such Letter of
Credit or Acceptance and such sums shall be deposited in a non-
interest bearing cash collateral account maintained by the
Issuing Lender and such amounts shall be held by the Issuing
Lender and applied by the Issuing Lender in reduction of any
obligations of the Issuing Lender arising out of each such
Letter of Credit or Acceptance. Except as expressly provided
above in this Section, presentment, demand, protest and all
other notice of any kind are hereby expressly waived.
SECTION 8. THE AGENT
8.1 Appointment. Each Lender hereby irrevocably
designates and appoints Chemical as the Agent of such Lender
under this Agreement and the other Loan Documents, and each
such Lender irrevocably authorizes Chemical, as the Agent for
such Lender, to take such action on its behalf under the provi-
sions of this Agreement and the other Loan Documents and to
exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and the
other Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision
to the contrary elsewhere in this Agreement, the Agent shall
not have any duties or responsibilities, except those expressly
set forth herein, or any fiduciary relationship with any Lend-
er, and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist with
respect to the Agent.
8.2 Delegation of Duties. The Agent may execute any
of its duties under this Agreement and the other Loan Documents
by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the negligence
or misconduct of any agents or attorneys-in-fact selected by it
with reasonable care.
8.3 Exculpatory Provisions. Neither the Agent nor
any of its officers, directors, employees, agents, attorneys-
in-fact or
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affiliates shall be (a) liable for any action lawfully taken or
omitted to be taken by it or such Person under or in connection
with this Agreement or any other Loan Document (except for its
or such Person's own gross negligence or willful misconduct) or
(b) responsible in any manner to any of the Lenders for any
recitals, statements, representations or warranties made by any
Borrower or Guarantor or any officer thereof contained in this
Agreement or any other Loan Document or in any certificate,
report, statement or other document referred to or provided for
in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document, or for the value,
validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the Notes or any other Loan
Document or for any failure of any Borrower or Guarantor to
perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the
agreements contained in, or the satisfaction of conditions of,
this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Borrower or Guarantor.
8.4 Reliance by Agent. The Agent shall be entitled
to rely, and shall be fully protected in relying, upon any
Note, writing, resolution, notice, consent, certificate, affi-
davit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been
signed, sent or made by the proper Person or Persons, and upon
advice and statements of legal counsel (including, without lim-
itation, counsel to a Borrower or a Guarantor), independent
accountants and other experts selected by the Agent. The Agent
may deem and treat the payee of any Note as the owner thereof
for all purposes unless a written notice of assignment, nego-
tiation or transfer thereof shall have been filed with the
Agent. The Agent shall be fully justified in failing or refus-
ing to take any action under this Agreement or any other Loan
Document unless it shall first receive such advice or concur-
rence of the Majority Lenders as it deems appropriate or it
shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred
by it by reason of taking or continuing to take such action.
The Agent shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement and the Notes
and the other Loan Documents in
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accordance with a request of the Majority Lenders, and such
request and any action taken or failure to act pursuant thereto
shall be binding upon all the Lenders and all future holders of
the Notes.
8.5 Notice of Default. The Agent shall not be
deemed to have knowledge or notice of the occurrence of any
Default or Event of Default hereunder unless the Agent has
received notice from a Lender or a Borrower referring to this
Agreement, describing 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, the Agent shall
give prompt notice thereof to the Lenders. The Agent shall
take such action with respect to such Default or Event of
Default as shall be reasonably directed by the Majority Lend-
ers; provided that unless and until the Agent shall have
received such directions, the Agent may (but shall not be obli-
gated to) 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 interests of the Lenders.
8.6 Non-Reliance on Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact
or affiliates has made any representations or warranties to it
and that no act by the Agent hereinafter taken, including any
review of the affairs of any Borrower or Guarantor, shall be
deemed to constitute any representation or warranty by the
Agent to any Lender. Each Lender represents to the Agent that
it has, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information
as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, finan-
cial and other condition and creditworthiness of each Borrower
and Guarantor and made its own decision to make its Advances
hereunder and enter into this Agreement and each other Loan
Document. Each Lender also represents that it will, indepen-
dently and without reliance upon the Agent or any other Lender,
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit analy-
sis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to
the business, operations,
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property, financial and other condition and creditworthiness of
each Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility
to provide any Lender with any credit or other information
concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of any
Borrower or Guarantor which may come into the possession of the
Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates.
