SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED JANUARY 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-21764
SUPREME INTERNATIONAL CORPORATION
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(Exact name of Registrant as specified in its charter)
FLORIDA 59-1162998
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
3000 N.W. 107TH AVENUE
MIAMI, FLORIDA 33172
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (305) 592-2830
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, par value $.01 per share
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the Registrant has filed all documents
and reports to be filed by Sections 12, 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court. Yes [ ] No [ ]
The number of shares outstanding of the Registrant's Common Stock is
6,884,022 (as of April 20, 1998).
The aggregate market value of the voting stock held by non-affiliates of
the Registrant is approximately $58,057,863 (as of April 20, 1998).
DOCUMENTS INCORPORATED BY REFERENCE
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PART I
SUPREME INTERNATIONAL CORPORATION (THE "COMPANY") CAUTIONS READERS THAT
CERTAIN IMPORTANT FACTORS MAY AFFECT THE COMPANY'S ACTUAL RESULTS AND COULD
CAUSE SUCH RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENTS
WHICH MAY BE DEEMED TO HAVE BEEN MADE IN THIS REPORT OR WHICH ARE OTHERWISE MADE
BY OR ON BEHALF OF THE COMPANY. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED IN
THIS REPORT THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE
FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
WORDS SUCH AS "MAY", "WILL", "EXPECT", "BELIEVE", "ANTICIPATE", "INTEND",
"COULD", "WOULD", "ESTIMATE", OR "CONTINUE" OR THE NEGATIVE OTHER VARIATIONS
THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. FACTORS WHICH MAY AFFECT THE COMPANY'S RESULTS INCLUDE, BUT ARE NOT
LIMITED TO, RISKS RELATED TO FASHION TRENDS; THE RETAIL INDUSTRY; RELIANCE ON
KEY CUSTOMERS; CONTRACT MANUFACTURING; FOREIGN SOURCING; IMPORTS AND IMPORT
RESTRICTIONS; COMPETITION; SEASONALITY; RAPID EXPANSION OF BUSINESS; DEPENDENCE
ON KEY PERSONNEL AND OTHER FACTORS DISCUSSED HEREIN AND IN THE COMPANY'S FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION").
All financial information herein has been adjusted to give effect to a
3-for-2 stock split declared in July 1997.
ITEM 1. BUSINESS
(a) General Development of Business
INTRODUCTION
The Company designs, imports and markets a broad line of moderately
priced and better men's and boys' sportswear, including sport and dress shirts,
golf sportswear and casual and dress pants. A significant majority of the
Company's products are sold under its own brand names, including its Natural
Issue/Registered Trademark/ and Munsingwear/Registered Trademark/ brands, as
well as other owned and licensed brand names, with the balance being private
label sales. The Company sells its merchandise to a broad spectrum of retailers,
including national and regional department stores, chain stores, mass
merchandisers and specialty stores throughout the U.S., Puerto Rico and Canada.
BUSINESS STRATEGY
The Company's business strategies are as follows:
/bullet/ INCREASE BRAND NAME RECOGNITION. The Company seeks to increase its
presence in the men's shirt category by increasing the brand name
recognition of its brand names, including Natural Issue/Registered
trademark/ and Munsingwear/Registered trademark/. In order to
promote these brands at the retail level, the Company conducts
cooperative advertising in print and
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broadcast media in which these products are featured by various
retailers in their advertisements and the cost of the advertisements
is shared by the Company and the retailers. The Company also
conducts various in-store marketing activities with its customers,
displaying its products with an emphasis on related and coordinated
clothing in highly visible locations and offering promotions geared
to holidays such as Christmas and Father's Day. During the fiscal
year ended January 31, 1998 ("Fiscal 1998"), the Company started
direct consumer advertising in select markets featuring the Natural
Issue/Registered trademark/ and Munsingwear/Registered trademark/
brand names through the placement of highly visible billboards,
sponsorships and special event advertising.
/bullet/ CONTINUE TO DIVERSIFY PRODUCT LINE. The Company has been
diversifying its product lines and expanding its customer base. The
Company has developed a fall, winter, and holiday shirt line with a
view towards reducing the seasonality of the Company's existing
product lines, which have historically emphasized spring and summer
merchandise. During the year ended January 31, 1997 ("Fiscal 1997"),
the Company expanded into golfwear through its acquisition of the
Munsingwear/Registered trademark/ brand name. The Company has also
expanded its ethnic lines and its boyswear lines and has introduced
a higher-end sweater line under the Crossings/Registered trademark/
brand name, which it acquired in Fiscal 1998.
/bullet/ PURSUE SELECT PRIVATE LABEL OPPORTUNITIES. The Company believes that
the trend towards increased consolidation in the retail industry has
created an environment where retailers are turning to a select group
of suppliers for their private label sourcing needs. As a result,
the Company believes retailers will seek vendors who have worldwide
sourcing capabilities and offer customized, creative designs at
competitive prices. The Company seeks to utilize its strengths in
these areas to selectively pursue private label opportunities.
/bullet/ PURSUE ACQUISITION AND LICENSING OPPORTUNITIES. The Company
continues to focus its efforts on expanding its product lines and
brand name recognition through acquisition and licensing
opportunities. During Fiscal 1998, the Company acquired the
Crossings/Registered trademark/ brand name. The Company has granted
licenses of its Natural Issue/Registered trademark/ brand name for
the marketing of a line of men's underwear, neckwear, and hosiery
and a line of women's apparel. The Company is also party to
licensing arrangements of its Munsingwear/Registered trademark/
brand name for the marketing of men's undergarments, hosiery,
activewear, outerwear, thermals, swimwear, robes, sleepwear, pants,
shorts, loungewear, hats and caps. The Company continues to evaluate
opportunities to acquire or license other brand names and businesses
which distribute complementary apparel products and to grant
licenses of its brand names.
(b) Financial Information about Industry Segments
Not Applicable.
(c) Narrative Description of Business
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PRODUCTS AND PRODUCT DESIGN
SHIRTS. The Company offers a broad line of sport shirts which include
cotton and cotton-blend printed and plain knit shirts, silk, cotton and rayon
printed button front sport shirts, linen sport shirts, golf shirts, embroidered
cotton shirts and cotton/poly mix dress shirts. The Company's shirt line also
includes dress shirts, brushed twill shirts, jacquard knits and yarn-dyed
flannels. In addition, the Company is also the leading distributor in the United
States of guayabera shirts. The Company markets shirts under a number of its own
brand names, as well as the private labels of its customers. The Company's
signature brand names are Natural Issue/Registered trademark/ and the
Munsingwear/Registered trademark/, Grand Slam, Grand Slam Tour/TM/ and Penguin
Sport/TM/ brand names. The Company also uses Feldini/Registered trademark/ for
its better shirts, and Corsa/Registered trademark/, Gianni Abozzi/Registered
trademark/, Premier/TM/, Monte Carlo/TM/, Career Club/Registered trademark/, CC
Sport/Registered trademark/, Cotton Mill/TM/, Tipos and Romani/Registered
trademark/ for its more moderately priced lines. The Company holds license
rights to market men's dress and sport shirts under Adolfo/Registered trademark/
and other brand names. Sales under the brand names owned and licensed by the
Company accounted for a significant majority of net shirt sales during Fiscal
1998, with the balance being private label sales. The Company's shirts are
produced in a wide range of men's sizes, including sizes for the big and tall
men's market. Sales of shirts accounted for approximately 83% of net sales
during Fiscal 1998.
PANTS. The Company's pants lines include a variety of styles of wool,
wool-blend, linen and poly/rayon dress pants, casual pants in cotton and
poly/cotton and linen/cotton walking shorts. The Company's pants lines, which
are offered in a wide range of men's sizes, are marketed under the
Feldini/Registered trademark/, Natural Issue/Registered trademark/ and other
brand names. Sales of pants accounted for approximately 11% of net sales during
Fiscal 1998.
OTHER PRODUCTS. The Company offers boyswear items including rayon and
cotton sport shirts under the Tones/TM/ and Natural Issue/Registered trademark/
brand names and recently introduced a line of sweaters under the
Crossings/Registered trademark/ brand name for Fall 1998. Sales of other
products accounted for approximately 6% of net sales during Fiscal 1998.
PRODUCT DESIGN. Substantially all of the Company's products are designed
by its in-house staff utilizing computer-aided design technology. This
technology enables the Company to produce computer-generated simulated samples
that display how a particular style will look in a given color and fabric. These
samples can be printed on paper or directly onto fabric to more accurately
present the colors and patterns to a potential customer. In addition, the
Company can quickly alter the simulated sample in response to customer comments,
such as a request to change the colors, print layout, collar style and trimming,
pocket details and/or placket treatments. The use of computer-aided design
technology minimizes the time consuming need for and costs associated with
producing actual sewn samples prior to customer approval and allows the Company
to create custom designed products meeting the specific needs of a customer.
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In designing its apparel, the Company seeks to foster consumer appeal by
combining functional, colorful and high quality fabrics with creative designs
and graphics. Styles, color schemes and fabrics are also selected to encourage
consumers to coordinate outfits, thereby encouraging multiple purchases. The
Company's design staff seeks to stay abreast of the latest design trends by
attending trade shows and periodically conducting market research in Europe and
the United States.
MARKETING AND SALES
The Company sells its merchandise to a broad spectrum of retailers,
including chain stores, department stores, mass merchandisers and specialty
stores. The Company's largest customers include Target Stores, Sears, Roebuck &
Co., Wal-Mart Stores Inc., Federated Department Stores, Inc., and K-Mart
Corporation. The Company's net sales to its five largest customers aggregated
approximately 43%, 52% and 54% of net sales during Fiscal 1998, Fiscal 1997, and
during the fiscal year ended January 31, 1996 ("Fiscal 1996"), respectively.
Sales to Target Stores and Sears, Roebuck & Co. each accounted for approximately
11% of net sales during Fiscal 1998. Sales to K-Mart Corporation, J.C. Penney
Company, Inc. and Sears, Roebuck & Co. accounted for approximately 15%, 12% and
11%, respectively, of net sales during Fiscal 1997. Sales to J.C. Penney
Company, Inc., Wal-Mart Stores Inc. and Sears, Roebuck & Co. accounted for
approximately 18%, 12% and 10% respectively, of net sales during Fiscal 1996. No
other single customer accounted for more than 10% of net sales during such
fiscal years.
The Company markets its apparel products to customers principally
through the direct efforts of an in-house sales staff and independent commission
sales representatives who work exclusively for the Company. These in-house
employees and sales representatives account for approximately 90% of net sales,
handling all major accounts. In addition, the Company uses independent
commission sales representatives, who generally market other product lines as
well as those of the Company. The Company supplements these sales efforts
through attendance at major industry trade shows and through telemarketing
efforts directed largely at specialty retailers. The Company also advertises to
retailers through print advertisements in a variety of trade magazines and
newspapers. In order to promote its men's sportswear at the retail level, the
Company conducts cooperative advertising in print and broadcast media in which
the Company's products are featured by various retailers in their advertisements
and the cost of the advertisements is shared by the Company and the retailers.
The Company also conducts various in-store marketing activities with its
customers, such as placing displays of its product line with an emphasis on
related and coordinated clothing in highly visible locations and offering
promotions geared to holidays such as Christmas and Father's Day. During Fiscal
1998 the Company started direct consumer advertising in select markets featuring
the Natural Issue/Registered Trademark/ and Munsingwear/Registered Trademark/
brand names through the placement of highly visible billboards, sponsorships,
and special event advertising.
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CUSTOMER SERVICE
The Company believes that customer service is a key factor in
successfully marketing its apparel products and seeks to provide customers with
a high level of customer service. The Company coordinates efforts with retailers
to develop products meeting the specific needs of a customer, uses
computer-aided design technology to offer custom designed products and utilizes
its sourcing capabilities to produce and deliver products on a timely basis.
The Company's in-house sales staff is responsible for customer follow-up
and support including monitoring prompt order fulfillment and timely delivery.
The Company utilizes an Electronic Data Interchange ("EDI") system for certain
customers in order to provide advance shipping notices, process orders and
conduct billing operations. In addition, certain customers use the EDI system to
communicate their weekly inventory requirements per store to the Company by
computer. The Company then fills those orders either by shipping directly to the
individual stores or by sending shipments, individually packaged and bar-coded
by store, to a customer's centralized distribution center.
SOURCES OF SUPPLY
The Company utilizes independent contract manufacturers to produce
substantially all its apparel products. During Fiscal 1998, in excess of 90% of
the Company's products were sourced from independent foreign suppliers, with the
remainder from domestic manufacturing and "807 operations." The Company
currently uses approximately 149 suppliers primarily from countries in the Far
East and other parts of Asia and approximately 16 suppliers from countries in
Central America. The Company is dependent upon the ability of its contract
manufacturers to secure a sufficient supply of raw materials, adequately finance
the production of goods ordered and maintain sufficient manufacturing and
shipping capacity. The use of contract manufacturers and the resulting lack of
direct control could subject the Company to difficulty in obtaining timely
delivery of products of acceptable quality. Nevertheless, the Company believes
that the use of numerous independent suppliers allows the Company to maximize
production flexibility while avoiding significant capital expenditures and the
costs of maintaining and operating production facilities.
The Company does not have long-term contracts with any of its suppliers.
The Company believes that the loss of any one or more of its suppliers is not
likely to have a long-term material adverse effect on the Company's business,
because either new or existing manufacturers would be available to fulfill the
Company's requirements. However, the failure of any key supplier to perform or
the loss of any key supplier could have a material adverse effect on a
short-term basis on the Company's business and results of operations until such
time as a comparable key supplier is identified.
The Company allocates production among suppliers based upon a number of
criteria, including availability of production capability, quality, pricing and
possession of necessary quota allocations to enable the import of finished goods
into the United States. Substantially all of the
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Company's products are manufactured by suppliers who purchase the necessary
materials and produce finished garments in accordance with specifications,
designs and patterns furnished by the Company. Cotton fabric is the principal
raw material used in the Company's apparel. Although the Company believes that
its suppliers will continue to be able to procure a sufficient supply of cotton
fabric for its production needs, the price and availability of cotton may
fluctuate significantly.
The Company maintains offices in Beijing, Guangzhou, Taipei and Mexico
City. It also operates through independent agents based in Thailand, Hong Kong,
Pakistan, Korea, Turkey, Indonesia and India to source the Company's products in
the Far East and monitor production at contract manufacturing facilities in
order to ensure quality control and timely delivery. Similar functions with
respect to the Company's Central American suppliers are performed by Company
personnel based in its Miami, Florida executive offices. The Company conducts
periodic inspections of samples of each product prior to cutting by contractors,
during the manufacturing process and prior to shipment. Finished goods are
generally shipped to the Company's Miami, Florida facilities for repackaging and
distribution to customers. The Company's return policy permits customers to
return defective products for credit. The amount of the Company's products which
were returned as defective was not material in the last three fiscal years.
In order to assist with timely delivery of finished goods, the Company
functions as its own customs broker, pursuant to which it is able to prepare its
own customs documentation and arrange for any inspections or other clearance
procedures with the United States Customs Service. The Company is also a member
of the United States Customs Automated Interface program, which permits the
Company to clear its goods through United States Customs electronically,
reducing the necessary clearance time to a matter of hours rather than days.
SEASONALITY
The Company's products have historically been geared towards lighter
weight products generally worn during the spring and summer months. While the
Company believes that this seasonality has been reduced with the introduction of
fall, winter, and holiday merchandise, there can be no assurance that these new
product lines will continue to be successful or that they will continue to
reduce the seasonality of the Company's sales.
COMPETITION
The men's sportswear industry is highly competitive. The Company's
competitors include numerous apparel importers, distributors and manufacturers,
many of which have greater financial, manufacturing and distribution resources
than the Company. Although to date the Company has been able to compete
successfully based upon product quality, price and customer service, there can
be no assurance that it will continue to be able to do so.
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TRADEMARKS
The Company holds or has applied for U.S. trademarks for its most
significant brand names. The Company believes that its Natural Issue/Registered
trademark/, Munsingwear/Registered trademark/, and Penguin Design trademarks
are material to its business. Natural Issue/Registered trademark/,
Munsingwear/Registered trademark/ and the Penguin Design are registered with the
United States Patent and Trademark Office. The Natural Issue registration
expires in June 2002 and is subject to renewal. The Munsingwear/Registered
trademark/ trademark registration expires in May 2009 and is subject to renewal.
The Penguin Design Trademark registration expires during 1999 and is subject to
renewal. The Company is subject to claims and suits against it, as well as the
initiator of claims and suits against others, in the ordinary course of its
business, including claims arising from the use of its trademarks. The Company
does not believe that the resolution of any pending claims will have a material
adverse affect on its business, financial condition, results of operations or
cash flows.
EMPLOYEES
The Company employed approximately 335 persons as of January 31, 1998.
None of the Company's employees is subject to a collective bargaining agreement,
and the Company believes that its employee relations are good.
ITEM 2. PROPERTIES
During the latter half of Fiscal 1998, the Company consolidated its
administrative offices and substantially all of its warehouse and distribution
facilities into a new 238,000 square foot leased facility in Miami which was
built to the Company's specifications. The Company originally entered into an
agreement to purchase this facility. In September 1997, the Company entered into
an agreement with a financial institution whereby the financial institution
assumed the Company's obligation to purchase the facility and, in turn, leased
the facility to the Company. The lease has an initial term of five years and a
minimum annual rental of approximately $1,000,000 and a minimum contingent
rental payment of $12,325,000 if the Company does not renew the lease after the
five-year term. In March 1998, for purposes of potential future expansion, the
Company purchased certain land adjacent to its facility from a non-affiliated
third party for $1,030,000.
During Fiscal 1998, the Company also leased the following facilities:
The Company leased a 19,000 square foot building in Miami, Florida
which housed the Company's executive offices. The space is leased from George
Feldenkreis, the Company's Chairman of the Board, pursuant to a lease which
expires in December 2000. The Company's current rental for the office facility
is $128,000 per annum. The Company will continue to pay rent on this facility
until the expiration of the lease or the lease of the facility to another party.
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The Company also leased an approximately 54,000 square foot
warehouse/office building adjacent to its former executive offices from George
Feldenkreis pursuant to a lease which expired in April 1998. Fiscal 1998 rental
for this facility was approximately $308,000. The Company leases a second 32,000
square foot warehouse building from a partnership of which Mr. Feldenkreis is a
general partner. This warehouse is leased pursuant to a lease expiring in June
1998, at a current annual rental of approximately $136,000. A portion of this
facility is still being used by the Company and a portion is subleased to
Carfel, Inc. ("Carfel"), an affiliated automotive parts importer and
distributor. The Company will vacate this facility upon expiration of the lease.
The Company also leased an additional 107,000 square foot warehouse
from an unaffiliated third party, pursuant to a lease which expired during
Fiscal 1998. Fiscal 1998 rental for this facility was approximately $275,000.
The Company leases a showroom and office space in New York City,
maintains an office in Guangzhou and also leases offices jointly with Carfel in
Beijing and Taipei to monitor Far East production of their respective products.
The Company believes that its arrangements with George Feldenkreis and
Carfel are on terms at least as favorable as the Company could secure from a
non-affiliated third party.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to claims and suits against it, as well as the
initiator of claims and suits against others, in the ordinary course of its
business, including claims arising from the use of its trademarks. The Company
does not believe that the resolution of any pending claims will have a material
adverse affect on its business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information
The Company's Common Stock has been listed for trading on The Nasdaq
National Market under the symbol SUPI since May 21, 1993. The following table
sets forth, for the Fiscal quarters indicated, the range of high and low closing
bid prices per share of Common Stock as reported by The Nasdaq National Market.
Such quotations represents inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
HIGH LOW
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FISCAL 1997
First Quarter.................................... $ 8.67 $ 8.17
Second Quarter................................... 11.50 10.42
Third Quarter.................................... 11.33 9.67
Fourth Quarter................................... 10.83 9.50
FISCAL 1998
First Quarter.................................... $ 11.00 $ 8.83
Second Quarter................................... 12.00 10.17
Third Quarter.................................... 15.38 11.25
Fourth Quarter................................... 13.13 10.38
(b) Holders
As of April 20, 1998, there were approximately 53 holders of record of
the Company's Common Stock. The Company believes the number of beneficial owners
of its Common Stock is in excess of 1100.
(c) Dividends
The Company has not paid any cash dividends since its inception and
the Board of Directors does not contemplate doing so in the near future. Payment
of cash dividends is prohibited under the Revolving Credit Agreement. See Note 7
of Notes to the Consolidated Financial Statements of the Company included in
Item 8 of this Report. Any future decision as to payment of cash dividends will
depend on the earnings and financial position of the Company and such other
factors as the Board of Directors deems relevant.
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<TABLE>
<CAPTION>
ITEM 6. SELECTED FINANCIAL DATA
(in thousands, except per share amounts and number of shares)
The following selected financial data is qualified by reference to,
and should be read in conjunction with, the Consolidated Financial Statements of
the Company and related Notes thereto included in Item 8 of this Report and
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations. Certain amounts in prior fiscal years have been reclassified to
conform to the 1998 presentation.
FISCAL YEAR ENDED JANUARY 31,
---------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- --------- --------
STATEMENT OF INCOME DATA:
<S> <C> <C> <C> <C> <C>
Net sales $50,006 $90,564 $121,838 $157,373 $190,689
Gross profit 12,488 21,377 29,694 35,327 44,698
Selling, General and
Administrative Expenses 7,651 13,967 20,361 24,222 31,854
Operating income 4,837 7,409 9,333 11,105 12,844
Interest expenses 796 1,219 2,224 1,664 2,782
Income before income taxes 4,041 6,191 7,109 9,441 10,063
Net income 2,540 3,872 4,424 5,844 7,178
Net income per share:
Basic $ .54 $ .73 $ .76 $ .89 $ 1.10
Diluted $ .54 $ .73 $ .75 $ .89 $ 1.08
Weighted average number of shares
outstanding:
Basic 4,727,945 5,300,000 5,800,000 6,534,446 6,540,604
Diluted 4,727,945 5,300,000 5,874,470 6,595,147 6,665,635
JANUARY 31,
---------------
1994 1995 1996 1997 1998
------ ------- -------- --------- --------
BALANCE SHEET DATA:
Accounts receivable, net $11,462 $21,272 $18,101 $28,807 $35,503
Inventories 16,056 30,153 30,353 32,201 35,799
Working capital 16,509 43,067 47,760 23,574 65,884
Total assets 30,030 55,512 53,735 88,158 101,367
Borrowings under credit
facilities, including current
portion of long-term debt 7,073 4,944 0 31,949 3,000
Long-term debt, less current
portion 96 23,312 6,968 0 36,658
Total stockholders' equity 18,144 22,016 43,833 47,775 55,155
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company has experienced significant growth with sales increasing
to $190.7 million for Fiscal 1998 from $157.4 million for Fiscal 1997. During
the year, the Company increased sales of its branded product lines, as well as
licensed branded products. At the same time revenue from sales of private label
products decreased. The Company also significantly increased sales to its
existing customer base, primarily mass merchandisers and department stores. In
addition, the Company expanded its customer base to include more mass
merchandisers, department stores and foreign customers.
A substantial portion of the 21.2% increase in net sales during Fiscal
1998 was achieved in the Company owned branded product lines which increased by
34.1%. The sale of licensed branded products also increased significantly. A
reduction in the sale to retailers of private label goods offset, to a small
extent, the aforementioned increases.
The increased recognition of the Company's products has allowed the
Company to expand its line of sports shirts and introduce additional products
such as golf sportswear, pants, shorts, sweaters and boyswear. In addition, the
Company believes that it has benefitted from the growing trend towards casual
dressing in the workplace and is well positioned to continue to benefit from
this trend.
The Company's marketing commitment is intended to further the growing
popularity of its brand names, including the Natural Issue/Registered
trademark/, Grand Slam/Registered trademark/ and Munsingwear/Registered
trademark/ brands as well as enhancing licensing opportunities. The Company has
increased expenditures to enhance its sales and marketing, design capability,
product sourcing, distribution and internal control systems. The Company
believes that such expenditures have provided the personnel and resources needed
to manage its growth and plans to continue to invest appropriately in order to
sustain future growth.
The following table sets forth, for the periods indicated, certain
items in the Company's consolidated statements of income expressed as a
percentage of sales:
FISCAL YEAR ENDED
JANUARY 31,
----------------------------
1996 1997 1998
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Net sales....................................... 100.0% 100.0% 100.0%
Cost of Sales................................... 75.6 77.6 76.6
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Gross profit.................................... 24.4 22.4 23.4
Selling, general and administrative expenses.... 16.7 15.3 16.7
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Operating income................................ 7.7 7.1 6.7
Interest expense................................ 1.8 1.1 1.4
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Income before income taxes...................... 5.9 6.0 5.3
Income tax provision............................ 2.2 2.3 1.5
-------- -------- -------
Net income...................................... 3.7% 3.7% 3.8%
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RESULTS OF OPERATIONS
FISCAL 1998 AS COMPARED TO FISCAL 1997
Sales for Fiscal 1998 were $190.7 million as compared to $157.4
million for Fiscal 1997, an increase of $33.3 million or 21.2%. This increase
was principally attributable to an increase in the Company's branded product
lines, including Munsingwear/Registered trademark/ and Grand Slam/Registered
trademark/, as well as in its licensed branded products. This increase was
partially offset by a decrease in revenue from sales of private label products.
Cost of sales for Fiscal 1998 was $146.0 million or 76.6% of sales as
compared to $122.0 million or 77.6% of sales for Fiscal 1997. This decrease in
cost of sales as a percentage of sales reflects a shift to more sales of brand
name products which typically generate higher gross profit than private label
products.
Selling, general and administrative expenses for Fiscal 1998 were
$31.9 million or 16.7% of sales as compared to $24.2 million or 15.3% of sales
for Fiscal 1997. This increase was due to increased levels of business and
increased advertising costs relating to the start of consumer advertising.
Interest expense for Fiscal 1998 was $2.8 million or 1.4% of sales as
compared to $1.7 million or 1.1% of sales for Fiscal 1997. This increase in
interest expense was a result of the additional indebtedness incurred by the
Company in connection with the acquisition of the Munsingwear and Jolem brands,
as well as to support increased levels of operations.
During Fiscal 1998, the Company reduced the provision for income taxes
by $503,000 to adjust certain income tax reserves.
Net income for Fiscal 1998 was $7.2 million or 3.8% of sales as
compared to $5.8 million or 3.7% of sales for Fiscal 1997.
FISCAL 1997 AS COMPARED TO FISCAL 1996
Sales for Fiscal 1997 were $157.4 million as compared to $121.8
million for Fiscal 1996, an increase of $35.6 million or 29.2%. This increase
was principally attributable to the broad-based growth in the Company's product
lines to existing customers, the addition of new customers, and the acquisition
of both Jolem and Munsingwear.
Cost of sales for Fiscal 1997 was $122.0 million or 77.6% of sales as
compared to $92.1 million or 75.6% of sales for Fiscal 1996. This increase in
cost of sales as a percentage of sales principally reflects sales of discounted
inventory.
Selling, general and administrative expenses for Fiscal 1997 were
$24.2 million or 15.3% of sales as compared to $20.4 million or 16.7% of sales
for Fiscal 1996. This increase was due to increased levels of business as well
as partial absorption of certain operating expenses as a result of the Jolem and
Munsingwear/Registered trademark/ acquisitions. Thereafter, the Company
integrated the purchasing, marketing and design functions of Jolem and
Munsingwear/Registered trademark/ into its operations in Miami. Such integration
directly impacted the selling, general and administrative expenses, and
contributed to the reduction of such expenses as a percentage of sales.
Interest expense for Fiscal 1997 was $1.7 million or 1.1% of sales as
compared to $2.2 million or 1.8% of sales for Fiscal 1996. This decrease in
interest expense was due to the
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<PAGE>
repayment of a portion of the amount outstanding under the Company's revolving
credit agreement with a portion of the proceeds of the Company's public offering
in September 1995.
Net income for Fiscal 1997 was $5.8 million or 3.7% of sales as
compared to $4.4 million or 3.7% of sales for Fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its growth in sales and the resulting
increase in inventory and other working capital requirements principally from
operating cash flow and borrowings under a revolving credit agreement with a
Bank. The Company's existing revolving credit expired in October 1997. From
October 1997 to March 1998, the Company operated under interim credit
arrangements with its lenders. At January 31, 1998, $36.7 million was
outstanding under the interim credit arrangements. In March 1998, the Company
replaced the credit arrangements with an expanded revolving credit agreement
(the "Revolving Credit Agreement") with a group of banks, including its existing
lender. The amount available for borrowings under the Revolving Credit Agreement
is determined pursuant to a formula based upon the levels of eligible accounts
receivable and finished goods inventory, subject to a maximum of $55.0 million.
The Revolving Credit Agreement bears interest at the bank's prime rate
or LIBOR plus 1.5%. The Company borrows under the Revolving Credit Agreement as
the need arises to meet working capital needs and to fund capital expenditures.
The outstanding balance due under the Revolving Credit Agreement matures in
March 2001.
The Company also maintains three letter of credit facilities totaling
$60.0 million. The letter of credit facilities are secured by the consignment of
merchandise in transit under each letter of credit. Indebtedness under these
facilities bears interest at variable rates substantially equal to the lenders'
specified base lending rates minus 1.0% per annum. As of January 31, 1998, there
was $30.3 million available under these facilities.
The Revolving Credit Agreement contains significant financial and
operating covenants, including requirements that the Company maintain minimum
net worth levels and certain financial ratios, prohibitions on the ability of
the Company to incur certain additional indebtedness and restrictions on its
ability to make capital expenditures, to incur or suffer to exist certain liens,
to pay dividends or to take certain other corporate actions. Amounts will only
be available under the Revolving Credit Agreement if such financial maintenance
and other covenants are satisfied and the borrowing base calculation (which is
based upon the amount of eligible accounts receivable and eligible inventory)
are satisfied. The Company is currently in compliance with all covenants under
the Revolving Credit Agreement.
Net cash used in operating activities was $3.1 million for Fiscal 1998
principally as a result of an increase in inventories of $3.6 million resulting
from introduction of the Company's Munsingwear/Registered trademark/ and Jolem
lines.
-13-
<PAGE>
Capital expenditures were $3.8 million for Fiscal 1998 primarily
relating to the Company's new distribution facility. The Company presently has
no significant commitments to incur capital expenditures except with respect to
the purchase of land as described in Item 2.
At January 31, 1998, the Company had working capital of $65.9 million.
The Company's current ratio was 7.9 to 1 at January 31, 1998. The Company's
sources of working capital are income generated from operations and the credit
facilities described above.
EFFECTS OF INFLATION AND FOREIGN CURRENCY FLUCTUATIONS
The Company does not believe that inflation has significantly affected
its results of operations.
The Company's purchases from foreign suppliers are made in U.S.
dollars. Accordingly, the Company, to date, has not been materially adversely
affected by foreign currency fluctuations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"), REPORTING
COMPREHENSIVE INCOME. SFAS No. 130 requires that all components of comprehensive
income be reported on one of the following: (1) the statement of income; (2) the
statement of changes in stockholders' equity; or (3) a separate statement of
comprehensive income. Comprehensive income is comprised of net income and all
changes to stockholders' equity, except those due to investments by stockholders
(changes in paid-in capital) and distributions to stockholders (dividends). SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997. The
Company will adopt this standard in Fiscal 1999. The Company does not believe
that the adoption of this statement will have a significant impact on its
consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No.
131 changes the way public companies report information about segments of their
business in their annual financial statements and requires them to report
selected segment information in their quarterly reports issued to shareholders.
SFAS No. 131 also requires entity-wide disclosure about products and services an
entity provides, the foreign countries in which it holds assets and reports
revenues, and its major customers. SFAS No. 131 is effective for fiscal years
beginning after December 15, 1997. The Company will adopt this standard in
fiscal year ending January 31, 1999.
YEAR 2000 MATTERS
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Consequently,
in the year 2000, such systems may be unable to accurately process certain
date-based information. The Company can potentially be affected by this issue
through the internal computer applications on which it relies. The Company is in
the process of reviewing all significant third-party applications which it
utilizes and obtaining documentation from the manufacturers which certify Year
2000 compliance. The Company is also developing a test plan for internal
applications to validate the
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<PAGE>
results of its initial review. Should the Company find any items which are not
Year 2000 compliant in the course of its testing, the Company will take the
necessary actions to correct the matter. The Company expects that its testing
procedures and any required Year 2000 compliance activities will be completed by
December 31, 1998. The Company does not anticipate that Year 2000 compliance
activities will have a material effect on the Company's business, financial
condition or results of operations. However, there can be no assurance that the
Company's systems are Year 2000 compliant until the successful completion of its
testing procedures. Additionally, there can be no assurance that the systems of
other companies on which the Company relies will be Year 2000 compliant which
could result in a material adverse effect on the Company's business, financial
condition or results of operations.
FORWARD LOOKING STATEMENTS
Except for the historical information contained herein, this "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains forward-looking statements that involve a number of risks
and uncertainties, including the risks described elsewhere in this report and
detailed from time to time in the Company's filings with the Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-15-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
NAME AGE POSITION
George Feldenkreis(1)................. 63 Chairman of the Board and Chief
Executive Officer
Oscar Feldenkreis..................... 38 President, Chief Operating
Officer and Director
Joseph Roisman........................ 52 Executive Vice President
Fanny Hanono.......................... 37 Secretary-Treasurer
Ronald L. Buch........................ 62 Director
Gary Dix(1)........................... 50 Director
Salomon Hanono........................ 48 Director
Richard W. McEwen(2).................. 77 Director
Leonard Miller(1)(2).................. 68 Director
- ------------------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.
GEORGE FELDENKREIS founded the Company in 1967, has been involved in
all aspects of its operations since that time and served as the Company's
President and a Director until February 1993, when he was elected Chairman of
the Board and Chief Executive Officer. Mr. Feldenkreis is also a director,
executive officer and principal shareholder of Carfel, an importer and
distributor of automotive parts which he founded in 1961, serves as Chairman of
the Board of Universal National Bank in Miami, Florida and is Vice President of
the Greater Miami Jewish Federation. Mr. Feldenkreis devotes a majority of his
working time to the affairs of the Company and devotes the balance of his
working time to the affairs of Carfel.
OSCAR FELDENKREIS was elected Vice President and a Director in 1979
and joined the Company on a full-time basis in 1980. Mr. Feldenkreis has been
involved in all aspects of the Company's operations since that time and was
elected President and Chief Operating Officer in February 1993. Oscar
Feldenkreis also serves as a director of Carfel, but does not devote any of his
working time to its affairs.
-16-
<PAGE>
JOSEPH ROISMAN was appointed Executive Vice President in September
1995. Previously, Mr. Roisman, who has been employed by the Company since 1988,
had the position of Vice President, Sales. Mr. Roisman was also employed by the
Company from 1970 to 1982 in various sales capacities. From 1982 to 1988, Mr.
Roisman was employed in similar capacities by Euro American Fashion, Inc.
FANNY HANONO was elected Secretary-Treasurer of the Company in
September 1990. From September 1988 to August 1990, Mrs. Hanono served as the
Company's Assistant Secretary and Assistant Treasurer. Mrs. Hanono has been
employed by Carfel since 1988 in various administrative positions. Mrs. Hanono
devotes substantially all of working time to the affairs of Carfel. In the
latter part of 1996, Mrs. Hanono was elected Vice President of Carfel.
RONALD L. BUCH was appointed to the Company's Board of Directors in
January 1996. Prior to his retirement in 1995, Mr. Buch was employed by K-Mart
Corporation for over 39 years, most recently as Vice President and General
Merchandise Manager.
GARY DIX was elected to the Company's Board of Directors in May 1993.
Since February 1994, Mr. Dix, a certified public accountant, has been a partner
at Mallah Furman & Company, P.A., an accounting firm in Miami, Florida. From
1979 to January 1994, Mr. Dix was a partner of Silver Dix & Hammer, P.A.,
another Miami accounting firm. Mr. Dix also is a member of the Board of
Directors of Universal National Bank in Miami, Florida.
SALOMON HANONO was elected to the Company's Board of Directors in
February 1993. Mr. Hanono has been employed by Carfel in various sales
capacities since 1987 and currently is Export Director, with overall
responsibilities for Carfel's export sales. Mr. Hanono devotes substantially all
of his working time to the affairs of Carfel.
RICHARD W. MCEWEN was elected to the Company's Board of Directors in
September 1994. Mr. McEwen serves as a director of Sound Advice, Inc. and
Wometco Enterprises, Inc. Prior to his retirement in 1985, Mr. McEwen was
Chairman of the Board and Chief Executive Officer of Burdines, a division of
Federated Department Stores, Inc.
LEONARD MILLER was elected to the Company's Board of Directors in May
1993. Mr. Miller has been Vice President and Secretary of Pasadena Homes, Inc.,
a home construction firm in Miami, Florida, since 1959.
GEORGE FELDENKREIS is the father of Oscar Feldenkreis and Fanny Hanono
and the father-in-law of Salomon Hanono, Fanny Hanono's spouse. There are no
other family relationships among the Company's directors and executive officers.
The Company's executive officers are elected annually by the Board of
Directors and serve at the discretion of the Board. The Company's directors hold
office until the next annual meeting of shareholders and until their successors
have been duly elected and qualified.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's executive officers, directors and holders of more than
ten percent of the Company's Common Stock, to file reports of ownership and
changes in ownership with the Securities and
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<PAGE>
Exchange Commission and The Nasdaq National Market. Such persons are required to
furnish the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or oral or written representations from certain reporting persons from whom no
Forms 5 were required, the Company believes that, with respect to Fiscal 1998,
its executive officers, directors and greater than ten percent beneficial owners
complied with all such filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following compensation table sets forth, for Fiscal 1996, Fiscal
1997 and Fiscal 1998, the cash and certain other compensation paid by the
Company to the Company's Chief Executive Officer ("CEO") and such other
executive officers whose annual salary and bonus exceeded $100,000 during Fiscal
1998 (together with the CEO, collectively, the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- -------------------
SECURITIES
UNDERLYING ALL OTHER
FISCAL SALARY BONUS OPTION/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)(1)
- --------------------------- ---- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
George Feldenkreis 1998 125,000 100,000 -- 4,750
Chairman and CEO 1997 120,000 50,000 -- 500
1996 120,000 -- -- 1,970
Oscar Feldenkreis 1998 350,000 460,000 -- 4,750
President and Chief 1997 350,000 450,000 -- 500
Operating Officer 1996 350,000 200,000 -- 2,634
Richard L. Dunn 1998 155,000 9,000 -- 2,500
Vice President, Finance and 1997 145,000 10,000 -- 500
Chief Financial Officer(2) 1996 132,692 10,000 -- 2,269
Joseph Roisman 1998 147,000 21,000 -- 4,750
Executive Vice President 1997 140,000 10,000 -- 500
1996 116,000 10,000 -- 2,179
<FN>
- -------------------
(1) The dollar amount represents Company contributions for the Named
Executive Officer of the Company's 401(K) plan.
(2) Mr. Dunn resigned as an executive officer of the Company in April 1998.
</FN>
</TABLE>
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<PAGE>
EMPLOYMENT AGREEMENTS
The Company is party to an employment agreement with Oscar Feldenkreis,
the Company's President and Chief Operating Officer, which expires in May 1998,
and is subject to annual renewal. The employment agreement currently provides
for an annual salary of $350,000, subject to annual cost-of-living increases,
and an annual bonus as may be determined by the Compensation Committee in its
discretion, up to a maximum of $500,000. The employment agreement requires Mr.
Feldenkreis to devote his full-time to the affairs of the Company. Upon
termination of the employment agreement by reason of the employee's death or
disability, Mr. Feldenkreis or his estate will receive a lump sum payment equal
to one year's salary plus a bonus as may be determined by the Compensation
Committee in its discretion. The employment agreement also prohibits Mr.
Feldenkreis from directly or indirectly competing with the Company for one year
after termination of his employment for any reason except the Company's
termination of Mr. Feldenkreis without Cause.
The Company is also party to an employment agreement with George
Feldenkreis, the Company's Chairman of the Board and Chief Executive Officer,
expiring in May 1998, and is subject to annual renewal. The employment agreement
currently provides for an annual salary of $125,000, subject to annual
cost-of-living increases, and an annual bonus as may be determined by the
Compensation Committee in its discretion, up to a maximum of $250,000. Pursuant
to his employment agreement, Mr. Feldenkreis devotes a majority of his working
time to the affairs of the Company. George Feldenkreis' employment agreement
contains termination and non-competition provisions similar to those set forth
in Oscar Feldenkreis' agreement.
OPTION GRANTS IN LAST FISCAL YEAR
The Company did not grant stock options during Fiscal 1998 to any of the
Named Executive Officers.
STOCK OPTIONS HELD AT END OF FISCAL 1998
The following table indicates the total number and value of exercisable
and unexercisable stock options held by each of the Named Executive Officers as
of January 31, 1998. No options to purchase stock were exercised by any of the
Named Executive Officers in Fiscal 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END
------------------------------ --------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- ---- ---------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Oscar Feldenkreis 45,000 0 $467,100 $ 0
Richard L. Dunn 37,500 0 389,250 0
Joseph Roisman 11,250 0 116,775 0
<FN>
- -------------------
(1) Based on the Nasdaq National Market last sales price for the Company's
Common Stock on January 30, 1998 in the amount of $10.38 per share.
</FN>
</TABLE>
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<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None.
COMPENSATION OF DIRECTORS
During Fiscal 1998, non-employee directors, with the exception of
Salomon Hanono, were compensated at the rate of $1,500 per quarter and $500 for
meetings of the Board of Directors or any committee thereof attended during a
quarter, up to a maximum of $8,000 per annum. Directors are reimbursed for
travel and lodging expenses in connection with their attendance at meetings. Mr.
Hanono receives no cash compensation for his services as a director. Directors
are also entitled to receive options under the Company's 1993 Stock Option Plan
and Directors' Stock Option Plan (the "Directors' Plan"). No such options were
granted during Fiscal 1998. As of January 31, 1998, the following options were
outstanding under the Directors' Plan:
NUMBER OF EXERCISE EXPIRATION
NAME OF OPTIONEE SHARES PRICE DATE
- ----------------- --------- -------- ------------
Gary Dix 11,250 $8.00 June 2, 2000
Richard W. McEwen 7,500 $8.00 June 2, 2000
Leonard Miller 11,250 $8.00 June 2, 2000
Salomon Hanono 11,250 $8.00 June 2, 2000
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<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 20, 1998, by (i)
each of the shareholders of the Company who is known by the Company to own more
than 5% of the outstanding shares of Common Stock, (ii) each director of the
Company, (iii) each Named Executive Officer and (iv) all directors and executive
officers of the Company as a group.
NAME AND ADDRESS OF NUMBER % OF CLASS
BENEFICIAL OWNER(1)(2) OF SHARES OUTSTANDING
- --------------------- --------- ----------
George Feldenkreis(3)................. 1,588,653 23.1
Oscar Feldenkreis(4).................. 1,254,688 18.1
Fanny Hanono(5)....................... 400,358 5.8
Salomon Hanono(5)(6).................. 411,608 6.0
Carfel, Inc(7)........................ 361,525 5.3
Richard L. Dunn(8).................... 37,500 *
Joseph Roisman(9)..................... 12,750 *
Ronald Buch........................... 750 *
Gary Dix(10).......................... 16,800 *
Richard W. McEwen(11)................. 9,750 *
Leonard Miller(12).................... 50,250 *
FMR Corporation
82 Devonshire Street
Boston, Massachusetts 02109(13).... 653,400 9.5
The Kaufmann Funds, Inc.
140 East 45th Street, 43rd Floor
New York, New York 10017(14)....... 450,000 6.5
All directors and executive
officers as a group
(ten persons)(15).................. 3,211,949 45.8
- ---------------------------
* Less than 1%.
(1) Except as otherwise indicated, the address of each beneficial owner is
c/o the Company 3000 N.W. 107th Avenue, Miami, Florida 33172.
(2) Except as otherwise indicated, the Company believes that all beneficial
owners named in the table have sole voting and investment power with
respect to all shares of Common Stock beneficially owned by them.
(3) Represents (a) 1,141,728 shares of Common Stock held by George
Feldenkreis, (b) 361,525 shares of Common Stock held by Carfel, of which
company Mr. Feldenkreis is a director, executive officer and principal
shareholder and (c) 85,400 shares of Common Stock held by a charitable
foundation of which George Feldenkreis, Oscar Feldenkreis and Fanny
Hanono are each directors and officers (the "Foundation").
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<PAGE>
(4) Represents (a) 1,122,288 shares of Common Stock held by a limited
partnership of which Oscar Feldenkreis is the sole shareholder of the
general partner and the sole limited partner, (b) 2,000 shares of Common
Stock held by Mr. Feldenkreis directly, (c) 45,000 shares of Common
Stock issuable upon the exercise of stock options held by Oscar
Feldenkreis and (d) 85,400 shares held by the Foundation.
(5) Represents (a) 314,958 shares of Common Stock held by a limited
partnership of which Fanny Hanono is the sole shareholder of the general
partner and the sole limited partner and (b) 85,400 shares held by the
Foundation. Fanny Hanono and Salomon Hanono are husband and wife.
(6) Also includes 11,250 shares of Common Stock issuable upon the exercise
of stock options held by Mr. Hanono.
(7) The shares of Common Stock held by Carfel are pledged to a bank to
secure Carfel's credit facility.
(8) Represents 37,500 shares of Common Stock issuable upon the exercise of
stock options held by Mr. Dunn. Mr. Dunn resigned as an executive
officer of Supreme in April 1998.
(9) Represents (a) 1,500 shares of Common Stock held by Mr. Roisman and (b)
11,250 shares of Common Stock issuable upon the exercise of stock
options held by Mr. Roisman.
(10) Represents (a) 3,000 shares of Common Stock held by Mr. Dix, (b) 1,800
shares of Common Stock held in trust for his children, (c) 750 shares
held in an individual retirement account and (d) 11,250 shares of Common
Stock issuable upon the exercise of stock options held by Mr. Dix.
(11) Represents (a) 2,250 shares of Common Stock held by Mr. McEwen and (b)
7,500 shares of Common Stock issuable upon the exercise of stock options
held by Mr. McEwen.
(12) Represents (a) 39,000 shares of Common Stock held by Mr. Miller and (b)
11,250 shares of Common Stock issuable upon the exercise of stock
options held by Mr. Miller.
(13) Based solely on information contained in amendment to Schedule 13G dated
December 30, 1997 filed with the Commission. 330,000 of these shares of
Common Stock are owned by Fidelity Capital Appreciation Fund, a
wholly-owned subsidiary of FMR Corporation.
(14) Based solely on information contained in Schedule 13G dated December 31,
1996 filed with the Commission.
(15) Includes the shares of Common Stock and options to purchase shares of
Common Stock described in Notes (3) through (6) and (8) through (12).
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<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Item 2. Properties" with respect to certain facilities leased by
the Company from George Feldenkreis and his affiliates.
In January 1995, the Company entered into a license agreement (the
"License Agreement") with Isaco International, Inc. ("Isaco"), pursuant to which
Isaco was granted an exclusive license to use the Natural Issue/Registered
Trademark/ brand name in the United States, its territories and possessions and
Puerto Rico to market a line of mens' underwear and loungewear. The License
Agreement provided for a guaranteed minimum royalty of $112,500 through May 31,
1997 (with increasing amounts in succeeding years) and expires on May 31, 1998.
Royalty income earned from the License Agreement amounted to approximately
$287,000 for Fiscal 1998. The principal shareholder of Isaco is Isaac Zelcer,
who is Oscar Feldenkreis' father-in-law. The Company believes that the License
Agreement is on terms at least as favorable as the Company could secure from a
non-affiliated third party.
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<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
(1) Consolidated Financial Statements.
The following Consolidated Financial Statements of Supreme
International Corporation and subsidiaries are included in Part II,
Item 8:
PAGE
-----
Independent Auditors' Report F-1
Consolidated Balance Sheets as of
January 31, 1998 and 1997 F-2
Consolidated Statements of Income
for each of the three years in the period
ended January 31, 1998 F-3
Consolidated Statements of Changes in
Stockholders' Equity for each of the three
years in the period ended January 31, 1998 F-4
Consolidated Statements of Cash Flows
for each of the three years in the
period ended January 31, 1998 F-5
Notes to Consolidated Financial Statements F-6
(2) Consolidated Financial Statement Schedules.
All schedules for which provision is made in applicable regulations of
the Securities and Exchange Commission are not required under the
related instructions, are inapplicable or the required information has
been included in the Consolidated Financial Statements and therefore
such schedules have been omitted.
(3) Exhibits.
EXHIBIT DESCRIPTION OF EXHIBIT
3.1 Registrant's Amended and Restated Articles of
Incorporation (1)
3.2 Registrant's Amended and Restated Bylaws (1)
4.1 Form of Common Stock Certificate (1)
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<PAGE>
10.3 Form of Indemnification Agreement between the
Registrant and each of the Registrant's Directors
and Officers (1)
10.6 Business Lease dated October 4, 1990, between
George Feldenkreis and the Registrant relating to
office facilities (1)
10.7 Business Lease dated May 1, 1993, between George
Feldenkreis and the Registrant relating to
warehouse facilities (1)
10.9 1993 Stock Option Plan (1)(2)
10.10 Directors Stock Option Plan (1)(2)
10.15 Loan and Security Agreement dated as of October
5, 1994 between the Registrant and NationsBank of
Georgia, N.A. (3)
10.16 First Amendment to Loan and Security Agreement
dated as of August 19, 1995, between the
Registrant and Nations Bank of Georgia, N.A. (4)
10.17 Amendment to Business Lease between George
Feldenkreis and the Registrant relating to office
facilities (4)
10.18 Revocable Credit Facility Agreement dated May 26,
1995 between the Registrant and Hamilton Bank,
N.A. (4)
10.19 Revolving Line of Credit Agreement dated June 23,
1995 between the Registrant and Ocean Bank (4)
10.20 Profit Sharing Plan (2)(4)
10.21 Amended and Restated Employment Agreement between
the Registrant and George Feldenkreis(2)(4)
10.22 Amended and Restated Employment Agreement between
the Registrant and Oscar Feldenkreis (2)(4)
10.23 Business Lease dated December 26, 1995, between
George Feldenkreis and the Registrant relating to
office facilities (5)
10.24 Lease Agreement [Land] dated as of August 28,
1997 between SUP Joint Venture, as Lessor and
Registrant, as Lessee (6)
10.25 Lease Agreement [Building] dated as of August 28,
1997, between SUP Joint Venture, as Lessor and
Registrant, as Lessee (6)
10.26 Amended and Restated Loan and Security Agreement
dated as of March 31, 1998 (6)
22.1 Subsidiaries of Registrant (3)
23.2 Consent of Deloitte & Touche LLP (6)
27.1 Financial Data Schedule (SEC use only) (6)
- ---------------
(1) Previously filed as an Exhibit of the same number to Registrant's
Registration Statement on Form S-1 (File No. 33-60750) and incorporated
herein by reference.
-25-
<PAGE>
(2) Management Contract or Compensation Plan.
(3) Previously filed as an Exhibit of the same number to Registrant's Annual
Report on Form 10-K for the year ended January 31, 1995 and incorporated
herein by reference.
(4) Previously filed as an Exhibit of the same number to Registrant's
Registration Statement on Form S-1 (File No. 33-96304) and incorporated
herein by reference.
(5) Previously filed as an Exhibit of the same number to Registrant's Annual
Report on Form 10-K for the year ended January 31, 1996 and incorporated
herein by reference.
(6) Filed herewith.
(b) Reports on Form 8-K
None.
(c) Item 601 Exhibits
The exhibits required by Item 601 of Regulation S-K are set forth in
(a)(3) above.
(d) Financial Statement Schedules
The financial statement schedules required by Regulation S-K are set
forth in (a)(2) above.
-26-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has caused the report or amendment thereto to be
signed on its behalf by the undersigned, thereunto duly authorized.
SUPREME INTERNATIONAL CORPORATION
By: /s/ GEORGE FELDENKREIS
----------------------
George Feldenkreis, Chairman of the
Board and Chief Executive Officer
Dated: April 30, 1998
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons in the capacities and on the
dates indicated.
SIGNATURES TITLE DATE
---------- ----- ----
/s/ GEORGE FELDENKREIS Chairman of the Board and April 30, 1998
- ------------------------- Chief Executive Officer
George Feldenkreis (principal executive, financial
and accounting officer)
/s/ OSCAR FELDENKREIS President, Chief Operating April 30, 1998
- ------------------------- Officer and Director
Oscar Feldenkreis
/s/ RONALD BUCH Director April 30, 1998
- -------------------------
Ronald Buch
/s/ GARY DIX Director April 30, 1998
- -------------------------
Gary Dix
/s/ SALOMON HANONO Director April 30, 1998
- -------------------------
Salomon Hanono
/s/ RICHARD MCEWEN Director April 30, 1998
- -------------------------
Richard McEwen
/s/ LEONARD MILLER Director April 30, 1998
- -------------------------
Leonard Miller
-27-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Supreme International Corporation and subsidiaries:
We have audited the accompanying consolidated balance sheets of Supreme
International Corporation and subsidiaries (the "Company") as of January 31,
1998 and 1997, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended January 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of January 31, 1998
and 1997, and the results of its operations and its cash flows for each of the
three years in the period ended January 31, 1998, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Miami, Florida
April 10, 1998
F-1
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JANUARY 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,010,256 $ 755,798
Accounts receivable, Net 35,502,607 28,807,236
Inventories 35,799,388 32,200,522
Deferred income taxes 872,000 668,658
Other current assets 2,253,328 1,525,695
------------ ------------
Total current assets 75,437,579 63,957,909
PROPERTY AND EQUIPMENT, Net 4,899,656 2,138,088
INTANGIBLE ASSETS, Net 19,716,064 19,858,692
OTHER 1,313,747 2,203,601
------------ ------------
TOTAL $101,367,046 $ 88,158,290
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 4,048,325 $ 5,584,924
Accrued expenses 1,692,225 2,063,040
Borrowings under credit facilities 3,000,000 6,812,629
Current portion of long-term debt - 25,136,801
Other current liabilities 813,477 785,422
-------------- -------------
Total current liabilities 9,554,027 40,382,816
------------- ------------
LONG-TERM DEBT 36,658,174 -
------------ ------------
Total liabilities 46,212,201 40,382,816
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value; 1,000,000 shares
authorized; no shares issued or outstanding - -
Common stock - $.01 par value; 15,000,000 shares
authorized; 6,555,681 and 6,529,431 shares issued and
outstanding as of January 31, 1998 and 1997, respectively 65,556 65,295
Additional paid-in capital 27,598,618 27,397,670
Retained earnings 27,490,671 20,312,509
----------- -----------
Total stockholders' equity 55,154,845 47,775,474
----------- -----------
TOTAL $ 101,367,046 $ 88,158,290
============ ===========
</TABLE>
See Notes to consolidated financial statements
F-2
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
NET SALES $190,689,212 $157,372,796 $121,838,493
COST OF SALES 145,991,132 122,045,614 92,144,575
------------ ------------ ------------
GROSS PROFIT 44,698,080 35,327,182 29,693,918
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 31,853,565 24,221,853 20,360,835
----------- ------------ ------------
OPERATING INCOME 12,844,515 11,105,329 9,333,083
INTEREST EXPENSE 2,781,509 1,664,392 2,223,869
------------ ----------- ------------
INCOME BEFORE INCOME TAXES 10,063,006 9,440,937 7,109,214
PROVISION FOR INCOME TAXES 2,884,844 3,596,918 2,685,663
------------ ------------ -----------
NET INCOME $ 7,178,162 $ 5,844,019 $ 4,423,551
============ =========== ===========
NET INCOME PER SHARE:
Basic $ 1.10 $ .89 $ .76
============ =========== ===========
Diluted $ 1.08 $ .89 $ .75
============ =========== ===========
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING:
Basic $ 6,540,604 $ 6,534,446 $ 5,800,000
============ =========== ===========
Diluted $ 6,665,635 $ 6,595,147 $ 5,874,470
============ =========== ===========
</TABLE>
See Notes to consolidated financial statements.