8.7 Indemnification. The Lenders agree to indemnify
the Agent in its capacity as such (to the extent not reimbursed
by the Borrowers and without limiting the obligation of the
Borrowers to do so), ratably according to the respective
amounts of their original Commitments, from and against any and
all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of
any kind whatsoever which may at any time (including, without
limitation, at any time following the payment of the Notes) be
imposed on, incurred by or asserted against the Agent in any
way relating to or arising out of this Agreement, any of the
other Loan Documents or any documents contemplated by or
referred to herein or therein or the transactions contemplated
hereby or thereby or any action taken or omitted by the Agent
under or in connection with any of the foregoing; provided that
no Lender shall be liable for the payment of any portion of
such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Agent's gross negligence or willful
misconduct. The agreements in this Subsection shall survive
the termination of the Commitments and the payment of the
Notes, the Acceptance Obligations, the Letter of Credit Obliga-
tions and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. The Agent and
its affiliates may make loans to, accept deposits from and gen-
erally engage in any kind of business with each Borrower as
though the Agent were not the Agent hereunder and under the
other Loan Documents. With respect to its Advances made or
renewed by it and any Note issued to it and with respect to any
Acceptance created or participated in by it and with respect to
any Letter of Credit issued or participated in by it, the Agent
shall have the same rights and powers under this Agreement and
the other
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Loan Documents as any Lender and may exercise the same as
though it were not the Agent, and the terms "Lender" and
"Lenders" shall include the Agent in its individual capacity.
8.9 Successor Agent. The Agent may resign as Agent
upon 10 days' notice to the Lenders. If the Agent shall resign
as Agent under this Agreement and the other Loan Documents,
then the Majority Lenders shall appoint from among the Lenders
a successor agent for the Lenders, which successor agent shall
be approved by each Borrower, whereupon such successor agent
shall succeed to the rights, powers and duties of the Agent,
and the term "Agent" shall mean such successor agent effective
upon its appointment, and the former Agent's rights, powers and
duties as Agent shall be terminated, without any other or fur-
ther act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. After
any retiring Agent's resignation as Agent, the provisions of
this Subsection 8.9 shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
SECTION 9. GUARANTY
9.1 Guaranty. Each Borrower hereby unconditionally
and irrevocably guarantees (the undertaking of each Borrower
contained in this Section 9 being such "Borrower's Guaranty")
the punctual payment when due, whether at stated maturity, by
acceleration or otherwise, of all obligations of the other Bor-
rower now or hereafter existing under this Agreement and the
other Loan Documents, whether for principal, interest, fees,
expenses or otherwise (such obligations being, for the purposes
of this Section 9, the "Obligations"), and any and all expenses
(including reasonable counsel fees and expenses) incurred by
the Agent, the Issuing Lender or any other Lender in enforcing
any rights under such Borrower's Guaranty.
9.2 Guaranty Absolute. Each Borrower guarantees
that the Obligations will be paid strictly in accordance with
the terms of this Agreement and the other Loan Documents,
regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the
rights of the Agent, the Issuing Lender or the other Lenders
with respect
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thereto. The liability of each Borrower under its Borrower's
Guaranty shall be absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of any
provision of this Agreement or any other Loan Document or
instrument relating thereto;
(b) any change in the time, manner or place of pay-
ment of, or in any other term of, all or any of the Obli-
gations, or any other amendment or waiver of or any con-
sent to departure from this Agreement or any other Loan
Document;
(c) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or
consent to departure from any Guaranty or other guaranty,
for all or any of the Obligations; or
(d) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, (i)
the Borrower whose Obligations are being guaranteed or
(ii) a guarantor.
Each Borrower's Guaranty shall continue to be effective or be
reinstated, as the case may be, if at any time any payment of
any of the Obligations is rescinded or must otherwise be
returned by the Agent, the Issuing Lender or any other Lender
upon the insolvency, bankruptcy or reorganization of a Borrower
or otherwise, all as though such payment had not been made.
9.3 Waiver. Each Borrower hereby waives promptness,
diligence, notice of acceptance and any other notice with
respect to any of the Obligations of the other Borrower and any
requirement that the Agent, the Issuing Lender or any other
Lender protect, secure, perfect or insure any security interest
or lien or any property subject thereto or exhaust any right or
take any action against such Borrower or any other Person or
any collateral.