F-3
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
---------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 31, 1995 5,300,000 $ 53,000 $11,918,064 $10,044,939 $22,016,003
Sale of common stock, net 1,500,000 15,000 17,378,530 - 17,393,530
Net income - - - 4,423,551 4,423,551
--------- ---------- ----------- ---------- -----------
BALANCE, JANUARY 31, 1996 6,800,000 68,000 29,296,594 14,468,490 43,833,084
Purchase of treasury stock,
at cost (278,069) (2,780) (1,947,599) - (1,950,379)
Exercise of stock options 7,500 75 48,675 - 48,750
Net income - - - 5,844,019 5,844,019
--------- ---------- ----------- ---------- -----------
BALANCE, JANUARY 31, 1997 6,529,431 65,295 27,397,670 20,312,509 47,775,474
Exercise of stock options 26,250 261 200,948 - 201,209
Net income - - - 7,178,162 7,178,162
--------- ---------- ----------- ---------- -----------
BALANCE, JANUARY 31, 1998 6,555,681 $ 65,556 $ 27,598,618 $27,490,671 $55,154,845
========= ========== ============ =========== ===========
</TABLE>
See Notes to consolidated financial statements.
F-4
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1998
<TABLE>
<CAPTION>
1998 1997 1996
CASH FLOW FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income $ 7,178,162 $ 5,844,019 $ 4,423,551
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,748,006 1,147,091 724,955
Loss on sale and abandonment of property 187,692 257,221 --
(Increase) decrease in deferred taxes (203,342) 159,655 (228,313)
Changes in operating assets and liabilities
(net of effects of acquisitions):
Accounts receivable, net (6,695,371) (8,951,318) 3,170,857
Inventories (3,598,866) 293,527 (200,269)
Other current assets (727,633) (359,942) (269,584)
Other assets 889,854 (1,915,477) (12,604)
Accounts payable and accrued expenses (1,907,414) 4,835,234 (2,174,659)
Other current liabilities 28,055 563,756 (131,184)
------------ ------------ ------------
Net cash (used in) provided by operating activities (3,100,857) 1,873,766 5,302,750
------------ ------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of property and equipment (3,828,142) (1,058,061) (1,308,535)
Proceeds from sale of property and equipment 32,102 164,545 --
Payment on purchase of intangible assets (758,598) (137,027) (183,138)
Payment for Jolem Imports, Inc. -- (3,657,435) --
Payment for Munsingwear, Inc.'s assets -- (19,768,380) --
------------ ------------ ------------
Net cash used in investing activities (4,554,638) (24,456,358) (1,491,673)
------------ ------------ ------------
CASH FLOW FROM FINANCING ACTIVITIES:
Net (decrease) increase in borrowings under credit
facilities (3,812,629) 6,812,629 (4,943,575)
Proceeds from long-term debt 48,653,294 60,288,097 41,357,933
Payments on long-term debt (37,131,921) (42,119,240) (57,702,058)
Proceeds from the issuance of common stock -- -- 17,393,530
Purchase of treasury stock -- (1,950,379) --
Proceeds from exercise of stock options 201,209 48,750 --
------------ ------------ ------------
Net cash provided by (used in) financing activities 7,909,953 23,079,857 (3,894,170)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 254,458 497,265 (83,093)
CASH AT BEGINNING OF YEAR 755,798 258,533 341,626
------------ ------------ ------------
CASH AT END OF YEAR $ 1,010,256 $ 755,798 $ 258,533
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest $ 2,820,016 $ 1,433,403 $ 2,306,659
============ ============ ============
Income taxes $ 3,174,807 $ 3,394,466 $ 3,285,250
============ ============ ============
</TABLE>
F-5
See Notes to consolidated financial statements.
<PAGE>
SUPREME INTERNATIONAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1998
1. GENERAL
Supreme International Corporation and subsidiaries (the "Company") was
incorporated in the State of Florida and has been in business since 1967.
The Company designs, imports, and markets fashion-oriented, moderately
priced and better men's sportswear, primarily sports and dress shirts and
casual and dress pants, which are sold principally to mass merchandisers,
department stores, and men's specialty retailers throughout the United
States, Puerto Rico and Canada.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Company's significant accounting
policies:
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Supreme International Corporation and its wholly-owned
subsidiaries. All intercompany transactions and balances have been
eliminated in consolidation.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts in the consolidated
financial statements and the accompanying notes. Actual results could
differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying amounts of accounts
receivable and accounts payable approximates fair value due to their
short-term nature. The carrying amount of debt and credit facilities
approximate fair value due to their stated interest rate approximating a
market rate. These estimated fair value amounts have been determined using
available market information or other appropriate valuation methodologies.
INVENTORIES - Inventories are stated at the lower of cost (first-in,
first-out basis) or market. Costs consists of the purchase price, customs,
duties, freight, insurance, and commissions to buying agents.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost.
Depreciation is computed using the straight-line and accelerated methods
over the estimated useful lives of the assets. Amortization of leasehold
improvements is computed using the straight-line method over the shorter of
the lease term or estimated useful lives of the improvements. The useful
lives range from five to ten years.
INTANGIBLE ASSETS - Intangible assets primarily represent costs capitalized
in connection with the acquisition, registration and maintenance of brand
names and license rights. Intangibles are amortized over their estimated
useful lives which range from three to twenty years. As of January 31, 1998
and 1997 accumulated amortization related to intangible assets amounted to
$1,608,588 and $707,362, respectively.
F-6
<PAGE>
LONG LIVED-ASSETS - Management reviews long-lived assets, including
identifiable intangible assets, for possible impairment whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. If there is an indication of impairment, management prepares
an estimate of future cash flows (undiscounted and without interest
charges) expected to result from the use of the asset and its eventual
disposition. If these cash flows are less than the carrying amount of the
asset, an impairment loss is recognized to reduce the asset to its
estimated fair value. Preparation of estimated expected future cash flows
is inherently subjective and is based on management's best estimate of
assumptions concerning future conditions. At January 31, 1998, there were
no impaired assets.
REVENUE RECOGNITION - Sales are recognized upon shipment, returns for
defective goods are netted against sales, and an allowance is provided for
estimated returns. Sales to any one customer exceeding ten percent amounted
to $21,648,468 (11%) and $20,630,689 (11%) for the year ended January 31,
1998; $23,490,000 (15%), $18,350,000 (12%) and $17,670,000 (11%) for the
year ended January 31, 1997; $22,020,000 (18%), $14,250,000 (12%) and
$12,280,000 (10%) for the year ended January 31, 1996. The Company does not
believe that these concentration of sales and credit risk represent a
material risk of loss with respect to its financial position as of January
31, 1998.
INCOME TAXES - Deferred income taxes result primarily from timing
differences in the recognition of expenses for tax and financial reporting
purposes and are accounted for in accordance with Financial Accounting
Standards Board Statement No. 109 ("SFAS No. 109"), ACCOUNTING FOR INCOME
TAXES, which requires the liability method of computing deferred income
taxes. Under the liability method, deferred taxes are adjusted for tax rate
changes as they occur.
NET INCOME PER SHARE - In February 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 128 ("SFAS No.
128"), EARNINGS PER SHARE, which changes the method of calculating earnings
per share. SFAS No. 128 requires the presentation of "basic" net income per
share and "diluted" net income per share on the face of the income
statement. Basic net income per share is computed by dividing net income by
the weighted average shares of outstanding common stock. The calculation of
diluted net income per share is similar to basic earnings per share except
that the denominator includes dilutive potential common stock. The dilutive
potential common stock included in the Company's computation of diluted net
income per share includes the effects of the stock options and warrants
described in Note 11, as determined using the treasury stock method. SFAS
No. 128 was effective for financial statements for periods ending after
December 15, 1997. The Company adopted SFAS No. 128 in the fourth quarter
of fiscal 1998 and restated its net income per share for prior periods
presented to give effect to SFAS No. 128.
STOCK SPLIT - On July 21, 1997, the Company's Board of Directors declared a
3 for 2 stock split in the form of a stock dividend. The accompanying
financial statements reflect the stock split as if it had occurred as of
the earliest period being presented.
ACCOUNTING FOR STOCK-BASED COMPENSATION - The Company has chosen to account
for stock-based compensation to employees and non-employee members of the
Board using the intrinsic value method prescribed by Accounting Principles
Board Opinion ("APB") No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,"
and related interpretations. As required by Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), ACCOUNTING FOR STOCK-BASED
COMPENSATION, the Company has presented certain pro forma and other
disclosures related to stock-based compensation plans.
RECLASSIFICATIONS - Certain amounts in the 1997 and 1996 financial
statements have been reclassified to conform to the 1998 presentation.
F-7
<PAGE>
NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130
("SFAS No. 130"), REPORTING COMPREHENSIVE INCOME. SFAS No. 130 requires
that all components of comprehensive income be reported on one of the
following: (1) the statement of income; (2) the statement of changes in
stockholders' equity, or (3) a separate statement of comprehensive income.
Comprehensive income is comprised of net income and all changes to
stockholders' equity, except those due to investments by stockholders
(changes in paid-in capital) and distributions to stockholders (dividends).
SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. The Company will adopt this standard in fiscal year ending January
31, 1999. The Company does not believe that the adoption of this statement
will have a significant impact on its consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 ("SFAS No. 131"), DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION. SFAS No. 131 changes the
way public companies report information about segments of their business in
their annual financial statements and requires them to report selected
segment information in their quarterly reports issued to shareholders. SFAS
No. 131 also requires entity-wide disclosure about products and services an
entity provides, the foreign countries in which it holds assets and reports
revenues, and its major customers. SFAS No. 131 is effective for fiscal
years beginning after December 15, 1997. The Company will adopt this
standard in fiscal year ending January 31, 1999.
3. ACQUISITIONS
MUNSINGWEAR ACQUISITION - On September 6, 1996, the Company acquired
certain assets of Munsingwear, Inc. ("Munsingwear"), a manufacturer of
men's casual apparel, for approximately $18,400,000. The assets acquired
consisted of brand names including GRAND SLAM /Registered trademark/, GRAND
SLAM TOUR /Registered trademark/, PENGUIN SPORT /Registered trademark/, and
other intangible assets. The purchase price amounted to approximately
$19,800,000, which included $1,400,000 of transaction costs, and was
primarily allocated to working capital and intangible assets as follows:
inventories $300,000; accounts receivable $300,000; and brand names
$19,200,000. The acquisition was accounted for under the purchase method of
accounting and was financed with borrowings from the revolving credit
agreement (see Note 8).
JOLEM ACQUISITION - On May 6, 1996, the Company acquired all of the assets
of Jolem Imports, Inc. ("Jolem"), a Miami based manufacturer of men's and
boy's casual apparel. The purchase price amounted to approximately
$3,700,000, and was primarily allocated to working capital and intangible
assets as follows: inventories $1,800,000; accounts receivable $1,500,000;
and brand names $400,000. The acquisition was accounted for under the
purchase method of accounting.
The following unaudited information presents the Company's pro forma
operating data for the years ended January 31, 1997 and 1996 as if the
acquisitions had been consummated at the beginning of each of the years
presented. It includes certain adjustments to the historical consolidated
statements of income of the Company to give effect to the acquisition of
brand names and associated rights, license agreements and other acquired
net assets, the related issuance of additional indebtedness by the Company
and the increased amortization of the intangible assets. The unaudited pro
forma financial data are not necessarily indicative of the results of
operations that would have been achieved had the transactions reflected
therein been consummated prior to the period in which they were completed,
or that might be attained in the future.
F-8
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA YEAR ENDED
JANUARY 31, 1997 JANUARY 31, 1996
<S> <C> <C>
Net sales $185,226,000 $167,996,000
Net income 6,614,000 5,578,000
Net income per share:
Basic 1.01 .96
Diluted 1.00 .95
</TABLE>
4. ACCOUNTS RECEIVABLE
Accounts receivable consist of the following as of January 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Trade accounts $37,499,297 $29,924,228
Royalties and other receivables 2,217,338 803,573
----------- -----------
Total 39,716,635 30,727,801
Less: Allowance for doubtful accounts 609,874 250,000
Allowance for sales returns and other chargebacks 3,604,154 1,670,565
----------- -----------
Total $35,502,607 $28,807,236
=========== ===========
</TABLE>
The activity for the allowance accounts are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Allowance for doubtful accounts:
Beginning balance $ 250,000 $ 242,792 $ 627,108
Provision 799,129 135,854 362,007
Write-offs, net of recoveries (439,255) (128,646) (746,323)
---------- ----------- ----------
Ending balance $ 609,874 $ 250,000 $ 242,792
=========== =========== ==========
Beginning balance $ 1,670,565 $ 567,014 $ 189,997
Provision 13,047,822 9,057,342 7,790,650
Actual returns and other chargebacks (11,114,233) (7,953,791) (7,413,633)
----------- ------------ ----------
Ending balance $ 3,604,154 $ 1,670,565 $ 567,014
=========== =========== ==========
</TABLE>
The Company carries accounts receivable at the amount it deems to be
collectible. Accordingly, the Company provides allowances for accounts
receivable it deems to be uncollectible based on management's best
estimates. Recoveries are recognized in the period they are received. The
ultimate amount of accounts receivable that become uncollectible could
differ from those estimated.
F-9
<PAGE>
5. INVENTORIES
Inventories consist of the following as of January 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Finished goods $ 31,972,723 $ 27,445,635
Raw materials and in process 1,204,841 3,629,940
Merchandise in transit 2,621,824 1,124,947
------------- -------------
Total $ 35,799,388 $ 32,200,522
============ ============
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment consists of the following as of January 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Furniture, fixtures and equipment $ 5,723,557 $ 3,250,373
Vehicles 309,955 321,553
Leasehold improvements 1,617,288 775,292
-------------- --------------
7,650,800 4,347,218
Less: accumulated depreciation and amortization (2,751,144) (2,209,130)
-------------- ----------
Total $ 4,899,656 $ 2,138,088
============= =============
</TABLE>
7. BORROWINGS UNDER LETTER OF CREDIT FACILITIES
The Company has a $45 million facility which provides up to $35 million to
issue sight letters of credit including a sub-limit of $2 million to issue
time letters of credit up to 120 days. In addition, the facility has a $10
million sub-limit for refinancing of sight letters of credit for a period
of up to 120 days. The facility is secured by the consignment of
merchandise in transit under each letter of credit. Indebtedness under this
facility bears interest at variable rates substantially equal to the
lenders' prime rate minus 1.0% per annum (7.5 % as of January 31, 1998).
Amounts outstanding under the $10 million sub-limit are secured by a
secondary interest in the Company's accounts receivable and inventories.
The Company has two additional letter of credit facilities which provide
for borrowings of up to $15 million to issue sight letters of credit. The
facilities are secured by the consignment of the merchandise in transit
under each letter of credit.
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total letter of credit facilities $60,000,000 $33,000,000
Borrowings (3,000,000) (6,812,629)
Outstanding letters of credit (26,673,016) (16,978,246)
----------- -----------
Available $30,326,984 $ 9,209,115
=========== ===========
</TABLE>
F-10
<PAGE>
8. LONG-TERM DEBT
The Company entered into a revolving credit agreement in March 1998 with a
commercial bank giving it the right to borrow $55 million or a portion
thereof for its general corporate purposes. This revolving credit agreement
expires in April 2001 and replaced the previous revolving credit agreement
which expired in October 1997. Borrowings are limited under the terms of a
borrowing base calculation which generally restricts the outstanding
balance to 85% of eligible receivables plus 50% of eligible inventories, as
defined. Interest on borrowings is variable, based upon the Company's
option of selecting a LIBOR plus 1.5% or the bank's prime rate. Interest of
7.4% was being charged as of January 31, 1998. The agreement contains
certain covenants, the most restrictive of which require the Company to
maintain certain financial and net worth ratios. In addition, the agreement
restricts the payment of dividends. The agreements are secured by the
Company's assets. The outstanding balance under these revolving credit
agreements as of January 31, 1998 and 1997 amounted to $36,658,174 and
$25,136,801, respectively.
9. INCOME TAXES
The income tax provision consists of the following for each of the years
ended January 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Current income taxes:
Federal $ 2,780,815 $ 2,910,509 $ 2,510,684
State 307,371 526,754 403,292
------------- ------------- -------------
Total 3,088,186 3,437,263 2,913,976
Deferred income taxes:
Federal and state (203,342) 159,655 (228,313)
------------- ------------- -------------
Total $ 2,884,844 $ 3,596,918 $ 2,685,663
============= ============= =============
</TABLE>
The following table reconciles the statutory federal income tax rate to the
Company's effective income tax rate for each of the years ended January 31:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Statutory federal income tax rate 35.0% 35.0% 35.0%
Increase (decrease) resulting from:
State income taxes, net of
federal income tax benefit 2.1 3.9 3.3
Benefit of graduated rate (1.0) (1.0) (1.0)
Reversal of certain income tax
reserves (5.0) - -
Other (2.4) 0.2 0.5
---- ---- ----
Total 28.7% 38.1% 37.8%
==== ==== ====
</TABLE>
F-11
<PAGE>
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows as of January 31:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Deferred income tax assets:
Inventories $ 642,944 $ 589,770
Accounts receivable 227,468 93,750
Accrued expenses 183,750 233,604
Other 39,001 44,901
------------ ------------
Deferred income tax assets 1,093,163 962,025
------------ ------------
Deferred income tax liabilities:
Intangibles (99,694) (167,188)
Other (121,469) (126,179)
------------- -------------
Deferred income tax assets (221,163) (293,367)
------------- -------------
Net deferred income tax asset $ 872,000 $ 668,658
============ ===========
</TABLE>
A valuation allowance for deferred income tax assets is not deemed
necessary as the assets are expected to be recovered.
10. RELATED PARTY TRANSACTIONS
The Company leases certain office and warehouse space owned by the
Company's Chairman of the Board of Directors and Chief Executive Officer
under a non-cancelable operating lease arrangement. Rent expense, including
taxes, for these leases amounted to $625,000, $600,000 and $506,000 for the
years ended January 31, 1998, 1997 and 1996, respectively.
The Company entered into a license agreement (the "License Agreement") with
Isaco International, Inc. ("Isaco"), pursuant to which Isaco was granted an
exclusive license to use the Natural Issue/Registered trademark/ brand name
in the United States and Puerto Rico to market a line of men's underwear
and loungewear. The License Agreement provides for a guaranteed minimum
royalty payment to the Company of $137,500 and expires on May 31, 1998. The
principal shareholder of Isaco is the father-in-law of the Company's
President and Chief Operating Officer. Royalty income earned from the
License Agreement amounted to $287,000, $243,000 and $93,000 for the years
ended January 31, 1998, 1997 and 1996, respectively.
11. STOCK OPTIONS AND WARRANTS
STOCK OPTIONS - The Company adopted a 1993 Stock Option Plan (the "1993
Plan") and a Directors Stock Option Plan (the "Directors Plan")
(collectively, the "Stock Option Plans"), under which 450,000 shares of
common stock and 150,000 shares of common stock, respectively, are reserved
for issuance upon the exercise of the options. The Stock Option Plans are
designed to serve as an incentive for attracting and retaining qualified
and competent employees, directors, consultants, and independent
contractors of the Company. The 1993 Plan provides for the granting of both
incentive stock options and nonstatutory stock options. Incentive stock
options may only be granted to employees.
F-12
<PAGE>
Only non-employee directors are eligible to receive options under the
Directors Plan. All matters relating to the Directors Plan are administered
by a committee of the Board of Directors consisting of two or more employee
directors, including selection of participants, allotment of shares,
determination of price and other conditions of purchase, except that the
per share exercise price of options granted under the Directors Plan may
not be less than the fair market value of the common stock on the date of
grant.
Options can be granted under the 1993 Plan on such terms and at such prices
as determined by the Board of Directors, or a committee thereof, except
that the per share exercise price of incentive stock options granted under
the 1993 Plan may not be less than the fair market value of the common
stock on the date of grant, and in the case of an incentive stock option
granted to a 10% shareholder, the per share exercise price will not be less
than 110% of such fair market value. The aggregate fair market value of the
shares covered by incentive stock options granted under the 1993 Plan that
become exercisable by a grantee for the first time in any calendar year is
subject to a $100,000 limit.
A summary of the stock option activity for options issued under the 1993
Plan and the Directors Plan is as follows for the years ended January 31:
<TABLE>
<CAPTION>
1998 1997 1996
--------------------------------------------------------------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE OF SHARES EXERCISE PRICE
-------------------------- ---------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares under option at
beginning of year .............. 293,250 $ 8.01 218,250 $ 7.71 141,000 $ 7.57
Granted ....................... 24,000 6.56 90,000 8.87 78,750 8.00
Exercised ..................... (26,250) 7.73 (7,500) 6.50 -- --
Cancelled ..................... -- -- (7,500) 6.50 (1,500) 7.70
-------- -------- ------- -------- ------- --------
Shares under option
at end of year ................ 291,000 $ 7.92 293,250 $ 8.01 218,250 $ 7.71
-------- -------- ------- -------- ------- --------
Exercisable at end of year .... 221,750 $ 7.90 192,938 $ 8.14 114,938 $ 8.06
======== ======== ======= ======== ======= ========
Weighted-average fair value of
options granted during the year $ 5.99 $ 4.97 $ 3.80
======== ======== ========
</TABLE>
The following table summarizes information about fixed-price stock options
outstanding as of January 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTION EXCERCISABLE
------------------------------------------------------------------------------------------
WEIGHTED
AVERAGE
NUMBER REMAINING WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING CONTRACTUAL AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICE AT 1/31/98 LIFE EXERCISE AT 1/31/98 EXERCISE
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 6.00 - $ 8.00 180,875 2 years $ 7.20 143,000 $ 7.24
8.01 - 10.00 68,875 1 years 8.49 56,250 8.47
10.01 - 11.00 41,250 4 years 10.61 22,500 10.64
--------------------------------------------------------------------------------------------
$ 6.00 - $11.00 291,000 221,750
</TABLE>
F-13
<PAGE>
As described in Note 2, the Company accounts for stock-based compensation
using the provisions of APB No. 25 and related interpretations. No
compensation expense has been recognized in the years ended January 31,
1998, 1997 and 1996 as the exercise prices for stock options granted are
equal to their fair market value at the time of grant. Had compensation
cost for options granted been determined in accordance with the fair value
provisions of SFAS 123, the Company's net income and net income per share
would have been as follows for the years ended January 31:
1998 1997 1996
Net income:
As reported $7,178,162 $5,844,019 $4,423,551
========== ========== ==========
Pro forma $7,026,242 $5,710,383 $4,311,772
========== ========== ==========
Net income per share:
As reported:
Basic $ 1.10 $ .89 $ .76
======= ====== ======
Diluted $ 1.08 $ .89 $ .75
======= ====== ======
Pro forma:
Basic $ 1.07 $ .87 $ .74
======= ====== ======
Diluted $ 1.05 $ .87 $ .73
======= ====== ======
The fair value of options issued was estimated at the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions: a risk-free interest rate of 6.5%; no dividend yield; a
volatility factor of 45.9%; and a weighted-average expected life of the
options of 5 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
stock options.
The pro forma amounts may not be representative of the future effects on
reported net income and net income per share that will result from the
future granting of stock options, since the pro forma compensation expense
is allocated over the periods in which options become exercisable and new
option awards are granted each year.
WARRANTS - In conjunction with the Company's initial public offering in May
1993, the Company granted 180,000 warrants entitling the holders of each
warrant to purchase one share of common stock at an exercise price of $9.35
per share. The warrants became exercisable on May 21, 1995 and expire on
May 20, 1998. No warrants have been exercised as of January 31, 1998.
F-14
<PAGE>
12. COMMITMENTS AND CONTINGENCIES
The Company has licensing agreements, as licensee, for the use of certain
branded and designer labels. The license agreements expire on varying dates
through December 31, 2000. Total royalty payments under these license
agreements amounted to $330,000, $405,000 and $443,000 for the years ended
January 31, 1998, 1997 and 1996, respectively, and were classified as
selling, general and administrative expenses.
The Company is party to an employment agreement with Oscar Feldenkreis, the
Company's President and Chief Operating Officer, which expires in May 1998,
and is subject to annual renewal. The employment agreement currently
provides for an annual salary of $350,000, subject to annual cost-of-living
increases, and an annual bonus as may be determined by the Compensation
Committee in its discretion, up to a maximum of $500,000. The employment
agreement requires Mr. Feldenkreis to devote his full-time to the affairs
of the Company. Upon termination of the employment agreement by reason of
the employee's death or disability, Mr. Feldenkreis or his estate will
receive a lump sum payment equal to one year's salary plus a bonus as may
be determined by the Compensation Committee in its discretion. The
employment agreement also prohibits Mr. Feldenkreis from directly or
indirectly competing with the Company for one year after termination of his
employment for any reason except the Company's termination of Mr.
Feldenkreis without cause.
The Company is also party to an employment agreement with George
Feldenkreis, the Company's Chairman of the Board and Chief Executive
Officer, expiring in May 1998, and is subject to annual renewal. The
employment agreement currently provides for an annual salary of $125,000,
subject to annual cost-of-living increases, and an annual bonus as may be
determined by the Compensation Committee in its discretion, up to a maximum
of $250,000. Pursuant to his employment agreement, Mr. Feldenkreis devotes
a majority of his working time to the affairs of the Company. George
Feldenkreis' employment agreement contains termination and non-competition
provisions similar to those set forth in Oscar Feldenkreis' agreement.
The Company has consolidated its administrative offices and warehouses and
distribution facilities into a new 238,000 square foot facility in Miami.
The lease has a term of five years, minimum annual rental of approximately
$1,000,000 and requires a minimum contingent rental payment at the
termination of the lease of $12,325,000. The minimum contingent rental
payment is not required if, at the Company's option, the lease is renewed
after the five year term.
Minimum aggregate annual commitments for all of the Company's noncancelable
operating lease commitments, including the related party leases described
in Note 10 and the minimum contingent rental payment described above, are
as follows.
YEAR ENDING
JANUARY 31,
1999 $ 1,490,500
2000 1,335,000
2001 1,323,300
2002 1,206,200
2003 13,154,500
2004 and thereafter 372,100
-------------
Total $ 18,881,600
=============
F-15
<PAGE>
Rent expense for these leases, including the related party rent payments
discussed in Note 10, amounted to $1,460,000, $1,078,000, and $825,000 for
the fiscal years ended January 31, 1998, 1997 and 1996, respectively.
On March 4, 1998, the Company purchased certain land adjacent to the
building it occupies. The purchase price of $1,030,000 was financed with
borrowings from the revolving credit agreement (see Note 8).
The Company guarantees up to $600,000 of letters of credit of an
unaffiliated entity.
The Company is subject to claims and suits against it, as well as the
initiator of claims and suits against others, in the ordinary course of its
business, including claims arising from the use of its trademarks. The
Company does not believe that the resolution of any pending claims will
have a material adverse affect on its financial position, results of
operations or cash flows.
13. SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)
(000'S OMITTED EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JANUARY 31, 1998 1Q 2Q 3Q 4Q TOTAL
<S> <C> <C> <C> <C> <C>
Net sales $ 48,841 $42,037 $ 54,550 $45,261 $190,689
Gross profit 11,840 9,487 11,590 11,781 44,698
Net income 2,149 826 2,411 1,792 7,178
Net income per share:
Basic $ 0.33 $ 0.13 $ 0.37 $ 0.27 $ 1.10
Diluted $ 0.33 $ 0.12 $ 0.36 $ 0.27 $ 1.08
FISCAL YEAR ENDED JANUARY 31, 1997 1Q 2Q 3Q 4Q TOTAL
Net sales $ 37,807 $31,159 $ 46,746 $41,661 $157,373
Gross profit 8,644 6,754 10,711 9,218 35,327
Net income 1,615 689 1,974 1,566 5,844
Net income per share:
Basic (1) $ 0.25 $ 0.11 $ 0.30 $ 0.24 $ 0.89
Diluted $ 0.25 $ 0.10 $ 0.30 $ 0.24 $ 0.89
FISCAL YEAR ENDED JANUARY 31, 1996 1Q 2Q 3Q 4Q TOTAL
Net sales $ 35,090 $25,358 $ 35,506 $25,884 $121,838
Gross profit 8,703 6,595 8,757 5,639 29,694
Net income 1,595 1,024 1,505 300 4,424
Net income per share:
Basic (1) $ 0.29 $ 0.18 $ 0.27 $ 0.04 $ 0.76
Diluted (1) $ 0.28 $ 0.18 $ 0.26 $ 0.04 $ 0.75
<FN>
- -------------------
(1) Total does not equal sum of quarters due to effect of the weighted
averaging of shares outstanding.
</FN>
</TABLE>
* * * * * *
F-16
<PAGE>
SUPREME INTERNATIONAL CORPORATION
INDEX TO EXHIBITS
FILED WITH ANNUAL REPORT ON FORM 10-K
EXHIBIT DESCRIPTION OF EXHIBIT
10.24 Lease Agreement [Land] dated as of August 28, 1997 between SUP Joint
Venture, as Lessor and Registrant, as Lessee
10.25 Lease Agreement [Building] dated as of August 28, 1997, between SUP
Joint Venture, as Lessor and Registrant, as Lessee
10.26 Amended and Restated Loan and Security Agreement dated as of March 31,
1998
23.2 Consent of Deloitte & Touche LLP
27.1 Financial Data Schedule (SEC use only)
EXHIBIT 10.24
Recording requested by,
and after recordation,
this instrument
should be returned to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Rex Palmer
================================================================================
================================================================================
LEASE AGREEMENT
[LAND]
Dated as of August 28, 1997
between
SUP JOINT VENTURE, as Lessor,
and
SUPREME INTERNATIONAL CORPORATION, as Lessee
-------------------------------------------
================================================================================
================================================================================
<PAGE>
TABLE OF CONTENTS
(Lease Agreement)
PAGE
----
ARTICLE I. DEFINITIONS............................................... 1
ARTICLE II. LEASE OF LEASED PROPERTY.................................. 1
Section 2.1 Lease of Property..................................... 1
Section 2.2 Acceptance Procedure.................................. 1
Section 2.3 Separate Leases....................................... 2
Section 2.4 Construction.......................................... 2
ARTICLE III. RENT...................................................... 2
Section 3.1 Basic Rent............................................ 2
Section 3.2 Supplemental Rent..................................... 2
Section 3.3 Method of Payment..................................... 3
Section 3.4 Late Payment.......................................... 3
Section 3.5 Net Lease; No Setoff, Etc............................. 3
Section 3.6 Certain Taxes......................................... 5
Section 3.7 Utility Charges....................................... 6
ARTICLE IV. WAIVERS................................................... 6
ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES..................... 7
ARTICLE VI. MAINTENANCE AND REPAIR;ALTERATIONS,
MODIFICATIONS AND ADDITIONS............................... 8
Section 6.1 Maintenance and Repair; Compliance With
Law................................................... 8
Section 6.2 Alterations........................................... 9
Section 6.3 Title to Alterations.................................. 9
ARTICLE VII. USE....................................................... 9
ARTICLE VIII. INSURANCE................................................ 10
ARTICLE IX. ASSIGNMENT AND SUBLEASING................................ 11
ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................ 12
Section 10.1 Event of Loss........................................ 12
Section 10.2 Event of Taking...................................... 12
Section 10.3 Casualty............................................. 13
Section 10.4 Condemnation......................................... 13
Section 10.5 Verification of Restoration and
Rebuilding........................................... 14
<PAGE>
Section 10.6 Application of Payments.............................. 14
Section 10.7 Prosecution of Awards................................ 15
Section 10.8 Application of Certain Payments Not
Relating to an Event of Taking....................... 16
Section 10.9 Other Dispositions................................... 16
Section 10.10 No Rent Abatement.................................... 16
ARTICLE XI. INTEREST CONVEYED TO LESSEE.............................. 16
ARTICLE XII. EVENTS OF DEFAULT........................................ 22
ARTICLE XIII. ENFORCEMENT.............................................. 25
Section 13.1 Remedies............................................. 25
Section 13.2 Remedies Cumulative; No Waiver;
Consents............................................. 27
ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY;
RENEWAL ................................................. 28
Section 14.1 Lessee's Option to Purchase.......................... 28
Section 14.2 Conveyance to Lessee................................. 29
Section 14.3 Acceleration of Purchase Obligation.................. 29
Section 14.4 Determination of Purchase Price...................... 29
Section 14.5 Purchase Procedure................................... 29
Section 14.6 Option to Remarket; Surrender Option................. 30
Section 14.7 Rejection of Sale.................................... 33
Section 14.8 Return of Leased Property............................ 33
Section 14.9 Renewal.............................................. 34
ARTICLE XV. LESSEE'S EQUIPMENT....................................... 35
ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE.............................. 35
ARTICLE XVII. MISCELLANEOUS............................................ 36
Section 17.1 Reports.............................................. 36
Section 17.2 Binding Effect; Successors and Assigns;
Survival............................................. 36
Section 17.3 Quiet Enjoyment...................................... 36
Section 17.4 Notices.............................................. 36
Section 17.5 Severability......................................... 37
Section 17.6 Amendment; Complete Agreements....................... 37
Section 17.7 Construction......................................... 37
Section 17.8 Headings............................................. 37
Section 17.9 Counterparts......................................... 38
Section 17.10 GOVERNING LAW........................................ 38
Section 17.11 Discharge of Lessee's Obligations by its
Affiliates........................................... 38
<PAGE>
Section 17.12 Liability of Lessor Limited......................... 38
Section 17.13 Estoppel Certificates............................... 38
Section 17.14 No Joint Venture.................................... 39
Section 17.15 No Accord and Satisfaction.......................... 39
Section 17.16 No Merger........................................... 39
Section 17.17 Survival............................................ 39
Section 17.18 Chattel Paper....................................... 40
Section 17.19 Time of Essence..................................... 40
Section 17.20 Recordation of Lease................................ 40
Section 17.21 Investment of Security Funds........................ 40
<PAGE>
PAGE
----
(iv)
<PAGE>
PAGE
----
(v)
<PAGE>
APPENDICES AND EXHIBITS
- -----------------------
APPENDIX A Defined Terms
EXHIBIT A Legal Description
(vi)
<PAGE>
THIS LEASE AGREEMENT (as from time to time amended or supplemented,
this "LEASE"), dated as of August 28, 1997, is between SUP JOINT VENTURE, a
Florida general partnership (together with its successors and assigns hereunder,
the "LESSOR"), as Lessor, and SUPREME INTERNATIONAL CORPORATION, a Florida
corporation (together with its successors and permitted assigns hereunder, the
"LESSEE"), as Lessee.
PRELIMINARY STATEMENT
A. Lessor owns certain real property.
B. Lessor desires to lease to Lessee, and Lessee desires to lease from
Lessor, such property.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, Lessor
and Lessee hereby agree as follows:
ARTICLE I.
DEFINITIONS
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in APPENDIX A hereto for all purposes hereof.
ARTICLE II.
LEASE OF LEASED PROPERTY
Section II.1 LEASE OF PROPERTY. Commencing on the Closing Date, Lessor,
subject to the satisfaction or waiver of the conditions set forth in Section 3
of the Master Agreement, hereby agrees to lease to Lessee hereunder and under
the Building Lease for the Lease Term, Lessor's interest in the Land and in the
improvements thereon and Lessee hereby agrees, expressly for the direct benefit
of Lessor, commencing on the Closing Date for the Lease Term, to lease from
Lessor Lessor's interest in the Land, together with Lessor's interest in any
Building and other improvements thereon or which thereafter may be constructed
thereon pursuant hereto. The legal description of the Land is set forth on
EXHIBIT A hereto.
<PAGE>
Section II.2 ACCEPTANCE PROCEDURE. Lessor hereby authorizes one or more
employees of Lessee, to be designated by Lessee, as the authorized
representative or representatives of Lessor to accept delivery on behalf of
Lessor of the Leased Property. Lessee hereby agrees that such acceptance of
delivery by such authorized representative or representatives and the execution
and delivery by Lessee on the Closing Date of this Lease shall, without further
act, constitute the irrevocable acceptance by Lessee of the Leased Property for
all purposes of this Lease and the other Operative Documents on the terms set
forth therein and herein, and that the Leased Property, shall be deemed to be
included in the leasehold estate of this Lease and shall be subject to the terms
and conditions of this Lease as of the Closing Date. The demise and lease of
each Building pursuant to this SECTION 2.2 shall include any additional right,
title or interest in such Building which may at any time be acquired by Lessor,
the intent being that all right, title and interest of Lessor in and to such
Building shall at all times be demised and leased to Lessee hereunder.
Section II.3 SEPARATE LEASES. Lessor and Lessee hereby acknowledge that
the Land and the Building will be leased under separate leases. This Lease is
the Land Lease. For purposes of this Lease only (and not for purposes of the
other Operative Documents), the term ALeased Property@ refers only to the Land.
Lessee agrees that any event giving rise to a termination of this Lease,
including an Event of Loss and an Event of Taking, shall be deemed to give rise
to a termination of the Building Lease as well, and that each option to be
exercised at the end of the Lease Term hereunder, including the Purchase Option,
the Surrender Option, the Remarketing Option and the renewal option must be
exercised simultaneously with the same such option under the Building Lease.
Section II.4 CONSTRUCTION. Lessee hereby agrees, as agent for Lessor,
to cause the completion of the construction of the Building, in accordance with
Applicable Law, on or before October 31, 1997.
2
<PAGE>
ARTICLE III.
RENT
Section III.1 BASIC RENT. Beginning with and including the first
Payment Date occurring after the Closing Date, Lessee shall pay to the Agent the
Basic Rent for the Leased Property, in installments, payable in arrears on each
Payment Date during the Lease Term.
Section III.2 SUPPLEMENTAL RENT. Lessee shall pay to the Agent, or to
whomever shall be entitled thereto as expressly provided herein or in any other
Operative Document, any and all Supplemental Rent within five (5) Business Days
of the date the same shall become due and payable and in the event of any
failure on the part of Lessee to pay any Supplemental Rent, the Agent shall have
all rights, powers and remedies provided for herein or by law or in equity or
otherwise in the case of nonpayment of Basic Rent. All Supplemental Rent to be
paid pursuant to this SECTION 3.2 shall be payable in the type of funds and in
the manner set forth in SECTION 3.3.
Section III.3 METHOD OF PAYMENT. Basic Rent shall be paid to the Agent,
and Supplemental Rent (including amounts due under ARTICLE XIV hereof) shall be
paid to the Agent (or to such Person as may be entitled thereto) or, in each
case, to such Person as the Agent (or such other Person) shall specify in
writing to Lessee, and at such place as the Agent (or such other Person) shall
specify in writing to Lessee, which specifications by the Agent shall be given
by the Agent at least five (5) Business Days prior to the due date therefor.
Each payment of Rent (including payments under ARTICLE XIV hereof) shall be made
by Lessee prior to 12:00 p.m. (noon) Miami, Florida time at the place of payment
in funds consisting of lawful currency of the United States of America which
shall be immediately available on the scheduled date when such payment shall be
due, unless such scheduled date shall not be a Business Day, in which case such
payment shall be made on the next succeeding Business Day.
Section III.4 LATE PAYMENT. If any Basic Rent shall not be paid on the
date when due, Lessee shall pay to the Agent, as Supplemental Rent, interest (to
the maximum extent permitted by law) on such overdue amount from and including
the due date
3
<PAGE>
thereof to but excluding the Business Day of payment thereof at the Overdue
Rate.
Section III.5 NET LEASE; NO SETOFF, ETC. This Lease is a net lease and
notwithstanding any other provision of this Lease, Lessee shall pay all Basic
Rent and Supplemental Rent, and all costs, charges, taxes (other than taxes and
other items covered by the exclusion described in Section 7.4(b) of the Master
Agreement and other than the costs of insurance carried by the Lessor, the Agent
or any Lender pursuant to the last sentence of ARTICLE VIII(C)), assessments and
other expenses foreseen or unforeseen, for which Lessee or any Indemnitee is or
shall become liable by reason of Lessee's or such Indemnitee's estate, right,
title or interest in the Leased Property, or that are connected with or arise
out of the acquisition (except the initial costs of purchase by Lessor of its
interest in the Leased Property, which costs, subject to the terms of the Master
Agreement, shall be funded by the Funding Parties pursuant to the Master
Agreement), installation, possession, use, occupancy, maintenance, ownership,
leasing, repairs and rebuilding of, or addition to, the Leased Property or any
portion thereof, and any other amounts payable hereunder and under the other
Operative Documents without counterclaim, setoff, deduction or defense and
without abatement, suspension, deferment, diminution or reduction, and Lessee's
obligation to pay all such amounts throughout the Lease Term is absolute and
unconditional. The obligations and liabilities of Lessee hereunder shall in no
way be released, discharged or otherwise affected for any reason, including
without limitation: (a) any defect in the condition, merchantability, design,
quality or fitness for use of the Leased Property or any part thereof, or the
failure of the Leased Property to comply with all Applicable Law, including any
inability to occupy or use the Leased Property by reason of such non-compliance;
(b) any damage to, removal, abandonment, salvage, loss, contamination of or
Release from, scrapping or destruction of or any requisition or taking of the
Leased Property or any part thereof; (c) any restriction, prevention or
curtailment of or interference with any use of the Leased Property or any part
thereof including eviction; (d) any defect in title to or rights to the Leased
Property or any Lien on such title or rights or on the Leased Property; (e) any
change, waiver, extension, indulgence or other action or omission or breach in
respect of any obligation or liability of or by Lessor, the Agent or any Lender;
(f) any bankruptcy, insolvency,
4
<PAGE>
reorganization, composition, adjustment, dissolution, liquidation or other like
proceedings relating to Lessee, Lessor, any Lender, the Agent or any other
Person, or any action taken with respect to this Lease by any trustee or
receiver of Lessee, Lessor, any Lender, the Agent or any other Person, or by any
court, in any such proceeding; (g) any claim that Lessee has or might have
against any Person, including without limitation, Lessor, any vendor,
manufacturer, contractor of or for any Building or any part thereof, the Agent
or any Lender; (h) any failure on the part of Lessor to perform or comply with
any of the terms of this Lease, any other Operative Document or of any other
agreement; (i) any invalidity or unenforceability or illegality or disaffirmance
of this Lease against or by Lessee or any provision hereof or any of the other
Operative Documents or any provision of any thereof whether or not related to
the Transaction; (j) the impossibility or illegality of performance by Lessee,
Lessor or both; (k) any action by any court, administrative agency or other
Governmental Authority; (l) any restriction, prevention or curtailment of or
interference with any use of the Leased Property or any part thereof; or (m) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Lessee shall have notice or knowledge of any of the foregoing.
Except as specifically set forth in ARTICLE XIV or X of this Lease, this Lease
shall be noncancellable by Lessee in any circumstance whatsoever and Lessee, to
the extent permitted by Applicable Law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this Lease, or
to any diminution, abatement or reduction of Rent payable by Lessee hereunder.
Each payment of Rent made by Lessee hereunder shall be final and Lessee shall
not seek or have any right to recover all or any part of such payment from
Lessor, the Agent, any Lender or any party to any agreements related thereto for
any reason whatsoever. Lessee assumes the sole responsibility for the condition,
use, operation, maintenance, and management of the Leased Property and Lessor
shall have no responsibility in respect thereof and shall have no liability for
damage to the property of either Lessee or any subtenant of Lessee on any
account or for any reason whatsoever, other than solely by reason of Lessor's
willful misconduct or gross negligence. Nothing contained in this SECTION 3.5 is
intended to be, nor shall be deemed to be, a waiver by Lessee of any rights it
may have at law or in equity to bring a cause of action against Lessor for its
gross negligence, willful misconduct or
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breach of contract, PROVIDED that Lessee may not terminate this Lease or take
any offset against Rent due hereunder.
Section III.6 CERTAIN TAXES. Without limiting the generality of SECTION
3.5, Lessee agrees to pay when due all real estate taxes, personal property
taxes, gross sales taxes, including any sales or lease tax imposed upon the
rental payments hereunder or under a sublease, occupational license taxes, water
charges, sewer charges, assessments of any nature and all other governmental
impositions and charges of every kind and nature whatsoever (the "TAX(ES)"),
when the same shall be due and payable without penalty or interest; PROVIDED,
HOWEVER, that this Section shall not apply to any of the taxes and other items
covered by the exclusion described in Section 7.4(b) of the Master Agreement. It
is the intention of the parties hereto that, insofar as the same may lawfully be
done, Lessor shall be, except as specifically provided for herein, free from all
expenses in any way related to the Leased Property and the use and occupancy
thereof. Any tax relating to a fiscal period of any taxing authority falling
partially within and partially outside the Lease Term, shall be apportioned and
adjusted between Lessor and Lessee. Lessee covenants to furnish Lessor and the
Agent, upon the Agent's request, within forty-five (45) days after the last date
when any tax must be paid by Lessee as provided in this SECTION 3.6, official
receipts of the appropriate taxing, authority or other proof satisfactory to
Lessor, evidencing the payment thereof.
So long as no Event of Default has occurred and is continuing, Lessee
may defer payment of a tax so long as the validity or the amount thereof is
contested by Lessee with diligence and in good faith; PROVIDED, HOWEVER, that
Lessee shall furnish to Lessor and the Agent a bond in an amount and on terms
satisfactory to Lessor and the Agent and shall pay the tax in sufficient time to
prevent delivery of a tax deed. Such contest shall be at Lessee's sole cost and
expense. Lessee covenants to indemnify and save harmless Lessor, the Agent and
each Lender from any actual and reasonable costs or expenses incurred by Lessor,
the Agent or any Lender as a result of such contest.
Section III.7 UTILITY CHARGES. Lessee agrees to pay or cause to be paid
as and when the same are due and payable all charges for gas, water, sewer,
electricity, lights, heat, power,
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telephone or other communication service and all other utility services used,
rendered or supplied to, upon or in connection with the Leased Property.
ARTICLE IV.
WAIVERS
During the Lease Term, Lessor's interest in the Building(s) (whether or
not completed) and the Land is demised and let by Lessor "AS IS" subject to (a)
the rights of any parties in possession thereof, (b) the state of the title
thereto existing at the time Lessor acquired its interest in the Leased
Property, (c) any state of facts which an accurate survey or physical inspection
might show (including the survey delivered on the Closing Date), (d) all
Applicable Law, and (e) any violations of Applicable Law which may exist upon or
subsequent to the commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT,
ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTY, LESSOR IS NOT
RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE
BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT NOR ANY LENDER HAS
MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE,
MERCHANTABILITY, TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS
FOR USE OF THE LEASED PROPERTY (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
LEASED PROPERTY (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY
DISCLAIMED, AND NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY
LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF THE LEASED PROPERTY,
OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW, except that Lessor
hereby represents and warrants that the Leased Property is and shall be free of
Lessor Liens. As between Lessor and Lessee, Lessee has been afforded full
opportunity to inspect the Leased Property, is satisfied with the results of its
inspections of the Leased Property and is entering into this Lease solely on the
basis of the results of its own inspections and all risks incident to the
matters discussed in the two preceding sentences, as between Lessor, the Agent
or the Lenders on the one hand, and Lessee, on the other, are to be borne by
Lessee. The provisions of this ARTICLE IV have been negotiated, and, except to
the extent otherwise expressly stated,
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the foregoing provisions are intended to be a complete exclusion and negation of
any representations or warranties by Lessor, the Agent or the Lenders, express
or implied, with respect to the Leased Property, that may arise pursuant to any
law now or hereafter in effect, or otherwise.
ARTICLE V.
LIENS; EASEMENTS; PARTIAL CONVEYANCES
Lessee shall not directly or indirectly create, incur or assume, any
Lien on or with respect to the Leased Property, the title thereto, or any
interest therein, including any Liens which arise out of the possession, use,
occupancy, construction, repair or rebuilding of the Leased Property or by
reason of labor or materials furnished or claimed to have been furnished to
Lessee, or any of its contractors or agents or by reason of the financing of any
personalty or equipment purchased or leased by Lessee from third parties and not
financed by Lessor or Alterations constructed by Lessee, except, in all cases,
Permitted Liens.
At the request of Lessee, Lessor shall, from time to time during the
Lease Term and upon reasonable advance written notice from Lessee, and receipt
of the materials specified in the next succeeding sentence, consent to and join
in any (i) grant of easements, licenses, rights of way and other rights in the
nature of easements, including, without limitation, utility easements to
facilitate Lessee's use, development and construction of the Leased Property,
(ii) release or termination of easements, licenses, rights of way or other
rights in the nature of easements which are for the benefit of the Land or the
Building(s) or any portion thereof, (iii) dedication or transfer of portions of
the Land, not improved with a building, for road, highway or other public
purposes, (iv) execution of agreements for ingress and egress and amendments to
any covenants and restrictions affecting the Land or the Building(s) or any
portion thereof and (v) request to any Governmental Authority for platting or
subdivision or replatting or resubdivision approval with respect to the Land or
any portion thereof or any parcel of land of which the Land or any portion
thereof forms a part or a request for any variance from zoning or other
governmental requirements. Lessor's obligations pursuant to the preceding
sentence shall be subject to the requirements that:
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(a) any such action shall be at the sole cost and expense of Lessee and
Lessee shall pay all actual and reasonable out-of-pocket costs of Lessor, the
Agent and any Lender in connection therewith (including, without limitation, the
reasonable fees of attorneys, architects, engineers, planners, appraisers and
other professionals reasonably retained by Lessor, the Agent or any Lender in
connection with any such action),
(b) Lessee shall have delivered to Lessor and Agent a certificate of a
Responsible Officer of Lessee stating that
(1) such action will not cause the Leased Property, the Land
or any Building or any portion thereof to fail to comply in any
material respect with the provisions of this Lease or any other
Operative Documents, or in any material respect with Applicable Law;
and
(2) such action will not materially reduce the Fair Market
Sales Value, utility or useful life of the Leased Property, the Land or
any Building nor Lessor's interest therein; and
(c) in the case of any release or conveyance, if Lessor, the Agent or
any Lender so reasonably requests, Lessee will cause to be issued and delivered
to Lessor and the Agent by the Title Insurance Company an endorsement to the
Title Policy pursuant to which the Title Insurance Company agrees that its
liability for the payment of any loss or damage under the terms and provisions
of the Title Policy will not be affected by reason of the fact that a portion of
the real property referred to in Schedule A of the Title Policy has been
released or conveyed by Lessor.
ARTICLE VI.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
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Section VI.1 MAINTENANCE AND REPAIR; COMPLIANCE WITH LAW. Lessee, at
its own expense, shall at all times (a) maintain the Leased Property in good
repair and condition (subject to ordinary wear and tear), in accordance with
prudent industry standards and, in any event, in no less a manner as other
similar office buildings owned or leased by Lessee or its Affiliates, (b) make
all Alterations in accordance with, and maintain (whether or not such
maintenance requires structural modifications or Alterations) and operate and
otherwise keep the Leased Property in compliance in all material respects with,
all Applicable Laws and insurance requirements, and (c) make all material
repairs, replacements and renewals of the Leased Property or any part thereof
which may be required to keep the Leased Property in the condition required by
the preceding CLAUSES (A) and (B). Lessee shall perform the foregoing
maintenance obligations regardless of whether the Leased Property is occupied or
unoccupied. Lessee waives any right that it may now have or hereafter acquire to
(i) require Lessor, the Agent or any Lender to maintain, repair, replace, alter,
remove or rebuild all or any part of the Leased Property or (ii) make repairs at
the expense of Lessor, the Agent or any Lender pursuant to any Applicable Law or
other agreements or otherwise. NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE
LIABLE TO LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN,
SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN
CONNECTION WITH ANY LEASED PROPERTY OR ANY PART THEREOF. THE INTEREST OF LESSOR
UNDER THIS LEASE SHALL NOT BE SUBJECT TO LIENS FOR IMPROVEMENTS MADE BY LESSEE.
Neither Lessor, the Agent nor any Lender shall be required to maintain, alter,
repair, rebuild or replace the Leased Property in any way.
Section VI.2 ALTERATIONS. Lessee may, without the consent of Lessor, at
Lessee's own cost and expense, make Alterations which do not materially diminish
the value, utility or useful life of the Leased Property.
Section VI.3 TITLE TO ALTERATIONS. Title to all Alterations shall
without further act vest in Lessor (subject to Lessee's right to remove, or
grant a Lien on, trade fixtures, personal property, inventory and equipment
which were not acquired with funds advanced by Lessor or any Lender at a time
when no Event of Default has occurred and is continuing) and shall be deemed to
constitute a part of the Leased Property and be subject to this Lease.
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ARTICLE VII.
USE
Lessee may use the Leased Property or any part thereof for any lawful
purpose, and in a manner consistent with the standards applicable to properties
of a similar nature in the geographic area in which the Leased Property is
located, PROVIDED that such use does not materially adversely affect the Fair
Market Sales Value, utility, remaining useful life or residual value of the
Leased Property, and does not materially violate or conflict with, or constitute
or result in a material default under, any Applicable Law or any insurance
policy required hereunder. In the event Lessee's use substantially changes the
character of the Building in a manner or to an extent that, in Lessor's or the
Lenders' reasonable opinion, adversely affects the Fair Market Sales Value
and/or marketability of the Building, Lessee shall, upon the termination or
expiration of this Lease, at Lessor's request, restore the Leased Property to
its general character at the Date (ordinary wear and tear excepted), unless
Lessee has purchased the Leased Property pursuant to the terms of this Lease.
Lessee shall not commit or permit any waste of the Leased Property or the
material part thereof. Lessor shall not take any affirmative action to commit
waste of, or cause damage to, the Leased Property, PROVIDED that Lessor shall
not be liable to Lessee for any action Lessor takes at the request of Lessee or
any action imputed to Lessor by virtue of Lessee=s acting as Lessors agent.
ARTICLE VIII.
INSURANCE
(a) At any time during which any part of the Building or any Alteration
is under construction and as to any part of the Building or any Alteration under
construction, Lessee shall maintain, or cause to be maintained, at its sole cost
and expense, as a part of its blanket policies or otherwise, "all risks"
non-reporting completed value form of builder's risk insurance.
(b) During the Lease Term, Lessee shall maintain, at its sole cost and
expense, as a part of its blanket policies or otherwise, insurance against loss
or damage to any Building by
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fire and other risks, including comprehensive boiler and machinery coverage, on
terms and in amounts no less favorable than insurance covering other similar
properties owned or leased by Lessee and that are in accordance with normal
industry practice, but in no event less than the replacement cost of such
Building from time to time.
(c) During the Lease Term, Lessee shall maintain, at its sole cost and
expense, commercial general liability insurance with respect to the Leased
Property, as is ordinarily procured by Persons who own or operate similar
properties in the same geographic area. Such insurance shall be on terms and in
amounts that are no less favorable than insurance maintained by Lessee or its
Affiliates with respect to similar properties that it owns or leases and that
are in accordance with normal industry practice, but in no event less than
$1,000,000 per occurrence. Such insurance policies shall also provide that
Lessee's insurance shall be considered primary insurance. Nothing in this
ARTICLE VIII shall prohibit Lessor, the Agent or any Lender from carrying at its
own expense other insurance on or with respect to the Leased Property, PROVIDED
that any insurance carried by Lessor, the Agent or any Lender shall not prevent
Lessee from carrying the insurance required hereby.
(d) Each policy of insurance maintained by Lessee pursuant to CLAUSES
(A) and (B) of this ARTICLE IX shall provide that all insurance proceeds in
respect of any loss or occurrence shall be adjusted by Lessee, except (a) that
with respect to any loss, the estimated cost of restoration of which is in
excess of $3,000,000, the adjustment thereof shall be subject to the prior
written approval of the Agent (or of Lessor if the Funded Amounts have been
fully paid) and the insurance proceeds therefor shall be paid to the Agent (or
to Lessor if the Funded Amounts have been fully paid) for application in
accordance with this Lease, and (b) if, and for so long as an Event of Default
exists, all losses shall be adjusted solely by, and all insurance proceeds shall
be paid solely to, the Agent (or Lessor if the Loans have been fully paid) for
application pursuant to this Lease.
(e) On the Closing Date and on each anniversary of the Closing Date,
Lessee shall furnish Lessor with certificates showing the insurance required
under this ARTICLE VIII to be in effect and naming Lessor, the Agent and the
Lenders as additional
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insureds. Such certificates shall include a provision for thirty (30) days'
advance written notice by the insurer to Lessor and the Agent in the event of
cancellation or expiration or nonpayment of premium with respect to such
insurance, and shall include a customary breach of warranty clause.
(f) Each policy of insurance maintained by Lessee pursuant to this
ARTICLE VIII shall (1) contain the waiver of any right of subrogation of the
insurer against Lessor, the Agent and the Lenders, and (2) provide that in
respect of the interests of Lessor, the Agent and the Lenders, such policies
shall not be invalidated by any fraud, action, inaction or misrepresentation of
Lessee or any other Person acting on behalf of Lessee.
(g) All insurance policies carried in accordance with this ARTICLE VIII
shall be maintained with insurers rated at least A by A.M. Best & Company, and
in all cases the insurer shall be qualified to insure risks in the State where
the Leased Property is located.
ARTICLE IX.
ASSIGNMENT AND SUBLEASING
Lessee may not assign any of its right, title or interest in, to or
under this Lease, except as set forth in the following sentence. Lessee may
sublease all or any portion of the Leased Property, PROVIDED that (a) all
obligations of Lessee shall continue in full effect as obligations of a
principal and not of a guarantor or surety, as though no sublease had been made;
(b) such sublease shall be expressly subject and subordinate to this Lease, the
Loan Agreement and the other Operative Documents; and (c) each such sublease
shall terminate on or before the Lease Termination Date.
Except pursuant to an Operative Document, this Lease shall not be
mortgaged or pledged by Lessee, nor shall Lessee mortgage or pledge any interest
in the Leased Property or any portion thereof. Any such mortgage or pledge shall
be void.
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ARTICLE X.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section X.1 EVENT OF LOSS. Any event (i) which would otherwise
constitute a Casualty during the Base Term, and (ii) which, in the good-faith
judgment of Lessee, renders repair and restoration of the Leased Property
impractical or uneconomical, and (iii) as to which Lessee, within sixty (60)
days after the occurrence of such event, delivers to Lessor an Officer's
Certificate notifying Lessor of such event and of such judgment, shall
constitute an "EVENT OF LOSS". In the case of any other event which constitutes
a Casualty, Lessee shall restore the Leased Property pursuant to SECTION 10.3.
If an Event of Loss other than an Event of Taking shall occur, Lessee shall pay
to Lessor on the next Payment Date following delivery of the Officer's
Certificate pursuant to CLAUSE (III) above an amount equal to the Lease Balance.
Upon Lessor's receipt of such Lease Balance on such date, Lessor shall cause
Lessor's interest in the Leased Property to be conveyed to Lessee in accordance
with and subject to the provisions of SECTION 14.5 hereof; upon completion of
such purchase, but not prior thereto, this Lease and all obligations hereunder
shall terminate, except with respect to obligations and liabilities hereunder,
actual or contingent, that have arisen or relate to events occurring on or prior
to such date of purchase, or which are expressly stated herein to survive
termination of this Lease.
Upon the consummation of the purchase of the Leased Property pursuant
to this SECTION 10.1, any proceeds derived from insurance required to be
maintained by Lessee pursuant to this Lease for the Leased Property remaining
after payment of such purchase price shall be paid over to, or retained by,
Lessee or as it may direct, and Lessor shall assign to Lessee, without warranty,
all of Lessor's rights to and interest in insurance required to be maintained by
Lessee pursuant to this Lease.
Section X.2 EVENT OF TAKING. Any event (i) which constitutes a
Condemnation of all of, or substantially all of, the Leased Property, or (ii)
(A) which would otherwise constitute the Condemnation, (B) which, in the
good-faith judgment of Lessee, renders restoration and rebuilding of the Leased
Property impossible, impractical or uneconomical, and (C) as to which Lessee,
within sixty (60) days after the occurrence of such
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event, delivers to Lessor an Officer's Certificate notifying Lessor of such
event and of such judgment, shall constitute an "EVENT OF TAKING". In the case
of any other event which constitutes a Condemnation, Lessee shall restore and
rebuild the Leased Property pursuant to SECTION 10.4. If an Event of Taking
shall occur, Lessee shall pay to Lessor (1) on the next Payment Date occurring
not less than ninety (90) days after the occurrence of such Event of Taking, in
the case of an Event of Taking described in CLAUSE (I) above, or (2) on the next
Payment Date occurring not less than ninety (90) days after delivery of the
Officer's Certificate pursuant to CLAUSE (II) above, in the case of an Event of
Taking described in CLAUSE (II) above, an amount equal to the Lease Balance.
Upon Lessor's receipt of such Lease Balance on such date, Lessor shall cause
Lessor's interest in the Leased Property to be conveyed to Lessee in accordance
with and subject to the provisions of SECTION 14.5 hereof (provided that such
conveyance shall be subject to all rights of the condemning authority); upon
completion of such purchase, but not prior thereto, this Lease and all
obligations hereunder shall terminate, except with respect to obligations and
liabilities hereunder, actual or contingent, that have arisen or relate to
events occurring on or prior to such date of purchase, or which are expressly
stated herein to survive termination of this Lease.
Upon the consummation of the purchase of the Leased Property pursuant
to this SECTION 10.2, all Awards received by Lessor, after deducting any
reasonable costs incurred by Lessor in collecting such Awards, received or
payable on account of an Event of Taking with respect to the Leased Property
during the related Lease Term shall be paid to Lessee, and all rights of Lessor
in Awards not then received shall be assigned to Lessee by Lessor.
Section X.3 CASUALTY. If a Casualty shall occur, Lessee shall rebuild
and restore the Leased Property, will complete the same prior to the Lease
Termination Date, and will cause the condition set forth in SECTION 3.4 (C) of
the Master Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date, regardless of whether insurance
proceeds received as a result of such Casualty are sufficient for such purpose,
unless Lessee purchases the Leased Property in accordance with the terms of this
Lease.
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Section X.4 CONDEMNATION. If a Condemnation shall occur, Lessee shall
rebuild and restore the Leased Property, will complete the same prior to the
Lease Termination Date, and will cause the condition set forth in SECTION 3.4
(C) of the Master Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date, unless Lessee purchases the
Leased Property in accordance with the terms of this Lease.
Section X.5 VERIFICATION OF RESTORATION AND REBUILDING. In the event of
Casualty or Condemnation, to verify Lessee's compliance with the foregoing
SECTIONS 10.3 and 10.4, Lessor, the Agent, the Lenders and their respective
authorized representatives may, upon five (5) Business Days' notice to Lessee,
make inspections of the Leased Property with respect to (i) the extent of the
Casualty or Condemnation and (ii) the restoration and rebuilding of the Building
and the Land. All actual and reasonable out-of-pocket costs of such inspections
incurred by Lessor, the Agent or any Lender will be paid by Lessee promptly
after written request. No such inspection shall unreasonably interfere with
Lessee's operations or the operations of any other occupant of the Leased
Property. None of the inspecting parties shall have any duty to make any such
inspection or inquiry and none of the inspecting parties shall incur any
liability or obligation by reason of making or not making any such inspection or
inquiry.
Section X.6 APPLICATION OF PAYMENTS. All proceeds (except for payments
under insurance policies maintained other than pursuant to ARTICLE VIII of this
Lease) received at any time by Lessor, Lessee or the Agent from any Governmental
Authority or other Person with respect to any Condemnation or Casualty to the
Leased Property or any part thereof or with respect to an Event of Loss or an
Event of Taking, PLUS the amount of any payment that would have been due from an
insurer but for Lessee's self-insurance or deductibles ("LOSS PROCEEDS"), shall
(except to the extent SECTION 10.9 applies) be applied as follows:
(a) In the event Lessee purchases the Leased Property pursuant
to SECTION 10.1 or SECTION 10.2, such Loss Proceeds shall be applied as
set forth in SECTION 10.1 or SECTION 10.2, as the case may be;
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(b) In the event of a Casualty at such time when no Event of
Default has occurred and is continuing and Lessee is obligated to
repair and rebuild the Leased Property pursuant to SECTION 10.3, Lessee
may, in good faith and subsequent to the date of such Casualty, certify
to Lessor and to the applicable insurer that no Event of Default has
occurred and is continuing, in which event the applicable insurer shall
pay the Loss Proceeds to Lessee, unless the estimated cost of
restoration exceeds $3,000,000, in which case the Loss Proceeds shall
be paid to the Agent (or Lessor if the Loans have been paid in full),
and shall be promptly released to Lessee upon certification by Lessee
to Lessor and the Agent that Lessee has incurred costs in the amount
requested to be released for the repair and rebuilding of the Leased
Property;
(c) In the event of a Condemnation at such time when no Event
of Default has occurred and is continuing and Lessee is obligated to
repair and rebuild the Leased Property pursuant to SECTION 10.4, Lessor
shall upon Lessee's request assign to Lessee Lessor's interest in any
applicable Awards; and
(d) As provided in SECTION 10.8, if such section is
applicable.
During any period of repair or rebuilding pursuant to this ARTICLE X,
this Lease will remain in full force and effect and Basic Rent shall continue to
accrue and be payable without abatement or reduction. Lessee shall maintain
records setting forth information relating to the receipt and application of
payments in accordance with this SECTION 10.6. Such records shall be kept on
file by Lessee at its offices and shall be made available to Lessor, the Lenders
and the Agent upon request.
Section X.7 PROSECUTION OF AWARDS. (a) If, during the continuance of
any Event of Default, any Condemnation shall occur, Lessee shall give to Lessor
and the Agent promptly, but in any event within thirty (30) days after the
occurrence thereof, written notice of such occurrence and the date thereof,
generally describing the nature and extent of such Condemnation. With respect to
any Event of Taking or any Condemnation, Lessee shall control the negotiations
with the relevant Governmental Authority
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as to any proceeding in respect of which Awards are required, under SECTION
10.6, to be assigned or released to Lessee, unless an Event of Default shall
have occurred and be continuing, in which case (1) the Agent shall control such
negotiations; and (2) Lessee hereby irrevocably assigns, transfers and sets over
to Lessor all rights of Lessee to any Award made during the continuance of an
Event of Default on account of any Event of Taking or any Condemnation and, if
there will not be separate Awards to Lessor and Lessee on account of such Event
of Taking or Condemnation, irrevocably authorizes and empowers the Agent during
the continuance of an Event of Default, with full power of substitution, in the
name of Lessee or otherwise (but without limiting the obligations of Lessee
under this ARTICLE X), to file and prosecute what would otherwise be Lessee's
claim for any such Award and to collect, receipt for and retain the same;
PROVIDED, HOWEVER, that in any event Lessor and the Agent may participate in
such negotiations, and no settlement will be made without the prior consent of
the Agent, not to be unreasonably withheld.
(b) Notwithstanding the foregoing, Lessee may prosecute, and Lessor
shall have no interest in, any claim with respect to Lessee's personal property
and equipment not financed by Lessor, lost income and Lessee's relocation
expenses.
Section X.8 APPLICATION OF CERTAIN PAYMENTS NOT RELATING TO AN EVENT OF
TAKING. In case of a requisition for temporary use of all or a portion of the
Leased Property which is not an Event of Taking, this Lease shall remain in full
force and effect, without any abatement or reduction of Basic Rent, and the
Awards for the Leased Property shall, unless an Event of Default has occurred
and is continuing, be paid to Lessee.
Section X.9 OTHER DISPOSITIONS. Notwithstanding the foregoing
provisions of this ARTICLE X, so long as an Event of Default shall have occurred
and be continuing, any amount that would otherwise be payable to or for the
account of, or that would otherwise be retained by, Lessee pursuant to this
ARTICLE X shall be paid to the Agent (or Lessor if the Loans have been fully
paid) as security for the obligations of Lessee under this Lease and, at such
time thereafter as no Event of Default shall be continuing, such amount shall be
paid promptly to Lessee to the extent not previously applied by Lessor or the
Agent in
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accordance with the terms of this Lease or the other Operative Documents.
Section X.10 NO RENT ABATEMENT. Rent shall not abate hereunder by
reason of any Casualty, any Event of Loss, any Event of Taking or any
Condemnation of the Leased Property, and Lessee shall continue to perform and
fulfill all of Lessee's obligations, covenants and agreements hereunder
notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation
until the Lease Termination Date.
ARTICLE XI.
INTEREST CONVEYED TO LESSEE
Lessor and Lessee intend that this Lease be treated, for accounting
purposes, as an operating lease. For all other purposes, Lessee and Lessor
intend that the transaction represented by this Lease be treated as a financing
transaction; for such purposes, it is the intention of the parties hereto that
this Lease is hereby agreed to be a mortgage and security agreement.
Said Mortgage and Security Agreement is made and entered into as of the
date set forth first above by and between Lessee, as mortgagor (hereinafter
sometimes designated as "MORTGAGOR"), and Lessor, as mortgagee (hereinafter
sometimes designated as "MORTGAGEE").
W I T N E S S E T H:
WHEREAS, Mortgagor is indebted and obligated to Mortgagee as evidenced
by this Lease providing for payment of the Basic Rent, Supplemental Rent and
other obligations described therein plus attorney's fees for collection if not
paid according to the terms thereof and being due and payable as set forth in
the Lease and other Operative Documents; and
WHEREAS, Mortgagor desires to secure prompt payment of the Basic Rent,
Supplemental Rent and all of its other obligations under the Lease and the other
Operative Documents (all such obligations being herein referred to as the
"INDEBTEDNESS").
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NOW THEREFORE, to secure the performance and observance by Mortgagor of
all covenants and conditions as set forth in this Mortgage and the prompt
payment of the Indebtedness and for and in consideration of the sum of TEN
DOLLARS ($10.00) paid by Mortgagee to Mortgagor this date, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Mortgagor, MORTGAGOR DOES HEREBY GRANT, BARGAIN, SELL, LIEN,
REMISE, RELEASE, CONVEY, ASSIGN, TRANSFER, MORTGAGE, HYPOTHECATE, PLEDGE,
DELIVER, SET OVER, WARRANTY AND CONFIRM UNTO MORTGAGEE, ITS SUCCESSORS AND
ASSIGNS FOREVER all of the following:
(A) the parcel(s) of real property described on EXHIBIT A (the
"LAND"); and the fee interest in the land described in EXHIBIT A (if
and when acquired by Mortgagor, and which shall then be deemed included
in the "LAND"); all buildings, structures, Fixtures, Equipment, and
other improvements of every kind existing at any time and from time to
time on or under the Land, together with any and all appurtenances to
such buildings, structures or improvements, including sidewalks,
utility pipes, conduits and lines, parking areas and roadways, and
including all modifications, alterations, renovations, improvements and
other additions to or changes in the Improvements at any time
("IMPROVEMENTS"); all agreements, easements, rights of way or use,
rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or
pertaining to the Land or the Improvements, including, without
limitation, the use of any streets, ways, alleys, vaults or strips of
land adjoining, abutting, adjacent or contiguous to the Land and all
permits, licenses and rights, whether or not of record, appurtenant to
the Land ("APPURTENANT RIGHTS"; the Land, Improvements, Appurtenant
Rights, Fixtures and Equipment relating thereto being collectively
referred to as the "PROPERTY");
(B) all the estate, right, title, claim or demand whatsoever
of the Mortgagor, in possession or expectancy, in and to the Property
or any part thereof;
(C) all right, title and interest of the Mortgagor in and to
all of the fixtures, furnishings and fittings of
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every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by the Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Property (all of the foregoing in
this PARAGRAPH (C) being referred to as the "FIXTURES");
(D) all right, title and interest of the Mortgagor in and to
all of the fixtures, chattels, business machines, machinery, apparatus,
equipment, furnishings, fittings and articles of personal property of
every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by the Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Property, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, refrigerators, display cases, elevators, loading
and unloading equipment and systems, stoves, ranges, laundry equipment,
cleaning systems (including window cleaning apparatus), telephones,
communication systems (including satellite dishes and antennae),
televisions, computers, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, security systems, motors,
engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings
and fixtures of every kind and description (all of the foregoing in
this PARAGRAPH (D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of the Mortgagor in and to
all substitutes and replacements of, and all additions and improvements
to, the Improvements and the Fixtures and Equipment, subsequently
acquired by the
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Mortgagor or constructed, assembled or placed by the Mortgagor on the
Land, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials whether stored at the Property or offsite, and, in
each such case, without any further conveyance, mortgage, assignment or
other act by the Mortgagor;
(F) all right, title and interest of the Mortgagor in, to and
under all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the operation
of the Property or the Fixtures or any part thereof; and all general
intangibles related to the operation of the Improvements now existing
or hereafter arising;
(G) all right, title and interest of the Mortgagor in and to
all unearned premiums under insurance policies now or subsequently
obtained by the Lessee relating to the Property or the Fixtures and the
Mortgagor's interest in and to all proceeds of any such insurance
policies (including title insurance policies) including the right to
collect and receive such proceeds: and all awards and other
compensation, including the interest payable thereon and the right to
collect and receive the same, made to the present or any subsequent
owner of the Property for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Property or any easement or other
right therein;
(H) all right, title and interest of the Mortgagor in and to
(i) all consents, licenses, building permits, certificates of occupancy
and other governmental approvals relating to construction, completion,
occupancy, use or operation of the Property or any part thereof and
(ii) all Plans and Specifications relating to the Property;
(I) all Rent and all other rents, payments, purchase prices,
receipts, revenues, issues and profits payable under the Lease or
pursuant to any other lease with respect to the Property; and
(J) all proceeds, both cash and noncash, of the foregoing;
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excluding, however, inventory of Lessee held by Lessee for resale or rental.
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by the Mortgagor and described in the foregoing
CLAUSES (A) through (J) are collectively referred to as the "MORTGAGED
PROPERTY"); PROVIDED, HOWEVER, that notwithstanding anything hereinabove to the
contrary the maximum principal amount of the Indebtedness secured hereby at any
one time shall not exceed Fourteen Million Five Hundred Thousand and no/100
Dollars ($14,500,000), plus all costs of enforcement and collection of this
Lease and the other Operative Documents, plus the total amount of any advances
made pursuant to the Operative Documents to protect the collateral and the
security interest and lien created hereby; together with interest on all of the
foregoing as provided in the Operative Documents.
To HAVE AND TO HOLD the Mortgaged Property and all parts thereof unto
Mortgagee, its successors and assigns, to its own proper use and benefit
forever, subject however, to the terms and conditions herein: PROVIDED, HOWEVER,
that if Mortgagor shall promptly pay or cause to be paid to Mortgagee the
Indebtedness at the times and in the manner stipulated in this Lease, this
Mortgage and all the properties, interests and rights hereby granted, conveyed,
and assigned shall cease and be void.
The Mortgagor covenants and agrees with Mortgagee as follows:
A. At any time and from time to time, upon the written request of
Mortgagee, and at the sole expense of Mortgagor, the Mortgagor will promptly and
duly execute and deliver such further instruments and documents and take such
further action as Mortgagee may reasonably request for the purposes of retaining
or preserving the full benefits of this Mortgage and of the rights and powers
granted by this Mortgage.
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B. If an Event of Default has occurred under this Lease and is
continuing, Mortgagee may accelerate payment of the Indebtedness and the
Mortgagee shall have the right to foreclose this Mortgage and to receive the
rents, issues and profits thereof and shall have as a matter of right, the
entitlement to the appointment of receiver to enter upon and take possession of
the Mortgaged Property and to collect all rents, revenues, issues, income,
products and profits thereof and apply the same as the court may direct. The
receiver shall have all rights and powers permitted under the laws of the State
of Florida. Mortgagee shall be entitled to the appointment of a receiver without
regard to the value or adequacy of the security afforded to it by the Mortgaged
Property.
C. The Mortgagor hereby waives the benefit of all appraisements,
valuation, stay, extension, reinstatement and redemption laws now or hereinafter
in force and all rights of marshalling in the event of any sale of the Mortgaged
Property or any interests therein.
D. If the Mortgagor fails to perform or comply with any of its
agreements contained herein, the Mortgagee, at its option, but without any
obligations so to do, may perform or comply or otherwise cause performance or
compliance with such agreement. The expenses of Mortgagee incurred in connection
with actions undertaken as provided herein, together with interest thereon at a
rate per annum equal to the Overdue Rate from the date of payment by the
Mortgagee, as applicable, to the date reimbursed by the Mortgagor, shall be
payable by the Mortgagor to Mortgagee on demand.
E. Mortgagor hereby authorizes Mortgagee to file financing statements
with respect to the Mortgaged Property without the signature of the Mortgagor in
such form and in such filing offices as the Mortgagee reasonably determines
appropriate to perfect the security interest of the Mortgagee under this
Mortgage.
F. It is the intention of the parties that this Mortgage shall
constitute a security agreement within the meaning of the Uniform Commercial
Code of the State of Florida. If an Event of Default shall occur under this
Lease, then in addition to having all other rights and remedies available at law
or in equity, the
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Mortgagee shall have all rights and remedies available to it under the Uniform
Commercial Code of the State of Florida.
G. Except as otherwise set forth herein, to the fullest extent
permitted by law, the Mortgagor waives the benefit of all laws now existing or
that may subsequently be enacted, providing for (i) any appraisement before a
sale of any portion of the Mortgage Property; (ii) any extension for the time of
the enforcement of the collection of the Indebtedness or the creation or
extension of a period of redemption from any sale made in collecting such debt;
and (iii) exemption of the Mortgage Property from attachment, levy or sale under
the execution or exemption from civil process. Mortgagor agrees that the
Mortgagor shall not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereinafter in force, providing for the
appraisement, valuation, stay, execution, extension, reinstatement or redemption
or requiring foreclosure of this Mortgage before Mortgagee exercises any
remedies granted hereunder.
H. This Mortgage is given to secure not only an existing indebtedness,
but also future advances made pursuant to or as provided in the Operative
Documents, including Lessor's Invested Amounts as defined in this Lease, whether
such advances are obligatory or at the option of Mortgagee, or otherwise, to the
same extent as if such future advances were made on the date of execution of
this Mortgage, provided, however, the maximum amount of indebtedness secured by
this Mortgage shall not exceed Fourteen Million Five Hundred Thousand and No/100
($14,500,000), plus all costs of enforcement and collection of this Mortgage,
plus any costs and expenses incurred or advances made by Mortgagee to protect
and preserve the Mortgaged Property" together with interest on all of the
foregoing at the Overdue Rate.
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ARTICLE XII.
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any
such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) BASIC RENT. Lessee shall fail to make any payment of Basic Rent
when due, and such failure shall continue for five (5) or more days;
(b) OTHER RENT. Lessee shall fail to make any payment of Rent (other
than Basic Rent) or any other amount payable hereunder or under any of the other
Operative Documents (other than Basic Rent and other than as set forth in CLAUSE
(C)), and such failure shall continue for a period of five (5) days after
written notice thereof from Lessor or the Agent;
(c) LEASE BALANCE. Lessee shall fail to pay the Funded Amount or Lease
Balance when due pursuant to SECTION 10.1, 10.2, 14.1 or 14.2, or Lessee shall
fail to pay the Recourse Deficiency Amount when required pursuant to ARTICLE
XIV;
(d) INSURANCE. Lessee shall fail to maintain insurance as required by
ARTICLE VIII hereof, and such failure shall continue until the earlier of (i) 15
days after written notice thereof from Lessor or the Agent and (ii) the day
immediately preceding the date on which any applicable insurance coverage would
otherwise lapse or terminate;
(e) CROSS DEFAULT. A default shall have occurred and be continuing
under any instrument or agreement evidencing, securing or providing for the
issuance of Indebtedness in excess of $150,000 of, or guaranteed by, Lessee or
any Subsidiary of Lessee, which default is a failure to pay any amount when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), which default continues after the applicable grace period, if any,
or any other default which, if unremedied, uncured or unwaived, would permit
acceleration of the maturity of such Indebtedness;
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(f) BANKRUPTCY. Lessee or any Subsidiary shall (i) apply for or consent
to the appointment of a receiver, trustee or liquidator of itself or of its
property, (ii) be unable, or admit in writing inability, to pay its debts as
they mature, (iii) make ageneral assignment for the benefit of creditors, (iv)
be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy, or a petition or answer seeking reorganization or an arrangement
with creditors to take advantage of any insolvency law or an answer admitting
the material allegations of a bankruptcy, reorganization or insolvency petition
filed against it, (vi) take corporate action for the purpose of effecting any of
the foregoing, or (vii) have an order for relief entered against it in any
proceeding under any bankruptcy law;
(g) JUDGMENT. An order, judgment or decree shall be entered, without
the application, approval or consent of Lessee or any Subsidiary, by any court
of competent jurisdiction, approving a petition seeking reorganization of such
entity or appointing a receiver, trustee or liquidator of such entity or of all
or a substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 90 consecutive days;
(h) REPRESENTATIONS. Any representation or warranty by Lessee in any
Operative Document or in any certificate or document delivered to Lessor, the
Agent or any Lender pursuant to any Operative Document shall have been incorrect
in any material respect when made;
(i) TRANSACTION GUARANTY. Lessee shall repudiate or terminate the
Transaction Guaranty, or the Transaction Guaranty shall at any time cease to be
in full force and effect or cease to be the legal, valid and binding obligation
of Lessee;
(j) COVENANTS. Lessee shall fail in any material respect to timely,
perform or observe any covenant, condition or agreement (not included in CLAUSE
(A), (B), (C), (D), (E), (F), (G), (H) or (I) of this ARTICLE XII) to be
performed or observed by it hereunder or under any other Operative Document and
such failure shall continue for a period of 30 days after Lessee's receipt of
written notice thereof from Lessor, the Agent or any Lender;
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(k) JUDGMENT. A judgment or order for the payment of money which
exceeds $100,000 in amount shall be entered against the Lessee by any court and
such judgment or order shall continue undischarged or unstayed for 30 days;
(l) ATTACHMENT. A warrant or writ of attachment or execution or similar
process, which exceeds $100,000 in value shall be issued against any property of
the Lessee and such warrant or process shall continue undischarged or unstayed
for 30 days;
(m) ERISA. (i) Any Termination Event with respect to a Benefit Plan
shall occur that, after taking into account the excess, if any, of (A) the fair
market value of the assets of any other Benefit Plan with respect to which a
Termination Event occurs on the same day (but only to the extent that such
excess is the property of the Lessee) over (B) the present value on such day of
all vested nonforfeitable benefits under such other Benefit Plan, results in an
Unfunded Vested Accrued Benefit in excess of $0, (ii) any Benefit Plan shall
incur an "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA) for which a waiver has not been obtained in accordance
with the applicable provisions of the Code and ERISA, or (iii) the Lessee is in
'default' (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from the Lessee's complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan;
(n) QUALIFIED AUDITS. The independent certified public accountants
retained by the Lessee shall refuse to deliver an opinion in accordance with
SECTION 5.10(A) of the Master Agreement with respect to the annual financial
statements of the Lessee;
(o) CHANGE IN MANAGEMENT. Both George Feldenkreis and Oscar Feldenkreis
shall for any reason cease to be officers of the Lessee; and
(p) OTHER LEASE. An Event of Default shall occur under the Building
Lease.
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ARTICLE XIII.
ENFORCEMENT
Section XIII.1 REMEDIES. Upon the occurrence and during the continuance
of any Event of Default, Lessor may do one or more of the following as Lessor in
its sole discretion shall determine, without limiting any other right or remedy
Lessor may have on account of such Event of Default (including, without
limitation, the obligation of Lessee to purchase the Leased Property as set
forth in SECTION 14.3):
(a) Lessor may, by notice to Lessee, rescind or terminate this Lease as
of the date specified in such notice; however, (A) no reletting, reentry or
taking of possession of the Leased Property by Lessor will be construed as an
election on Lessor's part to terminate this Lease unless a written notice of
such intention is given to Lessee, (B) notwithstanding any reletting, reentry or
taking of possession, Lessor may at any time thereafter elect to terminate this
Lease for a continuing Event of Default, and (C) no act or thing done by Lessor
or any of its agents, representatives or employees and no agreement accepting a
surrender of the Leased Property shall be valid unless the same be made in
writing and executed by Lessor;
(b) Lessor may (i) demand that Lessee, and Lessee shall upon the
written demand of Lessor, return the Leased Property promptly to Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, ARTICLES VI and XIV hereof as if the Leased Property were being
returned at the end of the Lease Term, and Lessor shall not be liable for the
reimbursement of Lessee for any costs and expenses incurred by Lessee in
connection therewith and (ii) without prejudice to any other remedy which Lessor
may have for possession of the Leased Property, and to the extent and in the
manner permitted by Applicable Law, enter upon the Leased Property and take
immediate possession of (to the exclusion of Lessee) the Leased Property or any
part thereof and expel or remove Lessee and any other person who may be
occupying the Leased Property, by summary proceedings or otherwise, all without
liability to Lessee for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise and, in addition to Lessor's other damages, Lessee shall be
responsible for the actual and reasonable costs and expenses of reletting,
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including brokers' fees and the reasonable costs of any alterations or repairs
made by Lessor;
(c) Lessor may (i) sell all or any part of the Leased Property at
public or private sale, as Lessor may determine, free and clear of any rights of
Lessee and without any duty to account to Lessee with respect to such action or
inaction or any proceeds with respect thereto (except to the extent required by
CLAUSE (II) below if Lessor shall elect to exercise its rights thereunder) in
which event Lessee's obligation to pay Basic Rent hereunder for periods
commencing after the date of such sale shall be terminated or proportionately
reduced, as the case may be; and (ii) if Lessor shall so elect, demand that
Lessee pay to Lessor, and Lessee shall pay to Lessor, on the date of such sale,
as liquidated damages for loss of a bargain and not as a penalty (the parties
agreeing that Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation of such
amount) (in lieu of Basic Rent due for periods commencing on or after the
Payment Date coinciding with such date of sale (or, if the sale date is not a
Payment Date, the Payment Date next preceding the date of such sale)), an amount
equal to (a) the excess, if any, of (1) the sum of (A) all Rent due and unpaid
to and including such Payment Date and (B) the Funded Amounts, computed as of
such date, over (2) the net proceeds of such sale (that is, after deducting all
costs and expenses incurred by Lessor, the Agent or any Lender incident to such
conveyance (including, without limitation, all costs, expenses, fees, premiums
and taxes described in SECTION 14.5(B))); PLUS (b) interest at the Overdue Rate
on the foregoing amount from such Payment Date until the date of payment;
(d) Lessor may, at its option, not terminate this Lease, and continue
to collect all Basic Rent, Supplemental Rent, and all other amounts (including,
without limitation, the Funded Amount) due Lessor (together with all costs of
collection) and enforce Lessee's obligations under this Lease as and when the
same become due, or are to be performed, and at the option of Lessor, upon any
abandonment of the Leased Property by Lessee or re-entry of same by Lessor,
Lessor may, in its sole and absolute discretion, elect not to terminate this
Lease with respect thereto and may make such reasonable alterations and
necessary repairs in order to relet the Leased Property, and relet the
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Leased Property or any part thereof for such term or terms (which may be for a
term extending beyond the term of this Lease) and at such rental or rentals and
upon such other terms and conditions as Lessor in its reasonable discretion may
deem advisable; and upon each such reletting all rentals actually received by
Lessor from such reletting shall be applied to Lessee's obligations hereunder in
such order, proportion and priority as Lessor may elect in Lessor's sole and
absolute discretion; it being agreed that under no circumstances shall Lessee
benefit from its default from any increase in market rents. If such rentals
received from such reletting during any Rent Period are less than the Rent to be
paid during that Rent Period by Lessee hereunder, Lessee shall pay any
deficiency, as calculated by Lessor, to Lessor on the Payment Date for such Rent
Period; any such rentals received by Lessor after such time as Lessee has paid
the Lease Balance hereunder and under the Building Lease shall be paid to
Lessee;
(e) If the Leased Property has not been sold, Lessor may, whether or
not Lessor shall have exercised or shall thereafter at any time exercise any of
its rights under PARAGRAPH (B), (C) or (D) of this ARTICLE XIII with respect to
the Leased Property, demand, by written notice to Lessee specifying a date (the
"FINAL RENT PAYMENT DATE") not earlier than 30 days after the date of such
notice, that Lessee purchase, on the Final Rent Payment Date, the Leased
Property in accordance with the provisions of SECTIONS 14.2, 14.4 and 14.5;
PROVIDED, HOWEVER, that (1) such purchase shall occur on the date set forth in
such notice, notwithstanding the provision in SECTION 14.2 calling for such
purchase to occur on the Lease Termination Date; and (2) Lessor's obligations
under SECTION 14.5(A) shall be limited to delivery of a special warranty deed
and quit claim bill of sale of the Leased Property, without recourse or
warranty, but free and clear of Lessor Liens;
(f) Lessor may exercise any other right or remedy that may be available
to it under Applicable Law, or proceed by appropriate court action (legal or
equitable) to enforce the terms hereof or to recover damages for the breach
hereof. Separate suits may be brought to collect any such damages for any Rent
Period(s), and such suits shall not in any manner prejudice Lessor's right to
collect any such damages for any subsequent Rent Period(s), or Lessor may defer
any such suit until after the expiration of the Lease Term, in which event such
suit shall be
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deemed not to have accrued until the expiration of the Lease Term; or
(g) Lessor may retain and apply against Lessor's damages all sums which
Lessor would, absent such Event of Default, be required to pay to, or turn over
to, Lessee pursuant to the terms of this Lease.
Section XIII.2 REMEDIES CUMULATIVE; NO WAIVER; CONSENTS. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any right, power or remedy. Notwithstanding the foregoing, so long
as Lessee purchases the Leased Property in accordance with SECTIONS 14.2, 14.4
and 14.5 (including the payment of the Lease Balance in cash) prior to the sale
of the Leased Property to another Person, Lessor shall not have the right to
exercise any other remedy set forth in SECTION 13.1. No delay or omission by
Lessor in the exercise of any right, power or remedy or in the pursuit of any
remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of Lessee or to be an acquiescence therein.
Lessor's consent to any request made by Lessee shall not be deemed to constitute
or preclude the necessity for obtaining Lessor's consent, in the future, to all
similar requests. No express or implied waiver by Lessor of any Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Potential Event of Default or Event of Default. To the extent permitted by
Applicable Law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Lessor to sell, lease or otherwise use the
Leased Property or part thereof in mitigation of Lessor's damages upon the
occurrence of an Event of Default or that may otherwise limit or modify any of
Lessor's rights or remedies under this ARTICLE XIII.
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ARTICLE XIV.
SALE, RETURN OR PURCHASE OF LEASED PROPERTY; RENEWAL
Section XIV.1 LESSEE'S OPTION TO PURCHASE. Subject to the terms,
conditions and provisions set forth in this ARTICLE XIV, Lessee shall have the
option (the "PURCHASE OPTION"), to be exercised as set forth below, to purchase
from Lessor, Lessor's interest in the Leased Property. Such option must be
exercised bywritten notice to Lessor not later than twelve months prior to the
Lease Termination Date which notice shall be irrevocable; such notice shall
specify the date that such purchase shall take place, which date shall be a date
occurring not less than thirty (30) days after such notice or the Lease
Termination Date (whichever is earlier). If the Purchase Option is exercised
pursuant to the foregoing, then Lessee shall also be deemed to have exercised
its APurchase Option@ under the Building Lease and, subject to the provisions
set forth in this ARTICLE XIV, on the applicable purchase date or the Lease
Termination Date, as the case may be, Lessor shall convey to Lessee, without
recourse or warranty (other than as to the absence of Lessor Liens) and Lessee
shall purchase from Lessor, Lessor's interest in the Leased Property. Lessor
shall continue to pay Basic Rent hereunder until the Purchase Option is
consummated by the payment of the purchase price pursuant to this ARTICLE XIV.
Section XIV.2 CONVEYANCE TO LESSEE. Unless (a) Lessee shall have
properly exercised the Purchase Option and purchased the Leased Property
pursuant to SECTION 14.1 hereof, or (b) Lessee shall have properly exercised the
Remarketing Option or the Surrender Option and shall have fulfilled all of the
conditions of SECTION 14.6 hereof, then, subject to the terms, conditions and
provisions set forth in this ARTICLE XIV, Lessee shall purchase from Lessor, and
Lessor shall convey to Lessee, on the Lease Termination Date all of Lessor's
interest in the Leased Property. Lessee may designate, in a notice given to
Lessor not less than ten (10) Business Days prior to the closing of such
purchase (time being of the essence), the transferee to whom the conveyance
shall be made (if other than to Lessee), in which case such conveyance shall
(subject to the terms and conditions set forth herein) be made to such designee;
PROVIDED, HOWEVER, that such designation of a transferee shall not cause Lessee
to be
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released, fully or partially, from any of its obligations under this Lease.
Section XIV.3 ACCELERATION OF PURCHASE OBLIGATION. Lessee shall be
obligated to purchase Lessor's interest in the Leased Property immediately,
automatically and without notice upon the occurrence of any Event of Default
specified in CLAUSE (F) of ARTICLE XII, for the purchase price set forth in
SECTION 14.4. Upon the occurrence and during the continuance of any other Event
of Default, Lessee shall be obligated to purchase Lessor's interest in the
Leased Property for the purchase price set forth in SECTION 14.4 upon notice of
such obligation from Lessor.
Section XIV.4 DETERMINATION OF PURCHASE PRICE. Upon the purchase by
Lessee of Lessor's interest in the Leased Property upon the exercise of the
Purchase Option or pursuant to SECTION 14.2 or 14.3, the purchase price for the
Leased Property shall be an amount equal to the Lease Balance as of the closing
date for such purchase, PLUS any amount due pursuant to Section 7.5(f) of the
Master Agreement as a result of such purchase.
Section XIV.5 PURCHASE PROCEDURE. (a) If Lessee shall purchase Lessor's
interest in the Leased Property pursuant to any provision of this Lease, (i)
Lessee shall accept from Lessor and Lessor shall convey the Leased Property by a
duly executed and acknowledged special warranty deed and quit claim bill of sale
of the Leased Property in recordable form, (ii) upon the date fixed for any
purchase of Lessor's interest in the Leased Property hereunder, Lessee shall pay
to the order of the Agent (or Lessor if the Loans have been paid in full) the
Lease Balance, PLUS any amount due pursuant to Section 7.5(f) of the Master
Agreement as a result of such purchase by wire transfer of immediately available
funds, and (iii) Lessor will execute and deliver to Lessee such other documents,
including releases, termination agreements and termination statements, as may be
legally required or as may be reasonably requested by Lessee in order to effect
such conveyance, free and clear of Lessor Liens and the Liens of the Operative
Documents.
(b) Lessee shall, at Lessee's sole cost and expense, obtain all
required governmental and regulatory approval and consents andshall make such
filings as required by Applicable Law; in the event that Lessor is required by
Applicable Law to take any
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action in connection with such purchase and sale, Lessee shall pay all
costs incurred by Lessor in connection therewith. In addition, all charges
incident to such conveyance, including, without limitation, Lessee's attorneys'
fees, Lessor's attorneys' fees, commissions, Lessee's and Lessor's escrow fees,
recording fees, title insurance premiums and all applicable documentary transfer
or other transfer taxes and other taxes required to be paid in order to record
the transfer documents that might be imposed by reason of such conveyance and
the delivery of such deed shall be borne entirely and paid by Lessee.
(c) Upon expiration or termination of this Lease resulting in
conveyance of Lessor's interest in the title to the Leased Property to Lessee,
there shall be no apportionment of rents (including, without limitation, water
rents and sewer rents), taxes, insurance, utility charges or other charges
payable with respect to the Leased Property, all of such rents, taxes,
insurance, utility or other charges due and payable with respect to the Leased
Property prior to termination being payable by Lessee hereunder and all due
after such time being payable by Lessee as the then owner of the Leased
Property.
Section XIV.6 OPTION TO REMARKET; SURRENDER OPTION. Subject to the
fulfillment of each of the conditions set forth in this SECTION 14.6, Lessee
shall have the option to either (i) market the Leased Property for Lessor (the
"REMARKETING OPTION") or (ii) surrender the Leased Property to Lessor (the
"SURRENDER OPTION").
Lessee's effective exercise and consummation of the Remarketing Option
or the Surrender Option, as the case may be, shall be subject to the due and
timely fulfillment of each of the following provisions, the failure of any of
which shall render the Remarketing Option or the Surrender Option, as the case
may be, and Lessee's exercise thereof null and void, in which event, Lessee
shall be obligated to perform its obligations under SECTION 14.2.
(a) Not later than twelve months prior to the Lease
Termination Date, Lessee shall give to Lessor and the Agent written
notice of Lessee's exercise of the Remarketing Option or the Surrender
Option, as the case may be, which exercise shall be irrevocable and
shall state whether Lessee
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has exercised the Remarketing Option or the Surrender Option.
(b) Not later than ten (10) Business Days prior to the Lease
Termination Date, Lessee shall deliver to Lessor and the Agent an
environmental assessment of the Leased Property dated not later than
forty-five (45) days prior to the Lease Termination Date. Such
environmental assessment shall be prepared by an environmental
consultant approved by the Required Funding Parties, shall be in form,
detail and substance reasonably satisfactory to the Required Funding
Parties, and shall otherwise indicate the environmental condition of
the Leased Property to be the same as described in the related
Environmental Audit.
(c) On the date of Lessee's notice to Lessor and the Agent of
Lessee's exercise of the Remarketing Option or the Surrender Option, as
the case may be, the Completion Date shall have occurred and no Event
of Default or Potential Event of Default shall exist, and thereafter,
no Event of Default or Potential Event of Default shall exist under
this Lease.
(d) Lessee shall have completed all Alterations, restoration
and rebuilding of the Leased Property pursuant to SECTIONS 6.1, 6.2,
10.3 and 10.4 (as the case may be) and shall have fulfilled all of the
conditions and requirements in connection therewith pursuant to said
SECTIONS, in each case by the date on which Lessor and the Agent
receive Lessee's notice of Lessee's exercise of the Remarketing Option
or the Surrender Option, as the case may be (time being of the
essence), regardless of whether the same shall be within Lessee's
control.
(e) Lessee shall promptly provide any maintenance records
relating to the Leased Property to Lessor, the Agent and any potential
purchaser upon request, and shall otherwise do all things necessary to
deliver possession of the Leased Property to the purchaser. Lessee
shall allow Lessor, the Agent and any potential purchaser access to the
Leased Property for the purpose of inspecting the same during regular
business hours (or as otherwise agreed by Lessee).
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(f) On the Lease Termination Date, Lessee shall surrender the
Leased Property in accordance with SECTION 14.8 hereof.
(g) In connection with any such sale of the Leased Property,
Lessee will provide to the purchaser all customary "seller's"
indemnities, representations and warranties regarding title, absence of
Liens (except Lessor Liens) and the condition of the Leased Property,
including, without limitation, an environmental indemnity. Lessee shall
fulfill all of the requirements set forth in CLAUSE (B) of SECTION
14.5, and such requirements are incorporated herein by reference. As to
Lessor, any such sale shall be made on an "as is, with all faults"
basis without representation or warranty by Lessor, other than the
absence of Lessor Liens.
(h) In connection with any such sale of Leased Property,
Lessee shall pay directly, and not from the sale proceeds, all
prorations, credits, costs and expenses of the sale of the Leased
Property, whether incurred by Lessor, any Lender, the Agent or Lessee,
including without limitation, the cost of all title insurance, surveys,
environmental reports, appraisals, transfer taxes, Lessor's and the
Agent's attorneys' fees, Lessee's attorneys' fees, commissions, escrow
fees, recording fees, and all applicable documentary and other transfer
taxes.
(i) Lessee shall pay to the Agent on the Lease Termination
Date (or to such other Person as Agent shall notify Lessee in writing,
or in the case of Supplemental Rent, to the Person entitled thereto) an
amount equal to the Recourse Deficiency Amount, PLUS all Basic Rent and
Supplemental Rent, and all other amounts hereunder which have accrued
prior to or as of such date, in the type of funds specified in SECTION
3.3 hereof.
If Lessee has exercised the Remarketing Option, the following additional
provisions shall apply: During the period commencing on the date twelve months
prior to the scheduled expiration of the Lease Term, Lessee shall, as
nonexclusive agent for Lessor, use commercially reasonable efforts to sell
Lessor's interest in the Leased Property and will attempt to obtain the highest
purchase price therefor. All such marketing of the Leased
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Property shall be at Lessee's sole expense. Lessee shall submit all bids to
Lessor and the Agent and Lessor and the Agent will have the right to review the
same and the right to submit any one or more bids. All bids shall be on an
all-cash basis. In no event shall such bidder be Lessee or any Subsidiary or
Affiliate of Lessee. The written offer must specify the Lease Termination Date
as the closing date. If, and only if, the selling price (net of closing costs
and prorations, as reasonably estimated by the Agent) is less than the
difference between the Lease Balance at such time minus the Recourse Deficiency
Amount, then Lessor or the Agent may, in its sole and absolute discretion, by
notice to Lessee, reject such offer to purchase, in which event the parties will
proceed according to the provisions of SECTION 14.7 [Rejection of Sale] hereof.
If neither Lessor nor the Agent rejects such purchase offer as provided above,
the closing of such purchase of the Leased Property by such purchaser shall
occur on the Lease Termination Date, contemporaneously with Lessee's surrender
of the Leased Property in accordance with SECTION 14.8 hereof, and the gross
proceeds of the sale (i.e., without deduction for any marketing, closing or
other costs, prorations or commissions) shall be paid directly to the Agent (or
Lessor if the Loans have been fully paid); PROVIDED, HOWEVER, that if the sum of
the gross proceeds from such sale plus the Recourse Deficiency Amount paid by
Lessee on the Lease Termination Date pursuant to SECTION 14.6(I), minus any and
all costs and expenses (including broker fees, appraisal costs, legal fees and
transfer taxes) incurred by the Agent or Lessor in connection with the marketing
of the Leased Property or the sale thereof exceeds the Lease Balance as of such
date, then the excess shall be paid to Lessee on the Lease Termination Date.
Lessee shall have no right, power or authority to bind Lessor in connection with
any proposed sale of the Leased Property.
Section XIV.7 REJECTION OF SALE. Notwithstanding anything contained
herein to the contrary, if Lessor or the Agent rejects the purchase offer for
the Leased Property as provided in SECTION 14.6, then (a) Lessee shall pay to
the Agent the Recourse Deficiency Amount pursuant to SECTION 14.6(I), (b) Lessor
shall retain title to the Leased Property, and (c) in addition to Lessee's other
obligations hereunder, Lessee will reimburse Lessor and the Agent, within ten
(10) Business Days after written request, for all reasonable costs and expenses
incurred by Lessor or Agent during the period ending on the first anniversary of
the
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Lease Termination Date in connection with the marketing, sale, closing or
transfer of the Leased Property, which obligation shall survive the Lease
Termination Date and the termination or expiration of this Lease.
Section XIV.8 RETURN OF LEASED PROPERTY. If Lessor retains title to the
Leased Property pursuant to SECTION 14.7 hereof or Lessee has properly exercised
the Surrender Option, then Lessee shall, on the Lease Termination Date, and at
its own expense, return possession of the Leased Property to Lessor for
retention by Lessor or, if Lessee properly exercises the Remarketing Option and
fulfills all of the conditions of SECTION 14.6 hereof and neither Lessor nor the
Agent rejects such purchase offer pursuant to SECTION 14.6, then Lessee shall,
on such Lease Termination Date, and at its own cost, transfer possession of the
Leased Property to the independent purchaser thereof, in each case by
surrendering the same into the possession of Lessor or such purchaser, as the
case may be, free and clear of all Liens other than Lessor Liens, in as good
condition as it was on the Closing Date (as modified by Alterations permitted by
this Lease), ordinary wear and tear excepted, and in compliance in all material
respects with Applicable Law. Lessee shall, on and within a reasonable time
before and after the Lease Termination Date, cooperate with Lessor and the
independent purchaser of the Leased Property in order to facilitate the
ownership and operation by such purchaser of the Leased Property after the Lease
Termination Date, which cooperation shall include the following, all of which
Lessee shall do on or before the Lease Termination Date or as soon thereafter as
is reasonably practicable: providing all books and records regarding the
maintenance and ownership of the Leased Property and all know- how, data and
technical information relating thereto, providing a copy of the plans and
specifications, granting or assigning all licenses (to the extent assignable)
necessary for the operation and maintenance of the Leased Property, and
cooperating in seeking and obtaining all necessary Governmental Action. Lessee
shall have also paid the cost of all Alterations commenced prior to the Lease
Termination Date. The obligations of Lessee under this ARTICLE XIV shall survive
the expiration or termination of this Lease.
Section XIV.9 RENEWAL. Subject to the conditions set forth herein,
Lessee may, by written notice to Lessor and the Agent
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given not later than twelve months and not earlier than sixteen months, prior to
the Lease Termination Date then in effect, renew this Lease and the Building
Lease, for up to five years commencing on the date following the Lease
Termination Date then in effect, PROVIDED that Lessee may only exercise such
renewal option two times. No later than the date that is 45 days after the date
the request to renew has been delivered to each of Lessor and the Agent, the
Agent will notify Lessee whether or not Lessor and the Lenders consent to such
renewal request (which consent, in the case of Lessor and the Lenders, may be
granted or denied in their sole discretion, and may be conditioned on such
conditions precedent as may be specified by Lessor and the Lenders). If the
Agent fails to respond within such time frame, such failure shall be deemed to
be a rejection of such request. If the Agent notifies Lessee of Lessor's and the
Lenders' consent to such renewal, such renewal shall be effective.
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ARTICLE XV.
LESSEE'S EQUIPMENT
After any repossession of the Leased Property (whether or not this
Lease has been terminated), as a result of the exercise of the Surrender Option
or otherwise, Lessee, at its expense and so long as such removal of such
Alteration shall not result in a violation of Applicable Law, shall, within a
reasonable time after such repossession or within sixty (60) days after Lessee's
receipt of Lessor's written request (whichever shall first occur), remove all of
Lessee's trade fixtures, personal property and equipment from the Leased
Property (to the extent that the same can be readily removed from the Leased
Property without causing material damage to the Leased Property); PROVIDED,
HOWEVER, that Lessee shall not remove any such trade fixtures, personal property
or equipment that has been financed by Lessor under the Operative Documents or
otherwise constituting Leased Property (or that constitutes a replacement of
such property). Any of Lessee's trade fixtures, personal property and equipment
not so removed by Lessee within such period shall be considered abandoned by
Lessee, and title thereto shall without further act vest in Lessor, and may be
appropriated, sold, destroyed or otherwise disposed of by Lessor without notice
to Lessee and without obligation to account therefor and Lessee will pay Lessor,
upon written demand, all reasonable costs and expenses incurred by Lessor in
removing, storing or disposing of the same and all costs and expenses incurred
by Lessor to repair any damage to the Leased Property caused by such removal.
Lessee will immediately repair at its expense all damage to the Leased Property
caused by any such removal (unless such removal is effected by Lessor, in which
event Lessee shall pay all reasonable costs and expenses incurred by Lessor for
such repairs). Lessor shall have no liability in exercising Lessor's rights
under this ARTICLE XV except as set forth in CLAUSE (II) of the first sentence
hereof, nor shall Lessor be responsible for any loss of or damage to Lessee's
personal property and equipment.
ARTICLE XVI.
RIGHT TO PERFORM FOR LESSEE
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If Lessee shall fail to perform or comply with any of its agreements
contained herein, Lessor may perform or comply with such agreement, and Lessor
shall not thereby be deemed to have waived any default caused by such failure,
and the amount of such payment and the amount of the expenses of Lessor
(including actual and reasonable attorneys' fees and expenses) incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, shall be deemed Supplemental Rent, payable by
Lessee to Lessor within thirty (30) days after written demand therefor.
ARTICLE XVII.
MISCELLANEOUS
Section XVII.1 REPORTS. To the extent required under Applicable Law and
to the extent it is reasonably practical for Lessee to do so, Lessee shall
prepare and file in timely fashion, or, where such filing is required to be made
by Lessor or it is otherwise not reasonably practical for Lessee to make such
filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent)
within a reasonable time prior to the date for filing and Lessor shall file, any
material reports with respect to the condition or operation of the Leased
Property that shall be required to be filed with any Governmental Authority.