9.4 Waiver of Right of Subrogation. Each Borrower
hereby irrevocably waives any claim or other rights that it may
now or hereafter acquire against the other Borrower that arise
from the existence, payment, performance or enforcement of the
Obligations under its Borrower's Guaranty, including, without
limitation, any
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right of subrogation, reimbursement, exoneration, contribution
or indemnification and any right to participate in any claim or
remedy of the Agent, the Issuing Lender or any other Lender
against such Borrower, whether or not such claim, remedy or
right arises in equity or under contract, statute or common
law, including, without limitation, the right to take or
receive from such Borrower, directly or indirectly, in cash or
other property or by set-off or in any other manner, payment or
security on account of such claim, remedy or right. If any
amount shall be paid to a Borrower in violation of the
preceding sentence at any time prior to the later of the inde-
feasible cash payment in full of the Obligations and all other
amounts payable under its Borrower's Guaranty and the Termina-
tion Date, such amount shall be held in trust for the benefit
of the Agent, the Issuing Lender and the other Lenders and
shall forthwith be paid to the Agent to be credited and applied
to the Obligations and all other amounts payable under this
Agreement and the other Loan Documents, whether matured or
unmatured, in accordance with the terms of the Loan Documents,
or other amounts payable under the Loan Documents thereafter
arising. Each Borrower acknowledges that it will receive
direct and indirect benefits from the financing arrangements
contemplated by this Agreement and that the waiver set forth in
this Subsection 9.4 is knowingly made in contemplation of such
benefits.
9.5 No Waiver; Remedies. No failure on the part of
the Agent, the Issuing Lender or any Lender to exercise, and no
delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any
right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies herein pro-
vided are cumulative and not exclusive of any remedies provided
by law.
9.6 Continuing Guaranty; Transfer of Notes. Each
Borrower's Guaranty is a continuing guaranty and shall (a)
remain in full force and effect during the Commitment Period
and until payment in full of the Obligations and all other
amounts payable under such Borrower's Guaranty, (b) be binding
upon each Borrower, its successors and assigns, and (c) inure
to the benefit of and be enforceable by the Agent, the Issuing
Lender and each other Lender and their respective successors,
transferees and assigns. Without limiting the generality of
the foregoing clause (c), upon any assignment by any Lender of
all or
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any part of any Note held by it to any other Person in
accordance with the terms of this Agreement, such other Person
shall thereupon become vested with all the rights in respect
thereof granted to such Lender herein or otherwise.
SECTION 10. MISCELLANEOUS
10.1 Waivers, Amendments, etc. The provisions of
this Agreement and of each other Loan Document may from time to
time be amended, modified or waived, if such amendment, modifi-
cation or waiver is in writing and consented to by each Borrow-
er and the Majority Lenders; provided, however, that no such
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any par-
ticular action be taken by all the Lenders or by the
Majority Lenders shall be effective unless consented to by
each Lender;
(b) modify this Subsection 10.1, change the defini-
tion of Majority Lenders, increase the Commitment of any
Lender, reduce any fees described in Subsection 2.7, or
extend the Termination Date shall be effective unless con-
sented to by each Lender;
(c) extend the due date for, or reduce the amount
of, any scheduled repayment or prepayment of principal of
or interest on any Advance or Acceptance Obligation or
Letter of Credit Obligation (or reduce the principal
amount of or rate of interest on any Advance or Acceptance
Obligation or Letter of Credit Obligation) shall be effec-
tive unless consented to by each Lender;
(d) exchange or release any Collateral, or release,
amend, waive or consent to any departure from any Guaran-
tee shall be effective unless consented to by each Lender;
or
(e) affect adversely the interests, rights or obli-
gations of the Agent as Agent or the Issuing Lender shall
be effective unless consented to by the Agent or the Issu-
ing Lender, respectively.
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No failure or delay on the part of the Agent, any Lender, or
the Issuing Lender in exercising any power or right under this
Agreement or any other Loan Document shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
power or right preclude any other or further exercise thereof
or the exercise of any other power or right. No notice to or
demand on a Borrower in any case shall entitle it to any notice
or demand in similar or other circumstances. No waiver or
approval by the Agent, the Issuing Lender or any Lender under
this Agreement or any other Loan Document shall, except as may
be otherwise stated in such waiver or approval, be applicable
to subsequent transactions.
10.2 Limited Role of Lenders. The relationship
between each Borrower and the Lenders shall be solely that of
borrower and lenders, respectively. The Lenders shall not have
any fiduciary responsibilities to any Borrower and no joint
venture exists between any Borrower and the Lenders or any of
them. Each Borrower, each Guarantor and each Lender hereby
severally acknowledges that there are no representations, war-
ranties, covenants, undertakings or agreements by the parties
hereto as to the subject matter of the Loan Documents except as
specifically provided herein and therein.
10.3 Choice of Law; Construction. THE LOAN DOCU-
MENTS (OTHER THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF
LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH THE INTER-
NAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF NEW
YORK.
10.4 Consent to Jurisdiction.
(A) EACH BORROWER, EACH GUARANTOR AND EACH LENDER
HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDIC-
TION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARIS-
ING OUT OF OR RELATING TO ANY LOAN DOCUMENT, AGREES THAT
ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN ANY SUCH COURT AND WAIVES ANY
OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF
ANY SUCH ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR
THE FACT THAT SUCH COURT IS AN INCONVENIENT FORUM.
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(B) EACH BORROWER, EACH GUARANTOR AND EACH LENDER
IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE SERVICE OF
PROCESS IN ANY SUCH ACTION OR PROCEEDING IN ANY OF THE
AFORESAID COURTS BY THE MAILING OF COPIES OF SUCH PROCESS
TO IT, BY CERTIFIED OR REGISTERED MAIL OR BY OVERNIGHT
COURIER SERVICE AT ITS ADDRESS SET FORTH HEREIN.
(C) EACH BORROWER AND GUARANTOR AGREES THAT NOTHING
HEREIN SHALL AFFECT THE AGENT'S OR EACH LENDER'S RIGHT TO
EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW AND THE AGENT AND EACH LENDER SHALL HAVE THE RIGHT TO
BRING ANY LEGAL PROCEEDINGS (INCLUDING A PROCEEDING FOR
ENFORCEMENT OF A JUDGMENT ENTERED BY ANY OF THE AFOREMEN-
TIONED COURTS) AGAINST EACH BORROWER AND GUARANTOR IN ANY
OTHER COURT OR JURISDICTION IN ACCORDANCE WITH APPLICABLE
LAW.
10.5 Notices. All notices, requests and demands to
or upon the respective parties hereto shall be in writing and
shall be deemed to have been duly given or made when delivered
by hand, or if sent by certified mail, three days after the day
on which mailed, or, in the case of telex, when answer back
received, or, in the case of an overnight courier service, one
Business Day after delivery to such courier service, addressed,
if to any Borrower or Guarantor, as set forth below and if to
the Agent or any Lender, as set forth with its signature here-
to, or to such other address as may be hereafter notified by
the respective parties hereto:
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As to each 25 West 39th Street
Borrower New York, NY 10018
or Guarantor: Attention: Joel Horowitz
Chief Executive Officer
Telephone Number: (212) 840-8888
Telecopy Number: (212) 768-7312
With a copy to: Steven Gursky, Esq.
Gursky & Associates, P.C.
21 E. 40th Street
New York, NY 10016
Telephone Number: (212) 213-1234
Telecopy Number: (212) 213-1245
10.6 Entire Agreement; Setoff.
(a) This Agreement and the other Loan Documents con-
stitute the entire agreement among the parties hereto and
thereto as to the subject matter hereof and thereof and
supersede any previous agreement, oral or written, as to
such subject matter.
(b) In addition to any rights or remedies of the
Lenders provided by law, upon the occurrence of any Event
of Default, each Lender is hereby authorized without
notice to the respective Borrower or Guarantor to set off
and appropriate and apply all deposits (general and
special) and other indebtedness at any time held or owing
by such Lender to or for the credit or the account of such
Borrower or Guarantor against and on account of all
obligations, liabilities and claims of such Borrower or
Guarantor to such Lender, and in such amounts as such
Lender may elect, although such obligations, liabilities
and claims may be contingent or unmatured. Each Lender
agrees promptly to notify each Borrower or Guarantor, as
the case may be, and the Agent after any such set-off and
application, provided that the failure to give such notice
shall not affect the validity of such set-off and
application.