Section XVII.2 BINDING EFFECT; SUCCESSORS AND ASSIGNS; SURVIVAL. The
terms and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor and Lessee, shall be binding upon their respective
successors, legal representatives and assigns (including, in the case of Lessor,
any Person to whom Lessor may transfer the Leased Property or any interest
therein in accordance with the provisions of the Operative Documents), and inure
to the benefit of their respective permitted successors and assigns, and the
rights hereunder of the Agent and the Lenders shall inure (subject to such
conditions as are contained herein) to the benefit of their respective permitted
successors and assigns. Lessee hereby acknowledges that Lessor has assigned all
of its right, title and interest to, in and under this Lease to the Agent and
the Lenders, and that all of Lessor's rights hereunder may be exercised by the
Agent.
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Section XVII.3 QUIET ENJOYMENT. Lessor covenants that it will not
interfere in Lessee's or any of its permitted sublessees' quiet enjoyment of the
Leased Property in accordance with this Lease during the Lease Term, so long as
no Event of Default has occurred and is continuing. Such right of quiet
enjoyment is independent of, and shall not affect, Lessor's rights otherwise to
initiate legal action to enforce the obligations of Lessee under this Lease.
Section XVII.4 NOTICES. Unless otherwise specified herein, all notices,
offers, acceptances, rejections, consents, requests, demands or other
communications to or upon the respective parties hereto shall be in writing and
shall be deemed to have been given as set forth in Section 8.2 of the Master
Agreement. All such notices, offers, acceptances, rejections, consents,
requests, demands or other communications shall be addressed as set forth in
Schedule 8.2 of the Master Agreement or to such other address as any of the
parties hereto may designate by written notice.
Section XVII.5 SEVERABILITY. Any provision of this Lease that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, and Lessee shall remain
liable to perform its obligations hereunder except to the extent of such
unenforceability. To the extent permitted by Applicable Law, Lessee hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
Section XVII.6 AMENDMENT; COMPLETE AGREEMENTS. Neither this Lease nor
any of the terms hereof may be terminated, amended, supplemented, waived or
modified orally, except by an instrument in writing signed by Lessor and Lessee
in accordance with the provisions of Section 8.4 of the Master Agreement. This
Lease, together with the other Operative Documents, is intended by the parties
as a final expression of their lease agreement and as a complete and exclusive
statement of the terms thereof, all negotiations, considerations and
representations between the parties having been incorporated herein and therein.
No course of prior dealings between the parties or their officers,
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employees, agents or Affiliates shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Lease or any other Operative Document.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties or their Affiliates shall not be
relevant or admissible to determine the meaning of any of the terms of this
Lease or any other Operative Document. No representations, undertakings, or
agreements have been made or relied upon in the making of this Lease other than
those specifically set forth in the Operative Documents.
Section XVII.7 CONSTRUCTION. This Lease shall not be construed more
strictly against any one party, it being recognized that both of the parties
hereto have contributed substantially and materially to the preparation and
negotiation of this Lease.
Section XVII.8 HEADINGS. The Table of Contents and headings of the
various Articles and Sections of this Lease are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
hereof.
Section XVII.9 COUNTERPARTS. This Lease may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section XVII.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section XVII.11 DISCHARGE OF LESSEE'S OBLIGATIONS BY ITS AFFILIATES.
Lessor agrees that performance of any of Lessee's obligations hereunder by one
or more of Lessee's Affiliates or one or more of Lessee's sublessees of the
Leased Property or any part thereof shall constitute performance by Lessee of
such obligations to the same extent and with the same effect hereunder as if
such obligations were performed by Lessee, but no such performance shall excuse
Lessee from any obligation not performed by it or on its behalf under the
Operative Documents.
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Section XVII.12 LIABILITY OF LESSOR LIMITED. Except as otherwise
expressly provided below in this SECTION 17.12, it is expressly understood and
agreed by and between Lessee, Lessor and their respective successors and assigns
that nothing herein contained shall be construed as creating any liability of
Lessor or any of its Affiliates or any of their respective officers, directors,
employees or agents, individually or personally, to perform any covenant, either
express or implied, contained herein, all such liability, if any, being
expressly waived by Lessee and by each and every Person now or hereafter
claiming by, through or under Lessee, and that, so far as Lessor or any of its
Affiliates or any of their respective officers, directors, employees or agents,
individually or personally, is concerned, Lessee and any Person claiming by,
through or under Lessee shall look solely to the right, title and interest of
Lessor in the Leased Property and any proceeds from Lessor's sale or encumbrance
thereof (PROVIDED, HOWEVER, that Lessee shall not be entitled to any double
recovery) for the performance of any obligation under this Lease and under the
Operative Documents and the satisfaction of any liability arising therefrom.
Section XVII.13 ESTOPPEL CERTIFICATES. Each party hereto agrees that at
any time and from time to time during the Lease Term, it will promptly, but in
no event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser has signed a commitment or letter of
intent to purchase the Leased Property or any part thereof or any Note),
assignee or mortgagee or third party designated by such other party, a
certificate stating (a) that this Lease is unmodified and in force and effect
(or if there have been modifications, that this Lease is in force and effect as
modified, and identifying the modification agreements); (b) the date to which
Basic Rent has been paid; (c) whether or not there is any existing default by
Lessee in the payment of Basic Rent or any other sum of money hereunder, and
whether or not there is any other existing default by either party with respect
to which a notice of default has been served, and, if there is any such default,
specifying the nature and extent thereof; (d) whether or not, to the knowledge
of the signer after due inquiry and investigation, there are any setoffs,
defenses or counterclaims against enforcement of the obligations to be performed
hereunder existing in favor of the party executing such
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certificate and (e) other items that may be reasonably requested; PROVIDED that
no such certificate may be requested unless the requesting party has a good
faith reason for such request.
Section XVII.14 NO JOINT VENTURE. Any intention to create a joint
venture or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
Section XVII.15 NO ACCORD AND SATISFACTION. The acceptance by Lessor of
any sums from Lessee (whether as Basic Rent or otherwise) in amounts which are
less than the amounts due and payable by Lessee hereunder is not intended, nor
shall be construed, to constitute an accord and satisfaction of any dispute
between Lessor and Lessee regarding sums due and payable by Lessee hereunder,
unless Lessor specifically deems it as such in writing.
Section XVII.16 NO MERGER. In no event shall the leasehold interests,
estates or rights of Lessee hereunder, or of the holder of any Notes secured by
a security interest in this Lease, merge with any interests, estates or rights
of Lessor in or to the Leased Properties, it being understood that such
leasehold interests, estates and rights of Lessee hereunder, and of the holder
of any Notes secured by a security interest in this Lease, shall be deemed to be
separate and distinct from Lessor's interests, estates and rights in or to the
Leased Property, notwithstanding that any such interests, estates or rights
shall at any time or times be held by or vested in the same person, corporation
or other entity.
Section XVII.17 SURVIVAL. The obligations of Lessee to be performed
under this Lease prior to the Lease Termination Date and the obligations of
Lessee pursuant to ARTICLE III, ARTICLES X, XI, XIII, SECTIONS 14.2, 14.3, 14.4,
14.5, 14.8, ARTICLES XIV, XV, and XVI, and SECTIONS 17.10 and 17.12 shall
survive the expiration or termination of this Lease. The extension of any
applicable statute of limitations by Lessor, Lessee, the Agent or any Indemnitee
shall not affect such survival.
Section XVII.18 CHATTEL PAPER. To the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code in any applicable jurisdiction), no security interest in this Lease may be
created through the
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transfer or possession of any counterpart other than the original counterpart,
which shall be identified as the original counterpart by the receipt of the
Agent.
Section XVII.19 TIME OF ESSENCE. Time is of the essence of this Lease.
Section XVII.20 RECORDATION OF LEASE. Lessee will, at its expense,
cause this Lease or memorandum of lease (if permitted by Applicable Law) to be
recorded in the proper office or offices in the States and the municipalities in
which the Land is located.
Section XVII.21 INVESTMENT OF SECURITY FUNDS. Any amounts not payable
to Lessee pursuant to any provision of ARTICLE VIII, X or XIV or this SECTION
17.21 solely because an Event of Default shall have occurred and be continuing
shall be held by the Agent (or Lessor if the Loans have been fully paid) as
security for the obligations of Lessee under this Lease and the Master
Agreement. At such time as no Event of Default shall be continuing, such
amounts, net of any amounts previously applied to Lessee's obligations hereunder
or under the Master Agreement, shall be paid to Lessee. Any such amounts which
are held by the Agent (or Lessor if the Loans have been fully paid) pending
payment to Lessee shall until paid to Lessee, as provided hereunder or, as long
as the Loan Agreement is in effect, until applied against Lessee's obligations
herein and under the Master Agreement and distributed as provided in the Loan
Agreement or herein (after the Loan Agreement is no longer in effect) in
connection with any exercise of remedies hereunder, be invested by the Agent or
Lessor, as the case may be as directed from time to time in writing by Lessee
(PROVIDED, HOWEVER, if an Event of Default has occurred and is continuing it
will be directed by the Agent or, if the Funded Amounts have been fully paid,
Lessor) and at the expense and risk of Lessee, in investments approved by the
Agent. Any gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) shall be applied in the same manner as the
principal invested.
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[Signature page follows]
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IN WITNESS WHEREOF, the undersigned have each caused this Lease
Agreement to be duly executed and delivered and attested by their respective
officers thereunto duly authorized as of the day and year first above written.
SUPREME INTERNATIONAL CORPORATION
as Lessee
By_________________________________
Name:___________________________
Title:__________________________
LAND
LEASE
S-1
AGREEMENT
<PAGE>
SUP JOINT VENTURE, as Lessor
By: Atlantic Financial Managers,
Inc., its General Partner
By_________________________________
Name:___________________________
Title:__________________________
By: Atlantic Financial Group,
Ltd., its General Partner
By: Atlantic Financial
Managers, Inc., its
General Partner
By____________________________
Name:_______________________
Title:______________________
LAND
LEASE
S-2
AGREEMENT
<PAGE>
STATE OF _________________________ )
) SS.
COUNTY OF _________________________ )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to take
acknowledgments, personally appeared _________________ , to me known to be the
_____________________ of SUP JOINT VENTURE, a Florida general partnership,
described in and who executed the foregoing instrument and who is personally
known to me, and who acknowledged before me that he/she executed the same for
the purposes expressed therein.
WITNESS my hand and official seal in the county and state aforesaid
this __ day of August, 1997.
(Notary Signature)
(NOTARY SEAL)
(Notary Name Printed)
NOTARY PUBLIC
Commission No._________________
N-1
<PAGE>
STATE OF _____________ )
) SS.
COUNTY OF ____________ )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to take
acknowledgments, personally appeared _________________ , to me known to be the
____________________ of SUPREME INTERNATIONAL CORPORATION, a Florida
corporation, described in and who executed the foregoing instrument and who is
personally known to me, and who acknowledged before me that he/she executed the
same for the purposes expressed therein.
WITNESS my hand and official seal in the county and state aforesaid
this __ day of August, 1997.
(Notary Signature)
(NOTARY SEAL)
(Notary Name Printed)
NOTARY PUBLIC
Commission No._________________
N-2
<PAGE>
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
SUNTRUST BANK, MIAMI, N.A., as the
Agent
By_________________________________
Name:___________________________
Title:__________________________
LAND
LEASE
S-3
AGREEMENT
EXHIBIT 10.25
Recording requested by,
and after recordation,
this instrument
should be returned to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Rex Palmer
================================================================================
================================================================================
LEASE AGREEMENT
[BUILDING]
Dated as of August 28, 1997
between
SUP JOINT VENTURE, as Lessor,
and
SUPREME INTERNATIONAL CORPORATION, as Lessee
-------------------------------------------
================================================================================
================================================================================
<PAGE>
TABLE OF CONTENTS
(Lease Agreement)
PAGE
----
ARTICLE I. DEFINITIONS............................................... 1
ARTICLE II. LEASE OF LEASED PROPERTY.................................. 1
Section 2.1 Lease of Property..................................... 1
Section 2.2 Acceptance Procedure.................................. 1
Section 2.3 Separate Leases....................................... 2
Section 2.4 Construction.......................................... 2
ARTICLE III. RENT...................................................... 2
Section 3.1 Basic Rent............................................ 2
Section 3.2 Supplemental Rent..................................... 2
Section 3.3 Method of Payment..................................... 3
Section 3.4 Late Payment.......................................... 3
Section 3.5 Net Lease; No Setoff, Etc............................. 3
Section 3.6 Certain Taxes......................................... 5
Section 3.7 Utility Charges....................................... 6
ARTICLE IV. WAIVERS................................................... 6
ARTICLE V. LIENS; EASEMENTS; PARTIAL CONVEYANCES..................... 7
ARTICLE VI. MAINTENANCE AND REPAIR;ALTERATIONS,
MODIFICATIONS AND ADDITIONS............................... 8
Section 6.1 Maintenance and Repair; Compliance With
Law................................................... 8
Section 6.2 Alterations........................................... 9
Section 6.3 Title to Alterations.................................. 9
ARTICLE VII. USE....................................................... 9
ARTICLE VIII. INSURANCE................................................ 10
ARTICLE IX. ASSIGNMENT AND SUBLEASING................................ 11
ARTICLE X. LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE................ 12
Section 10.1 Event of Loss........................................ 12
Section 10.2 Event of Taking...................................... 12
Section 10.3 Casualty............................................. 13
Section 10.4 Condemnation......................................... 13
Section 10.5 Verification of Restoration and
Rebuilding........................................... 14
<PAGE>
Section 10.6 Application of Payments.............................. 14
Section 10.7 Prosecution of Awards................................ 15
Section 10.8 Application of Certain Payments Not
Relating to an Event of Taking....................... 16
Section 10.9 Other Dispositions................................... 16
Section 10.10 No Rent Abatement.................................... 16
ARTICLE XI. INTEREST CONVEYED TO LESSEE.............................. 16
ARTICLE XII. EVENTS OF DEFAULT........................................ 22
ARTICLE XIII. ENFORCEMENT.............................................. 25
Section 13.1 Remedies............................................. 25
Section 13.2 Remedies Cumulative; No Waiver;
Consents............................................. 27
ARTICLE XIV. SALE, RETURN OR PURCHASE OF LEASED PROPERTY;
RENEWAL ................................................. 28
Section 14.1 Lessee's Option to Purchase.......................... 28
Section 14.2 Conveyance to Lessee................................. 29
Section 14.3 Acceleration of Purchase Obligation.................. 29
Section 14.4 Determination of Purchase Price...................... 29
Section 14.5 Purchase Procedure................................... 29
Section 14.6 Option to Remarket; Surrender Option................. 30
Section 14.7 Rejection of Sale.................................... 33
Section 14.8 Return of Leased Property............................ 33
Section 14.9 Renewal.............................................. 34
ARTICLE XV. LESSEE'S EQUIPMENT....................................... 35
ARTICLE XVI. RIGHT TO PERFORM FOR LESSEE.............................. 35
ARTICLE XVII. MISCELLANEOUS............................................ 36
Section 17.1 Reports.............................................. 36
Section 17.2 Binding Effect; Successors and Assigns;
Survival............................................. 36
Section 17.3 Quiet Enjoyment...................................... 36
Section 17.4 Notices.............................................. 36
Section 17.5 Severability......................................... 37
Section 17.6 Amendment; Complete Agreements....................... 37
Section 17.7 Construction......................................... 37
Section 17.8 Headings............................................. 37
Section 17.9 Counterparts......................................... 38
Section 17.10 GOVERNING LAW........................................ 38
Section 17.11 Discharge of Lessee's Obligations by its
Affiliates........................................... 38
<PAGE>
Section 17.12 Liability of Lessor Limited......................... 38
Section 17.13 Estoppel Certificates............................... 38
Section 17.14 No Joint Venture.................................... 39
Section 17.15 No Accord and Satisfaction.......................... 39
Section 17.16 No Merger........................................... 39
Section 17.17 Survival............................................ 39
Section 17.18 Chattel Paper....................................... 40
Section 17.19 Time of Essence..................................... 40
Section 17.20 Recordation of Lease................................ 40
Section 17.21 Investment of Security Funds........................ 40
<PAGE>
APPENDICES AND EXHIBITS
- -----------------------
APPENDIX A Defined Terms
EXHIBIT A Legal Description
(vi)
<PAGE>
THIS LEASE AGREEMENT (as from time to time amended or supplemented,
this "LEASE"), dated as of August 28, 1997, is between SUP JOINT VENTURE, a
Florida general partnership (together with its successors and assigns hereunder,
the "LESSOR"), as Lessor, and SUPREME INTERNATIONAL CORPORATION, a Florida
corporation (together with its successors and permitted assigns hereunder, the
"LESSEE"), as Lessee.
PRELIMINARY STATEMENT
A. Lessor owns certain real property.
B. Lessor desires to lease to Lessee, and Lessee desires to lease from
Lessor, such property.
In consideration of the mutual agreements herein contained and other
good and valuable consideration, receipt of which is hereby acknowledged, Lessor
and Lessee hereby agree as follows:
ARTICLE I.
DEFINITIONS
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in APPENDIX A hereto for all purposes hereof.
ARTICLE II.
LEASE OF LEASED PROPERTY
Section II.1 LEASE OF PROPERTY. Commencing on the Closing Date, Lessor,
subject to the satisfaction or waiver of the conditions set forth in Section 3
of the Master Agreement, hereby agrees to lease to Lessee hereunder and under
the Land Lease for the Lease Term, Lessor's interest in the Land and in the
improvements thereon and Lessee hereby agrees, expressly for the direct benefit
of Lessor, commencing on the Closing Date for the Lease Term, to lease from
Lessor Lessor's interest in the Land, together with Lessor's interest in any
Building and other improvements thereon or which thereafter may be constructed
thereon pursuant hereto. The legal description of the Land is set forth on
EXHIBIT A hereto.
<PAGE>
Section II.2 ACCEPTANCE PROCEDURE. Lessor hereby authorizes one or more
employees of Lessee, to be designated by Lessee, as the authorized
representative or representatives of Lessor to accept delivery on behalf of
Lessor of the Leased Property. Lessee hereby agrees that such acceptance of
delivery by such authorized representative or representatives and the execution
and delivery by Lessee on the Closing Date of this Lease shall, without further
act, constitute the irrevocable acceptance by Lessee of the Leased Property for
all purposes of this Lease and the other Operative Documents on the terms set
forth therein and herein, and that the Leased Property, shall be deemed to be
included in the leasehold estate of this Lease and shall be subject to the terms
and conditions of this Lease as of the Closing Date. The demise and lease of
each Building pursuant to this SECTION 2.2 shall include any additional right,
title or interest in such Building which may at any time be acquired by Lessor,
the intent being that all right, title and interest of Lessor in and to such
Building shall at all times be demised and leased to Lessee hereunder.
Section II.3 SEPARATE LEASES. Lessor and Lessee hereby acknowledge that
the Land and the Building will be leased under separate leases. This Lease is
the Building Lease. For purposes of this Lease only (and not for purposes of the
other Operative Documents), the term ALeased Property@ refers only to the
Building. Lessee agrees that any event giving rise to a termination of this
Lease, including an Event of Loss and an Event of Taking, shall be deemed to
give rise to a termination of the Land Lease as well, and that each option to be
exercised at the end of the Lease Term hereunder, including the Purchase Option,
the Surrender Option, the Remarketing Option and the renewal option must be
exercised simultaneously with the same such option under the Land Lease.
Section II.4 CONSTRUCTION. Lessee hereby agrees, as agent for Lessor,
to cause the completion of the construction of the Building, in accordance with
Applicable Law, on or before October 31, 1997.
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ARTICLE III
RENT
Section III.1 BASIC RENT. Beginning with and including the first
Payment Date occurring after the Closing Date, Lessee shall pay to the Agent the
Basic Rent for the Leased Property, in installments, payable in arrears on each
Payment Date during the Lease Term.
Section III.2 SUPPLEMENTAL RENT. Lessee shall pay to the Agent, or to
whomever shall be entitled thereto as expressly provided herein or in any other
Operative Document, any and all Supplemental Rent within five (5) Business Days
of the date the same shall become due and payable and in the event of any
failure on the part of Lessee to pay any Supplemental Rent, the Agent shall have
all rights, powers and remedies provided for herein or by law or in equity or
otherwise in the case of nonpayment of Basic Rent. All Supplemental Rent to be
paid pursuant to this SECTION 3.2 shall be payable in the type of funds and in
the manner set forth in SECTION 3.3.
Section III.3 METHOD OF PAYMENT. Basic Rent shall be paid to the Agent,
and Supplemental Rent (including amounts due under ARTICLE XIV hereof) shall be
paid to the Agent (or to such Person as may be entitled thereto) or, in each
case, to such Person as the Agent (or such other Person) shall specify in
writing to Lessee, and at such place as the Agent (or such other Person) shall
specify in writing to Lessee, which specifications by the Agent shall be given
by the Agent at least five (5) Business Days prior to the due date therefor.
Each payment of Rent (including payments under ARTICLE XIV hereof) shall be made
by Lessee prior to 12:00 p.m. (noon) Miami, Florida time at the place of payment
in funds consisting of lawful currency of the United States of America which
shall be immediately available on the scheduled date when such payment shall be
due, unless such scheduled date shall not be a Business Day, in which case such
payment shall be made on the next succeeding Business Day.
Section III.4 LATE PAYMENT. If any Basic Rent shall not be paid on the
date when due, Lessee shall pay to the Agent, as Supplemental Rent, interest (to
the maximum extent permitted by law) on such overdue amount from and including
the due date
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thereof to but excluding the Business Day of payment thereof at the
Overdue Rate.
Section III.5 NET LEASE; NO SETOFF, ETC. This Lease is a net lease and
notwithstanding any other provision of this Lease, Lessee shall pay all Basic
Rent and Supplemental Rent, and all costs, charges, taxes (other than taxes and
other items covered by the exclusion described in Section 7.4(b) of the Master
Agreement and other than the costs of insurance carried by the Lessor, the Agent
or any Lender pursuant to the last sentence of ARTICLE VIII(C)), assessments and
other expenses foreseen or unforeseen, for which Lessee or any Indemnitee is or
shall become liable by reason of Lessee's or such Indemnitee's estate, right,
title or interest in the Leased Property, or that are connected with or arise
out of the acquisition (except the initial costs of purchase by Lessor of its
interest in the Leased Property, which costs, subject to the terms of the Master
Agreement, shall be funded by the Funding Parties pursuant to the Master
Agreement), installation, possession, use, occupancy, maintenance, ownership,
leasing, repairs and rebuilding of, or addition to, the Leased Property or any
portion thereof, and any other amounts payable hereunder and under the other
Operative Documents without counterclaim, setoff, deduction or defense and
without abatement, suspension, deferment, diminution or reduction, and Lessee's
obligation to pay all such amounts throughout the Lease Term is absolute and
unconditional. The obligations and liabilities of Lessee hereunder shall in no
way be released, discharged or otherwise affected for any reason, including
without limitation: (a) any defect in the condition, merchantability, design,
quality or fitness for use of the Leased Property or any part thereof, or the
failure of the Leased Property to comply with all Applicable Law, including any
inability to occupy or use the Leased Property by reason of such non-compliance;
(b) any damage to, removal, abandonment, salvage, loss, contamination of or
Release from, scrapping or destruction of or any requisition or taking of the
Leased Property or any part thereof; (c) any restriction, prevention or
curtailment of or interference with any use of the Leased Property or any part
thereof including eviction; (d) any defect in title to or rights to the Leased
Property or any Lien on such title or rights or on the Leased Property; (e) any
change, waiver, extension, indulgence or other action or omission or breach in
respect of any obligation or liability of or by Lessor, the Agent or any Lender;
(f) any bankruptcy, insolvency,
4
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reorganization, composition, adjustment, dissolution, liquidation or other like
proceedings relating to Lessee, Lessor, any Lender, the Agent or any other
Person, or any action taken with respect to this Lease by any trustee or
receiver of Lessee, Lessor, any Lender, the Agent or any other Person, or by any
court, in any such proceeding; (g) any claim that Lessee has or might have
against any Person, including without limitation, Lessor, any vendor,
manufacturer, contractor of or for any Building or any part thereof, the Agent
or any Lender; (h) any failure on the part of Lessor to perform or comply with
any of the terms of this Lease, any other Operative Document or of any other
agreement; (i) any invalidity or unenforceability or illegality or disaffirmance
of this Lease against or by Lessee or any provision hereof or any of the other
Operative Documents or any provision of any thereof whether or not related to
the Transaction; (j) the impossibility or illegality of performance by Lessee,
Lessor or both; (k) any action by any court, administrative agency or other
Governmental Authority; (l) any restriction, prevention or curtailment of or
interference with any use of the Leased Property or any part thereof; or (m) any
other occurrence whatsoever, whether similar or dissimilar to the foregoing,
whether or not Lessee shall have notice or knowledge of any of the foregoing.
Except as specifically set forth in ARTICLE XIV or X of this Lease, this Lease
shall be noncancellable by Lessee in any circumstance whatsoever and Lessee, to
the extent permitted by Applicable Law, waives all rights now or hereafter
conferred by statute or otherwise to quit, terminate or surrender this Lease, or
to any diminution, abatement or reduction of Rent payable by Lessee hereunder.
Each payment of Rent made by Lessee hereunder shall be final and Lessee shall
not seek or have any right to recover all or any part of such payment from
Lessor, the Agent, any Lender or any party to any agreements related thereto for
any reason whatsoever. Lessee assumes the sole responsibility for the condition,
use, operation, maintenance, and management of the Leased Property and Lessor
shall have no responsibility in respect thereof and shall have no liability for
damage to the property of either Lessee or any subtenant of Lessee on any
account or for any reason whatsoever, other than solely by reason of Lessor's
willful misconduct or gross negligence. Nothing contained in this SECTION 3.5 is
intended to be, nor shall be deemed to be, a waiver by Lessee of any rights it
may have at law or in equity to bring a cause of action against Lessor for its
gross negligence, willful misconduct or
5
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breach of contract, PROVIDED that Lessee may not terminate this Lease or take
any offset against Rent due hereunder.
Section III.6 CERTAIN TAXES. Without limiting the generality of SECTION
3.5, Lessee agrees to pay when due all real estate taxes, personal property
taxes, gross sales taxes, including any sales or lease tax imposed upon the
rental payments hereunder or under a sublease, occupational license taxes, water
charges, sewer charges, assessments of any nature and all other governmental
impositions and charges of every kind and nature whatsoever (the "TAX(ES)"),
when the same shall be due and payable without penalty or interest; PROVIDED,
HOWEVER, that this Section shall not apply to any of the taxes and other items
covered by the exclusion described in Section 7.4(b) of the Master Agreement. It
is the intention of the parties hereto that, insofar as the same may lawfully be
done, Lessor shall be, except as specifically provided for herein, free from all
expenses in any way related to the Leased Property and the use and occupancy
thereof. Any tax relating to a fiscal period of any taxing authority falling
partially within and partially outside the Lease Term, shall be apportioned and
adjusted between Lessor and Lessee. Lessee covenants to furnish Lessor and the
Agent, upon the Agent's request, within forty-five (45) days after the last date
when any tax must be paid by Lessee as provided in this SECTION 3.6, official
receipts of the appropriate taxing, authority or other proof satisfactory to
Lessor, evidencing the payment thereof.
So long as no Event of Default has occurred and is continuing, Lessee
may defer payment of a tax so long as the validity or the amount thereof is
contested by Lessee with diligence and in good faith; PROVIDED, HOWEVER, that
Lessee shall furnish to Lessor and the Agent a bond in an amount and on terms
satisfactory to Lessor and the Agent and shall pay the tax in sufficient time to
prevent delivery of a tax deed. Such contest shall be at Lessee's sole cost and
expense. Lessee covenants to g indemnify and save harmless Lessor, the Agent and
each Lender from any actual and reasonable costs or expenses incurred by Lessor,
the Agent or any Lender as a result of such contest.
Section III.7 UTILITY CHARGES. Lessee agrees to pay or cause to be paid
as and when the same are due and payable all charges for gas, water, sewer,
electricity, lights, heat, power,
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telephone or other communication service and all other utility services used,
rendered or supplied to, upon or in connection with the Leased Property.
ARTICLE IV.
WAIVERS
During the Lease Term, Lessor's interest in the Building(s) (whether or
not completed) and the Land is demised and let by Lessor "AS IS" subject to (a)
the rights of any parties in possession thereof, (b) the state of the title
thereto existing at the time Lessor acquired its interest in the Leased
Property, (c) any state of facts which an accurate survey or physical inspection
might show (including the survey delivered on the Closing Date), (d) all
Applicable Law, and (e) any violations of AR Applicable Law which may exist upon
or subsequent to the commencement of the Lease Term. LESSEE ACKNOWLEDGES THAT,
ALTHOUGH LESSOR WILL OWN AND HOLD TITLE TO THE LEASED PROPERTY, LESSOR IS NOT
RESPONSIBLE FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE
BUILDING(S) OR ANY ALTERATIONS. NEITHER LESSOR, THE AGENT NOR ANY LENDER HAS
MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, AR
MERCHANTABILITY, TITLE, HABITABILITY, CONDITION, DESIGN, OPERATION, OR FITNESS
FOR USE OF THE LEASED PROPERTY (OR ANY PART THEREOF), OR ANY OTHER
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE
LEASED PROPERTY (OR ANY PART THEREOF), ALL SUCH WARRANTIES BEING HEREBY
DISCLAIMED, AND NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE LIABLE FOR ANY
LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF THE LEASED PROPERTY,
OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE A LAW, except that Lessor
hereby represents and warrants that the Leased Property is and shall be free of
Lessor Liens. As between Lessor and Lessee, Lessee has been afforded full
opportunity to inspect the Leased Property, is satisfied with the results of its
inspections of the Leased Property and is entering into this Lease solely on the
basis of the results of its own inspections and all risks incident to the
matters discussed in the two preceding sentences, as between Lessor, the Agent
or the Lenders R on the one hand, and Lessee, on the other, are to be borne by
Lessee. The provisions of this ARTICLE IV have been negotiated, and, except to
the extent otherwise expressly stated,
7
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the foregoing provisions are intended to be a complete exclusion and negation of
any representations or warranties by Lessor, the Agent or the Lenders, express
or implied, with respect to the Leased Property, that may arise pursuant to any
law now or hereafter in effect, or otherwise.
ARTICLE V.
LIENS; EASEMENTS; PARTIAL CONVEYANCES
Lessee shall not directly or indirectly create, incur or assume, any
Lien on or with respect to the Leased Property, the title thereto, or any
interest therein, including any Liens which arise out of the possession, use,
occupancy, construction, repair or rebuilding of the Leased Property or by
reason of labor or materials furnished or claimed to have been furnished to
Lessee, or any of its contractors or agents or by reason of the financing of any
personalty or equipment purchased or leased by R Lessee from third parties and
not financed by Lessor or Alterations constructed by Lessee, except, in all
cases, Permitted Liens.
At the request of Lessee, Lessor shall, from time to time during the
Lease Term and upon reasonable advance written notice from Lessee, and receipt
of the materials specified in the next succeeding sentence, consent to and join
in any (i) grant of easements, licenses, rights of way and other rights in the
nature of easements, including, without limitation, utility easements to
facilitate Lessee's use, development and construction of the Leased Property,
(ii) release or termination of easements, A licenses, rights of way or other
rights in the nature of easements which are for the benefit of the Land or the
Building(s) or any portion thereof, (iii) dedication or transfer of portions of
the Land, not improved with a building, for road, highway or other public
purposes, (iv) execution of agreements for ingress and egress and amendments to
any covenants and restrictions affecting the Land or the Building(s) or any
portion thereof and (v) request to any Governmental Authority for platting or
subdivision or replatting or resubdivision approval with respect to the Land or
any portion thereof or any parcel of land of which the Land or any portion
thereof forms a part or a request for any variance from zoning or other
governmental requirements. Lessor's obligations pursuant to the preceding
sentence shall be subject to the requirements that:
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(a) any such action shall be at the sole cost and expense of
Lessee and Lessee shall pay all actual and reasonable out-of-pocket costs of
Lessor, the Agent and any Lender in connection therewith (including, without
limitation, the reasonable fees of attorneys, architects, engineers, planners,
appraisers and other professionals reasonably retained by Lessor, the Agent or
any Lender in connection with any such action),
(b) Lessee shall have delivered to Lessor and Agent a
certificate of a Responsible Officer of Lessee stating that
(1) such action will not cause the Leased Property,
the Land or any Building or any portion thereof to fail to comply in
any material respect with the provisions of this Lease or any other
Operative Documents, or in any material respect with Applicable Law;
and
(2) such action will not materially reduce the Fair
Market Sales Value, utility or useful life of the Leased Property, the
Land or any Building nor Lessor's interest therein; and
(c) in the case of any release or conveyance, if Lessor, the
Agent or any Lender so reasonably requests, Lessee will cause to be issued and
delivered to Lessor and the Agent by the Title Insurance Company an endorsement
to the Title Policy pursuant to which the Title Insurance Company agrees that
its liability for the payment of any loss or damage under the terms and
provisions of the Title Policy will not be affected by reason of the fact that a
portion of the real property referred to in Schedule A o f the Title Policy has
been released or conveyed by Lessor.
ARTICLE VI.
MAINTENANCE AND REPAIR;
ALTERATIONS, MODIFICATIONS AND ADDITIONS
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Section VI.1 MAINTENANCE AND REPAIR; COMPLIANCE WITH LAW. Lessee, at
its own expense, shall at all times (a) maintain the Leased Property in good
repair and condition (subject to ordinary wear and tear), in accordance with
prudent industry standards and, in any event, in no less a manner as other
similar office buildings owned or leased by Lessee or its Affiliates, (b) make
all Alterations in accordance with, and maintain (whether or not such
maintenance requires structural modifications or Alterations) and operate and
otherwise keep the Leased Property in compliance in all material respects with,
all Applicable Laws and insurance requirements, and (c) make all material
repairs, replacements and renewals of the Leased Property or any part thereof
which may be required to keep the Leased Property in the condition required by
the preceding CLAUSES (A) and (B). Lessee shall perform the foregoing
maintenance obligations regardless of whether the Leased Property is occupied or
unoccupied. Lessee waives any right that it may now have or hereafter acquire to
(i) require Lessor, the Agent or any Lender to maintain, repair, replace, alter,
remove or rebuild all or any part of the Leased Property or (ii) make repairs at
the expense of Lessor, the Agent or any Lender pursuant to any Applicable Law or
other agreements or otherwise. NEITHER LESSOR, THE AGENT NOR ANY LENDER SHALL BE
LIABLE TO LESSEE OR TO ANY CONTRACTORS, SUBCONTRACTORS, LABORERS, MATERIALMEN,
SUPPLIERS OR VENDORS FOR SERVICES PERFORMED OR MATERIAL PROVIDED ON OR IN
CONNECTION WITH ANY LEASED PROPERTY OR ANY PART THEREOF. THE INTEREST OF LESSOR
UNDER THIS LEASE SHALL NOT BE SUBJECT TO LIENS FOR IMPROVEMENTS MADE BY LESSEE.
Neither Lessor, the Agent nor any Lender shall be required to maintain, alter,
repair, rebuild or replace the Leased Property in any way.
Section VI.2 ALTERATIONS. Lessee may, without the consent of Lessor, at
Lessee's own cost and expense, make Alterations which do not materially diminish
the value, utility or useful life of the Leased Property.
Section VI.3 TITLE TO ALTERATIONS. Title to all Alterations shall
without further act vest in Lessor (subject to Lessee's right to remove, or
grant a Lien on, trade fixtures, personal property, inventory and equipment
which were not acquired with funds advanced by Lessor or any Lender at a time
when no Event of Default has occurred and is continuing) and shall be deemed to
constitute a part of the Leased Property and be subject to this Lease.
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ARTICLE VII.
USE
Lessee may use the Leased Property or any part thereof for any lawful
purpose, and in a manner consistent with the standards applicable to properties
of a similar nature in the geographic area in which the Leased Property is
located, PROVIDED that such use does not materially adversely affect the Fair
Market Sales Value, utility, remaining useful life or residual value of the
Leased Property, and does not materially violate or conflict with, or constitute
or result in a material default under, any Applicable Law or any insurance
policy required hereunder. In the event Lessee's use substantially changes the
character of the Building in a manner or to an extent that, in Lessor's or the
Lenders' reasonable opinion, adversely affects the Fair Market Sales Value
and/or marketability of the Building, Lessee shall, upon the termination or
expiration of this Lease, at Lessor's request, restore the Leased Property to
its general character at the Date (ordinary wear and tear excepted), unless
Lessee has purchased the Leased Property pursuant to the terms of this Lease.
Lessee shall not commit or permit any waste of the Leased Property or the
material part thereof. Lessor shall not take any affirmative action to commit
waste of, or cause damage to, the Leased Property, PROVIDED that Lessor shall
not be liable to Lessee for any action Lessor takes at the request of Lessee or
any action imputed to Lessor by virtue of Lessee=s acting as Lessor's agent.
ARTICLE VIII.
INSURANCE
(a) At any time during which any part of the Building or any
Alteration is under construction and as to any part of the Building or any
Alteration under construction, Lessee shall maintain, or cause to be maintained,
at its sole cost and expense, as a part of its blanket policies or otherwise,
"all risks" non-reporting completed value form of builder's risk insurance.
(b) During the Lease Term, Lessee shall maintain, at its sole
cost and expense, as a part of its blanket policies or otherwise, insurance
against loss or damage to any Building by
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fire and other risks, including comprehensive boiler and machinery coverage, on
terms and in amounts no less favorable than insurance covering other similar
properties owned or leased by Lessee and that are in accordance with normal
industry practice, but in no event less than the replacement cost of such
Building from time to time.
(c) During the Lease Term, Lessee shall maintain, at its sole
cost and expense, commercial general liability insurance with respect to the
Leased Property, as is ordinarily procured by Persons who own or operate similar
properties in the same geographic area. Such insurance shall be on terms and in
amounts that are no less favorable than insurance maintained by Lessee or its
Affiliates with respect to similar properties that it owns or leases and that
are in accordance with normal industry practice, but in no event less than
$1,000,000 per occurrence. Such insurance policies shall also provide that
Lessee's insurance shall be considered primary insurance. Nothing in this
ARTICLE VIII shall prohibit Lessor, the Agent or any Lender from carrying at its
own expense other insurance on or with respect to the Leased Property, PROVIDED
that any insurance carried by Lessor, the Agent or any Lender shall not prevent
Lessee from carrying the insurance required hereby.
(d) Each policy of insurance maintained by Lessee pursuant to
CLAUSES (A) and (B) of this ARTICLE IX shall provide that all insurance proceeds
in respect of any loss or occurrence shall be adjusted by Lessee, except (a)
that with respect to any loss, the estimated cost of restoration of which is in
excess of $3,000,000, the adjustment thereof shall be subject to the prior
written approval of the Agent (or of Lessor if the Funded Amounts have been
fully paid) and the insurance proceeds therefor shall be paid to the Agent (or
to Lessor if the Funded Amounts have been fully paid) for application in
accordance with this Lease, and (b) if, and for so long as an Event of Default
exists, all losses shall be adjusted solely by, and all insurance proceeds shall
be paid solely to, the Agent (or Lessor if the Loans have been fully paid) for
application pursuant to this Lease.
(e) On the Closing Date and on each anniversary of the Closing
Date, Lessee shall furnish Lessor with certificates showing the insurance
required under this ARTICLE VIII to be in effect and naming Lessor, the Agent
and the Lenders as additional
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insureds. Such certificates shall include a provision for thirty (30) days'
advance written notice by the insurer to Lessor and the Agent in the event of
cancellation or expiration or nonpayment of premium with respect to such
insurance, and shall include a customary b reach of warranty clause.
(f) Each policy of insurance maintained by Lessee pursuant to
this ARTICLE VIII shall (1) contain the waiver of any right of subrogation of
the insurer against Lessor, the Agent and the Lenders, and (2) provide that in
respect of the interests of Lessor, the Agent and the Lenders, such policies
shall not be invalidated by any fraud, action, inaction or misrepresentation of
Lessee or any other Person acting on behalf of Lessee.
(g) All insurance policies carried in accordance with this
ARTICLE VIII shall be maintained with insurers rated at least A by A.M. Best &
Company, and in all cases the insurer shall be qualified to insure risks in the
State where the Leased Property is located.
ARTICLE IX.
ASSIGNMENT AND SUBLEASING
Lessee may not assign any of its right, title or interest in, to or
under this Lease, except as set forth in the following sentence. Lessee may
sublease all or any portion of the Leased Property, PROVIDED that (a) all
obligations of Lessee shall continue in full effect as obligations of a
principal and not of a guarantor or surety, as though no sublease had been made;
(b) such sublease shall be expressly subject and subordinate to this Lease, the
Loan Agreement and the other Operative Documents; and (c) e ach such sublease
shall terminate on or before the Lease Termination Date.
Except pursuant to an Operative Document, this Lease shall not be
mortgaged or pledged by Lessee, nor shall Lessee mortgage or pledge any interest
in the Leased Property or any portion thereof. Any such mortgage or pledge shall
be void.
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ARTICLE X.
LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE
Section X.1 EVENT OF LOSS. Any event (i) which would otherwise
constitute a Casualty during the Base Term, and (ii) which, in the good-faith
judgment of Lessee, renders repair and restoration of the Leased Property
impractical or uneconomical, and (iii) as to which Lessee, within sixty (60)
days after the occurrence of such event, delivers to Lessor an Officer's
Certificate notifying Lessor of such event and of such judgment, shall
constitute an "EVENT OF LOSS". In the case of any other event which constitutes
a Casualty, Lessee shall restore the Leased Property pursuant to SECTION 10.3.
If an Event of Loss other than an Event of Taking shall occur, Lessee shall pay
to Lessor on the next Payment Date following delivery of the Officer's
Certificate pursuant to CLAUSE (III) above an amount equal to the Lease Balance.
Upon Lessor's receipt of such Lease Balance on such date, Lessor shall cause
Lessor's interest in the Leased Property to be conveyed to Lessee in accordance
with and subject to the provisions of SECTION 14.5 hereof; upon completion of
such purchase, but not prior thereto, this Lease and all obligations hereunder
shall terminate, except with respect to obligations and liabilities hereunder,
actual or contingent, that have arisen or relate to events occurring on or prior
to such date of purchase, or which are expressly stated herein to survive
termination of this Lease.
Upon the consummation of the purchase of the Leased Property pursuant
to this SECTION 10.1, any proceeds derived from insurance required to be
maintained by Lessee pursuant to this Lease for the Leased Property remaining
after payment of such purchase price shall be paid over to, or retained by,
Lessee or as it may direct, and Lessor shall assign to Lessee, without warranty,
all of Lessor's rights to and interest in insurance required to be maintained by
Lessee pursuant to this Lease.
Section X.2 EVENT OF TAKING. Any event (i) which constitutes a
Condemnation of all of, or substantially all of, the Leased Property, or (ii)
(A) which would otherwise constitute the Condemnation, (B) which, in the
good-faith judgment of Lessee, renders restoration and rebuilding of the Leased
Property impossible, impractical or uneconomical, and (C) as to which Lessee,
within sixty (60) days after the occurrence of such
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event, delivers to Lessor an Officer's Certificate notifying Lessor of such
event and of such judgment, shall constitute an "EVENT OF TAKING". In the case
of any other event which constitutes a Condemnation, Lessee shall restore and
rebuild the Leased Property pursuant to SECTION 10.4. If an Event of Taking
shall occur, Lessee shall pay to Lessor (1) on the next Payment Date occurring
not less than ninety (90) days after the occurrence of such Event of Taking, in
the case of an Event of Taking described in CLAUSE (I) above, or (2) on the next
Payment Date occurring not less than ninety (90) days after delivery of the
Officer's Certificate pursuant to CLAUSE (II) above, in the case of an Event of
Taking described in CLAUSE (II) above, an amount equal to the Lease Balance.
Upon Lessor's receipt of such Lease Balance on such date, Lessor shall cause
Lessor's interest in the Leased Property to be conveyed to Lessee in accordance
with and subject to the provisions of SECTION 14.5 hereof (provided that such
conveyance shall be subject to all rights of the condemning authority); upon
completion of such purchase, but not prior thereto, this Lease and all
obligations hereunder shall terminate, except with respect to obligations and
liabilities hereunder, actual or contingent, that have arisen or relate to
events occurring on or prior to such date of purchase, or which are expressly
stated herein to survive termination of this Lease.
Upon the consummation of the purchase of the Leased Property pursuant
to this SECTION 10.2, all Awards received by Lessor, after deducting any
reasonable costs incurred by Lessor in collecting such Awards, received or
payable on account of an Event of Taking with respect to the Leased Property
during the related Lease Term shall be paid to Lessee, and all rights of Lessor
in Awards not then received shall be assigned to Lessee by Lessor.
Section X.3 CASUALTY. If a Casualty shall occur, Lessee shall rebuild
and restore the Leased Property, will complete the same prior to the Lease
Termination Date, and will cause the condition set forth in SECTION 3.4 (C) of
the Master Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date, regardless of whether insurance
proceeds received as a result of such Casualty are sufficient for such purpose,
unless Lessee purchases the Leased Property in accordance with t he terms of
this Lease.
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Section X.4 CONDEMNATION. If a Condemnation shall occur, Lessee shall
rebuild and restore the Leased Property, will complete the same prior to the
Lease Termination Date, and will cause the condition set forth in SECTION 3.4
(C) of the Master Agreement to be fulfilled with respect to such restoration and
rebuilding prior to the Lease Termination Date, unless Lessee purchases the
Leased Property in accordance with the terms of this Lease.
Section X.5 VERIFICATION OF RESTORATION AND REBUILDING. In the event of
Casualty or Condemnation, to verify Lessee's compliance with the foregoing
SECTIONS 10.3 and 10.4, Lessor, the Agent, the Lenders and their respective
authorized representatives may, upon five (5) Business Days' notice to Lessee,
make inspections of the Leased Property with respect to (i) the extent of the
Casualty or Condemnation and (ii) the restoration and rebuilding of the Building
and the Land. All actual and reasonable out-of-pocket costs of such inspections
incurred by Lessor, the Agent or any Lender will be paid by Lessee promptly
after written request. No such inspection shall unreasonably interfere with
Lessee's operations or the operations of any other occupant of the Leased
Property. None of the inspecting parties shall have any duty to make any such
inspection or inquiry and none of the inspecting parties shall incur any
liability or obligation by reason of making or not making any such inspection or
inquiry.
Section X.6 APPLICATION OF PAYMENTS. All proceeds (except for payments
under insurance policies maintained other than pursuant to ARTICLE VIII of this
Lease) received at any time by Lessor, Lessee or the Agent from any Governmental
Authority or other Person with respect to any Condemnation or Casualty to the
Leased Property or any part thereof or with respect to an Event of Loss or an
Event of Taking, PLUS the amount of any payment that would have been due from an
insurer but for Lessee's self-insurance or deductibles ("LOSS PROCEEDS"), shall
(except to the extent SECTION 10.9 applies) be applied as follows:
(a) In the event Lessee purchases the Leased Property pursuant
to SECTION 10.1 or SECTION 10.2, such Loss Proceeds shall be applied as
set forth in SECTION 10.1 or SECTION 10.2, as the case may be;
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(b) In the event of a Casualty at such time when no Event of
Default has occurred and is continuing and Lessee is obligated to
repair and rebuild the Leased Property pursuant to SECTION 10.3, Lessee
may, in good faith and subsequent to the date of such Casualty, certify
to Lessor and to the applicable insurer that no Event of Default has
occurred and is continuing, in which event the applicable insurer shall
pay the Loss Proceeds to Lessee, unless the estimated cost of
restoration exceeds $3,000,000, in which case the Loss Proceeds shall
be paid to the Agent (or Lessor if the Loans have been paid in full),
and shall be promptly released to Lessee upon certification by Lessee
to Lessor and the Agent that Lessee has incurred costs in the amount
requested to be released for the repair and rebuilding of the Leased
Property;
(c) In the event of a Condemnation at such time when no Event
of Default has occurred and is continuing and Lessee is obligated to
repair and rebuild the Leased Property pursuant to SECTION 10.4, Lessor
shall upon Lessee's request assign to Lessee Lessor's interest in any
applicable Awards; and
(d) As provided in SECTION 10.8, if such section is
applicable.
During any period of repair or rebuilding pursuant to this ARTICLE X,
this Lease will remain in full force and effect and Basic Rent shall continue to
accrue and be payable without abatement or reduction. Lessee shall maintain
records setting forth information relating to the receipt and application of
payments in accordance with this SECTION 10.6. Such records shall be kept on
file by Lessee at its offices and shall be made available to Lessor, the Lenders
and the Agent upon request.
Section X.7 PROSECUTION OF AWARDS. (a) If, during the continuance of
any Event of Default, any Condemnation shall occur, Lessee shall give to Lessor
and the Agent promptly, but in any event within thirty (30) days after the
occurrence thereof, written notice of such occurrence and the date thereof,
generally describing the nature and extent of such Condemnation. With respect to
any Event of Taking or any Condemnation, Lessee shall control the negotiations
with the relevant Governmental Authority
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as to any proceeding in respect of which Awards are required, under SECTION
10.6, to be assigned or released to Lessee, unless an Event of Default shall
have occurred and be continuing, in which case (1) the Agent shall control such
negotiations; and (2) Lessee hereby irrevocably assigns, transfers and sets over
to Lessor all rights of Lessee to any Award made during the continuance of an
Event of Default on account of any Event of Taking or any Condemnation and, if
there will not be separate Awards to Lessor and Lessee on account of such Event
of Taking or Condemnation, irrevocably authorizes and empowers the Agent during
the continuance of an Event of Default, with full power of substitution, in the
name of Lessee or otherwise (but without limiting the obligations of Lessee
under this ARTICLE X), to file and prosecute what would otherwise be Lessee's
claim for any such Award and to collect, receipt for and retain the same;
PROVIDED, HOWEVER, that in any event Lessor and the Agent may participate in
such negotiations, and no settlement will be made without the prior consent of
the Agent, not to be unreasonably withheld.
(b) Notwithstanding the foregoing, Lessee may prosecute, and Lessor
shall have no interest in, any claim with respect to Lessee's personal property
and equipment not financed by Lessor, lost income and Lessee's relocation
expenses.
Section X.8 APPLICATION OF CERTAIN PAYMENTS NOT RELATING TO AN EVENT OF
TAKING. In case of a requisition for temporary use of all or a portion of the
Leased Property which is not an Event of Taking, this Lease shall remain in full
force and effect, without any abatement or reduction of Basic Rent, and the
Awards for the Leased Property shall, unless an Event of Default has occurred
and is continuing, be paid to Lessee.
Section X.9 OTHER DISPOSITIONS. Notwithstanding the foregoing
provisions of this ARTICLE X, so long as an Event of Default shall have occurred
and be continuing, any amount that would otherwise be payable to or for the
account of, or that would otherwise be retained by, Lessee pursuant to this
ARTICLE X shall be paid to the Agent (or Lessor if the Loans have been fully
paid) as security for the obligations of Lessee under this Lease and, at such
time thereafter as no Event of Default shall be continuing, such amount shall be
paid promptly to Lessee to the extent not previously applied by Lessor or the
Agent in
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accordance with the terms of this Lease or the other Operative
Documents.
Section X.10 NO RENT ABATEMENT. Rent shall not abate hereunder by
reason of any Casualty, any Event of Loss, any Event of Taking or any
Condemnation of the Leased Property, and Lessee shall continue to perform and
fulfill all of Lessee's obligations, covenants and agreements hereunder
notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation
until the Lease Termination Date.
ARTICLE XI.
INTEREST CONVEYED TO LESSEE
Lessor and Lessee intend that this Lease be treated, for accounting
purposes, as an operating lease. For all other purposes, Lessee and Lessor
intend that the transaction represented by this Lease be treated as a financing
transaction; for such purposes, it is the intention of the parties hereto that
this Lease is hereby agreed to be a mortgage and security agreement.
Said Mortgage and Security Agreement is made and entered into as of the
date set forth first above by and between Lessee, as mortgagor (hereinafter
sometimes designated as "MORTGAGOR"), and Lessor, as mortgagee (hereinafter
sometimes designated as "MORTGAGEE").
W I T N E S S E T H:
WHEREAS, Mortgagor is indebted and obligated to Mortgagee as evidenced
by this Lease providing for payment of the Basic Rent, Supplemental Rent and
other obligations described therein plus attorney's fees for collection if not
paid according to the terms thereof and being due and payable as set forth in
the Lease and other Operative Documents; and
WHEREAS, Mortgagor desires to secure prompt payment of the Basic Rent,
Supplemental Rent and all of its other obligations under the Lease and the other
Operative Documents (all such obligations being herein referred to as the
"INDEBTEDNESS").