10.7 Equitable Adjustment Among Lenders. The
Lenders agree among themselves that, with respect to all sums
received by the Lenders applicable to the payment of the
Obligations, equitable
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adjustment will be made between the Lenders so that, in effect,
all such sums shall be shared ratably by the Lenders in
accordance with their Commitment Percentages, whether received
by voluntary or required payment or prepayment, by the exercise
of the right of set-off or bankers' lien, by counterclaim or
cross-action or by the enforcement of any or all of the Notes
or otherwise. If any Lender receives any payment on its Notes,
or in respect of its commitment fee or any other amount payable
to it under this Agreement, of a sum or sums in excess of its
Commitment Percentage, then such Lender receiving such excess
payment shall purchase for cash from the other Lenders an
interest in the latter's Notes in such amount as shall result
in a participation by the Lenders in accordance with their
Commitment Percentages in the aggregate unpaid amount of Notes
then outstanding; provided, however, that if all or any portion
of such excess payment is thereafter recovered from any such
Lender, the purchase shall be rescinded and the purchase price
restored to the extent of such recovery, but without interest.
10.8 Reference to Subsidiaries and Guarantors. If a
Borrower or a Guarantor has no Subsidiaries, then the provi-
sions of this Agreement relating to Subsidiaries shall be
deemed surplusage without affecting the applicability of the
provisions of this Agreement to each Borrower.
10.9 Captions. The captions of the various sections
and subsections of this Agreement have been inserted only for
the purposes of convenience, and shall not be deemed in any
manner to modify, explain, enlarge or restrict any of the pro-
visions of this Agreement.
10.10 Payment of Costs and Expenses. Each Borrower
agrees to pay on demand its pro rata portion of all reasonable
out-of-pocket expenses of the Agent (including the fees and
out-of-pocket expenses of counsel to the Agent) in connection
with
(a) the negotiation, preparation, execution and
delivery of this Agreement and each other Loan Document,
including schedules and exhibits, and any amendments,
waivers, consents, supplements or other modifications to
this Agreement or any other Loan Document as may from time
to time hereafter be required;
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(b) the preparation or review of any document or
instrument now or hereafter relating to this Agreement or
any other Loan Document; and
(c) the administration and monitoring of this Agree-
ment and the Loan Documents, and compliance by the parties
hereto with respect to the terms hereof.
Each Borrower further agrees to pay its pro rata portion of,
and to save the Agent and the Lenders harmless from all liabil-
ity for, any stamp or other taxes which may be payable in con-
nection with the execution or delivery of this Agreement, the
Notes or any other Loan Document, the Advances, the creation of
the Acceptances and the issuance of the Letters of Credit here-
under. Each Borrower further agrees to reimburse the Agent and
each Lender upon demand for its pro rata portion of all reason-
able out-of-pocket expenses (including attorneys' fees and
legal expenses (including those fees and legal expenses of
internal counsel to such Lender allocated to this Agreement))
incurred by the Agent or such Lender in connection with (x) the
negotiation of any restructuring or "work-out", whether or not
consummated, of this Agreement or any other Loan Document or
any Obligations and (y) the enforcement or preservation of any
rights and remedies available to the Agent or any Lender under
this Agreement or any other Loan Document or with respect to
any Obligations.
10.11 Indemnification. Each Borrower hereby indem-
nifies, on a pro rata basis, the Agent, the Issuing Lender and
each other Lender and each of their respective officers, direc-
tors, employees and agents (collectively, the "Indemnified Par-
ties") from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at
any time (including, without limitation, at any time following
the termination of the Commitments and the payment of the
Notes, the Letter of Credit Obligations and the Acceptance
Obligations) be imposed on, incurred by or asserted against the
Indemnified Parties or any of them (irrespective of whether any
such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including reasonable
attorneys' fees and disbursements (collectively, the "Indemni-
fied Liabilities"), in any way relating to or arising out of
this
-88-<PAGE>
Agreement, any of the other Loan Documents or any documents
contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken
or omitted by the Agent, the Issuing Lender or any other Lender
under or in connection with any of the foregoing, including,
without limitation, as a result of, or arising out of, or
relating to:
(a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the pro-
ceeds of any Advance or Acceptance;
(b) any transaction supported by or relating to any
Letter of Credit;
(c) the entering into and performance of this Agree-
ment and any other Loan Document by any of the Indemnified
Parties (including any action brought by or on behalf of a
Borrower as the result of any determination pursuant to
Section 3 not to make an Advance or issue a Letter of
Credit or create an Acceptance due to the failure of a
Borrower to meet the conditions for such credit exten-
sion);
(d) any investigation, litigation or proceeding
involving any Borrower or Guarantor or any Subsidiary
thereof or property now or previously owned or leased by
any such Borrower or Guarantor or Subsidiary related to
any environmental cleanup, compliance or other similar
matter relating to the protection of the environment;
except for any such Indemnified Liabilities arising for the
account of a particular Indemnified Party by reason of such
Indemnified Party's gross negligence or willful misconduct. If
and to the extent that the foregoing undertaking may be
unenforceable for any reason, each Borrower hereby agrees to
make the maximum contribution to the payment and satisfaction
of each of the Indemnified Liabilities which is permissible
under applicable law.
10.12 Execution in Counterparts, Effectiveness, etc.
This Agreement may be executed by the parties hereto in several
counterparts, each of which shall be executed by each Borrower
-89-<PAGE>
and the Agent and be deemed to be an original and all of which
shall constitute together but one and the same agreement. This
Agreement shall become effective when counterparts hereof exe-
cuted on behalf of each Borrower, the Agent, and each Lender
(or notice thereof satisfactory to the Agent) shall have been
received by the Agent and notice thereof shall have been given
by the Agent to each Borrower and each Lender.
10.13 Successors and Assigns; Participation. This
Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and
assigns; provided, however, that (a) the Borrowers may not
assign or transfer their rights or obligations hereunder with-
out the prior written consent of all the Lenders, (b) no Lender
may at any time assign all or any part of its rights and obli-
gations hereunder except that (i) with notice to the Agent but
without the consent of any Person, each Lender may pledge its
Advances to a Federal Reserve Bank in support of borrowings
made by such Lender from such Federal Reserve Bank and (ii)
Chemical Bank may assign up to $15,000,000 of its Commitment,
and (c) any Lender may at any time sell to one or more commer-
cial Lenders or other Persons (each of such commercial Lenders
and other Persons being herein called a "Participant") partici-
pating interests in any of the Advances, its Commitment, or
other interests of such Lender hereunder; provided, however,
that (i) no such participation shall relieve such Lender from
its Commitment or its other obligations hereunder or under any
other Loan Document; (ii) such Lender shall remain solely
responsible for the performance of its Commitment and such
other obligations; (iii) each Borrower and the Agent shall con-
tinue to deal solely and directly with such Lender in connec-
tion with such Lender's rights and obligations under this
Agreement and each of the other Loan Documents; (iv) no Par-
ticipant shall be entitled to require such Lender to take or
refrain from taking any action hereunder or under any other
Loan Document, except that such Lender may agree with any Par-
ticipant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (b)
or (c) of Subsection 10.1; and (v) no Borrower shall be
required to pay any amount hereunder that is greater than the
amount which it would have been required to pay had no partici-
pating interest been sold.
-90-<PAGE>
10.14 Survival of Agreements. All agreements, rep-
resentations and warranties made herein and in any certificates
delivered pursuant hereto shall survive the execution and
delivery of this Agreement, the other Loan Documents and the
making and renewal of the Advances, the creation of Acceptances
and the issuance of Letters of Credit authorized hereunder.
10.15 Waiver of Jury Trial. EACH BORROWER, GUARAN-
TOR AND EACH LENDER, AFTER CONSULTING OR HAVING HAD THE OPPOR-
TUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTELLIGENTLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY LITI-
GATION (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOC-
UMENT, THE RELATIONSHIP ESTABLISHED THEREUNDER, ANY OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ANY OF THE OTHER
LOAN DOCUMENTS OR ANY COURSE OF CONDUCT, DEALING, PERFORMANCE,
USAGE OF TRADE, STATEMENTS (WHETHER ORAL OR WRITTEN), OR
ACTIONS OF ANY OF THEM. NO LENDER, BORROWER OR GUARANTOR SHALL
SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY ACTION
IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN
WHICH A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE
PROVISIONS SHALL NOT BE DEEMED TO HAVE BEEN MODIFIED IN ANY
RESPECT OR RELINQUISHED BY THE AGENT, ANY LENDER, BORROWER OR
GUARANTOR EXCEPT BY A WRITTEN INSTRUMENT EXECUTED BY ALL OF
THEM.