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NOW THEREFORE, to secure the performance and observance by Mortgagor of
all covenants and conditions as set forth in this Mortgage and the prompt
payment of the Indebtedness and for and in consideration of the sum of TEN
DOLLARS ($10.00) paid by Mortgagee to Mortgagor this date, and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by Mortgagor, MORTGAGOR DOES HEREBY GRANT, BARGAIN, SELL, LIEN,
REMISE, RELEASE, CONVEY, ASSIGN, TRANSFER, MORTGAGE, HYPOTHECATE, PLEDGE,
DELIVER, SET OVER, WARRANTY AND CONFIRM UNTO MORTGAGEE, ITS SUCCESSORS AND
ASSIGNS FOREVER all of the following:
(A) the parcel(s) of real property described on EXHIBIT A (the
"LAND"); and the fee interest in the land described in EXHIBIT A (if
and when acquired by Mortgagor, and which shall then be deemed included
in the "LAND"); all buildings, structures, Fixtures, Equipment, and
other improvements of every kind existing at any time and from time to
time on or under the Land, together with any and all appurtenances to
such buildings, structures or improvements, including sidewalks,
utility pipes, conduits and lines, parking areas and roadways, and
including all modifications, alterations, renovations, improvements and
other additions to or changes in the Improvements at any time
("IMPROVEMENTS"); all agreements, easements, rights of way or use,
rights of ingress or egress, privileges, appurtenances, tenements,
hereditaments and other rights and benefits at any time belonging or
pertaining to the Land or the Improvements, including, without
limitation, the use of any streets, ways, alleys, vaults or strips of
land adjoining, abutting, adjacent or contiguous to the Land and all
permits, licenses and rights, whether or not of record, appurtenant to
the Land ("APPURTENANT RIGHTS"; the Land, Improvements, Appurtenant
Rights, Fixtures and Equipment relating thereto being collectively
referred to as the "PROPERTY");
(B) all the estate, right, title, claim or demand whatsoever
of the Mortgagor, in possession or expectancy, in and to the Property
or any part thereof;
(C) all right, title and interest of the Mortgagor in and to
all of the fixtures, furnishings and fittings of
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every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by the Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Pr operty (all of the foregoing in
this PARAGRAPH (C) being referred to as the "FIXTURES");
(D) all right, title and interest of the Mortgagor in and to
all of the fixtures, chattels, business machines, machinery, apparatus,
equipment, furnishings, fittings and articles of personal property of
every kind and nature whatsoever, and all appurtenances and additions
thereto and substitutions or replacements thereof (together with, in
each case, attachments, components, parts and accessories) currently
owned or subsequently acquired by the Mortgagor and now or subsequently
attached to, or contained in or used or usable in any way in connection
with any operation or letting of the Property, including but without
limiting the generality of the foregoing, all screens, awnings, shades,
blinds, curtains, draperies, artwork, carpets, rugs, storm doors and
windows, furniture and furnishings, heating, electrical, and mechanical
equipment, lighting, switchboards, plumbing, ventilating, air
conditioning and air-cooling apparatus, refrigerating, and incinerating
equipment, escalators, refrigerators, display cases, elevators, loading
and unloading equipment and systems, stoves, ranges, laundry equipment,
cleaning systems (including window cleaning apparatus), telephones,
communication systems (including satellite dishes and antennae),
televisions, computers, sprinkler systems and other fire prevention and
extinguishing apparatus and materials, security systems, motors,
engines, machinery, pipes, pumps, tanks, conduits, appliances, fittings
and fixtures of every kind and descripti on (all of the foregoing in
this PARAGRAPH (D) being referred to as the "EQUIPMENT");
(E) all right, title and interest of the Mortgagor in and to
all substitutes and replacements of, and all additions and improvements
to, the Improvements and the Fixtures and Equipment, subsequently
acquired by the
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Mortgagor or constructed, assembled or placed by the Mortgagor on the
Land, immediately upon such acquisition, release, construction,
assembling or placement, including, without limitation, any and all
building materials whether stored at the Property or offsite, and, in
each such case , without any further conveyance, mortgage, assignment
or other act by the Mortgagor;
(F) all right, title and interest of the Mortgagor in, to and
under all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the operation
of the Property or the Fixtures or any part thereof; and all general
intangibles related to the operation of the Improvements now existing
or hereafter arising;
(G) all right, title and interest of the Mortgagor in and to
all unearned premiums under insurance policies now or subsequently
obtained by the Lessee relating to the Property or the Fixtures and the
Mortgagor's interest in and to all proceeds of any such insurance
policies (including title insurance policies) including the right to
collect and receive such proceeds: and all awards and other
compensation, including the interest payable thereon and the right to
collect and receive the same, made to the present or any subsequent
owner of the Property for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Property or any easement or other
right therein;
(H) all right, title and interest of the Mortgagor in and to
(i) all consents, licenses, building permits, certificates of occupancy
and other governmental approvals relating to construction, completion,
occupancy, use or operation of the Property or any part thereof and
(ii) all Plans and Specifications relating to the Property;
(I) all Rent and all other rents, payments, purchase prices,
receipts, revenues, issues and profits payable under the Lease or
pursuant to any other lease with respect to the Property; and
(J) all proceeds, both cash and noncash, of the foregoing;
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excluding, however, inventory of Lessee held by Lessee for resale or rental.
(All of the foregoing property and rights and interests now
owned or held or subsequently acquired by the Mortgagor and described in the
foregoing CLAUSES (A) through (J) are collectively referred to as the "MORTGAGED
PROPERTY"); PROVIDED, HOWEVER, that notwithstanding anything hereinabove to the
contrary the maximum principal amount of the Indebtedness secured hereby at any
one time shall not exceed Fourteen Million Five Hundred Thousand and no/100
Dollars ($14,500,000), plus all costs of enforcement and collection of this
Lease and the other Operative Documents, plus the total amount of any advances
made pursuant to the Operative Documents to protect the collateral and the
security interest and lien created hereby; together with interest on all of the
foregoing as provided in the Operative Documents.
To HAVE AND TO HOLD the Mortgaged Property and all parts thereof unto
Mortgagee, its successors and assigns, to its own proper use and benefit
forever, subject however, to the terms and conditions herein: PROVIDED, HOWEVER,
that if Mortgagor shall promptly pay or cause to be paid to Mortgagee the
Indebtedness at the times and in the manner stipulated in this Lease, this
Mortgage and all the properties, interests and rights hereby granted, conveyed,
and assigned shall cease and be void.
The Mortgagor covenants and agrees with Mortgagee as follows:
A. At any time and from time to time, upon the written request of
Mortgagee, and at the sole expense of Mortgagor, the Mortgagor will promptly and
duly execute and deliver such further instruments and documents and take such
further action as Mortgagee may reasonably request for the purposes of retaining
or preserving the full benefits of this Mortgage and of the rights and powers
granted by this Mortgage.
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B. If an Event of Default has occurred under this Lease and is
continuing, Mortgagee may accelerate payment of the Indebtedness and the
Mortgagee shall have the right to foreclose this Mortgage and to receive the
rents, issues and profits thereof and shall have as a matter of right, the
entitlement to the appointment of receiver to enter upon and take possession of
the Mortgaged Property and to collect all rents, revenues, issues, income,
products and profits thereof and apply the same as the court may direct. The
receiver shall have all rights and powers permitted under the laws of the State
of Florida. Mortgagee shall be entitled to the appointment of a receiver without
regard to the value or adequacy of the security afforded to it by the Mortgaged
Property.
C. The Mortgagor hereby waives the benefit of all appraisements,
valuation, stay, extension, reinstatement and redemption laws now or hereinafter
in force and all rights of marshalling in the event of any sale of the Mortgaged
Property or any interests therein.
D. If the Mortgagor fails to perform or comply with any of its
agreements contained herein, the Mortgagee, at its option, but without any
obligations so to do, may perform or comply or otherwise cause performance or
compliance with such agreement. The expenses of Mortgagee incurred in connection
with actions undertaken as provided herein, together with interest thereon at a
rate per annum equal to the Overdue Rate from the date of payment by the
Mortgagee, as applicable, to the date reimbursed by the Mortgagor, shall be
payable by the Mortgagor to Mortgagee on demand.
E. Mortgagor hereby authorizes Mortgagee to file financing statements
with respect to the Mortgaged Property without the signature of the Mortgagor in
such form and in such filing offices as the Mortgagee reasonably determines
appropriate to perfect the security interest of the Mortgagee under this
Mortgage.
F. It is the intention of the parties that this Mortgage shall
constitute a security agreement within the meaning of the Uniform Commercial
Code of the State of Florida. If an Event of Default shall occur under this
Lease, then in addition to having all other rights and remedies available at law
or in equity, the
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Mortgagee shall have all rights and remedies available to it under the Uniform
Commercial Code of the State of Florida.
G. Except as otherwise set forth herein, to the fullest extent
permitted by law, the Mortgagor waives the benefit of all laws now existing or
that may subsequently be enacted, providing for (i) any appraisement before a
sale of any portion of the Mortgage Property; (ii) any extension for the time of
the enforcement of the collection of the Indebtedness or the creation or
extension of a period of redemption from any sale made in collecting such debt;
and (iii) exemption of the Mortgage Property from attachment, levy or sale under
the execution or exemption from civil process. Mortgagor agrees that the
Mortgagor shall not at any time insist upon, plead, claim or take the benefit or
advantage of any law now or hereinafter in force, providing for the
appraisement, valuation, stay, execution, extension, reinstatement or redemption
or requiring foreclosure of this Mortgage before Mortgagee exercises any
remedies granted hereunder.
H. This Mortgage is given to secure not only an existing indebtedness,
but also future advances made pursuant to or as provided in the Operative
Documents, including Lessor's Invested Amounts as defined in this Lease, whether
such advances are obligatory or at the option of Mortgagee, or otherwise, to the
same extent as if such future advances were made on the date of execution of
this Mortgage, provided, however, the maximum amount of indebtedness secured by
this Mortgage shall not exceed Fourteen Million Five Hundred Thousand and No/100
($14,500,000), plus all costs of enforcement and collection of this Mortgage,
plus any costs and expenses incurred or advances made by Mortgagee to protect
and preserve the Mortgaged Property" together with interest on all of the
foregoing at the Overdue Rate.
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ARTICLE XII.
EVENTS OF DEFAULT
The following events shall constitute Events of Default (whether any
such event shall be voluntary or involuntary or come about or be effected by
operation of law or pursuant to or in compliance with any judgment, decree or
order of any court or any order, rule or regulation of any Governmental
Authority):
(a) BASIC RENT. Lessee shall fail to make any payment of Basic Rent
when due, and such failure shall continue for five (5) or more days;
(b) OTHER RENT. Lessee shall fail to make any payment of Rent (other
than Basic Rent) or any other amount payable hereunder or under any of the other
Operative Documents (other than Basic Rent and other than as set forth in CLAUSE
(C)), and such failure shall continue for a period of five (5) days after
written notice thereof from Lessor or the Agent;
(c) LEASE BALANCE. Lessee shall fail to pay the Funded Amount or Lease
Balance when due pursuant to SECTION 10.1, 10.2, 14.1 or 14.2, or Lessee shall
fail to pay the Recourse Deficiency Amount when required pursuant to ARTICLE
XIV;
(d) INSURANCE. Lessee shall fail to maintain insurance as required by
ARTICLE VIII hereof, and such failure shall continue until the earlier of (i) 15
days after written notice thereof from Lessor or the Agent and (ii) the day
immediately preceding the date on which any applicable insurance coverage would
otherwise lapse or terminate;
(e) CROSS DEFAULT. A default shall have occurred and be continuing
under any instrument or agreement evidencing, securing or providing for the
issuance of Indebtedness in excess of $150,000 of, or guaranteed by, Lessee or
any Subsidiary of Lessee, which default is a failure to pay any amount when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), which default continues after the applicable grace period, if any,
or any other default which, if unremedied, uncure d or unwaived, would permit
acceleration of the maturity of such Indebtedness;
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(f) BANKRUPTCY. Lessee or any Subsidiary shall (i) apply for or consent
to the appointment of a receiver, trustee or liquidator of itself or of its
property, (ii) be unable, or admit in writing inability, to pay its debts as
they mature, (iii) make a general assignment for the benefit of creditors, (iv)
be adjudicated a bankrupt or insolvent, (v) file a voluntary petition in
bankruptcy, or a petition or answer seeking reorganization or an arrangement
with creditors to take advantage of any insolvency law or an answer admitting
the material allegations of a bankruptcy, reorganization or insolvency petition
filed against it, (vi) take corporate action for the purpose of effecting any of
the foregoing, or (vii) have an order for relief entered against it in any
proceeding under any bankruptcy law;
(g) JUDGMENT. An order, judgment or decree shall be entered, without
the application, approval or consent of Lessee or any Subsidiary, by any court
of competent jurisdiction, approving a petition seeking reorganization of such
entity or appointing a receiver, trustee or liquidator of such entity or of all
or a substantial part of its assets, and such order, judgment or decree shall
continue unstayed and in effect for any period of 90 consecutive days;
(h) REPRESENTATIONS. Any representation or warranty by Lessee in any
Operative Document or in any certificate or document delivered to Lessor, the
Agent or any Lender pursuant to any Operative Document shall have been incorrect
in any material respect when made;
(i) TRANSACTION GUARANTY. Lessee shall repudiate or terminate the
Transaction Guaranty, or the Transaction Guaranty shall at any time cease to be
in full force and effect or cease to be the legal, valid and binding obligation
of Lessee;
(j) COVENANTS. Lessee shall fail in any material respect to timely,
perform or observe any covenant, condition or agreement (not included in CLAUSE
(A), (B), (C), (D), (E), (F), (G), (H) or (I) of this ARTICLE XII) to be
performed or observed by it hereunder or under any other Operative Document and
such failure shall continue for a period of 30 days after Lessee's receipt of
written notice thereof from Lessor, the Agent or any Lender;
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(k) JUDGMENT. A judgment or order for the payment of money which
exceeds $100,000 in amount shall be entered against the Lessee by any court and
such judgment or order shall continue undischarged or unstayed for 30 days;
(l) ATTACHMENT. A warrant or writ of attachment or execution or similar
process ,which exceeds $100,000 in value shall be issued against any property of
the Lessee and such warrant or process shall continue undischarged or unstayed
for 30 days;
(m) ERISA. (i) Any Termination Event with respect to a Benefit Plan
shall occur that, after taking into account the excess, if any, of (A) the fair
market value of the assets of any other Benefit Plan with respect to which a
Termination Event occurs on the same day (but only to the extent that such
excess is the property of the Lessee) over (B) the present value on such day of
all vested nonforfeitable benefits under such other Benefit Plan, results in an
Unfunded Vested Accrued Benefit in excess of $0, (ii) any Benefit Plan shall
incur an "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA) for which a waiver has not been obtained in accordance
with the applicable provisions of the Code and ERISA, or (iii) the Lessee is in
'default' (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan resulting from the Lessee's complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan;
(n) QUALIFIED AUDITS. The independent certified public accountants
retained by the Lessee shall refuse to deliver an opinion in accordance with
SECTION 5.10(A) of the Master Agreement with respect to the annual financial
statements of the Lessee;
(o) CHANGE IN MANAGEMENT. Both George Feldenkreis and Oscar Feldenkreis
shall for any reason cease to be officers of the Lessee; and
(p) OTHER LEASE. An Event of Default shall occur under the Land Lease.
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ARTICLE XIII.
ENFORCEMENT
Section XIII.1 REMEDIES. Upon the occurrence and during the continuance
of any Event of Default, Lessor may do one or more of the following as Lessor in
its sole discretion shall determine, without limiting any other right or remedy
Lessor may have on account of such Event of Default (including, without
limitation, the obligation of Lessee to purchase the Leased Property as set
forth in SECTION 14.3):
(a) Lessor may, by notice to Lessee, rescind or terminate this Lease as
of the date specified in such notice; however, (A) no reletting, reentry or
taking of possession of the Leased Property by Lessor will be construed as an
election on Lessor's part to terminate this Lease unless a written notice of
such intention is given to Lessee, (B) notwithstanding any reletting, reentry or
taking of possession, Lessor may at any time thereafter elect to terminate this
Lease for a continuing Event of Default, and (C) no act or thing done by Lessor
or any of its agents, representatives or employees and no agreement accepting a
surrender of the Leased Property shall be valid unless the same be made in
writing and executed by Lessor;
(b) Lessor may (i) demand that Lessee, and Lessee shall upon the
written demand of Lessor, return the Leased Property promptly to Lessor in the
manner and condition required by, and otherwise in accordance with all of the
provisions of, ARTICLES VI and XIV hereof as if the Leased Property were being
returned at the end of the Lease Term, and Lessor shall not be liable for the
reimbursement of Lessee for any costs and expenses incurred by Lessee in
connection therewith and (ii) without prejudice to any other remedy which Lessor
may have for possession of the Leased Property, and to the extent and in the
manner permitted by Applicable Law, enter upon the Leased Property and take
immediate possession of (to the exclusion of Lessee) the Leased Property or any
part thereof and expel or remove Lessee and any other person who may be
occupying the Leased Property, by summary proceedings or otherwise, all without
liability to Lessee for or by reason of such entry or taking of possession,
whether for the restoration of damage to property caused by such taking or
otherwise and, in addition to Lessor's other damages, Lessee shall be
responsible for the actual and reasonable costs and expenses of reletting,
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including brokers' fees and the reasonable costs of any alterations or repairs
made by Lessor;
(c) Lessor may (i) sell all or any part of the Leased Property at
public or private sale, as Lessor may determine, free and clear of any rights of
Lessee and without any duty to account to Lessee with respect to such action or
inaction or any proceeds with respect thereto (except to the extent required by
CLAUSE (II) below if Lessor shall elect to exercise its rights thereunder) in
which event Lessee's obligation to pay Basic Rent hereunder for periods
commencing after the date of such sale shall be terminated or proportionately
reduced, as the case may be; and (ii) if Lessor shall so elect, demand that
Lessee pay to Lessor, and Lessee shall pay to Lessor, on the date of such sale,
as liquidated damages for loss of a bargain and not as a penalty (the parties
agreeing that Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation of such
amount) (in lieu of Basic Rent due for periods commencing on or after the
Payment Date coinciding with such date of sale (or, if the sale date is not a
Payment Date, the Payment Date next preceding the date of such sale)), an amount
equal to (a) the excess, if any, of (1) the sum of (A) all Rent due and unpaid
to and including such Payment Date and (B) the Funded Amounts, computed as of
such date, over (2) the net proceeds of such sale (that is, after deducting all
costs and expenses incurred by Lessor, the Agent or any Lender incident to such
conveyance (including, without limitation, all costs, expenses, fees, premiums
and taxes described in SECTION 14.5(B))); PLUS (b) interest at the Overdue Rate
on the foregoing amount from such Payment Date until the date of payment;
(d) Lessor may, at its option, not terminate this Lease, and continue
to collect all Basic Rent, Supplemental Rent, and all other amounts (including,
without limitation, the Funded Amount) due Lessor (together with all costs of
collection) and enforce Lessee's obligations under this Lease as and when the
same become due, or are to be performed, and at the option of Lessor, upon any
abandonment of the Leased Property by Lessee or re-entry of same by Lessor,
Lessor may, in its sole and absolute discretion, elect not to terminate this
Lease with respect thereto and may make such reasonable alterations and
necessary repairs in order to relet the Leased Property, and relet the
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Leased Property or any part thereof for such term or terms (which may be for a
term extending beyond the term of this Lease) and at such rental or rentals and
upon such other terms and conditions as Lessor in its reasonable discretion may
deem advisable; and upon each such reletting all rentals actually received by
Lessor from such reletting shall be applied to Lessee's obligations hereunder in
such order, proportion and priority as Lessor may elect in Lessor's sole and
absolute discretion; it being agreed that under no circumstances shall Lessee
benefit from its default from any increase in market rents. If such rentals
received from such reletting during any Rent Period are less than the Rent to be
paid during that Rent Period by Lessee hereunder, Lessee shall pay any
deficiency, as calculated by Lessor, to Lessor on the Payment Date for such Rent
Period; any such rentals received by Lessor after such time as Lessee has paid
the Lease Balance hereunder and under the Land Lease shall be paid to Lessee;
(e) If the Leased Property has not been sold, Lessor may, whether or
not Lessor shall have exercised or shall thereafter at any time exercise any of
its rights under PARAGRAPH (B), (C) or (D) of this ARTICLE XIII with respect to
the Leased Property, demand, by written notice to Lessee specifying a date (the
"FINAL RENT PAYMENT DATE") not earlier than 30 days after the date of such
notice, that Lessee purchase, on the Final Rent Payment Date, the Leased
Property in accordance with the provisions of SECTIONS 14.2, 14.4 and 14.5;
PROVIDED, HOWEVER, that (1) such purchase shall occur on the date set forth in
such notice, notwithstanding the provision in SECTION 14.2 calling for such
purchase to occur on the Lease Termination Date; and (2) Lessor's obligations
under SECTION 14.5(A) shall be limited to delivery of a special warranty deed
and quit claim bill of sale of the Leased Property, without recourse or
warranty, but free and clear of Lessor Liens;
(f) Lessor may exercise any other right or remedy that may be available
to it under Applicable Law, or proceed by appropriate court action (legal or
equitable) to enforce the terms hereof or to recover damages for the breach
hereof. Separate suits may be brought to collect any such damages for any Rent
Period(s), and such suits shall not in any manner prejudice Lessor's right to
collect any such damages for any subsequent Rent Period(s), or Lessor may defer
any such suit until after the expiration of the Lease Term, in which event such
suit shall be
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deemed not to have accrued until the expiration of the Lease Term; or
(g) Lessor may retain and apply against Lessor's damages all sums which
Lessor would, absent such Event of Default, be required to pay to, or turn over
to, Lessee pursuant to the terms of this Lease.
Section XIII.2 REMEDIES CUMULATIVE; NO WAIVER; CONSENTS. To the extent
permitted by, and subject to the mandatory requirements of, Applicable Law, each
and every right, power and remedy herein specifically given to Lessor or
otherwise in this Lease shall be cumulative and shall be in addition to every
other right, power and remedy herein specifically given or now or hereafter
existing at law, in equity or by statute, and each and every right, power and
remedy whether specifically herein given or otherwise existing may be exercised
from time to time and as often and in such order as may be deemed expedient by
Lessor, and the exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at the same time
or thereafter any right, power or remedy. Notwithstanding the foregoing, so long
as Lessee purchases the Leased Property in accordance with SECTIONS 14.2, 14.4
and 14.5 (including the payment of the Lease Balance in cash) prior to the sale
of the Leased Property to another Person, Lessor shall not have the right to
exercise any other remedy set forth in SECTION 13.1. No delay or omission by
Lessor in the exercise of any right, power or remedy or in the pursuit of any
remedy shall impair any such right, power or remedy or be construed to be a
waiver of any default on the part of Lessee or to be an acquiescence therein.
Lessor's consent to any request made by Lessee shall not be deemed to constitute
or preclude the necessity for obtaining Lessor's consent, in the future, to all
similar requests. No express or implied waiver by Lessor of any Event of Default
shall in any way be, or be construed to be, a waiver of any future or subsequent
Potential Event of Default or Event of Default. To the extent permitted by
Applicable Law, Lessee hereby waives any rights now or hereafter conferred by
statute or otherwise that may require Lessor to sell, lease or otherwise use the
Leased Property or part thereof in mitigation of Lessor's damages upon the
occurrence of an Event of Default or that may otherwise limit or modify any of
Lessor's rights or remedies under this ARTICLE XIII.
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ARTICLE XIV.
SALE, RETURN OR PURCHSE OF LEASED PROPERTY; RENEWAL
Section XIV.1 LESSEE'S OPTION TO PURCHASE. Subject to the terms,
conditions and provisions set forth in this ARTICLE XIV, Lessee shall have the
option (the "PURCHASE OPTION"), to be exercised as set forth below, to purchase
from Lessor, Lessor's interest in the Leased Property. Such option must be
exercised by written notice to Lessor not later than twelve months prior to the
Lease Termination Date which notice shall be irrevocable; such notice shall
specify the date that such AR purchase shall take place, which date shall be a
date occurring not less than thirty (30) days after such notice or the Lease
Termination Date (whichever is earlier). If the Purchase Option is exercised
pursuant to the foregoing, then Lessee shall also be deemed to have exercised
its APurchase Option@ under the Land Lease and, subject to the provisions set
forth in this ARTICLE XIV, on the applicable purchase date or the Lease
Termination Date, as the case may be, Lessor shall convey to Lessee, without AR
recourse or warranty (other than as to the absence of Lessor Liens) and Lessee
shall purchase from Lessor, Lessor's interest in the Leased Property. Lessor
shall continue to pay Basic Rent hereunder until the Purchase Option is
consummated by the payment of the purchase price pursuant to this ARTICLE XIV.
Section XIV.2 CONVEYANCE TO LESSEE. Unless (a) Lessee shall have
properly exercised the Purchase Option and purchased the Leased Property
pursuant to SECTION 14.1 hereof, or (b) Lessee shall have properly exercised the
Remarketing Option or the Surrender Option and shall have fulfilled all of the
conditions of SECTION 14.6 hereof, then, subject to the terms, conditions and
provisions set forth in this ARTICLE XIV, Lessee shall purchase from Lessor, and
Lessor shall convey to Lessee, on the Lease Termination Date all of Lessor's
interest in the Leased Property. Lessee may designate, in a notice given to
Lessor not less than ten (10) Business Days prior to the closing of such
purchase (time being of the essence), the transferee to whom the conveyance
shall be made (if other than to Lessee), in which case such conveyance shall
(subject to the terms and conditions set forth herein) be made to such designee;
PROVIDED, HOWEVER, that such designation of a transferee shall not cause Lessee
to be
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released, fully or partially, from any of its obligations under this Lease.
Section XIV.3 ACCELERATION OF PURCHASE OBLIGATION. Lessee shall be
obligated to purchase Lessor's interest in the Leased Property immediately,
automatically and without notice upon the occurrence of any Event of Default
specified in CLAUSE (F) of ARTICLE XII, for the purchase price set forth in
SECTION 14.4. Upon the occurrence and during the continuance of any other Event
of Default, Lessee shall be obligated to purchase Lessor's interest in the
Leased Property for the purchase price set forth in SECTION 14.4 upon notice of
such obligation from Lessor.
Section XIV.4 DETERMINATION OF PURCHASE PRICE. Upon the purchase by
Lessee of Lessor's interest in the Leased Property upon the exercise of the
Purchase Option or pursuant to SECTION 14.2 or 14.3, the purchase price for the
Leased Property shall be an amount equal to the Lease Balance as of the closing
date for such purchase, PLUS any amount due pursuant to Section 7.5(f) of the
Master Agreement as a result of such purchase.
Section XIV.5 PURCHASE PROCEDURE. (a) If Lessee shall purchase Lessor's
interest in the Leased Property pursuant to any provision of this Lease, (i)
Lessee shall accept from Lessor and Lessor shall convey the Leased Property by a
duly executed and acknowledged special warranty deed and quit claim bill of sale
of the Leased Property in recordable form, (ii) upon the date fixed for any
purchase of Lessor's interest in the Leased Property hereunder, Lessee shall pay
to the order of the Agent (or Lessor if the Loans have been paid in full) the
Lease Balance, PLUS any amount due pursuant to Section 7.5(f) of the Master
Agreement as a result of such purchase by wire transfer of immediately available
funds, and (iii) Lessor will execute and deliver to Lessee such other documents,
including releases, termination agreements and termination statements, as may be
legally required or as may be reasonably requested by Lessee in order to effect
such conveyance, free and clear of Lessor Liens and the Liens of the Operative
Documents.
(b) Lessee shall, at Lessee's sole cost and expense, obtain all
required governmental and regulatory approval and consents and shall make such
filings as required by Applicable Law; in the event that Lessor is required by
Applicable Law to take any
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action in connection with such purchase and sale, Lessee shall pay all costs
incurred by Lessor in connection therewith. In addition, all charges incident to
such conveyance, including, without limitation, Lessee's attorneys' fees,
Lessor's attorneys' fees, commissions, Lessee's and Lessor's escrow fees,
recording fees, title insurance premiums and all applicable documentary transfer
or other transfer taxes and other taxes required to be paid in order to record
the transfer documents that might be imposed by reason of such conveyance and
the delivery of such deed shall be borne entirely and paid by Lessee.
(c) Upon expiration or termination of this Lease resulting in
conveyance of Lessor's interest in the title to the Leased Property to Lessee,
there shall be no apportionment of rents (including, without limitation, water
rents and sewer rents), taxes, insurance, utility charges or other charges
payable with respect to the Leased Property, all of such rents, taxes,
insurance, utility or other charges due and payable with respect to the Leased
Property prior to termination being payable by Lessee hereunder and all due
after such time being payable by Lessee as the then owner of the Leased
Property.
Section XIV.6 OPTION TO REMARKET; SURRENDER OPTION. Subject to the
fulfillment of each of the conditions set forth in this SECTION 14.6, Lessee
shall have the option to either (i) market the Leased Property for Lessor (the
"REMARKETING OPTION") or (ii) surrender the Leased Property to Lessor (the
"SURRENDER OPTION").
Lessee's effective exercise and consummation of the Remarketing Option
or the Surrender Option, as the case may be, shall be subject to the due and
timely fulfillment of each of the following provisions, the failure of any of
which shall render the Remarketing Option or the Surrender Option, as the case
may be, and Lessee's exercise thereof null and void, in which event, Lessee
shall be obligated to perform its obligations under SECTION 14.2.
(a) Not later than twelve months prior to the Lease
Termination Date, Lessee shall give to Lessor and the Agent written
notice of Lessee's exercise of the Remarketing Option or the Surrender
Option, as the case may be, which exercise shall be irrevocable and
shall state whether Lessee
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has exercised the Remarketing Option or the Surrender Option.
(b) Not later than ten (10) Business Days prior to the Lease
Termination Date, Lessee shall deliver to Lessor and the Agent an
environmental assessment of the Leased Property dated not later than
forty-five (45) days prior to the Lease Termination Date. Such
environmental assessment shall be prepared by an environmental
consultant approved by the Required Funding Parties, shall be in form,
detail and substance reasonably satisfactory to the Required Funding
Parties, and shall otherwise indicate the environmental condition of
the Leased Property to be the same as described in the related
Environmental Audit.
(c) On the date of Lessee's notice to Lessor and the Agent of
Lessee's exercise of the Remarketing Option or the Surrender Option, as
the case may be, the Completion Date shall have occurred and no Event
of Default or Potential Event of Default shall exist, and thereafter,
no Event of Default or Potential Event of Default shall exist under
this Lease.
(d) Lessee shall have completed all Alterations, restoration
and rebuilding of the Leased Property pursuant to SECTIONS 6.1, 6.2,
10.3 and 10.4 (as the case may be) and shall have fulfilled all of the
conditions and requirements in connection therewith pursuant to said
SECTIONS, in each case by the date on which Lessor and the Agent
receive Lessee's notice of Lessee's exercise of the Remarketing Option
or the Surrender Option, as the case may be (time being of the
essence), regardless of whet her the same shall be within Lessee's
control.
(e) Lessee shall promptly provide any maintenance records
relating to the Leased Property to Lessor, the Agent and any potential
purchaser upon request, and shall otherwise do all things necessary to
deliver possession of the Leased Property to the purchaser. Lessee
shall allow Lessor, the Agent and any potential purchaser access to the
Leased Property for the purpose of inspecting the same during regular
business hours (or as otherwise agreed by Lessee).
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(f) On the Lease Termination Date, Lessee shall surrender the
Leased Property in accordance with SECTION 14.8 hereof.
(g) In connection with any such sale of the Leased Property,
Lessee will provide to the purchaser all customary "seller's"
indemnities, representations and warranties regarding title, absence of
Liens (except Lessor Liens) and the condition of the Leased Property,
including, without limitation, an environmental indemnity. Lessee shall
fulfill all of the requirements set forth in CLAUSE (B) of SECTION
14.5, and such requirements are incorporated herein by reference. As to
Lessor, e any such sale shall be made on an "as is, with all faults"
basis without representation or warranty by Lessor, other than the
absence of Lessor Liens.
(h) In connection with any such sale of Leased Property,
Lessee shall pay directly, and not from the sale proceeds, all
prorations, credits, costs and expenses of the sale of the Leased
Property, whether incurred by Lessor, any Lender, the Agent or Lessee,
including without limitation, the cost of all title insurance, surveys,
environmental reports, appraisals, transfer taxes, Lessor's and the
Agent's attorneys' fees, Lessee's attorneys' fees, commissions, escrow
fees, recording fees, and all applicable documentary and other transfer
taxes.
(i) Lessee shall pay to the Agent on the Lease Termination
Date (or to such other Person as Agent shall notify Lessee in writing,
or in the case of Supplemental Rent, to the Person entitled thereto) an
amount equal to the Recourse Deficiency Amount, PLUS all Basic Rent and
Supplemental Rent, and all other amounts hereunder which have accrued
prior to or as of such date, in the type of funds specified in SECTION
3.3 hereof.
If Lessee has exercised the Remarketing Option, the following additional
provisions shall apply: During the period commencing on the date twelve months
prior to the scheduled expiration of the Lease Term, Lessee shall, as
nonexclusive agent for Lessor, use commercially reasonable efforts to sell
Lessor's interest in the Leased Property and will attempt to obtain the highest
purchase price therefor. All such marketing of the Leased
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Property shall be at Lessee's sole expense. Lessee shall submit all bids to
Lessor and the Agent and Lessor and the Agent will have the right to review the
same and the right to submit any one or more bids. All bids shall be on an
all-cash basis. In no event shall such bidder be Lessee or any Subsidiary or
Affiliate of Lessee. The written offer must specify the Lease Termination Date
as the closing date. If, and only if, the selling price (net of closing costs
and prorations, as reasonably estimated by the Agent) is less than the
difference between the Lease Balance at ds such time minus the Recourse
Deficiency Amount, then Lessor or the Agent may, in its sole and absolute
discretion, by notice to Lessee, reject such offer to purchase, in which event
the parties will proceed according to the provisions of SECTION 14.7 [Rejection
of Sale] hereof. If neither Lessor nor the Agent rejects such purchase offer as
provided above, the closing of such purchase of the Leased Property by such
purchaser shall occur on the Lease Termination Date, contemporaneously with
Lessee's ds surrender of the Leased Property in accordance with SECTION 14.8
hereof, and the gross proceeds of the sale (i.e., without deduction for any
marketing, closing or other costs, prorations or commissions) shall be paid
directly to the Agent (or Lessor if the Loans have been fully paid); PROVIDED,
HOWEVER, that if the sum of the gross proceeds from such sale plus the Recourse
Deficiency Amount paid by Lessee on the Lease Termination Date pursuant to
SECTION 14.6(I), minus any and all costs and expenses ds (including broker fees,
appraisal costs, legal fees and transfer taxes) incurred by the Agent or Lessor
in connection with the marketing of the Leased Property or the sale thereof
exceeds the Lease Balance as of such date, then the excess shall be paid to
Lessee on the Lease Termination Date. Lessee shall have no right, power or
authority to bind Lessor in connection with any proposed sale of the Leased
Property.
Section XIV.7 REJECTION OF SALE. Notwithstanding anything contained
herein to the contrary, if Lessor or the Agent rejects the purchase offer for
the Leased Property as provided in SECTION 14.6, then (a) Lessee shall pay to
the Agent the Recourse Deficiency Amount pursuant to SECTION 14.6(I), (b) Lessor
shall retain title to the Leased Property, and (c) in addition to Lessee's other
obligations hereunder, Lessee will reimburse Lessor and the Agent, within ten
(10) Business Days ds after written request, for all reasonable costs and
expenses incurred by Lessor or Agent during the period ending on the first
anniversary of the
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Lease Termination Date in connection with the marketing, sale, closing or
transfer of the Leased Property, which obligation shall survive the Lease
Termination Date and the termination or expiration of this Lease.
Section XIV.8 RETURN OF LEASED PROPERTY. If Lessor retains title to the
Leased Property pursuant to SECTION 14.7 hereof or Lessee has properly exercised
the Surrender Option, then Lessee shall, on the Lease Termination Date, and at
its own expense, return possession of the Leased Property to Lessor for
retention by Lessor or, if Lessee properly exercises the Remarketing Option and
fulfills all of the conditions of SECTION 14.6 hereof and neither Lessor nor the
Agent rejects such ds purchase offer pursuant to SECTION 14.6, then Lessee
shall, on such Lease Termination Date, and at its own cost, transfer possession
of the Leased Property to the independent purchaser thereof, in each case by
surrendering the same into the possession of Lessor or such purchaser, as the
case may be, free and clear of all Liens other than Lessor Liens, in as good
condition as it was on the Closing Date (as modified by Alterations permitted by
this Lease), ordinary wear and tear excepted, and in compliance in all material
respects with Applicable Law. Lessee shall, on and within a reasonable time
before and after the Lease Termination Date, cooperate with Lessor and the
independent purchaser of the Leased Property in order to facilitate the
ownership and operation by such purchaser of the Leased Property after the Lease
Termination Date, which cooperation shall include the following, all of which
Lessee shall do on or before the Lease Termination Date or as soon thereafter as
is reasonably practicable: providing all books and records regarding the
maintenance and ownership of the Leased Property and all know-how, data and
technical information relating thereto, providing a copy of the plans and
specifications, granting or assigning all licenses (to the extent assignable)
necessary for the operation and maintenance of the Leased Property, and
cooperating in seeking and obtaining all necessary Governmental Action. Lessee
shall have also paid the cost of all Alterations commenced prior to the Lease
Termination Date. The obligations of Lessee under this ARTICLE XIV shall survive
the expiration or termination of this Lease.
Section XIV.9 RENEWAL. Subject to the conditions set forth herein,
Lessee may, by written notice to Lessor and the Agent
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given not later than twelve months and not earlier than sixteen months, prior to
the Lease Termination Date then in effect, renew this Lease and the Land Lease,
for up to five years commencing on the date following the Lease Termination Date
then in effect, PROVIDED that Lessee may only exercise such renewal option two
times. No later than the date that is 45 days after the date the request to
renew has been delivered to each of Lessor and the Agent, the Agent will notify
Lessee whether or not Lessor and the Lenders consent to such renewal request
(which consent, in the case of Lessor and the Lenders, may be granted or denied
in their sole discretion, and may be conditioned on such conditions precedent as
may be specified by Lessor and the Lenders). If the Agent fails to respond
within such time frame, such failure shall be deemed to be a rejection of such
request. If the Agent notifies Lessee of Lessor's and the Lenders' consent to
such renewal, such renewal shall be effective.
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ARTICLE XV.
LESSEE'S EQUIPMENT
After any repossession of the Leased Property (whether or not this
Lease has been terminated), as a result of the exercise of the Surrender Option
or otherwise, Lessee, at its expense and so long as such removal of such
Alteration shall not result in a violation of Applicable Law, shall, within a
reasonable time after such repossession or within sixty (60) days after Lessee's
receipt of Lessor's written request (whichever shall first occur), remove all of
Lessee's trade fixtures, personal property and equipment from the Leased
Property (to the extent that the same can be readily removed from the Leased
Property without causing material damage to the Leased Property); PROVIDED,
HOWEVER, that Lessee shall not remove any such trade fixtures, personal property
or equipment that has been financed by Lessor under the Operative Documents or
otherwise constituting Leased Property (or that constitutes a replacement of
such property). Any of Lessee's trade fixtures, personal property and equipment
not so removed by Lessee within such period shall be considered abandoned by
Lessee, and title thereto shall without further act vest in Lessor, and may be
appropriated, sold, destroyed or otherwise disposed of by Lessor without notice
to Lessee and without obligation to account therefor and Lessee will pay Lessor,
upon written demand, all reasonable costs and expenses incurred by Lessor in
removing, storing or disposing of the same and all costs and expenses incurred
by Lessor to repair any damage to the Leased Property caused by such removal.
Lessee will immediately repair at its expense all damage to the Leased Property
caused by any such removal (unless such removal is effected by Lessor, in which
event Lessee shall pay all reasonable costs and expenses incurred by Lessor for
such repairs). Lessor shall have no liability in exercising Lessor's rights
under this ARTICLE XV except as set forth in CLAUSE (II) of the first sentence
hereof, nor shall Lessor be responsible for any loss of or damage to Lessee's
personal property and equipment.
ARTICLE XVI.
RIGHT TO PERFORM F0R LESSEE
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If Lessee shall fail to perform or comply with any of its agreements
contained herein, Lessor may perform or comply with such agreement, and Lessor
shall not thereby be deemed to have waived any default caused by such failure,
and the amount of such payment and the amount of the expenses of Lessor
(including actual and reasonable attorneys' fees and expenses) incurred in
connection with such payment or the performance of or compliance with such
agreement, as the case may be, shall be deemed LE Supplemen tal Rent, payable by
Lessee to Lessor within thirty (30) days after written demand therefor.
ARTICLE XVII
MISCELLANEOUS
Section XVII.1 REPORTS. To the extent required under Applicable Law and
to the extent it is reasonably practical for Lessee to do so, Lessee shall
prepare and file in timely fashion, or, where such filing is required to be made
by Lessor or it is otherwise not reasonably practical for Lessee to make such
filing, Lessee shall prepare and deliver to Lessor (with a copy to the Agent)
within a reasonable time prior to the date for filing and Lessor shall file, any
material reports with LE respect to the condition or operation of the Leased
Property that shall be required to be filed with any Governmental Authority.
Section XVII.2 BINDING EFFECT; SUCCESSORS AND ASSIGNS; SURVIVAL. The
terms and provisions of this Lease, and the respective rights and obligations
hereunder of Lessor and Lessee, shall be binding upon their respective
successors, legal representatives and assigns (including, in the case of Lessor,
any Person to whom Lessor may transfer the Leased Property or any interest
therein in accordance with the provisions of the Operative Documents), and inure
to the benefit of their E respective permitted successors and assigns, and the
rights hereunder of the Agent and the Lenders shall inure (subject to such
conditions as are contained herein) to the benefit of their respective permitted
successors and assigns. Lessee hereby acknowledges that Lessor has assigned all
of its right, title and interest to, in and under this Lease to the Agent and
the Lenders, and that all of Lessor's rights hereunder may be exercised by the
Agent.
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Section XVII.3 QUIET ENJOYMENT. Lessor covenants that it will not
interfere in Lessee's or any of its permitted sublessees' quiet enjoyment of the
Leased Property in accordance with this Lease during the Lease Term, so long as
no Event of Default has occurred and is continuing. Such right of quiet
enjoyment is independent of, and shall not affect, Lessor's rights otherwise to
initiate legal action to enforce the obligations of Lessee under this Lease.
Section XVII.4 NOTICES. Unless otherwise specified herein, all notices,
offers, acceptances, rejections, consents, requests, demands or other
communications to or upon the respective parties hereto shall be in writing and
shall be deemed to have been given as set forth in Section 8.2 of the Master
Agreement. All such notices, offers, acceptances, rejections, consents,
requests, demands or other communications shall be addressed as set forth in
Schedule 8.2 of the Master Agreement or E to such other address as any of the
parties hereto may designate by written notice.
Section XVII.5 SEVERABILITY. Any provision of this Lease that shall be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction, and Lessee shall remain
liable to perform its obligations hereunder except to the extent of such
unenforceability. To the extent permitted by Applicable Law, Lessee hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
Section XVII.6 AMENDMENT; COMPLETE AGREEMENTS. Neither this Lease nor
any of the terms hereof may be terminated, amended, supplemented, waived or
modified orally, except by an instrument in writing signed by Lessor and Lessee
in accordance with the provisions of Section 8.4 of the Master Agreement. This
Lease, together with the other Operative Documents, is intended by the parties
as a final expression of their lease agreement and as a complete and exclusive
statement of the terms thereof, all negotiations, considerations and
representations between the parties having been incorporated herein and therein.
No course of prior dealings between the parties or their officers,
43
<PAGE>
employees, agents or Affiliates shall be relevant or admissible to supplement,
explain, or vary any of the terms of this Lease or any other Operative Document.
Acceptance of, or acquiescence in, a course of performance rendered under this
or any prior agreement between the parties or their Affiliates shall not be
relevant or admissible to determine the meaning of any of the terms of this
Lease or any other Operative Document. No representations, undertakings, or
agreements have been made or relied upon in the making of this Lease other than
those specifically set forth in the Operative Documents.
Section XVII.7 CONSTRUCTION. This Lease shall not be construed more
strictly against any one party, it being recognized that both of the parties
hereto have contributed substantially and materially to the preparation and
negotiation of this Lease.
Section XVII.8 HEADINGS. The Table of Contents and headings of the
various Articles and Sections of this Lease are for convenience of reference
only and shall not modify, define or limit any of the terms or provisions
hereof.
Section XVII.9 COUNTERPARTS. This Lease may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute but
one and the same instrument.
Section XVII.10 GOVERNING LAW. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF FLORIDA
APPLICABLE TO AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
Section XVII.11 DISCHARGE OF LESSEE'S OBLIGATIONS BY ITS AFFILIATES.
Lessor agrees that performance of any of Lessee's obligations hereunder by one
or more of Lessee's Affiliates or one or more of Lessee's sublessees of the
Leased Property or any part thereof shall constitute performance by Lessee of
such obligations to the same extent and with the same effect hereunder as if
such obligations were performed by Lessee, but no such performance shall excuse
Lessee from any e obligation not performed by it or on its beh alf under the
Operative Documents.
44
<PAGE>
Section XVII.12 LIABILITY OF LESSOR LIMITED. Except as otherwise
expressly provided below in this SECTION 17.12, it is expressly understood and
agreed by and between Lessee, Lessor and their respective successors and assigns
that nothing herein contained shall be construed as creating any liability of
Lessor or any of its Affiliates or any of their respective officers, directors,
employees or agents, individually or personally, to perform any covenant, either
express or e implied, contained herein, all such liability, if any, being
expressly waived by Lessee and by each and every Person now or hereafter
claiming by, through or under Lessee, and that, so far as Lessor or any of its
Affiliates or any of their respective officers, directors, employees or agents,
individually or personally, is concerned, Lessee and any Person claiming by,
through or under Lessee shall look solely to the right, title and interest of
Lessor in the Leased Property and any proceeds from Lessor's e sale or
encumbrance thereof (PROVIDED, HOWEVER, that Lessee shall not be entitled to any
double recovery) for the performance of any obligation under this Lease and
under the Operative Documents and the satisfaction of any liability arising
therefrom.
Section XVII.13 ESTOPPEL CERTIFICATES. Each party hereto agrees that at
any time and from time to time during the Lease Term, it will promptly, but in
no event later than thirty (30) days after request by the other party hereto,
execute, acknowledge and deliver to such other party or to any prospective
purchaser (if such prospective purchaser has signed a commitment or letter of
intent to purchase the Leased Property or any part thereof or any Note),
assignee or mortgagee or third party designated by such other party, a
certificate stating (a) that this Lease is unmodified and in force and effect
(or if there have been modifications, that this Lease is in force and effect as
modified, and identifying the modification agreements); (b) the date to which
Basic Rent has been paid; (c) whether or not there is any existing default by
Lessee in the payment of Basic Rent or any other sum of money hereunder, and
whether or not there is any other existing default by either party with respect
to which a notice of default has been served, and, if there is any such default,
specifying the nature and extent thereof; (d) whether or not, to the knowledge
of the signer after due inquiry and investigation, there are any setoffs,
defenses or counterclaims against enforcement of the obligations to be performed
hereunder existing in favor of the party executing such
45
<PAGE>
certificate and (e) other items that may be reasonably requested; PROVIDED that
no such certificate may be requested unless the requesting party has a good
faith reason for such request.
Section XVII.14 NO JOINT VENTURE. Any intention to create a joint
venture or partnership relation between Lessor and Lessee is hereby expressly
disclaimed.
Section XVII.15 NO ACCORD AND SATISFACTION. The acceptance by Lessor of
any sums from Lessee (whether as Basic Rent or otherwise) in amounts which are
less than the amounts due and payable by Lessee hereunder is not intended, nor
shall be construed, to constitute an accord and satisfaction of any dispute
between Lessor and Lessee regarding sums due and payable by Lessee hereunder,
unless Lessor specifically deems it as such in writing.
Section XVII.16 NO MERGER. In no event shall the leasehold interests,
estates or rights of Lessee hereunder, or of the holder of any Notes secured by
a security interest in this Lease, merge with any interests, estates or rights
of Lessor in or to the Leased Properties, it being understood that such
leasehold interests, estates and rights of Lessee hereunder, and of the holder
of any Notes secured by a security interest in this Lease, shall be deemed to be
separate and distinct from Lessor's interests, estates and rights in or to the
Leased Property, notwithstanding that any such interests, estates or rights
shall at any time or times be held by or vested in the same person, corporation
or other entity.
Section XVII.17 SURVIVAL. The obligations of Lessee to be performed
under this Lease prior to the Lease Termination Date and the obligations of
Lessee pursuant to ARTICLE III, ARTICLES X, XI, XIII, SECTIONS 14.2, 14.3, 14.4,
14.5, 14.8, ARTICLES XIV, XV, and XVI, and SECTIONS 17.10 and 17.12 shall
survive the expiration or termination of this Lease. The extension of any
applicable statute of limitations by Lessor, Lessee, the Agent or any Indemnitee
shall not affect such survival.
Section XVII.18 CHATTEL PAPER. To the extent that this Lease
constitutes chattel paper (as such term is defined in the Uniform Commercial
Code in any applicable jurisdiction), no security interest in this Lease may be
created through the
46
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transfer or possession of any counterpart other than the original counterpart,
which shall be identified as the original counterpart by the receipt of the
Agent.
Section XVII.19 TIME OF ESSENCE. Time is of the essence of this Lease.
Section XVII.20 RECORDATION OF LEASE. Lessee will, at its expense,
cause this Lease or memorandum of lease (if permitted by Applicable Law) to be
recorded in the proper office or offices in the States and the municipalities in
which the Land is located.
Section XVII.21 INVESTMENT OF SECURITY FUNDS. Any amounts not payable
to Lessee pursuant to any provision of ARTICLE VIII, X or XIV or this SECTION
17.21 solely because an Event of Default shall have occurred and be continuing
shall be held by the Agent (or Lessor if the Loans have been fully paid) as
security for the obligations of Lessee under this Lease and the Master
Agreement. At such time as no Event of Default shall be continuing, such
amounts, net of any amounts previously applied to Lessee's obligations hereunder
or under the Master Agreement, shall be paid to Lessee. Any such amounts which
are held by the Agent (or Lessor if the Loans have been fully paid) pending
payment to Lessee shall until paid to Lessee, as provided hereunder or, as long
as the Loan Agreement is in effect, until applied against Lessee's obligations
herein and under the Master Agreement and distributed as provided in the Loan
Agreement or herein (after the Loan Agreement is no longer in effect) in
connection with any exercise of remedies hereunder, be invested by the Agent or
Lessor, as the case may be as directed from time to time in writing by Lessee
(PROVIDED, HOWEVER, if an Event of Default has occurred and is continuing it
will be directed by the Agent or, if the Funded Amounts have been fully paid,
Lessor) and at the expense and risk of Lessee, in investments approved by the
Agent. Any gain (including interest received) realized as the result of any such
investment (net of any fees, commissions and other expenses, if any, incurred in
connection with such investment) shall be applied in the same manner as the
principal invested.
47
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[Signature page follows]
48
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IN WITNESS WHEREOF, the undersigned have each caused this Lease
Agreement to be duly executed and delivered and attested by their respective
officers thereunto duly authorized as of the day and year first above written.
SUPREME INTERNATIONAL CORPORATION
as Lessee
By_________________________________
Name:___________________________
Title:__________________________
BUILDING
LEASE
S-1
AGREEMENT
<PAGE>
SUP JOINT VENTURE, as Lessor
By: Atlantic Financial Managers,
Inc., its General Partner
By_________________________________
Name:___________________________
Title:__________________________
By: Atlantic Financial Group,
Ltd., its General Partner
By: Atlantic Financial
Managers, Inc., its
General Partner
By_________________________________
Name:___________________________
Title:__________________________
BUILDING
LEASE
S-2
AGREEMENT
<PAGE>
STATE OF __________________ )
) SS.
COUNTY OF _________________ )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to take
acknowledgments, personally appeared ___________________, to me known to be the
__________________ of SUP JOINT VENTURE, a Florida general partnership,
described in and who executed the foregoing instrument and who is personally
known to me, and who acknowledged before me that he/she executed the same for
the purposes expressed therein.
WITNESS my hand and official seal in the county and state aforesaid
this __ day of August, 1997.
(Notary Signature)
(NOTARY SEAL)
(Notary Name Printed)
NOTARY PUBLIC
Commission No. _____________
BUILDING
LEASE
N-1
AGREEMENT
<PAGE>
STATE OF _______________ )
) SS.
COUNTY OF ______________ )
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the state aforesaid and in the county aforesaid to take
acknowledgments, personally appeared ______________________, to me known to be
the _____________________ of SUPREME INTERNATIONAL CORPORATION, a Florida
corporation, described in and who executed the foregoing instrument and who is
personally known to me, and who acknowledged before me that he/she executed the
same for the purposes expressed therein.
WITNESS my hand and official seal in the county and state aforesaid
this __ day of August, 1997.
(Notary Signature)
(NOTARY SEAL)
(Notary Name Printed)
NOTARY PUBLIC
Commission No. _________________
BUILDING
LEASE
N-2
AGREEMENT
<PAGE>
Receipt of this original counterpart of the foregoing Lease is hereby
acknowledged as of the date hereof.
SUNTRUST BANK, MIAMI, N.A., as the
Agent
By__________________________________
Name:____________________________
Title:___________________________
BUILDING
LEASE
S-3
AGREEMENT
EXHIBIT 10.26
================================================================================
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of March 31, 1998
Among
SUPREME INTERNATIONAL CORPORATION
(the Borrower)
and
NATIONSBANK, N.A., as Agent
(the Agent)
and
THE LENDERS FROM TIME TO
TIME PARTY HERETO
================================================================================
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 - DEFINITIONS
SECTION 1.1 DEFINITIONS......................................................1
SECTION 1.2 OTHER REFERENTIAL POVISIONS.....................................21
SECTION 1.3 EXHIBITS AND SCHEDULES..........................................22
ARTICLE 2 - REVOLVING CREDIT FACILITY
SECTION 2.1 REVOLVING CREDIT LOANS..........................................22
SECTION 2.2 MANNER OF BORROWING REVOLVING CREDIT LOANS......................23
SECTION 2.3 REPAYMENT OF REVOLVING CREDIT LOANS.............................24
SECTION 2.4 REVOLVING CREDIT NOTE...........................................24
SECTION 2.5 EXTENSION OF FACILITY...........................................24
ARTICLE 3 - STANDBY LETTER OF CREDIT
Section 3.1 PARTICIPATIONS..................................................24
Section 3.2 DUTIES OF NATIONSBANK...........................................26
Section 3.3 PAYMENT OF REIMBURSEMENT OBLIGATIONS............................26
Section 3.4 INDEMNIFICATION, EXONERATION....................................27
Section 3.5 SUPPORTING STANDBY LETTER OF CREDIT; CASH COLLATERAL............28
ARTICLE 4 - GENERAL LOAN PROVISIONS
Section 4.1 INTEREST........................................................29
Section 4.2 FEES............................................................32
Section 4.3 MANNER OF PAYMENT...............................................33
Section 4.4 LOAN ACCOUNTS; STATEMENTS OF ACCOUNT............................34
Section 4.5 TERMINATION OF AGREEMENT........................................34
Section 4.6 INCREASED COSTS AND REDUCED RETURNS.............................35
Section 4.7 MAKING OF LOANS.................................................36
Section 4.8 SETTLEMENT AMONG LENDERS........................................38
Section 4.9 PAYMENTS NOT AT END OF INTEREST PERIOD; FAILURE TO BORROW.......42
ARTICLE 5 - CONDITIONS PRECEDENT
Section 5.1 CONDITIONS PRECEDENT TO INITIAL LOAN............................43
Section 5.2 ALL LOANS.......................................................45
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 6.1 REPRESENTATIONS AND WARRANTIES..................................46
Section 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC.................51
</TABLE>
2
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<TABLE>
<S> <C>
ARTICLE 7 - SECURITY INTEREST
Section 7.1 SECURITY INTEREST...............................................51
Section 7.2 CONTINUED PRIORITY OF SECURITY INTEREST.........................51
ARTICLE 8 - COLLATERAL COVENANTS
Section 8.1 COLLECTION OF RECEIVABLES.......................................52
Section 8.2 VERIFICATION AND NOTIFICATION...................................53
Section 8.3 DISPUTES, RETURNS AND ADJUSTMENTS...............................53
Section 8.4 INVOICES........................................................54
Section 8.5 DELIVERY OF INSTRUMENTS.........................................54
Section 8.6 SALES OF INVENTORY..............................................54
Section 8.7 RETURNED GOODS..................................................54
Section 8.8 OWNERSHIP AND DEFENSE OF TITLE..................................54
Section 8.9 INSURANCE.......................................................55
Section 8.10 LOCATION OF OFFICES AND COLLATERAL.............................55
Section 8.11 RECORDS RELATING TO COLLATERAL.................................56
Section 8.12 INSPECTION.....................................................56
Section 8.13 MAINTENANCE OF EQUIPMENT.......................................57
Section 8.14 INFORMATION AND REPORTS........................................57
Section 8.15 POWER OF ATTORNEY..............................................58
ARTICLE 9 - AFFIRMATIVE COVENANTS
Section 9.1 PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS.........58
Section 9.2 COMPLIANCE WITH APPLICABLE LAW..................................59
Section 9.3 CONDUCT OF BUSINESS.............................................59
Section 9.4 PAYMENT OF TAXES AND CLAIMS.....................................59
Section 9.5 ACCOUNTING METHODS AND FINANCIAL RECORDS........................59
Section 9.6 USE OF PROCEEDS.................................................59
Section 9.7 HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL REQUIREMENTS......59
Section 9.8 ACCURACY OF INFORMATION.........................................60
Section 9.9 REVISIONS OR UPDATES TO SCHEDULES...............................60
ARTICLE 10 - INFORMATION
Section 10.1 FINANCIAL STATEMENTS...........................................61
Section 10.2 ACCOUNTANTS' CERTIFICATE.......................................61
Section 10.3 OFFICER'S CERTIFICATE..........................................61
Section 10.4 COPIES OF OTHER REPORTS........................................62
Section 10.5 NOTICE OF LITIGATION AND OTHER MATTERS.........................62
Section 10.6 ERISA..........................................................63
ARTICLE 11 - NEGATIVE COVENANTS
Section 11.1 FINANCIAL COVENANTS............................................63
Section 11.2 INDEBTEDNESS...................................................64
Section 11.3 GUARANTIES.....................................................64
Section 11.4 INVESTMENTS....................................................64
Section 11.5 CAPITAL EXPENDITURES...........................................64
Section 11.6 RESTRICTED DISTRIBUTIONS AND PAYMENTS, ETC.....................64
Section 11.7 MERGER, CONSOLIDATION AND SALE OF ASSETS.......................64
Section 11.8 TRANSACTIONS WITH AFFILIATES...................................65
</TABLE>
3
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<TABLE>
<S> <C>
Section 11.9 LIENS..........................................................65
Section 11.10 OPERATING LEASES..............................................65
Section 11.11 BENEFIT PLANS.................................................65
Section 11.12 SALES AND LEASEBACKS..........................................65
Section 11.13 AMENDMENTS OF OTHER AGREEMENTS................................65
Section 11.14 MINIMUM AVAILABILITY..........................................65
ARTICLE 12 - DEFAULT
Section 12.1 EVENTS OF DEFAULT..............................................65
Section 12.2 REMEDIES.......................................................68
Section 12.3 APPLICATION OF PROCEEDS........................................70
Section 12.4 POWER OF ATTORNEY..............................................71
Section 12.5 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES...................71
Section 12.6 TRADEMARK LICENSE..............................................72
ARTICLE 13 - ASSIGNMENTS
Section 13.1. SUCCESSORS AND ASSIGNS; PARTICIPATIONS........................72
Section 13.2. REPRESENTATION OF LENDERS.....................................75
ARTICLE 14 - AGENT
Section 14.1. APPOINTMENT OF AGENT..........................................75
Section 14.2. DELEGATION OF DUTIES..........................................76
Section 14.3. EXCULPATORY PROVISIONS........................................76
Section 14.4. RELIANCE BY AGENT.............................................75
Section 14.5. NOTICE OF DEFAULT.............................................75
Section 14.6. NON-RELIANCE ON AGENT AND OTHER LENDERS.......................76
Section 14.7. INDEMNIFICATION...............................................76
Section 14.8. AGENT IN ITS INDIVIDUAL CAPACITY..............................76
Section 14.9. SUCCESSOR AGENT...............................................77
Section 14.10. NOTICES FROM AGENT TO LENDERS................................77
ARTICLE 15- MISCELLANEOUS
Section 15.1 NOTICES........................................................77
Section 15.2 EXPENSES.......................................................78
Section 15.3 STAMP AND OTHER TAXES..........................................79
Section 15.4 SETOFF.........................................................80
Section 15.5 LITIGATION.....................................................80
Section 15.6 WAIVER OF RIGHTS...............................................81
Section 15.7 REVERSAL OF PAYMENTS...........................................81
Section 15.8 INJUNCTIVE RELIEF..............................................81
Section 15.9 ACCOUNTING MATTERS............................................82
Section 15.10 AMENDMENTS....................................................82
Section 15.11 PERFORMANCE OF BORROWER'S DUTIES..............................83
Section 15.12 INDEMNIFICATION...............................................83
Section 15.13 ALL POWERS COUPLED WITH INTEREST..............................84
Section 15.14 SURVIVAL......................................................84
Section 15.15 SEVERABILITY OF PROVISIONS....................................84
Section 15.16 GOVERNING LAW.................................................84
Section 15.17 COUNTERPARTS..................................................84
</TABLE>
4
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<TABLE>
<S> <C>
Section 15.18 REPRODUCTION OF DOCUMENTS.....................................84
Section 15.19 CONSENT TO ADVERTISING AND PUBLICITY..........................85
Section 15.20 PRO-RATA PARTICIPATION........................................85
</TABLE>
5
<PAGE>
EXHIBITS AND SCHEDULES
EXHIBIT A FORM OF REVOLVING CREDIT NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT D FORM OF SETTLEMENT REPORT
SCHEDULE 6.1(a) Jurisdictions in Which Borrower is Qualified as a
Foreign Corporation
SCHEDULE 6.1(b) Borrower's Capital Stock
SCHEDULE 6.1(e) Borrower's Business
SCHEDULE 6.1(f) Exceptions to Governmental Approvals
SCHEDULE 6.1(g) Non Lien Title Exceptions and Defects and Property
Disposed of Out of Ordinary Course of Business
SCHEDULE 6.1(h) Liens
SCHEDULE 6.1(i) Indebtedness for Money Borrowed and Guaranties
SCHEDULE 6.1(j) Litigation
SCHEDULE 6.1(k) Tax Returns and Payments
SCHEDULE 6.1(o) ERISA
SCHEDULE 6.1(t) Location of Chief Executive Office
SCHEDULE 6.1(u) Locations of Inventory
SCHEDULE 6.1(v) Corporate and Fictitious Names
SCHEDULE 6.1(y) Employee Relations
SCHEDULE 6.1(z) Proprietary Rights
SCHEDULE 9.6 Use of Proceeds
// This Table of Contents is included for reference purposes only and does
not constitute part of the Loan and Security Agreement.
6
<PAGE>
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of March 31, 1998
SUPREME INTERNATIONAL CORPORATION, a Florida corporation (the
"Borrower"), the financial institutions party to this Agreement from time to
time (the "Lenders"), and NATIONSBANK, N.A., a national banking association, as
agent for the Lenders (the "Agent"), agree as follows:
RECITALS: NationsBank, N.A., as successor to NationsBank of Georgia,
N.A. ("NationsBank"), and the Borrower are party to that certain Loan and
Security Agreement dated as of October 5, 1994 (as amended, the "Original Loan
Agreement"), pursuant to which NationsBank agreed to make certain revolving
credit loans to the Borrower. Pursuant to that certain Assignment Agreement
dated of even date herewith (the "Assignment of Original Loan Documents"),
NationsBank has assigned to the Lenders and the Agent all of NationsBank's
right, title and interest in and to the Original Loan Agreement, each
instrument, agreement or document executed by the Borrower in connection with
the Original Loan Agreement, and the loans thereunder. The Borrower, the Lenders
and the Agent desire to amend and restate the Original Loan Agreement, as
follows:
ARTICLE 1 - DEFINITIONS
Section 1.1 DEFINITIONS. For the purposes of this Agreement:
"ACCOUNT DEBTOR" means a Person who is obligated on a Receivable.
"ACQUIRE" or "ACQUISITION", as applied to any Business Unit or
Investment, means the acquisition of such Business Unit or Investment by
purchase, exchange, issuance of stock or other securities, or by merger,
reorganization or any other method.
"ADVANCE" means amounts advanced by the Lenders to the Borrower
pursuant to SECTION 2 hereof and shall include Prime Rate Advances and
Eurodollar Rate Advances, as the case may be.
"AFFILIATE" means, with respect to a Person, (a) any officer, director,
employee or managing agent of such Person, (b) any spouse, parents, brothers,
sisters, children and grandchildren of such Person, (c) any association,
partnership, trust, entity or enterprise in which such Person is a director,
officer or general partner, (d) any other Person that, (i) directly or
indirectly, through one or more intermediaries, controls, or is controlled by,
or is under common control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock or
partnership or other interest of such Person or any Subsidiary of such Person,
or (iii) 10% or more of the voting stock or partnership or other
<PAGE>
interest of which is directly or indirectly beneficially owned or held by such
Person or a Subsidiary of such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities or partnership or other interests, by contract or otherwise.
"AGENCY ACCOUNT" means an account of the Borrower maintained by it with
a Clearing Bank pursuant to an Agency Account Agreement.
"AGENCY ACCOUNT AGREEMENT" means an agreement among the Borrower, the
Agent and a Clearing Bank concerning the collection of payments which represent
the proceeds of Receivables or of any other Collateral.
"AGENT" means NationsBank, N.A., a national banking association, and
any successor agent appointed pursuant to SECTION 14.9 hereof.
"AGENT'S OFFICE" means the office of the Agent specified in or
determined in accordance with the provisions of SECTION 15.1.
"AGREEMENT" means this Amended and Restated Loan and Security
Agreement, including the Exhibits and Schedules hereto, and all amendments,
modifications and supplements hereto and thereto and restatements hereof and
thereof.
"AGREEMENT DATE" means the date as of which this Agreement is dated.
"ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance in the
form attached hereto as EXHIBIT C assigning all or a portion of a Lender's
interests, rights and obligations under this Agreement pursuant to SECTION 13.1.
"ASSIGNMENT OF FACTORING CREDIT BALANCES" means the assignment to the
Agent, for the benefit of the Lenders, by the Borrower of the Factoring Credit
Balances with the Factor on terms and conditions satisfactory to the Agent.
"ASSIGNMENT OF ORIGINAL LOAN DOCUMENTS" has the meaning set forth in
the Recitals of this Agreement.
"AVAILABILITY" means as of the date of determination, the amount of
Revolving Credit Loans available to be borrowed by the Borrower hereunder in
accordance with SECTION 2.1 less the sum of the outstanding principal balance of
all Revolving Credit Loans hereunder as of such date.
"BENEFIT PLAN" means an employee benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which a Person or
any Related Company is, or within the immediately preceding 6 years was, an
"employer" as defined in Section 3(5) of ERISA, including such plans as may be
established after the Agreement Date.
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"BORROWER" means Supreme International Corporation, a Florida
corporation, and its successors and assigns.
"BORROWING BASE" means at any time the lesser of (a) the Revolving
Credit Facility minus the Standby Letter of Credit Reserve and (b) an amount
equal to the sum of:
(i) 85% (or such lesser percentage as the Agent may in its sole and
absolute discretion determine from time to time) of the face value of Eligible
Receivables due and owing at such time, PLUS
(ii) THE LESSER OF
(A) 90% (or such lesser percentage as the Agent may in its
sole and absolute discretion determine from time to time) of the
Factoring Credit Balances due and owing at such time, AND
(B) $10,000,000, PLUS
(iii) THE LESSER OF
(A) 50% (or such lesser percentage as the Agent may in its
sole and absolute discretion determine from time to time) of the lesser
of cost (computed on a first-in-first-out basis) and fair market value
of Eligible Inventory at such time, AND
(B) $25,000,000, MINUS
(iv) the Standby Letter of Credit Reserve and such other reserves as
the Agent may determine from time to time in the exercise of its reasonable
credit judgment.
"BORROWING BASE CERTIFICATE" means a certificate in the form of EXHIBIT
B attached hereto, which Borrowing Base Certificate shall specify which
Inventory is License Inventory and which Inventory is Private Label Inventory.
"BUSINESS DAY" means (a) any day other than a Saturday, Sunday or other
day on which banks in Atlanta, Georgia are authorized to close, and (b) in
respect of any determination with respect to a Eurodollar Rate Advance any day
referred to in CLAUSE (A) that is also a day on which tradings are conducted in
the London interbank eurodollar market.
"BUSINESS UNIT" means the assets constituting the business, or a
division or operating unit thereof, of any Person.
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than assets which constitute a Business Unit) which are not, in accordance with
GAAP, treated as expense items for such Person in the
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year made or incurred or as a prepaid expense applicable to a future year or
years.
"CAPITALIZED LEASE" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"CAPITALIZED LEASE OBLIGATION" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"CLEARING BANK" means NationsBank and any other banking institution
with which an Agency Account has been established pursuant to an Agency Account
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COLLATERAL" means and includes all of the Borrower's right, title and
interest in and to each of the following, wherever located and whether now or
hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Contract Rights,
(d) all General Intangibles,
(e) all Deposit Accounts,
(f) all Factoring Credit Balances,
(g) all goods and other property, whether or not delivered, (i) the
sale or lease of which gives or purports to give rise to any Receivable,
including, but not limited to, all merchandise returned or rejected by or
repossessed from customers, or (ii) securing any Receivable, including, without
limitation, all rights as an unpaid vendor or lienor (including, without
limitation, stoppage in transit, replevin and reclamation) with respect to such
goods and other properties,
(h) all mortgages, deeds to secure debt and deeds of trust on real or
personal property, guaranties, leases, security agreements and other agreements
and property which secure or relate to any Receivable or other Collateral or are
acquired for the purpose of securing and enforcing any item thereof,
(i) all documents of title, policies and certificates of insurance,
securities, chattel paper and other documents and instruments evidencing or
pertaining to any and all items of Col-
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lateral,
(j) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof,
(k) all cash deposited with the Agent or any Lender or any Affiliate
thereof or which the Agent or any Lender is entitled to retain or otherwise
possess as collateral pursuant to the provisions of this Agreement or any of the
Security Documents, and
(l) any and all products and cash and non-cash proceeds of the
foregoing (including, but not limited to, any claims to any items referred to in
this definition and any claims against third parties for loss of, damage to or
destruction of any or all of the Collateral or for proceeds payable under or
unearned premiums with respect to policies of insurance) in whatever form,
including, but not limited to, cash, negotiable instruments and other
instruments for the payment of money, chattel paper, security agreements and
other documents.
"COMMITMENT" means, as to each Lender, the amount set forth opposite
such Lender's name on the signature pages hereof, representing such Lender's
obligation, upon and subject to the terms and conditions of this Agreement
(including the applicable provisions of SECTION 13.1), to make Revolving Credit
Loans and to purchase participations in the Standby Letter of Credit or, from
and after the date hereof, in the Register (as defined in SECTION 13.1),
representing such Lender's obligation to make Revolving Credit Loans and to
purchase participations in Standby Letter of Credit.
"COMMITMENT PERCENTAGE" means, as to any Lender, the percentage of the
Total Commitment obtained by dividing such Lender's Commitment by the Total
Commitment.
"CONTRACT RIGHTS" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising rights under
contracts not yet earned by performance and not evidenced by an instrument or
chattel paper, to the extent that the same may lawfully be assigned.
"CONTROLLED DISBURSEMENT ACCOUNT" means the account maintained by and
in the name of the Borrower with NationsBank for the purpose of disbursing
Revolving Credit Loan proceeds and amounts credited thereto pursuant to SECTIONS
2.2(B) and 8.1(B)(II).
"DEFAULT" means any of the events specified in SECTION 12.1 that, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
"DEFAULT MARGIN" means 3%.
"DEPOSIT ACCOUNTS" means any demand, time, savings, passbook or like
account
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maintained with a bank, savings and loan association, credit union or like
organization, other than an account evidenced by a certificate of deposit that
is an instrument under the UCC.
"DOLLAR" and "$" means freely transferable United States dollars.
"EBITDAR" means, for any period, the Borrower's Net Income from
recurring operations, excluding extraordinary items, before deduction of
Interest Expense, taxes, depreciation, amortization expense and Operating Lease
Expense.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time, and any successor statute.
"EFFECTIVE DATE" means the later of (a) the Agreement Date, and (b) the
first date on which all of the conditions set forth in SECTION 5.1 shall have
been fulfilled or waived by the Lenders.
"EFFECTIVE INTEREST RATE" means the rate of interest per annum on the
Loans in effect from time to time pursuant to the provisions of SECTION 4.1.
"ELIGIBLE ASSIGNEE" means (i) a commercial bank, commercial finance
company or other asset based lender, having total assets in excess of
$1,000,000,000; (ii) any Lender listed on the signature page of this Agreement;
and (iii) if an Event of Default exists, any Person; PROVIDED in each case that
the representation contained in SECTION 13.2 hereof shall be applicable with
respect to such institution or Lender.
"ELIGIBLE INVENTORY" means items of Inventory of the Borrower held for
sale in the ordinary course of the business of the Borrower (but not including
packaging or shipping materials or maintenance supplies) which are deemed by the
Agent in the exercise of its sole and absolute discretion to be eligible for
inclusion in the calculation of the Borrowing Base. Unless otherwise approved in
writing by the Agent, no Inventory shall be deemed to be Eligible Inventory
unless it meets all of the following requirements: (a) such Inventory is owned
by the Borrower, is subject to the Security Interest, which is a first priority
perfected Lien as to such Inventory, and which is subject to no other Lien
whatsoever other than a Permitted Lien; (b) such Inventory consists of finished
goods and does not consist of raw materials, work-in-process, supplies or
consigned goods; (c) such Inventory is in good condition and meets all standards
applicable to such goods, their use or sale imposed by any gov ernmental agency,
or department or division thereof, having regulatory authority over such
matters; (d) such Inventory is currently saleable, at prices approximating at
least the cost thereof, in the normal course of the Borrower's business; (e)
such Inventory is not obsolete or repossessed or used goods taken in trade, or
returned goods not suitable for sale as new Inventory; (f) such Inventory is
located at a location listed on SCHEDULE 6.1(U), attached hereto; (g) such
Inventory is in the possession and control of the Borrower and not any third
party and if located in a warehouse or other facility leased by the Borrower,
the lessor has delivered to the Agent a waiver and consent in form and substance
satisfactory to the Agent; (h) if such Inventory is Private Label Inventory, it
comprises less than
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35% of Eligible Inventory; and (i) if such Inventory is License Inventory, it
comprises less than 15% of Eligible Inventory.
"ELIGIBLE RECEIVABLE" means the unpaid portion of a Receivable payable
in Dollars to the Borrower net of any returns, discounts, claims, credits,
charges or other allowances, offsets, deductions, counterclaims, disputes or
other defenses and reduced by the aggregate amount of all reserves, limits and
deductions provided for in this definition and elsewhere in this Agreement which
is deemed by the Agent in the exercise of its sole and absolute discretion to be
eligible for inclusion in the calculation of the Borrowing Base. Unless
otherwise approved in writing by the Agent, no Receivable shall be deemed an
Eligible Receivable unless it meets all of the following requirements: (a) such
Receivable is owned by the Borrower and represents a complete bona fide
transaction which requires no further act under any circumstances on the part of
the Borrower to make such Receivable payable by the Account Debtor; (b) such
Receivable is not unpaid more than 120 days after the date of the original
invoice or past due more than 90 days after its due date, which shall not be
later than 30 days after the invoice date; (c) such Receivable does not arise
out of any transaction with any Subsidiary, Affiliate, creditor, lessor or
supplier of the Borrower; (d) such Receivable is not owing by an Account Debtor
more than 50% of whose then-existing accounts owing to the Borrower do not meet
the requirements set forth in CLAUSE B above; (e) if the Account Debtor with
respect thereto is located outside of the United States of America or Puerto
Rico, the goods which gave rise to such Receivable were shipped after receipt by
the Borrower from the Account Debtor of an irrevocable letter of credit that has
been confirmed by a financial institution acceptable to the Agent and is in form
and substance acceptable to the Agent, payable in the full face amount of the
face value of the Receivable in Dollars at a place of payment located within the
United States and has been duly delivered to the Agent; (f) such Receivable is
not subject to the Assignment of Claims Act of 1940, as amended from time to
time, or any applicable law now or hereafter existing similar in effect thereto,
as determined in the sole discretion of the Agent, or to any provision
prohibiting its assignment or requiring notice of or consent to such assignment;
(g) the Borrower is not in material breach of any express or implied
representation or warranty with respect to the goods the sale of which gave rise
to such Receivable; (h) the Account Debtor with respect to such Receivable is
not insolvent or the subject of any bankruptcy or insolvency proceedings of any
kind or of any other proceeding or action, threatened or pending, which might,
in the Agent's sole judgment, have a Materially Adverse Effect on such Account
Debtor; (i) the goods the sale of which gave rise to such Receivable were
shipped or delivered to the Account Debtor on an absolute sale basis and not on
a bill and hold sale basis, a consignment sale basis, a guaranteed sale basis, a
sale or return basis or on the basis of any other similar understanding, and
such goods have not been returned or rejected; (j) such Receivable, to the
extent that it, when taken together with all other Receivables owing to the
Borrower by such Account Debtor and its Affiliates, causes the total face amount
of all then-existing accounts owing to the Borrower by such Account Debtor and
its Affiliates to exceed in face amount 20% of the Borrower's total Eligible
Receivables; (k) such Receivable is evidenced by an invoice or other
documentation in form acceptable to the Agent containing only terms normally
offered by the Borrower, and dated the date of shipment; (l) such Receivable is
a valid, legally enforceable obligation of the Account Debtor with respect
thereto and is not subject to any present, or contingent (and no facts exist
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which are the basis for any future), offset, deduction or counterclaim, dispute
or other defense on the part of such Account Debtor; (m) such Receivable is not
evidenced by chattel paper or an instrument of any kind; (n) such Receivable
does not arise from the performance of services, including services under or
related to any warranty obligation of the Borrower or out of service charges by
the Borrower or other fees for the time value of money; and (o) such Receivable
is subject to a Security Interest, which is perfected as to such Receivable, and
is subject to no other Lien whatsoever other than a Permitted Lien and the goods
giving rise to such Receivable were not, at the time of the sale thereof,
subject to any Lien other than a Permitted Lien.
"ENVIRONMENTAL LAWS" means all federal, state, local and foreign laws
now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals or industrial, toxic
or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport or handling of pollutants, contaminants, chemicals
or industrial, toxic or hazardous substances or wastes, and any and all
regulations, notices or demand letters issued, entered, promulgated or approved
thereunder.
"EQUIPMENT" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising machinery, apparatus,
equipment, motor vehicles, tractors, trailers, rolling stock, fittings, and
other tangible personal property (other than Inventory) of every kind and
description used in such Person's business operations or owned by such Person or
in which such Person has an interest and all parts, accessories and special
tools and all increases and accessions thereto and substitutions and
replacements therefor.
"EURODOLLAR RATE" means, with respect to any Eurodollar Rate Advance
for the Interest Period applicable thereto, a simple per annum interest rate
determined pursuant to the following formula:
Eurodollar Rate = INTERBANK OFFERED RATE
------------------------------------------------
1 - Eurodollar Reserve Percentage
The Eurodollar Rate shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"EURODOLLAR RATE ADVANCE" means any Advance which bears interest at the
time in question based on the Eurodollar Rate Basis.
"EURODOLLAR RATE BASIS" means a simple interest rate equal to the sum
of the Eurodollar Rate for the Interest Period plus one and one-quarter percent
(1.25%) per annum.
"EURODOLLAR RESERVE PERCENTAGE" means, for any day, that percentage
(expressed as a decimal) which is in effect from time to time under Regulation D
of the Board of Governors of
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the Federal Reserve System, as such regulation may be amended from time to time,
or any successor regulation, as the maximum reserve requirement (including,
without limitation, any basic, supplemental, emergency, special, or marginal
reserves) applicable to any member bank with respect to Eurocurrency liabilities
as that term is defined in Regulation D (or against any other category of
liabilities that includes deposits by reference to which the interest rate of
Eurodollar Rate Advances is determined), whether or not the Agent or any Lender
has any Eurocurrency liabilities subject to such reserve requirement at that
time. Eurodollar Rate Advances shall be deemed to constitute Eurocurrency
liabilities and as such shall be deemed subject to reserve requirements without
the benefit of credits for proration, exceptions or offsets that may be
available from time to time to the Agent or any Lender.
"EVENT OF DEFAULT" means any of the events specified in SECTION 12.1.
"FACTOR" means The CIT Group/Commercial Services, Inc. or any
replacement factor acceptable to the Agent and the Required Lenders (it being
acknowledged that Congress Talcott Corporation and Republic Business Credit
Corporation are acceptable).
"FACTORING CREDIT BALANCES" means the aggregate of outstanding
Receivables factored by the Borrower with the Factor at the Factor's credit
risk, less customer disputes, reserves and deductions.
"FEDERAL FUNDS EFFECTIVE RATE" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions 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 Atlanta, 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 the Agent from three federal funds brokers of
recognized standing selected by the Agent.
"FINANCING STATEMENTS" means the Uniform Commercial Code financing
statements executed and delivered by the Borrower to the Agent, naming the
Agent, for the benefit of the Lenders, as secured party, and the Borrower as
debtor, in connection with this Agreement.
"FIXED CHARGES" means, for any period, (a) Interest Expense, plus (b)
any provision for income or franchise taxes included in the determination of Net
Income, plus (c) payments of principal which were made or due with respect to
Indebtedness (other than Revolving Credit Loans), including payments with
respect to Capitalized Leases, plus (d) payments which were made or due with
respect to Operating Leases.
"FUNDED INDEBTEDNESS" means, without duplication, (a) all Indebtedness
under this Agreement, (b) the aggregate amount at any time of outstanding
reimbursement obligations with respect to letters of credit (other than the
Standby Letter of Credit) and banker's acceptances issued by Hamilton Bank, N.A.
or any other financial institution which have been drawn upon,
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(c) the aggregate amount of principal obligations under the SunTrust Lease, and
(d) all other Indebtedness for Money Borrowed.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and consistent with the
prior financial practice of the Person referred to.
"GENERAL INTANGIBLES" means, as to any Person, all of such Person's
then owned or existing and future acquired or arising general intangibles,
choses in action and causes of action and all other intangible personal property
of such Person of every kind and nature (other than Receivables), including,
without limitation, Intellectual Property, corporate or other business records,
inventions, designs, blueprints, plans, specifications, trade secrets, goodwill,
computer software, customer lists, registrations, licenses, franchises, tax
refund claims, reversions or any rights thereto and any other amounts payable to
such Person from any Benefit Plan, Multiemployer Plan or other employee benefit
plan, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, proceeds of
insurance covering the lives of key employees on which such Person is
beneficiary and any letter of credit, guarantee, claims, security interest or
other security held by or granted to such Person to secure payment by an Account
Debtor of any of the Receivables.
"GOVERNMENTAL APPROVALS" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local, foreign national or
provincial, and all agencies thereof.
"GOVERNMENTAL AUTHORITY" means any government or political subdivision
or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.
"GUARANTY", "GUARANTEED" or to "GUARANTEE," as applied to any
obligation of another Person shall mean and include:
(a) a guaranty (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), directly or indirectly, in any
manner, of any part or all of such obligation of such other Person, and
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation of such other Person
whether by (i) the purchase of securities or obligations, (ii) the purchase,
sale or lease (as lessee or lessor) of property or the purchase or sale of
services primarily for the purpose of enabling the obligor with respect to such
obligation to make any payment or performance (or payment of damages in the
event of nonperformance) of or on account of any part or all of such obligation
or to assure the owner of such obligation against loss, (iii) the
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supplying of funds to, or in any other manner investing in, the obligor with
respect to such obligation, (iv) repayment of amounts drawn down by
beneficiaries of letters of credit, or (v) the supplying of funds to or
investing in a Person on account of all or any part of such Person's obligation
under a guaranty of any obligation or indemnifying or holding harmless, in any
way, such Person against any part or all of such obligation.
"INDEBTEDNESS" of any Person means, without duplication, (a)
Liabilities, (b) all obligations for money borrowed or for the deferred purchase
price of property or services or in respect of reimbursement obligations under
letters of credit, (c) all obligations represented by bonds, debentures, notes
and accepted drafts that represent extensions of credit, (d) Capitalized Lease
Obligations, (e) all obligations (including, during the noncancellable term of
any lease in the nature of a title retention agreement, all future payment
obligations under such lease discounted to their present value in accordance
with GAAP) secured by any Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligation secured thereby shall have
been assumed by such Person, (f) all obligations under synthetic leases,
including all obligations under the SunTrust Lease, (g) all obligations of other
Persons which such Person has Guaranteed, including, but not limited to, all
obligations of such Person consisting of recourse liability with respect to
accounts receivable sold or otherwise disposed of by such Person, and (h) in the
case of the Borrower (without duplication) the Loans.
"INITIAL LOAN" means the Revolving Credit Loan made to the Borrower on
the Effective Date pursuant to the letter referred to in SECTION 5.1(A)(11).
"INTELLECTUAL PROPERTY" means, as to any Person, all of such Person's
then owned existing and future acquired or arising patents, patent rights,
copyrights, works which are the subject of copyrights, trademarks, service
marks, trade names, trade styles, patent, trademark and service mark
applications, and all licenses and rights related to any of the foregoing and
all other rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations and continuations-in-part of any of the foregoing and
all rights to sue for past, present and future infringements of any of the
foregoing.
"INTERBANK OFFERED RATE" means, with respect to any Eurodollar Rate
Advance for the Interest Period applicable thereto, the average (rounded upward
to the nearest one-sixteenth (1/16) of one percent) per annum rate of interest
determined by the office of the Agent then determining such rate (each such
determination to be conclusive and binding) as of two Business Days prior to the
first day of such Interest Period, as the effective rate at which deposits in
immediately available funds in Dollars are being, have been, or would be offered
or quoted by the Agent to major banks in the applicable interbank market for
Eurodollar deposits at any time during the Business Day which is the second
Business Day immediately preceding the first day of such Interest Period, for a
term comparable to such Interest Period and in an amount comparable to the
amount of the Eurodollar Rate Advance. If no such offers or quotes are generally
available for such amount, then the Agent shall be entitled to determine the
Eurodollar Rate by estimating in its reasonable judgment the per annum rate (as
described above) that would be applicable if such quotes or offers were
generally available.
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"INTEREST EXPENSE" means the interest on Indebtedness during the period
for which computation is being made, excluding (a) the amortization of fees and
costs incurred with respect to the closing of loans which have been capitalized
as transaction costs, and (b) interest paid in kind.
"INTEREST PERIOD" means, in connection with any Eurodollar Rate
Advance, the term of such Advance selected by the Borrower or otherwise
determined in accordance with this Agreement, which may have a duration of
thirty (30) days, sixty (60) days, ninety (90) days, one hundred eighty (180)
days or three hundred sixty (360) days. Notwithstanding the foregoing, however,
(i) any applicable Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day, (ii) any applicable Interest
Period which begins on a day for which there is no numerically corresponding day
in the calendar month during which such Interest Period is to end shall (subject
to clause (i) above) end on the last day of such calendar month, and (iii) no
Interest Period shall extend beyond the Termination Date or such earlier date as
would interfere hereunder with the repayment obligations of the Borrower.
"INTEREST RATE PROTECTION AGREEMENT" shall mean an interest rate swap,
cap or collar agreement or similar arrangement between the Borrower and a Lender
or an Affiliate of a Lender providing for the transfer or mitigation of interest
risks either generally or under specific contingencies.
"INVENTORY" means and includes, as to any Person, all of such Person's
then owned or existing and future acquired or arising (a) goods intended for
sale or lease or for display or demonstration, (b) work in process, (c) raw
materials and other materials and supplies of every nature and description used
or which might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of goods or otherwise used or
consumed in the conduct of business, and (d) documents evidencing and general
intangibles relating to any of the foregoing.
"INVESTMENT" means, with respect to any Person: (a) the direct or
indirect purchase or acquisition of any beneficial interest in, any share of
capital stock of, evidence of Indebtedness of or other security issued by any
other Person, (b) any loan, advance or extension of credit to, or contribution
to the capital of, any other Person, excluding advances to employees in the
ordinary course of business for business expenses, (c) any Guaranty of the
obligations of any other Person, or (d) any commitment or option to take any of
the actions described in CLAUSES (A), (B) or (C) above.
"LENDER" means at any time any financial institution party to this
Agreement at such time, including any such Person becoming a party hereto
pursuant to the provisions of ARTICLE 13, and its successors and assigns, and
"LENDERS" means at any time all of the financial institutions party to this
Agreement at such time, including any such Persons becoming parties hereto
pursuant to the provisions of ARTICLE 13, and their successors and assigns.
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"LIABILITIES" means all liabilities of a Person determined in
accordance with GAAP and includable on a balance sheet of such Person prepared
in accordance with GAAP.
"LICENSE INVENTORY" means Inventory owned by the Borrower bearing
trademarks used pursuant to license agreements between the Borrower and the
owners of such trademarks.
"LIEN" as applied to the property of any Person means: (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person or upon the income or
profits therefrom, (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person, (c) any Indebtedness which is unpaid more than 30 days
after the same shall have become due and payable and which if unpaid might by
law (including, but not limited to, bankruptcy and insolvency laws) or otherwise
be given any priority whatsoever over general unsecured creditors of such
Person, and (d) the filing of, or any agreement to give, any financing statement
under the UCC or its equivalent in any jurisdiction.
"LOAN" means any Revolving Credit Loan.
"LOAN ACCOUNT" and "LOAN ACCOUNTS" shall have the meanings ascribed
thereto in SECTION 4.4.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Note, the
Security Documents and each other instrument, agreement and document executed
and delivered by the Borrower in connection with this Agreement (including any
application, reimbursement agreement and other document executed in connection
with the Standby Letter of Credit) and each other instrument, agreement or
document referred to herein or contemplated hereby.
"LOCKBOX" means the U.S. Post Office Box(es) specified in, or pursuant
to, an Agency Account Agreement.
"MATERIALLY ADVERSE EFFECT" means any act, omission, event or
undertaking which would, singly or in the aggregate, have a materially adverse
effect upon (a) the business, assets, properties, liabilities, condition
(financial or otherwise), results of operations or business prospects of the
Borrower and its Subsidiaries, taken as a whole (b) upon the respective ability
of the Borrower or any of its Subsidiaries to perform any obligations under this
Agreement or any other Loan Document to which it is a party, or (c) the
legality, validity, binding effect, enforceability or admissibility into
evidence of any Loan Document or the ability of the Agent or any Lender to
enforce any rights or remedies under or in connection with any Loan Document; in
any case, whether resulting from any single act, omission, situation, status,
event, or undertaking, together with other such acts, omissions, situations,
statuses, events, or
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undertakings.
"MINIMUM COMMITMENT" means $5,000,000.
"MONEY BORROWED" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or not in any such case the same
was for money borrowed, (i) represented by notes payable, and drafts accepted,
that represent extensions of credit, (ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or (iii) upon which interest
charges are customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the ordinary
course of business), (c) Indebtedness that constitutes a Capitalized Lease
Obligation, and (d) Indebtedness that is such by virtue of CLAUSE (G) of the
definition thereof, but only to the extent that the obligations Guaranteed are
obligations that would constitute Indebtedness for Money Borrowed.
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which the Borrower or a Related Company is required to
contribute or has contributed within the immediately preceding 6 years.
"NATIONSBANK" means NationsBank, N.A., and its successors and assigns.
"NET INCOME" or "NET LOSS" means, as applied to any Person, the net
income (or net loss) of such Person for the period in question after giving
effect to deduction of or provision for all operating expenses, all taxes and
reserves (including reserves for deferred taxes and all other proper
deductions), all determined in accordance with GAAP, provided that there shall
be excluded: (a) the net income (or net loss) of any Person accrued prior to the
date it becomes a Subsidiary of, or is merged into or consolidated with, the
Person whose Net Income is being determined or a Subsidiary of such Person, (b)
the net income (or net loss) of any Person in which the Person whose Net Income
is being determined or any Subsidiary of such Person has an ownership interest,
except, in the case of net income, to the extent that any such income has
actually been received by such Person or such Subsidiary in the form of cash
dividends or similar distributions, (c) any restoration of any contingency
reserve, except to the extent that provision for such reserve was made out of
income during such period, (d) any net gains or losses on the sale or other
disposition, not in the ordinary course of business, of Investments, Business
Units and other capital assets, provided that there shall also be excluded any
related charges for taxes thereon, (e) any net gain arising from the collection
of the proceeds of any insurance policy (other than the proceeds of business
interruption insurance), (f) any write-up of any asset, and (g) any other
extraordinary item.
"NET OUTSTANDINGS" of any Lender means, at any time, the sum of (a) all
amounts paid by such Lender (other than pursuant to SECTION 14.7) to the Agent
in respect of Revolving Credit Loans or otherwise under this Agreement, MINUS
(b) all amounts paid by the Agent to such Lender which are received by the Agent
and which, pursuant to this Agreement, are paid over to such Lender for
application in reduction of the outstanding principal balance of the Revolving
Credit Loans.
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"NET WORTH" of any Person means the total shareholders' equity
(including capital stock, additional paid-in capital and retained earnings,
after deducting treasury stock) which would appear as such on a balance sheet of
such Person prepared in accordance with GAAP.
"NON-RATABLE LOAN" means a Revolving Credit Loan made by NationsBank in
accordance with the provisions of SECTION 4.8(B).
"NOTE" means any of the Revolving Credit Notes, individually, and
"NOTES" means all of the Revolving Credit Notes, collectively.
"OPERATING LEASE" means any lease (other than a lease constituting a
Capitalized Lease Obligation) of real or personal property, including the
SunTrust Lease.
"OPERATING LEASE EXPENSE" means the aggregate of all rent payments
under Operating Leases, including payments with respect to the SunTrust Lease.
"ORIGINAL LOAN AGREEMENT" has the meaning set forth in the Recitals of
this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation or any successor
agency.
"PERMITTED INDEBTEDNESS" means: (a) the Loan, (b) the letter of credit
and steamship guaranty facility in the aggregate amount of up to $45,000,000 at
any time with Hamilton Bank, (c) Indebtedness of up to $14,500,000 arising under
the SunTrust Lease, (d) Permitted Purchase Money Indebtedness, and (e) letter of
credit facilities with other financial institutions.
"PERMITTED INVESTMENTS" means: (a) Investments of the Borrower in: (i)
negotiable certificates of deposit, time deposits and banker's acceptances
issued by any Lender or any Affiliate of a Lender or by any United States bank
or trust company having capital, surplus and undivided profits in excess of
$250,000,000, (ii) any direct obligation of the United States of America or any
agency or instrumentality thereof which has a remaining maturity at the time of
purchase of not more than one year and repurchase agreements relating to the
same, (iii) sales on credit in the ordinary course of business on terms
customary in the industry, and (iv) notes, accepted in the ordinary course of
business, evidencing overdue accounts receivable arising in the ordinary course
of business, (b) other Investments of the Borrower, the net aggregate amount of
which does not at any time exceed $250,000, and (c) the Guaranty of Sunny
Industries obligations permitted under SECTION 11.3.
"PERMITTED LIENS" means: (a) Liens securing taxes, assessments and
other governmental charges or levies (excluding any Lien imposed pursuant to any
of the provisions of ERISA) or the claims of materialmen, mechanics, carriers,
warehousemen or landlords for labor, materials, supplies or rentals incurred in
the ordinary course of business, but in all cases, only if payment shall not at
the time be required to be made in accordance with SECTION 9.4; (b) Liens
consisting of deposits or pledges made in the ordinary course of business in
connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar
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legislation or under surety or performance bonds, in each case arising in the
ordinary course of business; (c) Liens constituting encumbrances in the nature
of zoning restrictions, easements and rights or restrictions of record on the
use of the Real Estate, which in the sole judgment of the Agent do not
materially detract from the value of such Real Estate or impair the use thereof
in the business of the Borrower; (d) Purchase Money Liens securing Permitted
Purchase Money Indebtedness; (e) purchase money security interests of Hamilton
Bank in Inventory acquired by the Borrower through letters of credit issued by
Hamilton Bank, but only if such Lien shall at all times be confined solely to
the tangible asset, the purchase price of which was financed by the letter of
credit and the reimbursement obligations relating to which are secured by such
Lien; (f) Liens in favor of SunTrust Bank, Miami, N.A. as security for the
Borrower's obligations arising under the SunTrust Lease, provided such Liens are
subject to a lien subordination agreement acceptable to the Agent and the
Lenders; (g) Liens of the Agent arising under this Agreement and the other Loan
Documents; (h) Liens arising out of or resulting from any judgment or award, the
time for the appeal or petition for rehearing of which shall not have expired,
or in respect of which the Borrower is fully protected by insurance or in
respect of which the Borrower shall at any time in good faith be prosecuting an
appeal or proceeding for a review and in respect of which a stay of execution
pending such appeal or proceeding for review shall have been secured, and as to
which appropriate reserves have been established on the books of the Borrower;
and (i) the interest of the Factor in factored Receivables.
"PERMITTED PURCHASE MONEY INDEBTEDNESS" means Purchase Money
Indebtedness secured only by Purchase Money Liens and Capitalized Lease
Obligations up to an aggregate amount outstanding at any time equal to $150,000.
"PERSON" means an individual, corporation, partnership, association,
trust or unincorporated organization or a government or any agency or political
subdivision thereof.
"PRIME RATE ADVANCE" means an Advance of the Loans which shall bear
interest at the Prime Rate.
"PRIME RATE" means during the period from the Effective Date through
the last day of the month in which the Effective Date falls, the per annum rate
of interest publicly announced by NationsBank at its principal office as its
"prime rate" as in effect on the Effective Date, and thereafter during each
succeeding calendar month, means such "prime rate" as in effect on the last
Business Day of the immediately preceding calendar month. Any change in an
interest rate resulting from a change in the Prime Rate shall become effective
as of 12:01 a.m. on the first day of the month following the month in which such
change was announced. The Prime Rate is a reference used by NationsBank in
determining interest rates on certain loans and is not intended to be the lowest
rate of interest charged on any extension of credit to any debtor.
"PRIME RATE BASIS" means an interest rate per annum equal to the Prime
Rate.
"PRIVATE LABEL INVENTORY" means Inventory owned by the Borrower bearing
private label trademarks pursuant to agreements between the Borrower and the
owners of such private label
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trademarks.
"PROPORTIONATE SHARE" or "RATABLE", as applied to a Lender, means such
Lender's share of an amount in Dollars or other property at the time of
determination equal to (i) the Commitment Percentage of such Lender, or (ii) if
the Commitments are terminated, the percentage of the total principal amount of
Loans (plus obligations under the Standby Letter of Credit) outstanding at such
time obtained by dividing the principal amount of the Loans (plus obligations
under the Standby Letter of Credit) then owing to such Lender by the total
principal amount of all Loans (plus obligations under the Standby Letter of
Credit) then owing to all Lenders.
"PURCHASE MONEY INDEBTEDNESS" means Indebtedness created to finance the
payment of all or any part of the purchase price (not in excess of the fair
market value thereof) of any tangible asset (other than Inventory) and incurred
at the time of or within 10 days prior to or after the acquisition of such
tangible asset.
"PURCHASE MONEY LIEN" means any Lien securing Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
tangible asset (other than Inventory) the purchase price of which was financed
through the incurrence of the Purchase Money Indebtedness secured by such Lien.
"REAL ESTATE" means all of the Borrower's now owned or hereafter
acquired estates in real property, including, without limitation, all fees,
leaseholds, future interests and easements, together with all of the Borrower's
now owned or hereafter acquired interests in the improvements thereon, the
fixtures attached thereto and the easements appurtenant thereto.
"RECEIVABLES" means and includes, as to any Person, all of such
Person's then owned or existing and future acquired or arising (a) rights to the
payment of money or other forms of consideration of any kind (whether classified
under the UCC as accounts, contract rights, chattel paper, general intangibles
or otherwise) including, but not limited to, accounts receivable, letters of
credit and the right to receive payment thereunder, chattel paper, tax refunds,
insurance proceeds, Contract Rights, notes, drafts, instruments, documents,
acceptances and all other debts, obligations and liabilities in whatever form
from any Person and guaranties, security and Liens securing payment thereof, (b)
goods, whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise to, any such right to payment or other debt,
obligation or liability, and (c) cash and non-cash proceeds of any of the
foregoing.
"RELATED COMPANY" means, as to any Person, any (a) corporation which is
a member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as such Person, (b) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Code) with such Person, or (c) member of the same
affiliated service group (within the meaning of Section 414(m) of the Code) as
such Person or any corporation described in CLAUSE (A) above or any partnership,
trade or
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business described in CLAUSE (B) above.
"REQUIRED LENDERS" means, at any time, any combination of Lenders whose
Commitment Percentages at such time aggregate in excess of 66.66%; provided,
however, that if any Lender shall have failed to fund its Proportionate Share of
any Loan in accordance with the terms of this Agreement, then, for so long as
such failure continues, the term "Required Lenders" shall mean Lenders
(excluding such Lender whose failure to fund its Proportionate Share of any Loan
has not been cured) whose Commitment Percentages (computed after excluding the
defaulting Lender's Commitment from the Total Commitment) at such time aggregate
in excess of 66.66%; provided further, however, that if the Commitments have
been terminated, the term "Required Lenders" shall mean Lenders (excluding each
Lender whose failure to fund its Proportionate Share of any Loan has not been
cured) holding Loans (plus obligations under the Standby Letter of Credit)
representing in excess of 66.66% of the aggregate principal amount of Loans and
obligations under the Standby Letter of Credit (excluding the Loans and
obligations under the Standby Letter of Credit owing to the defaulting Lender)
outstanding at such time.
"RESTRICTED DISTRIBUTION" by any Person means (a) its retirement,
redemption, purchase, or other acquisition for value of any capital stock or
other equity securities or partnership interests issued by such Person, (b) the
declaration or payment of any dividend or distribution on or with respect to any
such securities or partnership interests, (c) any loan or advance by such Person
to, or other investment by such Person in, the holder of any of such securities
or partnership interests, and (d) any other payment by such Person in respect of
such securities or partnership interests.
"RESTRICTED PAYMENT" means (a) any redemption, repurchase or prepayment
or other retirement, prior to the stated maturity thereof or prior to the due
date of any regularly scheduled installment or amortization payment with respect
thereto, of any Indebtedness of a Person (other than the Secured Obligations and
trade debt), and (b) the payment by any Person of the principal amount of or
interest on any Indebtedness (other than trade debt) owing to an Affiliate of
such Person.
"REVOLVING CREDIT FACILITY" means the facility for the Revolving Credit
Loans in the principal sum of up to $55,000,000 or such lesser or greater amount
as shall be agreed upon from time to time in writing by the Agent, the Lenders
and the Borrower.
"REVOLVING CREDIT LOANS" means loans made to the Borrower pursuant to
SECTION 2.1.
"REVOLVING CREDIT NOTE" means each Revolving Credit Note made by the
Borrower payable to the order of a Lender evidencing the obligation of the
Borrower to pay the aggregate unpaid principal amount of the Revolving Credit
Loans made to it by such Lender (and any promissory note or notes that may be
issued from time to time in substitution, renewal, extension, replacement or
exchange therefor whether payable to such Lender or to a different Lender in
connection with a Person becoming a Lender after the Effective Date or
otherwise) substantially in the form of EXHIBIT A hereto, with all blanks
properly completed, either as
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originally executed or as the same may from time to time be supplemented,
modified, amended, renewed, extended or refinanced.
"SCHEDULE OF INVENTORY" means a schedule delivered by the Borrower to
the Agent pursuant to the provisions of SECTION 8.14(B).
"SCHEDULE OF RECEIVABLES" means a schedule delivered by the Borrower to
the Agent pursuant to the provisions of SECTION 8.14(A).
"SECURED OBLIGATIONS" means, in each case whether now in existence or
hereafter arising, (a) the principal of, and interest and premium, if any, on,
the Loans, (b) the reimbursement obligations and all other obligations of the
Borrower to NationsBank or any Lender arising in connection with the Standby
Letter of Credit, and (c) all indebtedness, liabilities, obligations, covenants
and duties of the Borrower to the Agent or to the Lenders of every kind, nature
and description arising under or in respect of this Agreement, the Notes or any
of the other Loan Documents, or the Banking Relationship, whether direct or
indirect, absolute or contingent, due or not due, contractual or tortious,
liquidated or unliquidated, and whether or not evidenced by any note, and
whether or not for the payment of money, including without limitation, fees
required to be paid pursuant to ARTICLE 4 and expenses required to be paid or
reimbursed pursuant to SECTION 15.2. As used herein, "Banking Relationship"
means obligations of the Borrower relating to or arising out of (i) checking and
operating account relationships among the Borrower and any Lender (or any
Affiliate of a Lender) in the ordinary course of business and (ii) Interest Rate
Protection Agreements.
"SECURITY DOCUMENTS" means each of (a) the Financing Statements, and
(b) each other writing executed and delivered by any Person securing the Secured
Obligations or evidencing such security.
"SECURITY INTEREST" means the Liens of the Agent, for the benefit of
the Lenders, on and in the Collateral effected hereby or by any of the Security
Documents or pursuant to the terms hereof or thereof.
"SETTLEMENT DATE" means each Business Day after the Effective Date
selected by the Agent in its sole discretion subject to and in accordance with
the provisions of SECTION 4.8(B)(I) as of which a Settlement Report is delivered
by the Agent and on which settlement is to be made among the Lenders in
accordance with the provisions of SECTION 4.8.
"SETTLEMENT REPORT" means each report, substantially in the form
attached hereto as EXHIBIT D, prepared by the Agent and delivered to each Lender
and setting forth, among other things, as of the Settlement Date indicated
thereon and as of the next preceding Settlement Date, the aggregate principal
balance of all Revolving Credit Loans outstanding, each Lender's Commitment
Percentage thereof, each Lender's Net Outstandings and all Non-Ratable Loans
made, and all payments of principal, interest and fees received by the Agent
from the Borrower during the period beginning on such next preceding Settlement
Date and ending on such
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Settlement Date.
"STANDBY LETTER OF CREDIT" means that certain standby letter of credit
no. 931326 issued by NationsBank, for the account of the Borrower, in favor of
SunTrust Bank, Miami, N.A. in connection with the Borrower's obligations under
the SunTrust Lease, in the face amount of $2,175,000, as amended, modified or
extended from time to time.
"STANDBY LETTER OF CREDIT RESERVE" means, at any time, 100% of the sum
of (i) the aggregate undrawn amount of the Standby Letter of Credit, PLUS (ii)
the aggregate amount of all drawings under the Standby Letter of Credit for
which NationsBank has not been reimbursed.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness for money borrowed
of the Borrower which is subordinated to the Secured Obligations on terms and
conditions acceptable to the Agent and the Lenders in their sole discretion.
"SUBSIDIARY" when used to determine the relationship of a Person to
another Person, means a Person of which an aggregate of 50% or more of the stock
of any class or classes or 50% or more of other ownership interests is owned of
record or beneficially by such other Person or by one or more Subsidiaries of
such other Person or by such other Person and one or more Subsidiaries of such
Person, (i) if the holders of such stock or other ownership interests (A) are
ordinarily, in the absence of contin gencies, entitled to vote for the election
of a majority of the directors (or other individuals performing similar
functions) of such Person, even though the right so to vote has been suspended
by the happening of such a contingency, or (B) are entitled, as such holders, to
vote for the election of a majority of the directors (or individuals performing
similar functions) of such Person, whether or not the right so to vote exists by
reason of the happening of a contingency, or (ii) in the case of such other
ownership interests, if such ownership interests constitute a majority voting
interest.
"SUNTRUST LEASE" means the synthetic lease provided to the Borrower
with respect to its real property located at 3000 Northwest 107th Avenue, Miami,
Florida pursuant to that certain Master Agreement, dated as of August 28, 1997,
among the Borrower, SUP Joint Venture, SouthTrust Bank, National Association,
SunTrust Bank, Miami, N.A., as agent and a lender, Atlantic Financial Managers,
Inc. and Atlantic Financial Group, Ltd.
"TANGIBLE NET WORTH" means, as applied to any Person, the Net Worth of
such Person at the time in question, after deducting therefrom the amount of all
loans and advances to Affiliates and less the amount of all intangible items
reflected therein, including all unamortized debt discount and expense,
unamortized research and development expense, unamortized deferred charges,
goodwill, Intellectual Property, unamortized excess cost of investment in
Subsidiaries over equity at dates of acquisition, and all similar items which
should properly be treated as intangibles in accordance with GAAP.
"TERMINATION DATE" means March 31, 2001 or such later date as to which
the same may be extended pursuant to the provisions of SECTION 2.5, or, if
earlier, such date as the Secured
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Obligations shall have been accelerated pursuant to the provisions of SECTION
12.2 or such date as all Secured Obligations shall have been irrevocably paid in
full and the Revolving Credit Facility shall have been terminated.
"TERMINATION EVENT" means (a) a "Reportable Event" as defined in
Section 4043(b) of ERISA, but excluding any such event as to which the provision
for 30 days' notice to the PBGC is waived under applicable regulations, (b) the
filing of a notice of intent to terminate a Benefit Plan or the treatment of a
Benefit Plan amendment as a termination under Section 4041 of ERISA, or (c) the
institution of proceedings to terminate a Benefit Plan by the PBGC under Section
4042 of ERISA or the appointment of a trustee to administer any Benefit Plan.
"TOTAL COMMITMENT" means the sum of the Commitments.
"TRADEMARK ASSIGNMENT" means the Amended and Restated Conditional
Assignment and Trademark Security Agreement, dated as of the Agreement Date
between the Borrower and the Agent, for the benefit of the Lenders, as the same
may be amended, modified or supplemented from time to time.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of Georgia.
"UNFUNDED CAPITAL EXPENDITURES" means Capital Expenditures which are
paid for by a Person other than with the proceeds of Indebtedness for Money
Borrowed (other than the Loans) incurred to finance such Capital Expenditures
and other than those represented by Capitalized Lease Obligations.
"UNFUNDED VESTED ACCRUED BENEFITS" means, with respect to any Benefit
Plan at any time, the amount (if any) by which (a) the present value of all
vested nonforfeitable benefits under such Benefit Plan exceeds (b) the fair
market value of all Benefit Plan assets allocable to such benefits, as
determined using such reasonable actuarial assumptions and methods as are
specified in the Schedule B (Actuarial Information) to the most recent Annual
Report (Form 5500) filed with respect to such Benefit Plan.