-91-<PAGE>
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered by their proper and
duly authorized officers as of the day and year first above
written.
(Corporate Seal) TOMMY HILFIGER U.S.A., INC.
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
Chief Executive Officer
(Corporate Seal) TOMMY HILFIGER RETAIL, INC.
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
President
(Corporate Seal) TOMMY HILFIGER CORPORATION
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
President
-92-<PAGE>
(Corporate Seal) TOMMY HILFIGER (EASTERN HEMISPHERE)
LIMITED (f/k/a/ Tommy Hilfiger (Far
East) Limited
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
President
(Corporate Seal) TOMMY HILFIGER (HK) LIMITED
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
President
(Corporate Seal) TOMMY HILFIGER LICENSING, INC.
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
President
(Corporate Seal) TOMMY HILFIGER NIPPON CO., LTD.
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
President
Corporate Seal) TOMMY HILFIGER WOMENSWEAR, INC.
/s/ Steven Gursky By: /s/ Joel Horowitz
Attest Joel Horowitz
-93-<PAGE>
President
-94-<PAGE>
Commitments
$55,000,000 CHEMICAL BANK, individually and
as Agent
By: /s/ Paul Phelan
Paul Phelan, V.P.
35,000,000 BANK OF NEW YORK
By: /s/ Allison J. White
Name: Allison J. White
Title: VP
30,000,000 FLEET BANK, N.A. (formerly
NatWest Bank N.A.)
By: /s/ Catherine Lawrence
Name: Catherine Lawrence
Title: Vice President
20,000,000 ISRAEL DISCOUNT BANK OF NEW YORK
By: /s/ Howard Weinberg
Name: Howard Weinberg
Title: VP
By: /s/ Antonia Brocato
Name: Antonia Brocato
-95-<PAGE>
Title: AVP
Commitments
10,000,000 CENTURY BUSINESS CREDIT
CORPORATION
By: /s/ Andrew Tananbaum
Name: Andrew Tananbaum
Title: President
-96-<PAGE>
STATE OF NEW YORK )
)SS.:
COUNTY OF NEW YORK )
On this 11th day of July, 1996, before me personally
appeared Joel Horowitz, to me known, who, being by me duly
sworn, did depose and say that he resides at 58 Beech Road,
Englewood, NJ; that he is the Chief Executive Officer of Tommy
Hilfiger U.S.A., Inc. and the President of Tommy Hilfiger
Retail, Inc., Tommy Hilfiger (Eastern Hemisphere) Limited,
Tommy Hilfiger (HK) Limited, Tommy Hilfiger Licensing, Inc.,
Tommy Hilfiger Corporation, Tommy Hilfiger Womenswear, Inc. and
Tommy Hilfiger Nippon Co., Ltd., the corporations described in
and which executed the foregoing instrument; that he knows the
seal of each such corporation; that the seal affixed to said
instrument next to the signature of each corporation is the
corporate seal of such corporation; that it was so affixed by
order of the Board of Directors of such corporation, and that
he signed his name thereto by like order.
Lisa M. Tamplenizza
Notary Public
-97-
EXHIBIT 11
TOMMY HILFIGER CORPORATION
COMPUTATION OF NET INCOME PER ORDINARY SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
JUNE 30,
1996 1995
FINANCIAL STATEMENT PRESENTATION
PRIMARY
Average shares outstanding 36,911 35,291
Net effect of dilutive stock
options based on the treasury stock
method using average market price 589 1,446
--- -----
TOTAL 37,500 36,737
====== ======
NET INCOME $12,578 $7,789
======= ======
PER SHARE AMOUNT $0.34 $0.21
===== =====
FULLY DILUTED
Average shares outstanding 36,911 35,291
Net effect of dilutive stock
options based on the treasury stock
method using ending market price 1,079 1,713
Total 37,990 37,004
====== ======
Net Income $12,578 $7,789
======= ======
Per share amount $0.33 $0.21
===== =====