Section 1.2 OTHER REFERENTIAL PROVISIONS.
(a) All terms in this Agreement, the Exhibits and Schedules hereto
shall have the same defined meanings when used in any other Loan Documents,
unless the context shall require otherwise.
(b) Except as otherwise expressly provided herein, all accounting terms
not specifically defined or specified herein shall have the meanings generally
attributed to such terms under GAAP including, without limitation, applicable
statements and interpretations issued by the Financial Accounting Standards
Board and bulletins, opinions, interpretations and statements issued by the
American Institute of Certified Public Accountants or its committees.
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(c) All personal pronouns used in this Agreement, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural, and the plural shall include the singular.
(d) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provisions of this Agreement.
(e) Titles of Articles and Sections in this Agreement are for
convenience only, do not constitute part of this Agreement and neither limit nor
amplify the provisions of this Agreement, and all references in this Agreement
to Articles, Sections, Subsections, paragraphs, clauses, subclauses, Schedules
or Exhibits shall refer to the corresponding Article, Section, Subsection,
paragraph, clause or subclause of, or Schedule or Exhibit attached to, this
Agreement, unless specific reference is made to the articles, sections or other
subdivisions or divisions of , or to schedules or exhibits to, another document
or instrument.
(f) Each definition of a document in this Agreement shall include such
document as amended, modified, supplemented or restated from time to time in
accordance with the terms of this Agreement.
(g) Except where specifically restricted, reference to a party to a
Loan Document includes that party and its successors and assigns permitted
hereunder or under such Loan Document.
(h) Unless otherwise specifically stated, whenever a time is referred
to in this Agreement or in any other Loan Document, such time shall be the local
time in Atlanta, Georgia.
(i) Whenever the phrase "to the knowledge of the Borrower" or words of
similar import relating to the knowledge of the Borrower are used herein, such
phrase shall mean and refer to (i) the actual knowledge of the President or
chief financial officer or (ii) the knowledge that such officers would have
obtained if they had engaged in good faith in the diligent performance of their
duties, including the making of such reasonable specific inquiries as may be
necessary of the appropriate persons in a good faith attempt to ascertain the
accuracy of the matter to which such phrase relates.
(j) The terms accounts, chattel paper, documents, equipment,
instruments, general intangibles and inventory, as and when used (without being
capitalized) in this Agreement or the Security Documents, shall have the
meanings given those terms in the UCC.
Section 1.3 EXHIBITS AND SCHEDULES. All Exhibits and Schedules attached
hereto are by reference made a part hereof.
ARTICLE 2 - REVOLVING CREDIT FACILITY
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Section 2.1 REVOLVING CREDIT LOANS. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, each Lender agrees, severally, but not jointly, to make
Revolving Credit Loans to the Borrower from time to time from the Effective Date
to but not including the Termination Date, as requested or deemed requested by
the Borrower in accordance with the terms of SECTION 2.2, in amounts equal to
such Lender's Commitment Percentage of each such Loan requested or deemed
requested hereunder up to an aggregate amount at any one time outstanding equal
to such Lender's Commitment Percentage of the Borrowing Base; provided, however,
that the aggregate principal amount of all outstanding Revolving Credit Loans
(after giving effect to the Loans requested) shall not at any time exceed the
Borrowing Base. It is expressly understood and agreed that the Lenders may and
at present intend to use the Borrowing Base as a maximum ceiling on Revolving
Credit Loans; PROVIDED, HOWEVER, that it is agreed that should Revolving Credit
Loans exceed the ceiling so determined or any other limitation set forth in this
Agreement, such Revolving Credit Loans shall nevertheless constitute Secured
Obligations and, as such, shall be entitled to all benefits thereof and security
therefor. The principal amount of any Revolving Credit Loan which is repaid may
be reborrowed by the Borrower in accordance with the terms of this SECTION 2.1.
The Agent and each Lender are hereby authorized to record each repayment of
principal of the Revolving Credit Loans in their books and records, such books
and records constituting PRIMA FACIE evidence of the accuracy of the information
contained therein, subject to the provisions of SECTION 4.4(C).
Section 2.2 MANNER OF BORROWING REVOLVING CREDIT LOANS. Borrowings of
the Revolving Credit Loans shall be made as follows:
(a) REQUESTS FOR BORROWING. A request for a borrowing shall be made, or
shall be deemed to be made, in the following manner:
(i) with respect to requests for Revolving Credit Loans, the
Borrower shall give the Agent notice of its intention to borrow,
specifying the amount of the Advance, the proposed borrowing date and
whether the Advance shall be a Eurodollar Rate Advance or a Prime Rate
Advance, which notice shall be given in accordance with the provisions
of SECTION 4.1;
(ii) whenever a presentment or request for payment is made
against the Controlled Disbursement Account in an amount greater than
the then available balance in such account, such presentation or
request shall be deemed to be a request for a Prime Rate Advance on the
date of such notice in an amount equal to the excess of such check over
such available balance;
(iii) unless payment is otherwise made by the Borrower, the
maturity of any Secured Obligation required to be paid shall be deemed
to be a request for a Prime Rate Advance on the due date in the amount
required to pay such Secured Obligation; and
(iv) if a drawing is made under the Standby Letter of Credit
and the
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Borrower fails to reimburse NationsBank and the Lenders therefor, such
failure to reimburse shall be deemed to be a request for a Prime Rate
Advance on the date such notification is received in the amount so
unreimbursed.
Unless the Agent has elected periodic settlements pursuant to SECTION
4.8, the Agent shall promptly notify the Lenders of any notice of borrowing
given or deemed given pursuant to this SECTION 2.2(A) by 12:00 noon (Atlanta
time) on the proposed borrowing date with respect to a Prime Rate Advance or on
the second Business Day prior to the proposed borrowing date with respect to a
Eurodollar Rate Advance. The notice from the Agent to the Lenders shall set
forth the information contained in the Borrower's notice of borrowing. Not later
than 1:30 p.m. (Atlanta time) on the proposed borrowing date, each Lender will
make available to the Agent, for the account of the Borrower, at the Agent's
Office in funds immediately available to the Agent, an amount equal to such
Lender's Commitment Percentage of the Revolving Credit Loans to be made on such
borrowing date.
(b) DISBURSEMENT OF LOANS. The Borrower hereby irrevocably authorizes
the Agent to disburse the proceeds of each borrowing requested, or deemed to be
requested, pursuant to this SECTION 2.2 as follows: (i) the proceeds of each
borrowing requested under SECTION 2.2(A)(I) or (II) shall be disbursed by the
Agent in lawful money of the United States of America in immediately available
funds, (A) in the case of the initial borrowing, in accordance with the terms of
the letter from the Borrower to the Agent referred to in SECTION 5.1(A)(11), and
(B) in the case of each subsequent borrowing, by credit to the Controlled
Disbursement Account or to such other account as may be agreed upon by the
Borrower and the Agent from time to time; and (ii) the proceeds of each
borrowing requested under SECTION 2.2(A)(III) OR (IV) shall be disbursed by the
Agent by way of direct payment of the relevant principal, interest or other
Secured Obligation, as the case may be.
Section 2.3 REPAYMENT OF REVOLVING CREDIT LOANS. The Revolving Credit
Loans will be repaid as follows: (a) whether or not any Default or Event of
Default has occurred, the outstanding principal amount of all the Revolving
Credit Loans is due and payable, and shall be repaid by the Borrower in full
together with accrued and unpaid interest on the amount repaid to the date of
repayment, on the Termination Date; (b) if at any time the aggregate unpaid
principal amount of the Revolving Credit Loans then outstanding exceeds the
Borrowing Base, the Borrower shall repay the Revolving Credit Loans in an amount
sufficient to reduce the aggregate unpaid principal amount of such Loans by an
amount equal to such excess, together with accrued and unpaid interest on the
amount repaid to the date of repayment; and (c) the Borrower hereby instructs
the Agent to repay the Revolving Credit Loans outstanding on any day in an
amount equal to the amount received by the Agent on such day pursuant to SECTION
8.1(B).
Section 2.4 REVOLVING CREDIT NOTES. Each Lender's Revolving Credit
Loans and the obligation of the Borrower to repay such Loans shall also be
evidenced by a Revolving Credit Note payable to the order of such Lender.
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Section 2.5 EXTENSION OF FACILITY. Upon the request of the Borrower,
the Lenders may, in their discretion, agree to extend the Revolving Credit
Facility for a period of time beyond the then effective Termination Date. Each
such extension shall be effected by the Borrower's, the Agent's and the Lenders'
execution and delivery of a written agreement evidencing such extension.
ARTICLE 3
STANDBY LETTER OF CREDIT
Section 3.1. PARTICIPATIONS.
(a) PURCHASE OF PARTICIPATIONS. Each Lender is hereby deemed
to have irrevocably and unconditionally purchased and received, without recourse
or warranty, an undivided interest and participation in the Standby Letter of
Credit, equal to such Lender's Commitment Percentage of the face amount thereof
(including, without limitation, all obligations of the Borrower with respect
thereto, other than amounts owing to NationsBank under SECTION 4.2(B)(II), and
any security therefor or guaranty pertaining thereto).
(b) SHARING OF STANDBY LETTER OF CREDIT PAYMENTS. In the event
that NationsBank makes a payment under the Standby Letter of Credit and
NationsBank shall not have been repaid such amount pursuant to SECTION 3.3, then
NationsBank shall be deemed to have made a Non-Ratable Loan in the amount of
such payment, and notwithstanding the occurrence or continuance of a Default or
Event of Default at the time of such payment, such Non-Ratable Loan shall be
subject to the provisions of SECTION 4.8(B) and the absolute obligations of the
Lenders to pay for their respective participation interests therein.
(c) SHARING OF REIMBURSEMENT OBLIGATION PAYMENTS. Whenever
NationsBank receives a payment from or on behalf of the Borrower on account of a
reimbursement obligation on the Standby Letter of Credit as to which the Agent
has previously received for the account of NationsBank payment from a Lender
pursuant to this SECTION 3.1, NationsBank shall promptly pay to the Agent, for
the benefit of such Lender, such Lender's Commitment Percentage of the amount of
such payment from the Borrower in Dollars. Each such payment shall be made by
NationsBank to the Agent on the Business Day on which NationsBank receives
immediately available funds pursuant to the immediately preceding sentence, if
received prior to 11:00 a.m. (Atlanta time) on such Business Day, and otherwise
on the next succeeding Business Day.
(d) DOCUMENTATION. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of the Standby Letter of Credit and the
application for the Standby Letter of Credit, and such other documentation as
may reasonably be requested by such Lender.
(e) OBLIGATIONS IRREVOCABLE. The obligations of each Lender to
make payments to the Agent with respect to the Standby Letter of Credit and
their participations therein pursuant to the provisions of SECTION 4.8(B) hereof
or otherwise and the obligations of the Borrower to
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make payments to NationsBank or to the Agent, for the account of Lenders, shall
be irrevocable, shall not be subject to any qualification or exception
whatsoever and shall be made in accordance with the terms and conditions of this
Agreement, including, without limitation, any of the following circumstances:
(i) Any lack of validity or enforceability of this
Agreement or any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense or
other right which the Borrower may have at any time against the
beneficiary named in the Standby Letter of Credit or any transferee of
the Standby Letter of Credit (or any Person for whom any such
transferee may be acting), any Lender, NationsBank or any other Person,
whether in connection with this Agreement, the Standby Letter of
Credit, the transactions contemplated herein or any unrelated
transactions (including any underlying transactions between the
Borrower or any other Person and the beneficiary named in the Standby
Letter of Credit);
(iii) Any draft, certificate or any other document
presented under the Standby Letter of Credit upon which payment has
been made in good faith and according to its terms proving to be
forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect;
(iv) The surrender or impairment of any Collateral or
any other security for the Secured Obligations or the performance or
observance of any of the terms of any of the Loan Documents; or
(v) The occurrence of any Default or Event of
Default.
Section 3.2. DUTIES OF NATIONSBANK. Any action taken or omitted to be
taken by NationsBank under or in connection with the Standby Letter of Credit,
if taken or omitted in the absence of gross negligence or willful misconduct,
shall not result in any liability of NationsBank to any Lender or relieve any
Lender of its obligations hereunder to NationsBank. In determining whether to
pay under the Standby Letter of Credit, NationsBank shall have no obligation to
any Lender other than to confirm that any documents required to be delivered
under the Standby Letter of Credit in connection with such drawing have been
presented and appear on their face to comply with the requirements of the
Standby Letter of Credit.
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Section 3.3. PAYMENT OF REIMBURSEMENT OBLIGATIONS.
(a) PAYMENT TO ISSUER. Notwithstanding any provisions to the
contrary in any reimbursement agreement, the Borrower agrees to reimburse
NationsBank for any drawings (whether partial or full) under the Standby Letter
of Credit and to pay to NationsBank the amount of all other reimbursement
obligations and other amounts payable to NationsBank under or in connection with
the Standby Letter of Credit immediately when due, irrespective of any claim,
set-off, defense or other right which the Borrower may have at any time against
NationsBank or any other Person.
(b) RECOVERY OR AVOIDANCE OF PAYMENTS. In the event any
payment by or on behalf of the Borrower with respect to the Standby Letter of
Credit (or any reimbursement obligation relating thereto) received by
NationsBank, or by the Agent and distributed by the Agent to the Lenders on
account of their respective participations therein, is thereafter set aside,
avoided or recovered from NationsBank or the Agent in connection with any
receivership, liquidation or bankruptcy proceeding, the Lenders shall, upon
demand by the Agent, pay to the Agent, for the account of the Agent or
NationsBank, their respective Commitment Percentages of such amount set aside,
avoided or recovered together with interest at the rate required to be paid by
the Agent upon the amount required to be repaid by it.
Section 3.4. INDEMNIFICATION, EXONERATION.
(a) INDEMNIFICATION. In addition to amounts payable as
elsewhere provided in this ARTICLE 3, the Borrower agrees to protect, indemnify,
pay and save the Lenders and the Agent harmless from and against any and all
claims, demands, liabilities, damages, losses, costs, charges and expenses
(including reasonable attorneys' fees) which any Lender or the Agent may incur
or be subject to as a consequence, directly or indirectly, of
(i) the issuance of the Standby Letter of Credit,
other than as a result of its gross negligence or willful misconduct,
as determined by a court of competent jurisdiction, or
(ii) the failure of NationsBank to honor a drawing
under the Standby Letter of Credit as a result of any act or omission,
whether rightful or wrongful, of any present or future DE JURE or DE
FACTO governmental authority (all such acts or omissions being
hereinafter referred to collectively as "Government Acts").
(b) ASSUMPTION OF RISK BY THE BORROWER. As among the Borrower,
the Lenders and the Agent, the Borrower assume all risks of the acts and
omissions of, or misuse of the Standby Letter of Credit by, the beneficiary of
the Standby Letter of Credit. In furtherance and not in limitation of the
foregoing, subject to the provisions of the application for the issuance of the
Standby Letter of Credit, the Lenders and the Agent shall not be responsible
for:
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(i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any Person in
connection with the application for and issuance of and presentation of
drafts with respect to the Standby Letter of Credit, even if it should
prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged;
(ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign the
Standby Letter of Credit or 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) the failure of the beneficiary of the Standby
Letter of Credit to comply duly with conditions required in order to
draw upon the Standby Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under the
Standby Letter of Credit or of the proceeds thereof;
(vii) the misapplication by the beneficiary of the
Standby Letter of Credit of the proceeds of any drawing under the
Standby Letter of Credit; or
(viii) any consequences arising from causes beyond
the control of the Lenders or the Agent, including, without limitation,
any Government Acts.
None of the foregoing shall affect, impair or prevent the vesting of
any of the Agent's rights or powers under this SECTION 3.4.
(c) EXONERATION. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken or
omitted by the Agent, NationsBank or any Lender under or in connection with the
Standby Letter of Credit or any related certificates, if taken or omitted in
good faith, shall not result in any liability of any Lender or the Agent to the
Borrower or relieve the Borrower of any of its obligations hereunder to any such
Person.
Section 3.5. SUPPORTING STANDBY LETTER OF CREDIT; CASH COLLATERAL.
(a) If the Standby Letter of Credit is outstanding on the
Termination Date the Borrower shall, promptly on demand by the Agent, deposit
with the Agent, for the ratable
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benefit of the Lenders, as the Agent shall specify, either a Supporting Standby
Letter of Credit or Cash Collateral, as set forth in SECTION 3.5(B).
(b) Any Supporting Standby Letter of Credit or Cash Collateral
required pursuant to SECTION 3.5(A) shall, at the Agent's option, take the form
of either (i) a standby letter of credit (a "Supporting Standby Letter of
Credit") in form and substance satisfactory to the Agent, issued by an issuer
reasonably satisfactory to the Agent in an amount equal to 105% of the greatest
amount for which the Standby Letter of Credit may be drawn, under which
Supporting Standby Letter of Credit the Agent is entitled to draw amounts
necessary to reimburse the Agent and the Lenders for payments made by the Agent
and the Lenders under the Standby Letter of Credit or under any reimbursement or
guaranty agreement with respect thereto, or (ii) Cash Collateral in 105% of the
amount necessary to reimburse the Agent and the Lenders for payments made by the
Agent and the Lenders under the Standby Letter of Credit or under any
reimbursement or guaranty agreement with respect thereto. Such Supporting
Standby Letter of Credit or Cash Collateral shall be held by the Agent, for the
benefit of the Lenders, as security for, and to provide for the payment of, the
Borrower's reimbursement obligations with respect to the Standby Letter of
Credit. In addition, the Agent may at any time after the Termination Date apply
any or all of such Cash Collateral to the payment of any or all of the Secured
Obligations then due and payable. At the Borrower's request, but subject to the
Agent's reasonable approval, the Agent shall invest any Cash Collateral
consisting of cash or any proceeds of Cash Collateral consisting of cash in Cash
Equivalents, and any commissions, expenses and penalties incurred by the Agent
in connection with any investment and redemption of such Cash Collateral shall
be Secured Obligations hereunder secured by the Collateral, shall bear interest
at the rates provided herein for the Loans and shall be charged to the
Borrower's Loan Accounts, or, at the Agent's option, shall be paid out of the
proceeds of any earnings received by the Agent from the investment of such Cash
Collateral as provided herein or out of such cash itself. The Agent makes no
representation or warranty as to, and shall not be responsible for, the rate of
return, if any, earned on any Cash Collateral. Any earnings on Cash Collateral
shall be held as additional Cash Collateral on the terms set forth in this
SECTION 3.5. As used herein, "CASH EQUIVALENTS" means (a) marketable direct
obligations issued or unconditionally guaranteed by the United States Government
or issued by any agency thereof and backed by the full faith and credit of the
United States, in each case maturing within one year from the date of
acquisition thereof; (b) commercial paper maturing no more than one year from
the date issued and, at the time of acquisition thereof, having a rating of at
least A-1 from Standard & Poor's Corporation or at least P-1 from Moody's
Investors Service, Inc.; (c) certificates of deposit or bankers' acceptances
issued in Dollar denominations and maturing within one year from the date of
issuance thereof issued by any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $100,000,000 and, unless issued by
the Agent or a Lender, not subject to set-off or offset rights in favor of such
bank arising from any banking relationship with such bank; and (d) repurchase
agreements in form and substance and for amounts satisfactory to the Agent.
ARTICLE 4 - GENERAL LOAN PROVISIONS
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Section 4.1 INTEREST.
(a) CHOICE OF INTEREST RATE. Each Advance shall, at the option
of the Borrower, be made as a Prime Rate Advance or a Eurodollar Rate Advance.
Eurodollar Rate Advances shall in all cases be subject to SECTION 4.1(C) hereof.
Any notice given to the Agent in connection with a requested Advance hereunder
shall be given prior to 12:00 noon (Atlanta time) in order for such Business Day
to count toward the minimum number of Business Days required. If the Borrower
fails to give the Agent timely notice of its selection of a Eurodollar Rate
Basis, or if for any reason a determination of a Eurodollar Rate Basis for any
Advance is not timely concluded, the Prime Rate Basis shall apply to such
Advance.
(b) PRIME RATE ADVANCES.
(i) INITIAL ADVANCES. The Borrower shall give the
Agent, in the case of Prime Rate Advances, irrevocable notice of its
election by telephone or telecopy confirmed immediately in writing;
provided, however, that the failure by the Borrower to confirm any
notice by telephone or telecopy with a written notice shall not
invalidate any notice so given.
(ii) REPAYMENTS AND REBORROWINGS. The Borrower may
repay a Prime Rate Advance at any time and (A) reborrow all or a
portion of the principal amount thereof as one or more Prime Rate
Advances or Eurodollar Rate Advances, or (B) not reborrow all or any
portion of such Prime Rate Advance.
(iii) PREPAYMENT. The principal amount of any Prime
Rate Advance may be prepaid in full or in part at any time without
penalty.
(c) EURODOLLAR RATE ADVANCES.
(i) INITIAL ADVANCES. The Borrower shall give the
Agent, in the case of Eurodollar Rate Advances, at least two (2)
Business Days irrevocable notice of its election by telephone or
telecopy confirmed immediately in writing; provided, however, that the
failure by the Borrower to confirm any notice by telephone or telecopy
with a written notice shall not invalidate any notice so given. The
Agent, whose determination shall be conclusive, shall determine the
available Eurodollar Rate Basis and shall notify the Borrower of such
Eurodollar Rate Basis.
(ii) REPAYMENTS AND REBORROWINGS. At least two (2)
Business Days prior to the maturity date for a Eurodollar Rate Advance,
the Borrower shall give the Agent notice specifying whether all or a
portion of any Eurodollar Rate Advance outstanding on such maturity
date (A) is to be repaid and then reborrowed in whole or in part as a
Eurodollar Rate Advance, (B) is to be repaid and then reborrowed in
whole or in part as a Prime Rate Advance, or (C) is to be repaid and
not reborrowed. The Borrower's failure to give a proper notice shall be
deemed a request to reborrow the
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entire maturing amount as a Prime Rate Advance. Upon such maturity date
such Eurodollar Rate Advance will, subject to the provisions hereof, be
so repaid and, as applicable, reborrowed. Each repayment shall be in an
amount not less than $1,000,000.
(iii) LIMITATION ON EURODOLLAR RATE ADVANCES. Each
Eurodollar Rate Advance shall be in an amount of at least $1,000,000 or
an integral multiple thereof. Notwithstanding anything to the contrary
contained herein, no more than ten (10) Eurodollar Rate Advances shall
be outstanding under this Agreement at any one time.
(iv) PREPAYMENT. Eurodollar Rate Advances may be
prepaid prior to the applicable maturity date, upon four (4) Business
Days prior notice to the Agent, provided that the Borrower shall
reimburse the Agent and the Lenders, on the earlier of demand or the
Termination Date, an amount calculated in accordance with SECTION 4.9.
The Agent shall promptly notify the Lenders of any such notice of
prepayment received by the Agent. Any notice of prepayment of a
Eurodollar Rate Advance shall be irrevocable. Each prepayment of any of
the Eurodollar Rate Advances shall be in an amount not less than
$1,000,000.
(v) EURODOLLAR RATE BASIS DETERMINED INADEQUATE OR
UNFAIR. Notwithstanding anything contained herein which may be
construed to the contrary, if with respect to any proposed Eurodollar
Rate Advance for any Interest Period, the Agent determines that
deposits in Dollars (in the applicable amount) are not being offered to
the Agent in the relevant market for such Interest Period on a basis
sufficient to permit a fair establishment of the Eurodollar Rate, the
Agent shall forthwith give notice thereof to the Borrower, whereupon
until the Agent notifies the Borrower that the circumstances giving
rise to such situation no longer exist, the obligations of the Agent
and the Lenders to make such Eurodollar Rate Advances shall be
suspended.
(vi) ILLEGALITY. If any applicable law, rule or
regulation, or any change therein, or any interpretation or change in
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by the Agent or any Lender with
any request or directive (whether or not having the force of law) of
any such authority, central bank or comparable agency, shall make it
unlawful or impossible for the Agent or any Lender to make, maintain or
fund its Eurodollar Rate Advances, the Agent shall so notify the
Borrower. Upon receipt of such notice, notwithstanding anything
contained in SECTION 4.1 hereof, the Borrower shall repay in full the
then outstanding principal amount of each affected Eurodollar Rate
Advance, together with accrued interest thereon either (a) on the last
day of the then current Interest Period applicable to such Eurodollar
Rate Advance if the Agent and the Lenders may lawfully continue to
maintain and fund such Eurodollar Rate Advance to such day or (b)
immediately if the Agent and the Lenders may not lawfully continue to
fund and maintain such Eurodollar Rate Advance, whereupon the Borrower
shall borrow a Prime Rate Advance from the Lenders, and the Lenders
shall make such Advance, in the amount of the Eurodollar Rate Advances
to be
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repaid.
(vii) EFFECT ON OTHER ADVANCES. If notice has been
given to Borrower suspending the obligation of the Lenders to make any
Eurodollar Rate Advance, or requiring Eurodollar Rate Advances to be
repaid or prepaid, then, unless and until the Agent notifies the
Borrower that the circumstances giving rise to such repayment no longer
apply, all Advances which would otherwise be made as Eurodollar Rate
Advances shall, at the option of the Borrower, be made instead as Prime
Rate Advances, or, if available, as another type of fixed rate advance.
(d) GENERAL INTEREST PROVISIONS.
(i) The Borrower shall pay interest on the unpaid
principal amount of each Loan for each day from the day such Loan is
made until such Loan is due (whether at maturity, by reason of
acceleration or otherwise) at a rate per annum equal to the Eurodollar
Rate Basis or the Prime Rate Basis, as elected by the Borrower in
accordance with the provisions set forth herein, payable monthly in
arrears on the first day of each calendar month commencing April 1,
1998.
(ii) From and after the occurrence of an Event of
Default, the unpaid principal amount of each Secured Obligation shall,
at the election of the Agent (given in its discretion or at the
direction of the Required Lenders), bear interest until paid in full
(or, if earlier, until such Event of Default is cured or waived in
writing by the Lenders) at a rate per annum equal to the Default Margin
plus the Prime Rate Basis, payable on demand. The interest rate
provided for in this SECTION 4.1(D)(II) shall to the extent permitted
by applicable law apply to and accrue on the amount of any judgment
entered with respect to any Secured Obligation and shall continue to
accrue at such rate during any proceeding described in SECTION 12.1(G)
or (H).
(iii) The interest rates provided for in this SECTION
4.1 shall be computed on the basis of a year of 360 days and the actual
number of days elapsed.
(iv) It is not intended by the Agent or the Lenders,
and nothing contained in this Agreement or any Note shall be deemed, to
establish or require the payment of a rate of interest in excess of the
maximum rate permitted by applicable law (the "Maximum Rate"). If, in
any month, the Effective Interest Rate, absent such limitation, would
have exceeded the Maximum Rate, then the Effective Interest Rate for
that month shall be the Maximum Rate, and if, in future months, the
Effective Interest Rate would otherwise be less than the Maximum Rate,
then the Effective Interest Rate shall remain at the Maximum Rate until
such time as the amount of interest paid hereunder equals the amount of
interest which would have been paid if the same had not been limited by
the Maximum Rate. In this connection, in the event that, upon payment
in full of the Secured Obligations, the total amount of interest paid
or accrued under the terms of this Agreement is less than the total
amount of interest which would have been
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paid or accrued if the Effective Interest Rate had at all times been in
effect, then the Borrower shall, to the extent permitted by applicable
law, pay to the Agent, for the account of the Lenders, an amount equal
to the difference between (i) the lesser of (A) the amount of interest
which would have been charged if the Maximum Rate had, at all times,
been in effect and (B) the amount of interest which would have accrued
had the Effective Interest Rate, at all times, been in effect, and (ii)
the amount of interest actually paid or accrued under this Agreement.
In the event the Agent or the Lenders receive, collect or apply as
interest any sum in excess of the Maximum Rate, such excess amount
shall be applied to the reduction of the principal balance of the
applicable Secured Obligation, and, if no such principal is then
outstanding, such excess or part thereof remaining shall be paid to the
Borrower.
Section 4.2 FEES.
(a) AGENT'S FEE. For administration and other services performed by the
Agent in connection with its continuing administration of this Agreement, the
Borrower shall pay to the Agent, for its own account, and not for the account of
the Lenders, an annual fee as set forth in the letter dated the Agreement Date
between the Agent and the Borrower.
(b) STANDBY LETTER OF CREDIT FEES.
(i) The Borrower agrees to pay to the Agent, for the ratable
benefit of the Lenders, a fee equal to 1% per annum based on the amount
of the Standby Letter of Credit. Such fee shall be payable to the
Agent, for the ratable benefit of the Lenders, in accordance with their
respective Commitment Percentages on the Effective Date (it being
acknowledged that the Borrower has previously paid such initial fee to
NationsBank) and thereafter on September 1 of each year, and shall be
calculated based on a year of 360 days and the actual number of days
elapsed, PROVIDED that NationsBank shall be entitled to the full amount
of such fee for all periods prior to the Effective Date.
(ii) The Borrower agrees to pay to the Agent, for the account
of NationsBank, the standard fees and charges of NationsBank for
issuing, administering, amending, renewing, paying and canceling the
Standby Letter of Credit, as and when assessed.
(c) COMMITMENT FEE. In connection with and as consideration for the
Lenders' commitments hereunder, subject to the terms hereof, to lend to the
Borrower under the Revolving Credit Facility, the Borrower shall pay a fee to
the Agent, for the ratable benefit of the Lenders based on their respective
Commitment Percentages, from the Effective Date until the Termination Date, in
an amount equal to 3/16% per annum of the average daily unused portion of the
Revolving Credit Facility, payable monthly in arrears on the first day of each
month and on the date of any permanent reduction in the Revolving Credit
Facility.
(d) CLOSING FEE. On the Effective Date, the Borrower shall pay to the
Agent, for the ratable benefit of the Lenders based on their respective
Commitment Percentages, a closing fee
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in the amount of $137,500 in connection with the establishment of the Revolving
Credit Facility and in consideration of the making of Loans under this Agreement
and in order to compensate the Lenders for the costs associated with
structuring, processing, approving and closing the Revolving Credit Facility and
the Loans, but excluding expenses for which the Borrower has agreed elsewhere in
this Agreement to reimburse the Lenders.
(e) COLLECTION FEE. During the period from and including the Effective
Date to and including the Termination Date, the Borrower will pay to the Agent
for its own account on the first day of each month an amount of interest
computed at the Effective Interest Rate applicable to Prime Rate Advances on
each remittance received by the Agent against Receivables (as contemplated by
SECTION 8.1 hereof) during the preceding month, from the close of business on
the date of receipt of each such remittance until the close of business on the
first Business Day following the receipt of the remittance, as compensation for
delays in the collection and clearance of checks and other remittances.
(f) GENERAL. All fees shall be fully earned by the Agent and the
Lenders when due and payable and, except as otherwise set forth herein, shall
not be subject to refund or rebate. All fees are for compensation for services
and are not, and shall not be deemed to be, interest or a charge for the use of
money.
Section 4.3 MANNER OF PAYMENT. (a) Each payment (including prepayments)
by the Borrower on account of the principal of or interest on the Loans or of
any fee or other amounts payable to the Agent and the Lenders under this
Agreement or the Notes shall be made not later than 1:30 p.m. (Atlanta time) on
the date specified for payment under this Agreement (or if such day is not a
Business Day, the next succeeding Business Day) to the Agent at the Agent's
Office, in Dollars, in immediately available funds and shall be made without any
setoff, counterclaim or deduction whatsoever.
(b) The Borrower hereby irrevocably authorizes each Lender and each
Affiliate of each Lender to charge any account of the Borrower maintained with
such Lender or such Affiliate with such amounts as may be necessary from time to
time to pay any Secured Obligations which are not paid when due.
Section 4.4 LOAN ACCOUNTS; STATEMENTS OF ACCOUNT.
(a) Each Lender shall open and maintain on its books a loan account in
the Borrower's name (each, a "Loan Account" and collectively, the "Loan
Accounts"). Each such Loan Account shall show as debits thereto each Loan made
under this Agreement by such Lender to the Borrower and as credits thereto all
payments received by such Lender and applied to principal of such Loan, so that
the balance of the loan account at all times reflects the principal amount due
such Lender from the Borrower.
(b) The Agent shall maintain on its books a control account for the
Borrower in which shall be recorded (i) the amount of each disbursement made
hereunder, (ii) the amount of any
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principal or interest due or to become due from the Borrower hereunder, and
(iii) the amount of any sum received by the Agent hereunder from the Borrower
and each Lender's ratable share therein.
(c) The entries made in the accounts pursuant to SUBSECTIONS (A) and
(B) shall be PRIMA FACIE evidence, in the absence of manifest error, of the
existence and amounts of the obligations of the Borrower therein recorded and in
case of discrepancy between such accounts, in the absence of manifest error, the
accounts maintained pursuant to SUBSECTION (B) shall be controlling.
(d) The Agent will account separately to the Borrower within 30 days
after the end of each calendar month with a statement of Loans, charges and
payments made to and by the Borrower pursuant to this Agreement, and such
account rendered by the Agent shall be deemed final, binding and conclusive,
save for manifest error, unless the Agent is notified by the Borrower in writing
to the contrary within 60 days after the date the account to the Borrower was so
rendered. Such notice by the Borrower shall be deemed an objection to only those
items specifically objected to therein. Failure of the Agent to render such
account shall in no way affect the rights of the Agent or of the Lenders
hereunder.
Section 4.5 TERMINATION OF AGREEMENT. On the Termination Date the
Borrower shall pay to the Agent, for the account of the Lenders, in same day
funds, an amount equal to the aggregate amount of all Loans outstanding on such
date, together with accrued interest thereon, all fees payable pursuant to
SECTION 4.2 accrued from the date last paid through the effective date of
termination, any amounts payable to the Agent or any Lender pursuant to the
other provisions of this Agreement, including, without limitation, SECTIONS
12.2, 15.11 and 15.12, any and all other Secured Obligations then outstanding,
and an amount equal to the Standby Letter of Credit Reserve to be held by the
Agent as cash collateral security for the payment of and to be applied to the
payment of any amounts which may thereafter become due with respect to the
Standby Letter of Credit, and provide the Agent and the Lenders with an
indemnification agreement in form and substance satisfactory to the Agent and
the Lenders with respect to returned and dishonored items and such other matters
as the Agent and the Lenders shall require. Upon 60 days prior written notice to
the Agent, the Borrower may terminate this Agreement prior to the Termination
Date in effect at such time, upon payment of an early termination fee of (a)
$150,000 if such termination occurs on or prior to the first anniversary of the
Agreement Date, (b) $100,000 if such termination occurs after the first
anniversary of the Agreement Date but on or prior to the second anniversary of
the Agreement Date, and (c) $50,000 if such termination occurs after the second
anniversary of the Agreement Date but on or prior to the third anniversary of
the Agreement Date; provided however, such early termination fee shall only be
payable if the Loans are repaid from proceeds borrowed from another financial
institution, excluding proceeds from debt or equity placement.
Section 4.6 INCREASED COSTS AND REDUCED RETURNS. The Borrower agrees
that if any law now or hereafter in effect and whether or not presently
applicable to the Agent or any Lender or any request, guideline or directive of
any Governmental Authority (whether or not
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having the force of law and whether or not failure to comply therewith would be
unlawful) or the interpretation or administration thereof by any Governmental
Authority, shall either (a)(i) impose, affect, modify or deem applicable any
reserve, special deposit, capital maintenance or similar requirement against any
Loan, (ii) impose on the Agent or any Lender any other condition regarding any
Loan, this Agreement, any Note or the facilities provided hereunder, or (iii)
result in any requirement regarding capital adequacy (including any risk-based
capital guidelines) affecting the Agent or any Lender being imposed or modified
or deemed applicable to the Agent or any Lender or (b) subject the Agent or any
Lender to any taxes on the recording, registration, notarization or other
formalization of the Loans or any Note, and the result of any event referred to
in CLAUSE (A) or (B) above shall be to increase the cost to the Agent or any
Lender of making, funding or maintaining any Loan or to reduce the amount of any
sum receivable by the Agent or any Lender or the Agent's or any Lender's rate of
return on capital with respect to any Loan to a level below that which the Agent
or any Lender could have achieved but for such imposition, modification or
deemed applicability (taking into consideration the Agent's or such Lender's
policies with respect to capital adequacy) by an amount deemed by the Agent or
such Lender (in the exercise of its discretion) to be material, then, upon
demand by the Agent or such Lender, the Borrower shall immediately pay to the
Agent or such Lender additional amounts which shall be sufficient to compensate
the Agent or any such Lender for such increased cost, tax or reduced rate of
return. A certificate of the Agent or any such Lender to the Borrower claiming
compensation under this SECTION 4.6 shall be final, conclusive and binding on
all parties for all purposes in the absence of manifest error. Such certificate
shall set forth the nature of the occurrence giving rise to such compensation,
the additional amount or amounts to be paid to it hereunder and the method by
which such amounts were determined. In determining such amount, the Agent or
such Lender may use any reasonable averaging and attribution methods.
Section 4.7. MAKING OF LOANS.
(a) NATURE OF OBLIGATIONS OF LENDERS TO MAKE LOANS. The
obligations of the Lenders under this Agreement to make the Loans are
several and are not joint or joint and several.
(b) ASSUMPTION BY AGENT. Subject to the provisions of SECTION
4.8 and notwithstanding the occurrence or continuance of a Default or
Event of Default or other failure of any condition to the making of
Revolving Credit Loans hereunder subsequent to the Revolving Credit
Loans to be made on the Effective Date, unless the Agent shall have
received notice from the Required Lenders in accordance with the
provisions of SECTION 4.7(C) prior to a proposed borrowing date that
the Lenders will not make available to the Agent their ratable portion
of the amount to be borrowed on such date, the Agent may assume that
the Lenders will make such portion available to the Agent in accordance
with SECTION 2.2(A), and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding
amount. If and to the extent any Lender shall not make such ratable
portion available to the Agent, such Lender and the Borrower severally
agree to repay to the Agent forthwith on demand such
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corresponding amount, together with interest thereon for each day from
the date such amount is made available to the Borrower until the date
such amount is repaid to the Agent at the Effective Interest Rate or,
if lower, subject to SECTION 4.1(D)(IV), the Maximum Rate. If such
Lender shall repay to the Agent such corresponding amount, the amount
so repaid shall constitute such Lender's Commitment Percentage of the
Loan made on such borrowing date for purposes of this Agreement. The
failure of any Lender to make its Commitment Percentage of any Loan
available shall not (without regard to whether the Borrower shall have
returned the amount thereof to the Agent in accordance with this
SECTION 4.7) relieve it or any other Lender of its obligation, if any,
hereunder to make its Commitment Percentage of such Loan available on
such borrowing date, but no Lender shall be responsible for the failure
of any other Lender to make its Commitment Percentage of such Loan
available on the borrowing date.
(c) DELEGATION OF AUTHORITY TO AGENT. Without limiting the
generality of SECTION 14.1, each Lender expressly authorizes the Agent
to determine on behalf of such Lender (i) any reduction or increase of
advance rates applicable to the Borrowing Base, so long as such advance
rates do not at any time exceed the rates set forth in the Borrowing
Base definition, (ii) the creation or elimination of any reserves
(other than the Standby Letter of Credit Reserve) against the Revolving
Credit Facility and the Borrowing Base and (iii) whether or not
Inventory or Receivables shall be deemed to constitute Eligible
Inventory or Eligible Receivables. Such authorization may be withdrawn
by the Required Lenders by giving the Agent written notice of such
withdrawal signed by the Required Lenders; PROVIDED, HOWEVER, that
unless otherwise agreed by the Agent such withdrawal of authorization
shall not become effective until the thirtieth Business Day after
receipt of such notice by the Agent. Thereafter, the Required Lenders
shall jointly instruct the Agent in writing regarding such matters with
such frequency as the Required Lenders shall jointly determine. Unless
and until the Agent shall have received written notice from the
Required Lenders as to the existence of a Default, an Event of Default
or some other circumstance which would relieve the Lenders of their
respective obligations to make Loans hereunder, which notice shall be
in writing and shall be signed by the Required Lenders and shall
expressly state that the Lenders do not intend to make available to the
Agent their ratable share of Loans made after the effective date of
such notice, the Agent shall be entitled to continue to make the
assumptions described in SECTION 4.7(B). The notice described in the
preceding sentence shall become effective on the third Business Day
after receipt of such notice by the Agent unless otherwise agreed by
the Agent. The Agent shall not be required to make any Loan as to which
it shall have received notice by a Lender of such Lender's intention
not to make its ratable portion of such Loan available to the Agent.
Any withdrawal of authorization under this SECTION 4.7(C) shall not
affect the validity of any Loans made prior to the effectiveness
thereof.
(d) OVERADVANCES. Notwithstanding anything to the contrary
contained elsewhere in this SECTION 4.7 or this Agreement or the other
Loan Documents, and whether or not a Default or Event of Default exists
at the time, unless otherwise notified
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by the Required Lenders in accordance with SECTION 4.7(C), the Agent
may in its discretion require all Lenders to honor requests or deemed
requests by the Borrower for Revolving Credit Loans at a time that an
Overadvance exists or which would result in an Overadvance and each
Lender shall be obligated to continue to make its Proportionate Share
of Revolving Credit Loans, up to a maximum amount outstanding equal to
its Commitment to make Revolving Credit Loans, so long as such
Overadvance is not known by the Agent to exceed $2,000,000 and so long
as such Overadvance is not outstanding for more than 30 consecutive
days. "Overadvance" shall mean, as of any date of determination, the
amount, if any, by which the outstanding principal balance of Revolving
Credit Loans exceeds the sum determined from CLAUSE (B) of the
definition of the Borrowing Base.
(e) REPLACEMENT OF CERTAIN LENDERS. If a Lender (the "Affected
Lender") shall have failed to fund its Proportionate Share of any Loan
requested (or deemed requested) by the Borrower which such Lender is
obligated to fund under the terms of this Agreement and which failure
has not been cured, then, in any such case and in addition to any other
rights and remedies that the Agent, any other Lender or the Borrower
may have against such Affected Lender, the Agent may make written
demand on such Affected Lender (with a copy to the Borrower) for the
Affected Lender to assign, and such Affected Lender shall assign
pursuant to one or more duly executed Assignment and Acceptances within
5 Business Days after the date of such demand, to one or more Lenders
willing to accept such assignment or assignments, or to one or more
Eligible Assignees designated by the Agent, all of such Affected
Lender's rights and obligations under this Agreement (including its
Commitments and all Loans owing to it) in accordance with ARTICLE 13.
The Agent is hereby irrevocably authorized to execute one or more
Assignment and Acceptances as attorney-in-fact for any Affected Lender
which fails or refuses to execute and deliver the same within 5
Business Days after the date of such demand. The Affected Lender shall
be entitled to receive, in cash and concurrently with the execution and
delivery of each such Assignment and Acceptance, all amounts owed to
the Affected Lender hereunder or under any other Loan Document,
including the aggregate outstanding principal amount of the Loans owed
to such Lender, together with accrued interest thereon through the date
of such assignment. Upon the replacement of any Affected Lender
pursuant to this SECTION 4.7(E), such Affected Lender shall cease to
have any participation in, entitlement to, or other right to share in
the Security Interest or any other Lien of the Agent in any Collateral
and such Affected Lender shall have no further liability to the Agent,
any Lender or any other Person under any of the Loan Documents (except
as provided in SECTION 14.7 and elsewhere in this Agreement as to
events or transactions which occur prior to the replacement of such
Affected Lender).
Section 4.8. SETTLEMENT AMONG LENDERS.
(a) REVOLVING CREDIT LOANS. It is agreed that each Lender's
Net Outstandings are intended by the Lenders to be equal at all times
to such Lender's Commitment Percentage of the aggregate principal
amount of all Revolving Credit Loans outstanding.
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Notwithstanding such agreement, the several and not joint obligation of
each Lender to fund Revolving Credit Loans made in accordance with the
terms of this Agreement ratably in accordance with such Lender's
Commitment Percentage and each Lender's right to receive its ratable
share of principal payments on Revolving Credit Loans in accordance
with its Commitment Percentage, the Lenders agree that in order to
facilitate the administration of this Agreement and the Loan Documents
that settlement among them may take place on a periodic basis in
accordance with the provisions of this SECTION 4.8.
(b) SETTLEMENT PROCEDURES AS TO REVOLVING CREDIT LOANS. To the
extent and in the manner hereinafter provided in this SECTION 4.8,
settlement among the Lenders as to Revolving Credit Loans may occur
periodically on Settlement Dates determined from time to time by the
Agent, which may occur before or after the occurrence or during the
continuance of a Default or Event of Default and whether or not all of
the conditions set forth in SECTION 5.2 have been met. On each
Settlement Date payments shall be made by or to NationsBank and the
other Lenders in the manner provided in this SECTION 4.8 in accordance
with the Settlement Report delivered by the Agent pursuant to the
provisions of this SECTION 4.8 in respect of such Settlement Date so
that as of each Settlement Date, and after giving effect to the
transactions to take place on such Settlement Date, each Lender's Net
Outstandings shall equal such Lender's Commitment Percentage of the
Revolving Credit Loans outstanding.
(i) SELECTION OF SETTLEMENT DATES. If the Agent
elects, in its discretion, but subject to the consent of
NationsBank, to settle accounts among the Lenders with respect
to principal amounts of Revolving Credit Loans less frequently
than each Business Day, then the Agent shall designate
periodic Settlement Dates which may occur on any Business Day
after the Effective Date; PROVIDED, HOWEVER, that the Agent
shall designate as a Settlement Date any Business Day which is
an Interest Payment Date; and PROVIDED FURTHER, that a
Settlement Date shall occur at least once during each
seven-day period. The Agent shall designate a Settlement Date
by delivering to each Lender a Settlement Report not later
than 12:00 noon (Atlanta time) on the proposed Settlement
Date, which Settlement Report will be in the form of EXHIBIT D
hereto and shall be with respect to the period beginning on
the next preceding Settlement Date and ending on such
designated Settlement Date.
(ii) NON-RATABLE LOANS AND PAYMENTS. Between
Settlement Dates, the Agent shall request and NationsBank may
(but shall not be obligated to) advance to the Borrower out of
NationsBank's own funds, the entire principal amount of any
Revolving Credit Loan requested or deemed requested pursuant
to SECTION 2.2(A) (any such Revolving Credit Loan being
referred to as a "Non-Ratable Loan"). The making of each
Non-Ratable Loan by NationsBank shall be deemed to be a
purchase by NationsBank of a 100% participation in each other
Lender's Commitment Percentage of the amount of such
Non-Ratable Loan. All payments
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of principal, interest and any other amount with respect to
such Non-Ratable Loan shall be payable to and received by the
Agent for the account of NationsBank. Upon demand by
NationsBank, with notice thereof to the Agent, each other
Lender shall pay to NationsBank, as the repurchase of such
participation, an amount equal to 100% of such Lender's
Commitment Percentage of the principal amount of such
Non-Ratable Loan. Any payments received by the Agent between
Settlement Dates which in accordance with the terms of this
Agreement are to be applied to the reduction of the
outstanding principal balance of Revolving Credit Loans, shall
be paid over to and retained by NationsBank for such
application, and such payment to and retention by NationsBank
shall be deemed, to the extent of each other Lender's
Commitment Percentage of such payment, to be a purchase by
each such other Lender of a participation in the Revolving
Credit Loans (including the repurchase of participations in
Non-Ratable Loans) held by NationsBank. Upon demand by another
Lender, with notice thereof to the Agent, NationsBank shall
pay to the Agent, for the account of such other Lender, as a
repurchase of such participation, an amount equal to such
other Lender's Commitment Percentage of any such amounts
(after application thereof to the repurchase of any
participations of NationsBank in such other Lender's
Commitment Percentage of any Non-Ratable Loans) paid only to
NationsBank by the Agent.
(iii) NET DECREASE IN OUTSTANDINGS. If on any
Settlement Date the increase, if any, in the dollar amount of
any Lender's Net Outstandings which is required to comply with
the first sentence of SECTION 4.8(A) is less than such
Lender's Commitment Percentage of amounts received by the
Agent but paid only to NationsBank since the next preceding
Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment
Percentage of such amounts to the increase in such Lender's
Net Outstandings, and NationsBank shall pay to the Agent, for
the account of such Lender, the excess allocable to such
Lender.
(iv) NET INCREASE IN OUTSTANDINGS. If on any
Settlement Date the increase, if any, in the dollar amount of
any Lender's Net Outstandings which is required to comply with
the first sentence of SECTION 4.8(A) exceeds such Lender's
Commitment Percentage of amounts received by the Agent but
paid only to NationsBank since the next preceding Settlement
Date, such Lender and the Agent, in their respective records,
shall apply such Lender's Commitment Percentage of such
amounts to the increase in such Lender's Net Outstandings, and
such Lender shall pay to the Agent, for the account of
NationsBank, any excess.
(v) NO CHANGE IN OUTSTANDINGS. If a Settlement Report
indicates that no Revolving Credit Loans have been made during
the period since the next preceding Settlement Date, then such
Lender's Commitment Percentage of any
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amounts received by the Agent but paid only to NationsBank
shall be paid by NationsBank to the Agent, for the account of
such Lender. If a Settlement Report indicates that the
increase in the dollar amount of a Lender's Net Outstandings
which is required to comply with the first sentence of SECTION
4.8(A) is exactly equal to such Lender's Commitment Percentage
of amounts received by the Agent but paid only to NationsBank
since the next preceding Settlement Date, such Lender and the
Agent, in their respective records, shall apply such Lender's
Commitment Percentage of such amounts to the increase in such
Lender's Net Outstandings.
(vi) RETURN OF PAYMENTS. If any amounts received by
NationsBank in respect of the Secured Obligations are later
required to be returned or repaid by NationsBank to the
Borrower or their respective representatives or successors in
interest, whether by court order, settlement or otherwise, in
excess of the NationsBank's Commitment Percentage of all such
amounts required to be returned by all Lenders, each other
Lender shall, upon demand by NationsBank with notice to the
Agent, pay to the Agent for the account of NationsBank, an
amount equal to the excess of such Lender's Commitment
Percentage of all such amounts required to be returned by all
Lenders over the amount, if any, returned directly by such
Lender.
(vii) PAYMENTS TO AGENT, LENDERS.
(A) Payment by any Lender to the Agent shall
be made not later than 1:00 p.m. (Atlanta time) on
the Business Day such payment is due, PROVIDED that
if such payment is due on demand by another Lender,
such demand is made on the paying Lender not later
than 10:00 a.m. (Atlanta time) on such Business Day.
Payment by the Agent to any Lender shall be made by
wire transfer, promptly following the Agent's receipt
of funds for the account of such Lender and in the
type of funds received by the Agent, PROVIDED that if
the Agent receives such funds at or prior to 1:00
p.m. (Atlanta time), the Agent shall pay such funds
to such Lender by 2:00 p.m. (Atlanta time) on such
Business Day. If a demand for payment is made after
the applicable time set forth above, the payment due
shall be made by 2:00 p.m. (Atlanta time) on the
first Business Day following the date of such demand.
(B) If a Lender shall, at any time, fail to
make any payment to the Agent required hereunder, the
Agent may, but shall not be required to, retain
payments that would otherwise be made to such Lender
hereunder and apply such payments to such Lender's
defaulted obligations hereunder, at such time, and in
such order, as the Agent may elect in its discretion.
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(C) With respect to the payment of any funds
under this SECTION 4.8(B), whether from the Agent to
a Lender or from a Lender to the Agent, the party
failing to make full payment when due pursuant to the
terms hereof shall, upon demand by the other party,
pay such amount together with interest on such amount
at the Federal Funds Effective Rate.
(c) SETTLEMENT OF OTHER SECURED OBLIGATIONS. All other amounts
received by the Agent on account of, or applied by the Agent to the
payment of, any Secured Obligation owed to the Lenders (including,
without limitation, fees payable to the Lenders pursuant to SECTION 4.2
and proceeds from the sale of, or other realization upon, all or any
part of the Collateral following an Event of Default) that are received
by the Agent on or prior to 1:00 p.m. (Atlanta time) on a Business Day
will be paid by the Agent to each Lender on the same Business Day, and
any such amounts that are received by the Agent after 1:00 p.m.
(Atlanta time) will be paid by the Agent to each Lender on the
following Business Day. Unless otherwise stated herein, the Agent shall
distribute fees payable to the Lenders pursuant to SECTION 4.2 ratably
to the Lenders based on each Lender's Commitment Percentage and shall
distribute proceeds from the sale of, or other realization upon, all or
any part of the Collateral following an Event of Default ratably to the
Lenders based on the amount of the Secured Obligations then owing to
each Lender.
(d) ALLOCATION OF PAYMENTS FROM BORROWER. All monies to be
applied to the Secured Obligations, whether such monies represent
voluntary payments by the Borrower or are received pursuant to demand
for payment or realized from any disposition of Collateral, shall be
allocated among the Agent and such of the Lenders and other holders of
the Secured Obligations as are entitled thereto (and, with respect to
monies allocated to the Lenders, on a ratable basis unless otherwise
provided in this SECTION 4.8(D)): (i) first, to NationsBank to pay
principal and accrued interest on any portion of any Non-Ratable Loan
which NationsBank may have advanced on behalf of any Lender (other than
itself) and for which NationsBank has not been reimbursed by such
Lender or the Borrower; (ii) second, to the Agent to pay the amount of
expenses that have not been reimbursed to the Agent by the Borrower or
the Lenders, together with interest accrued thereon; (iii) third, to
the Agent to pay any indemnified amount that has not been paid to the
Agent by the Borrower or the Lenders, together with interest accrued
thereon; (iv) fourth, to the Agent to pay any fees due and payable to
the Agent under this Agreement; (v) fifth, to the Lenders for any
indemnified amount that they have paid to the Agent and for any
expenses that they have reimbursed to the Agent; (vi) sixth, to the
Lenders in payment of the unpaid principal and accrued interest in
respect of the Loans and any other Secured Obligations arising under
this Agreement (or the other Loan Documents) then outstanding and held
by any Lender to be shared among Lenders on a ratable basis, or on such
other basis as may be agreed upon in writing by all of the Lenders
(which agreement or agreements may be entered into without notice to or
the consent or approval of the Borrower), (vii) seventh, to the Lenders
and their Affiliates in payment of the unpaid amount of all Secured
Obligations arising under or in respect of the
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Banking Relationship to be shared on a pro rata basis, and (viii)
eighth, to the holders of the other Secured Obligations who are not
Lenders on a pro rata basis. The allocations set forth in this SECTION
4.8(D) are solely to determine the rights and priorities of the Agent
and the Lenders as among themselves and may be changed by the Agent and
the Lenders without notice or the consent of approval of the Borrower
or any other Person. Whenever allocation is made pursuant to this
SECTION 4.8(D) to the holder of Secured Obligations in which another
Lender acquires a participation, the monies received by such holder
shall be shared as between such holder and such participants on a
Ratable basis.
Section 4.9 PAYMENTS NOT AT END OF INTEREST PERIOD; FAILURE TO BORROW.
If for any reason any payment of principal with respect to any Eurodollar Rate
Advance is made on any day prior to the last day of the Interest Period
applicable to such Eurodollar Rate Advance or, after having given a notice of
borrowing with respect to any Eurodollar Rate Advance, such Advance is not made
as a Eurodollar Rate Advance due to the Borrower's failure to borrow or to
fulfill the applicable conditions set forth in ARTICLE 5, the Borrower shall pay
to each Lender upon the request of the Agent or such Lender, in addition to any
amounts that may be due under SECTION 4.5, an amount (if a positive number)
computed pursuant to the following formula:
L = (R - T) X P X D
-----------------------
360
L = amount payable
R = interest rate applicable to the Eurodollar
Rate Advance not borrowed, continued or
converted or prepaid
T = effective interest rate per annum at which
any readily marketable bonds or other
obligations of the United States, selected
at the Agent's sole discretion, maturing on
or near the last day of the then applicable
or requested Interest Period for such
Advance and in approximately the same amount
as such Advance, can be purchased by such
Lender on the day of such payment of
principal or failure to borrow, continue or
convert
P = the amount of principal paid or the amount
of the Advance requested or to have been
continued or converted
D = the number of days remaining in the Interest
Period as of the date of such payment or the
number of days in the requested Interest
Period
The Borrower shall pay such amount upon presentation by the Agent (or as to any
Lender, by such Lender) of a statement setting forth the amount and the Agent's
(or such Lender's) calculation thereof pursuant hereto, which statement shall be
deemed true and correct absent manifest error.
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ARTICLE 5 - CONDITIONS PRECEDENT
Section 5.1 CONDITIONS PRECEDENT TO INITIAL LOAN. Notwithstanding any
other provision of this Agreement, the Lenders' obligation to make the Initial
Loan is subject to the fulfillment of each of the following conditions prior to
or contemporaneously with the making of such Loan:
(a) CLOSING DOCUMENTS. The Agent shall have received each of the
following documents, all of which shall be satisfactory in form and substance to
the Agent and its counsel and to the Lenders:
(1) this Agreement, duly executed and delivered by the
Borrower;
(2) the Notes, dated the Effective Date and duly executed and
delivered by the Borrower;
(3) certified copies of the articles of incorporation and
by-laws of the Borrower as in effect on the Effective Date;
(4) certified copies of all corporate action, including
stockholder approval, if necessary, taken by the Borrower to authorize
the execution, delivery and performance of this Agreement and the other
Loan Documents and the borrowings under this Agreement;
(5) certificates of incumbency and specimen signatures with
respect to each of the officers of the Borrower who is authorized to
execute and deliver this Agreement or any other Loan Document on behalf
of the Borrower or any document, certificate or instrument to be
delivered in connection with this Agreement or the other Loan Documents
and to request borrowings under this Agreement;
(6) a certificate evidencing the good standing of the Borrower
in the jurisdiction of its incorporation and in each other jurisdiction
in which it is qualified as a foreign corporation to transact business;
(7) the Financing Statements duly executed and delivered by
the Borrower, and evidence satisfactory to the Agent that the Financing
Statements have been filed in each jurisdiction where such filing may
be necessary or appropriate to perfect the Security Interest;
(8) a Schedule of Receivables and a Schedule of Inventory,
both prepared as of a recent date;
(9) such Agency Account Agreements as shall be required by the
Agent and the Lenders duly executed by the applicable Clearing Bank and
the Borrower;
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(10) a Borrowing Base Certificate prepared as of the Effective
Date duly executed and delivered by the chief financial officer of the
Borrower;
(11) a letter from the Borrower to the Agent requesting the
Initial Loan and specifying the method of disbursement;
(12) copies of all the financial statements referred to in
SECTION 6.1(M) and meeting the requirements thereof;
(13) certificates or binders of insurance relating to the
insurance policies required under SECTION 8.8;
(14) forecasted consolidated financial statements consisting
of balance sheets, cash flow statements and income statements of the
Borrower, giving effect to the transactions contemplated by this
Agreement and reflecting projected borrowings hereunder and setting
forth the assumptions on which such forecasted financial statements
were prepared, covering the one-year period commencing on February 1,
1998, and prepared on a quarterly basis; and such other evidence as the
Lenders shall require supporting the representation and warranty of the
Borrower set forth in SECTION 6.1(R);
(15) a certificate of the President or Chief Financial Officer
of the Borrower stating that, to the best of his knowledge and based on
an examination sufficient to enable him to make an informed statement,
(a) all of the representations and warranties made or deemed to be made
under this Agreement are true and correct in all material respects as
of the Effective Date, both with and without giving effect to the Loans
to be made at such time and the application of the proceeds thereof,
and (b) no Default or Event of Default exists;
(16) a signed opinion of counsel for the Borrower, and such
local counsel as the Agent shall deem necessary or desirable, opining
as to such matters in connection with this Agreement as the Agent or
its counsel may reasonably request;
(17) intercreditor agreements with Hamilton Bank and SunTrust
Bank, Miami, N.A.;
(18) the Trademark Assignment, duly executed by the Borrower
and recorded in the United States Patent & Trademark Office;
(19) the Assignment of Factoring Credit Balances;
(20) the Assignment of Original Loan Documents; and
(21) copies of each of the other Loan Documents duly executed
by the parties thereto with evidence satisfactory to the Agent and its
counsel of the due authorization,
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binding effect and enforceability of each such Loan Document on each
such party and such other documents and instruments as the Agent may
reasonably request.
(b) AVAILABILITY. The Agent shall be provided with evidence
satisfactory to it that, as of the Effective Date, after giving effect to the
Initial Loan, Availability will be not less than $3,000,000.
(c) NO INJUNCTIONS, ETC. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or proposed
before any court, governmental agency or legislative body to enjoin, restrain or
prohibit or to obtain substantial damages in respect of or which is related to
or arises out of this Agreement or the consummation of the transactions
contemplated hereby or which, in the Lenders' sole discretion, would make it
inadvisable to consummate the transactions contemplated by this Agreement.
(d) MATERIAL ADVERSE CHANGE. As of the Effective Date, there shall not
have occurred any change which, in the Lenders' sole discretion, has had or may
have a Materially Adverse Effect as compared to the condition of the Borrower
presented by the most recent unaudited financial statements of the Borrower
described in SECTION 6.1(M).
(e) SOLVENCY. The Lenders shall have received evidence satisfactory to
them that, after giving effect to the Initial Loan (i) the Borrower has assets
(excluding goodwill and other intangible assets not capable of valuation) having
value, both at fair value and at present fair saleable value, greater than the
amount of its liabilities, and (ii) the Borrower's assets are sufficient in
value to provide the Borrower with sufficient working capital to enable it
profitably to operate its business and to meet its obligations as they become
due, and (iii) the Borrower has adequate capital to conduct the business in
which it is and proposes to be engaged.
(f) RELEASE OF SECURITY INTERESTS. The Lenders shall have received
evidence satisfactory to them of the release and termination of all Liens on the
Collateral other than Permitted Liens.
Section 5.2 ALL LOANS. At the time of the making of each Loan,
including the Initial Loan:
(a) all of the representations and warranties made or deemed to be made
under this Agreement shall be true and correct at such time both with and
without giving effect to the Loans to be made at such time and the application
of the proceeds thereof, except that representations and warranties which, by
their terms, are applicable only to the Effective Date shall be required to be
true and correct only as of the Effective Date,
(b) the corporate actions of the Borrower referred to in SECTION
5.1(A)(4) shall remain in full force and effect and the incumbency of officers
shall be as stated in the certificates of incumbency delivered pursuant to
SECTION 5.1(A)(5) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Agent, and
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(c) the Agent and the Lenders may, without waiving either condition,
consider the conditions specified in SECTIONS 5.2(A) and (B) fulfilled and a
representation by the Borrower to such effect made if no written notice to the
contrary is received by the Agent from the Borrower prior to the making of the
Loans then to be made.
ARTICLE 6 - REPRESENTATIONS AND WARRANTIES OF THE BORROWER
Section 6.1 REPRESENTATIONS AND WARRANTIES. The Borrower represents and
warrants to the Agent and the Lenders as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. The Borrower is a corporation,
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its properties and to carry on its business as now being and hereafter proposed
to be conducted and is duly qualified and authorized to do business in each
jurisdiction in which failure to be so qualified and authorized would have a
Materially Adverse Effect. The jurisdictions in which the Borrower is qualified
to do business as a foreign corporation are listed on SCHEDULE 6.1(A).
(b) SUBSIDIARIES AND OWNERSHIP OF THE BORROWER. The Subsidiaries of the
Borrower are listed on SCHEDULE 6.1(B). The outstanding stock of the Borrower
has been duly and validly issued and is fully paid and nonassessable by the
Borrower and the number and owners of such shares of capital stock of the
Borrower are set forth on SCHEDULE 6.1(B).
(c) AUTHORIZATION OF AGREEMENT, NOTE, LOAN DOCUMENTS AND BORROWING. The
Borrower has the right and power and has taken all necessary action to authorize
it to execute, deliver and perform this Agreement and each of the other Loan
Documents to which it is a party in accordance with their respective terms and
to borrow hereunder. This Agreement and each of the other Loan Documents to
which it is a party have been duly executed and delivered by the duly authorized
officers of the Borrower and each is, or when executed and delivered in
accordance with this Agreement will be, a legal, valid and binding obligation of
the Borrower, enforceable in accordance with its terms, subject to general
principles of equity and insolvency laws applicable to creditors generally.
(d) COMPLIANCE OF AGREEMENT, NOTE, LOAN DOCUMENTS AND BORROWING WITH
LAWS, ETC. The execution, delivery and performance of this Agreement and each of
the other Loan Documents to which the Borrower is a party in accordance with
their respective terms and the borrowings hereunder do not and will not, by the
passage of time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate any
applicable law relating to the Borrower or any of its Affiliates,
(ii) conflict with, result in a breach of or constitute a
default under (A) the articles or certificate of incorporation or
by-laws of the Borrower, (B) any indenture,
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agreement or other instrument to which the Borrower is a party or by
which any of its property may be bound which would have a Materially
Adverse Effect, or (C) any Governmental Approval relating to the
Borrower, or,
(iii) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter
acquired by the Borrower other than the Security Interest.
(e) BUSINESS. The Borrower is engaged principally in the business
described on SCHEDULE 6.1(E).
(f) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. Except as set forth in
SCHEDULE 6.1(F), the Borrower (i) has all material Governmental Approvals,
including permits relating to federal, state and local Environmental Laws,
ordinances and regulations required by any applicable law for it to conduct its
business, each of which is in full force and effect, is final and not subject to
review on appeal and is not the subject of any pending or, to the knowledge of
the Borrower, threatened attack by direct or collateral proceeding, and (ii) is
in compliance with each material Governmental Approval applicable to it and in
compliance with all other applicable laws relating to it, including, without
being limited to, all Environmental Laws and all occupational health and safety
laws applicable to the Borrower or its properties, except for instances of
noncompliance which would not, singly or in the aggregate, cause a Default or
Event of Default or have a Materially Adverse Effect and in respect of which
adequate reserves have been established on the books of the Borrower.
(g) TITLES TO PROPERTIES. Except as set forth in SCHEDULE 6.1(G), the
Borrower has good and marketable title to or a valid leasehold interest in all
its Real Estate and valid and legal title to or a valid leasehold interest in
all personal property and assets used in or necessary to the conduct of the
Borrower's business, including, but not limited to, those reflected on the
balance sheet of the Borrower delivered pursuant to SECTION 6.1(M)(II).
(h) LIENS. Except as set forth in SCHEDULE 6.1(H), none of the
properties and assets of the Borrower is subject to any Lien, except Permitted
Liens. Other than the Financing Statements, no financing statement under the
Uniform Commercial Code of any state which names the Borrower as debtor and
which has not been terminated has been filed in any state or other jurisdiction,
and the Borrower has not signed any such financing statement or any security
agreement authorizing any secured party thereunder to file any such financing
statement, except to perfect those Liens listed in SCHEDULE 6.1(H) and Permitted
Liens.
(i) INDEBTEDNESS AND GUARANTIES. Set forth on SCHEDULE 6.1(I) is a
complete and correct listing of all of the Borrower's (i) Indebtedness and (ii)
Guaranties. The Borrower is not in default of any material provision of any
agreement evidencing or relating to such any such Indebtedness or Guaranty.
(j) LITIGATION. Except as set forth on SCHEDULE 6.1(J), there are no
actions, suits or
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proceedings pending (nor, to the knowledge of the Borrower, are there any
actions, suits or proceedings threatened, nor is there any basis therefor)
against or in any other way relating adversely to or affecting the Borrower or
any of its property in any court or before any arbitrator of any kind or before
or by any governmental body that would have a Materially Adverse Effect.
(k) TAX RETURNS AND PAYMENTS. Except as set forth on SCHEDULE 6.1(K),
all United States federal, state and local and foreign national, provincial and
local and all other tax returns of the Borrower required by applicable law to be
filed have been duly filed, and all United States federal, state and local and
foreign national, provincial and local and all other taxes, assessments and
other governmental charges or levies upon the Borrower and its property, income,
profits and assets which are due and payable have been paid, except any such
nonpayment which is at the time permitted under SECTION 9.4. The charges,
accruals and reserves on the books of the Borrower in respect of United States
federal, state and local taxes and foreign national, provincial and local taxes
for all fiscal years and portions thereof since the organization of the Borrower
are in the judgment of the Borrower adequate, and the Borrower knows of no
reason to anticipate any additional assessments for any of such years which,
singly or in the aggregate, might have a Materially Adverse Effect.
(l) BURDENSOME PROVISIONS. The Borrower is not a party to any
indenture, agreement, lease or other instrument, or subject to any charter or
corporate restriction, Governmental Approval or applicable law, compliance with
the terms of which might have a Materially Adverse Effect.
(m) FINANCIAL STATEMENTS. The Borrower has furnished to the Lenders a
copy of (i) its audited balance sheet as at January 31, 1997, and the related
statements of income, cash flow and retained earnings for the twelve-month
period then ended and (ii) its unaudited balance sheet as at October 31, 1997,
and the related statement of income for the 9-month period then ended. Such
financial statements are complete and correct and present fairly and in all
material respects in accordance with GAAP, the financial position of the
Borrower as at the dates thereof and the results of operations of the Borrower
for the periods then ended. Except as disclosed or reflected in such financial
statements, the Borrower had no material liabilities, contingent or otherwise,
and there were no material unrealized or anticipated losses of the Borrower.
(n) ADVERSE CHANGE. Since the date of the financial statements
described in CLAUSE (I) of SECTION 6.1(M), (i) no change in the business,
assets, liabilities, condition (financial or otherwise), results of operations
or business prospects of the Borrower has occurred that has had, or may have, a
Materially Adverse Effect, and (ii) no event has occurred or failed to occur
which has had, or may have, a Materially Adverse Effect.
(o) ERISA. Neither the Borrower nor any Related Company maintains or
contributes to any Benefit Plan other than those listed on SCHEDULE 6.1(O). Each
Benefit Plan is in substantial compliance with ERISA, and neither the Borrower
nor any Related Company has received any notice asserting that a Benefit Plan is
not in compliance with ERISA. No material
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liability to the PBGC or to a Multiemployer Plan has been, or is expected by the
Borrower to be, incurred by the Borrower or any Related Company.
(p) ABSENCE OF DEFAULTS. The Borrower is not in default under its
articles or certificate of incorporation or by-laws, and no event has occurred
which has not been remedied, cured or waived (i) that constitutes a Default or
an Event of Default or (ii) that constitutes or that, with the passage of time
or giving of notice, or both, would constitute a default or event of default by
the Borrower under any material agreement or judgment, decree or order to which
the Borrower is a party or by which the Borrower or any of its properties may be
bound or which would require the Borrower to make any payment thereunder prior
to the scheduled maturity date therefor.
(q) ACCURACY AND COMPLETENESS OF INFORMATION. All written information,
reports and other papers and data produced by or on behalf of the Borrower and
furnished to the Agent or any Lender were, at the time the same were so
furnished, complete and correct in all material respects to the extent necessary
to give the recipient a true and accurate knowledge of the subject matter, no
fact is known to the Borrower which has had, or may in the future have (so far
as the Borrower can foresee), a Materially Adverse Effect which has not been set
forth in the financial statements or disclosure delivered prior to the Effective
Date, in each case referred to in SECTION 6.1(M), or in such written
information, reports or other papers or data or otherwise disclosed in writing
to the Agent and the Lenders prior to the Effective Date. No document furnished
or written statement made to the Agent or any Lender by the Borrower in
connection with the negotiation, preparation or execution of this Agreement or
any of the Loan Documents contains or will contain any untrue statement of a
fact material to the creditworthiness of the Borrower or omits or will omit to
state a material fact necessary in order to make the statements contained
therein not misleading.
(r) SOLVENCY. In each case after giving effect to the Indebtedness
represented by the Loans outstanding and to be incurred and the transactions
contemplated by this Agreement, the Borrower is solvent, having assets of a fair
value which exceeds the amount required to pay its debts (including contingent,
subordinated, unmatured and unliquidated liabilities) as they become absolute
and matured, and the Borrower is able to and anticipates that it will be able to
meet its debts as they mature and has adequate capital to conduct the business
in which it is or proposes to be engaged.
(s) STATUS OF RECEIVABLES. Each Receivable reflected in the
computations included in any Borrowing Base Certificate meets the criteria
enumerated in the definition of Eligible Receivables, except as disclosed in
such Borrowing Base Certificate or as disclosed in a timely manner in a
subsequent Borrowing Base Certificate or otherwise in writing to the Agent.
(t) CHIEF EXECUTIVE OFFICE. The chief executive office of the Borrower
and the books and records relating to the Receivables are located at the address
or addresses set forth on SCHEDULE 6.1(T); except as set forth on SCHEDULE
6.1(T), the Borrower has not maintained its chief executive office or the books
and records relating to any Receivables at any other address
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at any time during the five years immediately preceding the Agreement Date.
(u) STATUS OF INVENTORY. All Inventory included in any Borrowing Base
Certificate delivered to the Agent pursuant to SECTION 8.14(D) meets the
criteria enumerated in the definition of Eligible Inventory, except as disclosed
in such Borrowing Base Certificate or in a subsequent Borrowing Base Certificate
or as otherwise specifically disclosed in writing to the Agent. All Inventory is
in good condition, meets all standards imposed by any governmental agency or
department or division thereof having regulatory authority over such goods,
their use or sale, and is currently either usable or saleable in the normal
course of the Borrower's business, except to the extent reserved against in the
financial statements delivered pursuant to ARTICLE 10 or as disclosed on a
Schedule of Inventory delivered to the Agent pursuant to SECTION 8.14(B). Set
forth on SCHEDULE 6.1(U) is the (i) address (including street, city, county and
state) of each facility at which Inventory is located, (ii) the approximate
quantity in Dollars of the Inventory customarily located at each such facility,
and (iii) if the facility is leased or is a third party warehouse or processor
location, the name of the landlord or such third party warehouseman or
processor. All Inventory is located on the premises set forth on SCHEDULE 6.1(U)
or is in transit to one of such locations, except as otherwise disclosed in
writing to the Agent; the Borrower has not located Inventory at premises other
than those set forth on SCHEDULE 6.1(U) at any time during the four month
immediately preceding the Agreement Date.
(v) CORPORATE AND FICTITIOUS NAMES; TRADE NAMES. Except as otherwise
disclosed on SCHEDULE 6.1(V), during the one-year period preceding the Agreement
Date, the Borrower has not been known as or used any corporate or fictitious
name other than the corporate name of the Borrower on the Effective Date. All
trade names or styles under which the Borrower sells Inventory or creates
Receivables, or to which instruments in payment of Receivables are made payable,
are listed on SCHEDULE 6.1(V).
(w) FEDERAL REGULATIONS. The Borrower is not 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 each of the quoted
terms is defined or used in Regulations G and U of the Board of Governors of the
Federal Reserve System).
(x) INVESTMENT COMPANY ACT. The Borrower is not an "investment company"
or a company "controlled" by an "investment company" (as each of the quoted
terms is defined or used in the Investment Company Act of 1940, as amended).
(y) EMPLOYEE RELATIONS. The Borrower is not, except as set forth on
SCHEDULE 6.1(Y), party to any collective bargaining agreement nor has any labor
union been recognized as the representative of the Borrower's employees; the
Borrower knows of no pending, threatened or contemplated strikes, work stoppage
or other labor disputes involving its employees or those of its Subsidiaries.
(z) INTELLECTUAL PROPERTY. The Borrower owns or possesses all
Intellectual Property required to conduct its business as now and presently
planned to be conducted without, to its
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knowledge, conflict with the rights of others, and SCHEDULE 6.1(Z) lists all
Intellectual Property owned by the Borrower.
Section 6.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties set forth in this ARTICLE 6 and all statements
contained in any certificate, financial statement or other instrument delivered
by or on behalf of the Borrower pursuant to or in connection with this Agreement
or any of the Loan Documents (including, but not limited to, any such
representation, warranty or statement made in or in connection with any
amendment thereto) shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall be made or deemed to be made at and as of the Agreement Date, at and as of
the Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable only to one
such date shall be deemed to be made only at and as of such date. All
representations and warranties made or deemed to be made under this Agreement
shall survive and not be waived by the execution and delivery of this Agreement,
any investigation made by or on behalf of the Agent or any Lender, or any
borrowing hereunder.
ARTICLE 7 - SECURITY INTEREST
Section 7.1 SECURITY INTEREST. (a) To secure the payment, observance
and performance of the Secured Obligations, the Borrower hereby mortgages,
pledges and assigns all of the Collateral to the Agent for itself and as agent
for the Lenders and any Affiliate of the Lenders, and grants to the Agent, for
itself and as agent for the Lenders and any Affiliate of the Lenders, a
continuing security interest in, and a continuing Lien upon, all of the
Collateral.
(b) As additional security for all of the Secured Obligations, the
Borrower grants to the Agent, for itself and as agent for the Lenders and any
Affiliate of the Lenders, a security interest in, and assigns to the Agent, for
itself and as agent for the Lenders and any Affiliate of the Lenders, all of the
Borrower's right, title and interest in and to, any deposits or other sums at
any time credited by or due from each Lender and each Affiliate of the Lenders
to the Borrower, with the same rights therein as if the deposits or other sums
were credited by or due from such Lender or Affiliate.
Section 7.2 CONTINUED PRIORITY OF SECURITY INTEREST. (a) The Security
Interest granted by the Borrower shall at all times be valid, perfected and
enforceable against the Borrower and all third parties in accordance with the
terms of this Agreement, as security for the Secured Obligations, and the
Collateral shall not at any time be subject to any Liens that are prior to, on a
parity with or junior to the Security Interest, other than Permitted Liens.
(b) The Borrower shall, at its sole cost and expense, take all action
that may be necessary or desirable, or that the Agent may request, so as at all
times to maintain the validity, perfection, enforceability and rank of the
Security Interest in the Collateral in conformity with the requirements of
SECTION 7.2(A) or to enable the Agent and the Lenders to exercise or enforce
their rights hereunder, including, but not limited to: (i) paying all taxes,
assessments and other
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claims lawfully levied or assessed on any of the Collateral, except to the
extent that such taxes, assessments and other claims constitute Permitted Liens,
(ii) diligently seeking to obtain, after the Agreement Date, landlords',
mortgagees' or mechanics' releases, subordinations or waivers, (iii) delivering
to the Agent, endorsed or accompanied by such instruments of assignment as the
Agent may specify, and stamping or marking in such manner as the Agent may
specify, any and all chattel paper, instruments, letters and advices of guaranty
and documents evidencing or forming a part of the Collateral, and (iv) executing
and delivering financing statements, pledges, designations, hypothecations,
notices and assignments, in each case in form and substance satisfactory to the
Agent, relating to the creation, validity, perfection, maintenance or
continuation of the Security Interest under the UCC or other applicable law.
(c) The Agent is hereby authorized to file one or more financing or
continuation statements or amendments thereto without the signature of or in the
name of the Borrower for any purpose described in SECTION 7.2(B). A carbon,
photographic or other reproduction of this Agreement or of any of the Security
Documents or of any financing statement filed in connection with this Agreement
is sufficient as a financing statement, to the extent permitted by applicable
law.
(d) The Borrower shall mark its books and records as may be necessary
or appropriate to evidence, protect and perfect the Security Interest and shall
cause its financial statements to reflect the Security Interest.
ARTICLE 8 - COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Required
Lenders shall otherwise consent in the manner provided in SECTION 15.10:
Section 8.1 COLLECTION OF RECEIVABLES. (a) The Borrower will cause all
moneys, checks, notes, drafts and other payments relating to or constituting
proceeds of Receivables, or of any other Collateral, to be forwarded to a
Lockbox for deposit in an Agency Account in accordance with the procedures set
out in the corresponding Agency Account Agreement, and in particular the
Borrower will (i) advise each Account Debtor to address all remittances with
respect to amounts payable on account of any Receivables to a specified Lockbox,
and (ii) stamp all invoices relating to any such amounts with a legend
satisfactory to the Agent indicating that payment is to be made to the Borrower
via a specified Lockbox.
(b) The Borrower and the Agent shall cause all collected balances in
each Agency Account to be transmitted daily by wire transfer or depository
transfer check or Automated Clearing House transfer in accordance with the
procedures set forth in the corresponding Agency Account Agreement to the Agent
at the Agent's Office (i) for application, on account of the Secured
Obligations, as provided in SECTION 2.3(C), 12.2 and 12.3, such credits to be
entered on the day of receipt and to be conditioned upon final payment in cash
or solvent credits of the items giving rise to them, and (ii) with respect to
any balance remaining after such application,
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so long as no Default or Event of Default has occurred and is continuing, for
transfer to the Controlled Disbursement Account or such other account of the
Borrower as the Borrower and the Agent may agree.
(c) Any moneys, checks, notes, drafts or other payments referred to in
CLAUSE (A) of this SECTION 8.1 which are received by or on behalf of the
Borrower will be held in trust for the Agent and will be delivered to the Agent
at the Agent's Office as promptly as possible in the exact form received,
together with any necessary endorsements.
Section 8.2 VERIFICATION AND NOTIFICATION. The Agent shall have the
right (a) at any time and from time to time, in the name of the Agent or in the
name of the Borrower, to verify the validity, amount or any other matter
relating to any Receivables by mail, telephone, telegraph or otherwise, and (b)
after an Event of Default, to notify the Account Debtors or obligors under any
Receivables of the assignment of such Receivables to the Agent and to direct
such Account Debtor or obligors to make payment of all amounts due or to become
due thereunder directly to the Agent and, upon such notification and at the
expense of the Borrower, to enforce collection of any such Receivables and to
adjust, settle or compromise the amount or payment thereof, in the same manner
and to the same extent as the Borrower might have done.
Section 8.3 DISPUTES, RETURNS AND ADJUSTMENTS. (a) In the event amounts
due and owing under any Receivable in excess of $10,000 are in dispute between
the Account Debtor and the Borrower, the Borrower shall provide the Agent with
prompt written notice thereof.
(b) The Borrower shall notify the Agent promptly of all material
returns and credits in excess of $15,000 in respect of any Receivable, which
notice shall specify the Receivables affected.
(c) The Borrower may, in the ordinary course of business and prior to a
Default or an Event of Default, grant any extension of time for payment of any
Receivable or compromise, compound or settle the same for less than the full
amount thereof or release wholly or partly any Person liable for the payment
thereof or allow any credit or discount whatsoever thereon; PROVIDED that (i) no
such action results in the reduction of more than $10,000 in the amount payable
with respect to any Receivable or of more than $100,000 with respect to all
Receivables in any fiscal year of the Borrower, and (ii) the Agent is promptly
notified of the amount of such adjustments and the Receivable(s) affected
thereby.
Section 8.4 INVOICES. (a) The Borrower will not use any invoices except
invoices in the forms delivered to the Agent prior to the Agreement Date, unless
the Borrower shall have given the Agent 45 days' prior notice of the intended
use of a different form of invoice together with a copy of such different form.
(b) Upon the request of the Agent, the Borrower shall deliver to the
Agent, at the Borrower's expense, copies of customers' invoices or the
equivalent, original shipping and delivery receipts or other proof of delivery,
customers' statements, the original copy of all docu-
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ments, including, without limitation, repayment histories and present status
reports, relating to Receivables and such other documents and information
relating to the Receivables as the Agent shall specify.
Section 8.5 DELIVERY OF INSTRUMENTS. In the event any Receivable in an
amount in excess of $50,000 is, or Receivables in excess of $150,000 in the
aggregate are, at any time evidenced by a promissory note or notes, trade
acceptance or any other instrument for the payment of money, the Borrower will
immediately thereafter deliver such instruments to the Agent, appropriately
endorsed to the Agent.
Section 8.6 SALES OF INVENTORY. All sales of Inventory will be made in
compliance with all requirements of applicable law.
Section 8.7 RETURNED GOODS. The Security Interest in the Inventory
shall, without further act, attach to the cash and non-cash proceeds resulting
from the sale or other disposition thereof and to all Inventory which is
returned to the Borrower by customers or is otherwise recovered.
Section 8.8 OWNERSHIP AND DEFENSE OF TITLE. (a) Except for Permitted
Liens, the Borrower shall at all times be the sole owner of each and every item
of Collateral and shall not create any Lien on, or sell, lease, exchange,
assign, transfer, pledge, hypothecate, grant a security interest or security
title in or otherwise dispose of, any of the Collateral or any interest therein,
except for sales of Inventory in the ordinary course of business, for cash or on
open account or on terms of payment ordinarily extended to its customers and
except as otherwise expressly contemplated herein. The inclusion of "proceeds"
of the Collateral under the Security Interest shall not be deemed a consent by
the Agent to any other sale or other disposition of any part or all of the
Collateral.
(b) The Borrower shall defend its title in and to the Collateral and
shall defend the Security Interest in the Collateral against the claims and
demands of all Persons.
(c) In addition to, and not in derogation of, the foregoing and the
requirements of any of the Security Documents, the Borrower shall (i) protect
and preserve all properties material to its business, including Intellectual
Property and maintain all tangible property in good and workable condition in
all material respects, with reasonable allowance for wear and tear, and (ii)
from time to time make or cause to be made all needed and appropriate repairs,
renewals, replacements and additions to such properties necessary for the
conduct of its business, so that the business carried on in connection therewith
may be properly and advantageously conducted at all times.
Section 8.9 INSURANCE. (a) The Borrower shall at all times maintain
insurance on the Inventory and Equipment against loss or damage by fire, theft,
burglary, pilferage, loss in transit and such other hazards as the Agent shall
reasonably specify, in amounts and under policies issued by insurers acceptable
to the Agent. All premiums on such insurance shall be paid
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by the Borrower and copies of the policies delivered to the Agent. The Borrower
will not use or permit the Inventory or Equipment to be used in violation of any
applicable law or in any manner which might render inapplicable any insurance
coverage.
(b) All insurance policies required under SECTION 8.9(A) shall name the
Agent, for the benefit of the Lenders, as an additional named insured and shall
contain "New York standard" loss payable clauses in the form submitted to the
Borrower by the Agent, or otherwise in form and substance satisfactory to the
Agent, naming the Agent, for the benefit of the Lenders, as loss payee as its
interests may appear, and providing that (i) all proceeds thereunder shall be
payable to the Agent, for the benefit of the Lenders, (ii) no such insurance
shall be affected by any act or neglect of the insured or owner of the property
described in such policy, and (iii) such policy and loss payable clauses may not
be cancelled, amended or terminated unless at least ten days' prior written
notice is given to the Agent.
(c) Any proceeds of insurance referred to in this SECTION 8.9 which are
paid to the Agent, for the account of the Lenders, shall be, at the option of
the Required Lenders in their sole discretion, either (i) applied to rebuild,
restore or replace the damaged or destroyed property, or (ii) applied to the
payment or prepayment of the Secured Obligations.
(d) The Borrower shall at all times maintain, in addition to the
insurance required by SECTION 8.9(A) or any of the Security Documents, insurance
with responsible insurance companies against such risks and in such amounts as
is customarily maintained by similar businesses or as may be required by
applicable law, including such public liability, products liability, third party
property damage and business interruption insurance as is consistent with
reasonable business practices, and from time to time deliver to the Agent upon
its request a detailed list of the insurance then in effect, stating the names
of the insurance companies, the amounts and rates of the insurance, the dates of
the expiration thereof and the properties and risks covered thereby.
Section 8.10 LOCATION OF OFFICES AND COLLATERAL. (a) The Borrower will
not change the location of its chief executive office or the place where it
keeps its books and records relating to the Collateral or change its name,
identity or corporate structure without giving the Agent 30 days' prior written
notice thereof.
(b) All Inventory, other than Inventory in transit to any such
location, will at all times be kept by the Borrower at one of the locations set
forth in SCHEDULE 6.1(U) and shall not, without the prior written consent of the
Agent, which consent shall not be unreasonably withheld or delayed, be removed
therefrom except, so long as no Event of Default shall have occurred and be
continuing, for sales of Inventory permitted under SECTION 8.8.
(c) If any Inventory is in the possession or control of any of the
Borrower's agents or processors, the Borrower shall notify such agents or
processors of the Security Interest and, upon the occurrence of an Event of
Default, shall instruct them (and cause them to acknowledge such instruction) to
hold all such Inventory for the account of the Agent, for the benefit of the
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Lenders, subject to the instructions of the Agent.
Section 8.11 RECORDS RELATING TO COLLATERAL. (a) The Borrower will at
all times (i) keep complete and accurate records of Inventory on a basis
consistent with past practices of the Borrower, itemizing and describing the
kind, type and quantity of Inventory and the Borrower's cost therefor and a
current price list for such Inventory, and specifying which Inventory is License
Inventory and which Inventory is Private Label Inventory, and (ii) keep complete
and accurate records of all other Collateral.
(b) The Borrower will take a physical listing of all material
Inventory, wherever located, at least annually.
Section 8.12 INSPECTION. The Agent and each Lender (by any of their
officers, employees or agents) shall have the right, to the extent that the
exercise of such right shall be within the control of the Borrower, at any time
or times to (a) visit the properties of the Borrower, inspect the Collateral and
the other assets of the Borrower and its Subsidiaries and inspect and make
extracts from the books and records of the Borrower and its Subsidiaries,
including, but not limited to, management letters prepared by independent
accountants, all during customary business hours at such premises, (b) discuss
the Borrower's business, assets, liabilities, financial condition, results of
operations and business prospects, insofar as the same are reasonably related to
the rights of the Agent and the Lenders hereunder or under any of the Loan
Documents, with the Borrower's and its Subsidiaries' (i) principal officers,
(ii) independent accountants and other professionals providing services to the
Borrower, and (iii) any other Person (except that any such discussion with any
third parties shall be conducted only in accordance with the Agent's or such
Lender's standard operating procedures relating to the maintenance of
confidentiality of confidential information of borrowers), and (c) verify the
amount, quantity, value and condition of, or any other matter relating to, any
of the Collateral and in this connection to review, audit and make extracts from
all records and files related to any of the Collateral. The Borrower will
deliver to the Agent, for the benefit of the Lenders, any instrument necessary
to authorize an independent accountant or other professional to have discussions
of the type outlined above with the Agent or any Lender or for the Agent or any
Lender to obtain records from any service bureau maintaining records on behalf
of the Borrower.
Section 8.13 MAINTENANCE OF EQUIPMENT. The Borrower shall maintain all
physical property that constitutes Equipment in good and workable condition in
all material respects, with reasonable allowance for wear and tear, and shall
exercise proper custody over all such property.
Section 8.14 INFORMATION AND REPORTS.
(a) SCHEDULE OF RECEIVABLES. The Borrower shall deliver to the Agent
(i) on or before the Effective Date, a Schedule of Receivables as of a date not
more than three Business Days prior to the Effective Date setting forth a
detailed aged trial balance of all of its then existing Receivables, specifying
the name of and the balance due from (and any rebate due to) each
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Account Debtor obligated on a Receivable so listed, and (ii) no later than 10
days after the end of each accounting month of the Borrower, a Schedule of
Receivables as of the last Business Day of the Borrower's immediately preceding
accounting month setting forth (A) a detailed aged trial balance of all the
Borrower's then existing Receivables, specifying the name of and the balance due
from (and any rebate due to) each Account Debtor obligated on a Receivable so
listed and (B) a reconciliation to the Schedule of Receivables delivered in
respect of the next preceding accounting month.
(b) SCHEDULE OF INVENTORY. The Borrower shall deliver to the Agent (i)
on or before the Effective Date and no later than the 10th day of each
accounting month of the Borrower thereafter a Schedule of Inventory as of the
last Business Day of the immediately preceding accounting month of the Borrower,
itemizing and describing the kind, type, quantity and location of finished goods
Inventory not in transit and not located at contractor's locations and the cost
thereof and specifying which Inventory is License Inventory and which is Private
Label Inventory, and (ii) on a quarterly basis, within 35 days of the end of
each quarter, a Schedule of Inventory as of the last Business Day of the
immediately preceding quarter of the Borrower, itemizing and describing the
kind, type, quantity and location of all Inventory, including finished goods
Inventory, in-transit Inventory, and Inventory located at contractor's
facilities, and the cost thereof.
(c) BORROWING BASE CERTIFICATE. The Borrower shall deliver to the Agent
and the Lenders not later than the 10th day of each accounting month of the
Borrower a Borrowing Base Certificate prepared as of the close of business on
the last Business Day of the immediately preceding accounting month.
(d) LETTER OF CREDIT/BANKER'S ACCEPTANCES REPORTS. The Borrower shall
deliver to the Agent (i) on or before the Effective Date, a report listing all
letters of credit and banker's acceptances outstanding under its credit facility
with Hamilton Bank, N.A., and the face amount, maturity date and beneficiary
with respect to such letters of credit and banker's acceptances, and (ii) no
later than 10 days after the end of each accounting month of the Borrower, a
report listing all letters of credit and banker's acceptances outstanding under
its credit facility with Hamilton Bank, N.A. as of the last Business Day of the
immediately preceding accounting month of the Borrower, and the face amount,
maturity date and beneficiary with respect to such letters of credit and
banker's acceptances.
(e) FACTORING REPORTS. The Borrower shall deliver to the Agent upon the
Agent's request copies of all reports of the Factor relating to its factoring
arrangement with Borrower.
(f) NOTICE OF DIMINUTION OF VALUE. The Borrower shall give prompt
notice to the Agent of any matter or event which has resulted in, or may result
in, the actual or potential diminution in excess of $50,000 in the value of any
of its Collateral, except for any diminution in the value of any Receivables or
Inventory in the ordinary course of business which has been appropriately
reserved against, as reflected in the financial statements previously delivered
to the Lenders pursuant to ARTICLE 10.
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(g) CERTIFICATION. Each of the schedules delivered to the Agent and/or
the Lenders pursuant to this SECTION 8.14 shall be certified by the Chief
Financial Officer of the Borrower to be true, correct and complete as of the
date indicated thereon.
(h) OTHER INFORMATION. The Agent may, in its discretion, from time to
time require the Borrower to deliver the schedules described in SECTION 8.14(A),
(B), (C) and (D) more or less often and on different schedules than specified in
such Section, and the Borrower will comply with such requests. The Borrower
shall also furnish to the Agent and each Lender such other information with
respect to the Collateral as the Agent and each Lender may from time to time
reasonably request, including, without limitation, listings of all outstanding
steamship guaranties and letters of credit, specifically identifying those for
which the issuer is not the consignee.
Section 8.15 POWER OF ATTORNEY. The Borrower hereby appoints the Agent
as its attorney, upon the occurrence of an Event of Default, with power (a) to
endorse the name of the Borrower on any checks, notes, acceptances, money
orders, drafts or other forms of payment or security that may come into the
Agent's or any Lender's possession, and (b) to sign the name of the Borrower on
any invoice or bill of lading relating to any Receivables, Inventory or other
Collateral, on any drafts against customers related to letters of credit, on
schedules and assignments of Receivables furnished to the Agent by the Borrower,
on notices of assignment, financing statements and other public records relating
to the perfection or priority of the Security Interest or verifications of
account and on notices to or from customers.
ARTICLE 9 - AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Required
Lenders shall otherwise consent in the manner provided for in SECTION 15.10, the
Borrower will:
Section 9.1 PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS.
Preserve and maintain its corporate existence, rights, franchises, licenses and
privileges in the jurisdiction of its incorporation and qualify and remain
qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
Section 9.2 COMPLIANCE WITH APPLICABLE LAW. Comply with all applicable
laws relating to the Borrower.
Section 9.3 CONDUCT OF BUSINESS. Engage only in businesses in
substantially the same fields as the businesses conducted on the Effective Date.
Section 9.4 PAYMENT OF TAXES AND CLAIMS. Pay or discharge when due (a)
all taxes, assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon any properties belonging to it, and (b) all
lawful claims of materialmen, mechanics, carriers, warehousemen and landlords
for labor, materials, supplies and rentals which, if unpaid,
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might become a Lien on any properties of the Borrower or such Subsidiary, EXCEPT
that this SECTION 9.4 shall not require the payment or discharge of any such
tax, assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established on
the appropriate books.
Section 9.5 ACCOUNTING METHODS AND FINANCIAL RECORDS. Maintain a system
of accounting, and keep such books, records and accounts (which shall be true
and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP consistently
applied.
Section 9.6 USE OF PROCEEDS. (a) Use the proceeds of (i) the Initial
Loans to pay the amounts indicated in SCHEDULE 9.6 to the Persons indicated
therein, and (ii) all subsequent Revolving Credit Loans only for working capital
and general business purposes, and
(b) not use any part of such proceeds to purchase or carry, or to
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulation G or U of the Board of Governors
of the Federal Reserve System) or for any other purpose which would involve a
violation of such Regulation G or U or Regulation T or X of such Board of
Governors or for any other purpose prohibited by law or by the terms and
conditions of this Agreement.
Section 9.7 HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL REQUIREMENTS.
(a) In addition to, and not in derogation of, the requirements of SECTION 9.2
and of the Security Documents, comply with all laws, governmental standards and
regulations applicable to the Borrower or to any of its assets in respect of
occupational health and safety laws, rules and regulations and Environmental
Laws, promptly notify the Agent of its receipt of any notice of a violation of
any such law, rule, standard or regulation and indemnify and hold the Agent and
each Lender harmless from all loss, cost, damage, liability, claim and expense
incurred by or imposed upon the Agent or any Lender on account of the Borrower's
failure to perform its obligations under this SECTION 9.7.
(b) Whenever the Borrower gives notice to the Agent pursuant to this
SECTION 9.7 with respect to a matter that reasonably could be expected to result
in liability to the Borrower in excess of $25,000 in the aggregate, the Borrower
shall, at the Agent's request and the Borrower's expense, (i) cause an
independent environmental engineer acceptable to the Agent to conduct such tests
of the site where the noncompliance or alleged noncompliance with Environmental
Laws has occurred and prepare and deliver to the Agent and the Lenders a report
setting forth the results of such tests, a proposed plan to bring the Borrower
into compliance with such Environmental Laws and an estimate of the costs
thereof, and (ii) provide to the Agent and the Lenders a supplemental report of
such engineer whenever the scope of the noncompliance or the response thereto or
the estimated costs thereof shall materially change.
Section 9.8 ACCURACY OF INFORMATION. All written information, reports,
statements and other papers and data furnished to the Agent or any Lender,
whether pursuant to ARTICLE 10
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or any other provision of this Agreement or any of the other Loan Documents,
shall be, at the time the same is so furnished, complete and correct in all
material respects to the extent necessary to give the Agent and the Lenders true
and accurate knowledge of the subject matter.
Section 9.9 REVISIONS OR UPDATES TO SCHEDULES. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, the Borrower shall
provide promptly to the Agent and the Lenders such revisions or updates to such
Schedule(s) as may be necessary or appropriate to update or correct such
Schedule(s); PROVIDED that no such revisions or updates to any Schedule(s) shall
be deemed to have cured any breach of warranty or representation resulting from
the inaccuracy or incompleteness of any such Schedule(s) unless and until the
Required Lenders, in their sole discretion, shall have accepted in writing such
revisions or updates to such Schedule(s).
ARTICLE 10 - INFORMATION
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations have been indefeasibly paid in full, unless the Required
Lenders shall otherwise consent in the manner set forth in SECTION 15.10, the
Borrower will furnish to the Agent and each Lender at the offices designated for
such purpose pursuant to SECTION 14.1:
Section 10.1 FINANCIAL STATEMENTS.
(a) AUDITED YEAR-END STATEMENTS. As soon as available, but in any event
within 95 days after the end of each fiscal year of the Borrower, copies of the
balance sheet of the Borrower as at the end of such fiscal year and the related
statements of income, shareholders' equity and cash flow for such fiscal year,
along with the Borrower's annual 10K, in each case setting forth in comparative
form the figures for the previous year of the Borrower and reported on, without
qualification, by Deloitte & Touche or other independent certified public
accountants selected by the Borrower and reasonably acceptable to the Agent.
(b) QUARTERLY FINANCIAL STATEMENTS. As soon as available, but in any
event within 50 days after the end of each quarter copies of the unaudited
balance sheet of the Borrower as at the end of such quarter and the related
unaudited income statement for the Borrower for such quarter and for the portion
of the fiscal year of the Borrower through such quarter along with the
Borrower's quarterly 10Q, all of which shall be certified by the chief financial
officer of the Borrower to the best of his knowledge as presenting fairly the
financial condition and results of operations of the Borrower as at the date
thereof and for the periods ended on such date, subject to normal year end
adjustments.
All such financial statements shall be complete and correct in all material
respects and prepared in accordance with GAAP (except, with respect to interim
financial statements, for the omission of footnotes) applied consistently
throughout the periods reflected therein.
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Section 10.2 ACCOUNTANTS' CERTIFICATE. Together with each delivery of
financial statements required by SECTION 10.1(A), a certificate of the
accountants who performed the audit in connection with such statements stating
that they have reviewed this Agreement and that, in making the audit necessary
to the issuance of a report on such financial statements, they have obtained no
knowledge of any Default or Event of Default or, if such accountants have
obtained knowledge of a Default or Event of Default, specifying the nature and
period of existence thereof.
The Borrower authorizes the Agent and each Lender to discuss the financial
condition of the Borrower with the Borrower's independent certified public
accountants and agrees that such discussion or communication shall be without
liability to either the Agent or any Lender or the Borrower's independent
certified public accountants. The Borrower shall deliver a letter addressed to
such accountants authorizing them to comply with the provisions of this SECTION
10.2.
Section 10.3 OFFICER'S CERTIFICATE. Together with each delivery of
financial statements required by SECTION 10.1(A) and (B), a certificate of the
Borrower's President or chief financial officer (a) stating that, based on an
examination sufficient to enable him to make an informed statement, no Default
or Event of Default exists or, if such is not the case, specifying such Default
or Event of Default and its nature, when it occurred, whether it is continuing
and the steps being taken by the Borrower with respect to such Default or Event
of Default, and (b) setting forth the calculations necessary to establish
whether or not the Borrower was in compliance with the covenants contained in
SECTIONS 11.1, 11.2, and 11.5 as of the date of such statements.
Section 10.4 COPIES OF OTHER REPORTS. (a) Promptly upon receipt
thereof, copies of all reports, if any, submitted to the Borrower or its Board
of Directors by its independent public accountants, including, without
limitation, all management reports and management letters.
(b) Within 60 days prior to the end of each fiscal year, a projected
balance sheet, income statement and financial covenant compliance of the
Borrower for the upcoming fiscal year.
(c) From time to time and promptly upon each request, such forecasts,
data, certificates, reports, statements, opinions of counsel, documents or
further information regarding the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower as the
Agent or any Lender may reasonably request. The rights of the Agent and each
Lender under this SECTION 10.4(C) are in addition to and not in derogation of
its rights under any other provision of this Agreement or any Loan Document.
(d) If requested by the Agent or any Lender, statements in conformity
with the requirements of Federal Reserve Form G-1 or U-1 referred to in
Regulations G and U, respectively, of the Board of Governors of the Federal
Reserve System.
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Section 10.5 NOTICE OF LITIGATION AND OTHER MATTERS. Prompt notice of:
(a) the commencement, to the extent the Borrower is aware of the same,
of all proceedings and investigations by or before any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any other way relating adversely to, or adversely
affecting, the Borrower or any Affiliate of the Borrower or any of their
respective property, assets or businesses which might, singly or in the
aggregate, cause a Default or an Event of Default or have a Materially Adverse
Effect,
(b) any amendment of the articles of incorporation or by-laws of the
Borrower,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of the Borrower or any
Affiliate of the Borrower which has had or may have any Materially Adverse
Effect and any change in the executive officers of the Borrower, and
(d) any (i) Default or Event of Default, or (ii) event that constitutes
or that, with the passage of time or giving of notice or both, would constitute
a default or event of default by the Borrower under any material agreement
(other than this Agreement) to which the Borrower is a party or by which the
Borrower or any of its property may be bound if the exercise of remedies
thereunder by the other party to such agreement would have, either individually
or in the aggregate, a Materially Adverse Effect.
Section 10.6 ERISA. As soon as possible and in any event within 30 days
after the Borrower knows, or has reason to know, that:
(a) any Termination Event with respect to a Benefit Plan has occurred
or will occur,
(b) the aggregate present value of the Unfunded Vested Accrued Benefits
under all Plans has increased to an amount in excess of $0, or
(c) the Borrower is in "default" (as defined in Section 4219(c)(5) of
ERISA) with respect to payments to a Multiemployer Plan required by reason of
its complete or partial withdrawal (as described in Section 4203 or 4205 of
ERISA) from such Multiemployer Plan,
a certificate of the President or the chief financial officer of the Borrower
setting forth the details of such of the events described in CLAUSES (A) through
(C) as applicable and the action which is proposed to be taken with respect
thereto and, simultaneously with the filing thereof, copies of any notice or
filing which may be required by the PBGC or other agency of the United States
government with respect to such of the events described in CLAUSES (A) through
(C) as applicable.
ARTICLE 11 - NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all the
Secured Obligations
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have been indefeasibly paid in full, unless the Required Lenders shall otherwise
consent in the manner set forth in SECTION 15.10, the Borrower will not directly
or indirectly:
Section 11.1 FINANCIAL COVENANTS.
(a) MAXIMUM FUNDED INDEBTEDNESS TO EBITDAR RATIO. Permit the ratio of
the Borrower's Funded Indebtedness to its EBITDAR (measured for the preceding
four fiscal quarters) to be greater than:
(i) 4.5 to 1 as of any fiscal quarter end on or prior to
October 31, 1998;
(ii) 4.25 to 1 as of any fiscal quarter end after October 31,
1998 but on or prior to October 31, 1999; or
(iii) 4.0 to 1 as of any fiscal quarter end after October 31,
1999.
(b) MINIMUM CURRENT RATIO. Permit the ratio of the Borrower's current
assets to the Borrower's current Liabilities (in each case determined in
accordance with GAAP, but including in current Liabilities the outstanding
Revolving Credit Loans), to be less than 1.20 to 1 at the end of any fiscal
quarter.
(c) MINIMUM TANGIBLE NET WORTH. Permit the Tangible Net Worth of the
Borrower at any time:
(i) from January 31, 1998 through and including January 30,
1999, to be less than $34,000,000; or
(ii) from January 31, 1999 to and including January 30, 2000,
and from and including the last day of each subsequent fiscal year to
and including the next to last day of the succeeding fiscal year, to be
less than the Tangible Net Worth required for the previous fiscal year
plus the greater of (a) 75% of Net Income of Borrower for such previous
fiscal year, or (b) $1,750,000.
(d) MINIMUM FIXED CHARGE COVERAGE RATIO. Permit the ratio of (i) the
Borrower's EBITDAR less the Unfunded Capital Expenditures divided by (ii) the
Borrower's Fixed Charges, all as of the end of each fiscal quarter of the
Borrower, measured for the immediately preceding four fiscal quarters, to be
less than 1.4 to 1.
Section 11.2 INDEBTEDNESS. Create, assume, or otherwise become or
remain obligated in respect of, or permit or suffer to exist or to be created,
assumed or incurred or to be outstanding any Indebtedness, except for Permitted
Indebtedness for Money Borrowed.
Section 11.3 GUARANTIES. Become or remain liable with respect to any
Guaranty of any obligation of any other Person, excluding the guaranty for Sunny
Industries for $600,000.00.
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Section 11.4 INVESTMENTS. Acquire, after the Agreement Date, any
Business Unit or Investment or, after such date, permit any Investment to be
outstanding, other than Permitted Investments.
Section 11.5 CAPITAL EXPENDITURES. Make or incur any Capital
Expenditures, except that the Borrower may make or incur Capital Expenditures in
an amount not to exceed, in the aggregate, $2,000,000 during any fiscal year.
Section 11.6 RESTRICTED DISTRIBUTIONS AND PAYMENTS, ETC. Declare or
make any Restricted Distribution or Restricted Payment.
Section 11.7 MERGER, CONSOLIDATION AND SALE OF ASSETS. Merge or
consolidate with any other Person or sell, lease or transfer or otherwise
dispose of all or a substantial portion of its assets to any Person.
Section 11.8 TRANSACTIONS WITH AFFILIATES. Effect any transaction with
any Affiliate on a basis less favorable to the Borrower than would be the case
if such transaction had been effected with a Person not an Affiliate.
Section 11.9 LIENS. Create, assume or permit or suffer to exist or to
be created or assumed any Lien on any of the property or assets of the Borrower,
real, personal or mixed, tangible or intangible, except for Permitted Liens.
Section 11.10 OPERATING LEASES. Enter into any lease other than a
Capitalized Lease which would cause the annual payment obligations of the
Borrower under all leases (other than leases of real property, Capitalized
Leases and the SunTrust Lease) to exceed $250,000.00 in the aggregate.
Section 11.11 BENEFIT PLANS. Permit, or take any action which would
result in, the aggregate present value of the Unfunded Vested Accrued Benefits
under all Benefit Plans of the Borrower to exceed $0.
Section 11.12 SALES AND LEASEBACKS. Enter into any arrangement with any
Person providing for the leasing from such Person of real or personal property
which has been or is to be sold or transferred, directly or indirectly, by the
Borrower to such Person.
Section 11.13 AMENDMENTS OF OTHER AGREEMENTS. Amend in any way the
interest rate or principal amount or schedule of payments of principal and
interest with respect to any Indebtedness (other than the Secured Obligations)
other than to reduce the interest rate or extend the schedule of payments with
respect thereto.
Section 11.14 MINIMUM AVAILABILITY. Permit Availability to be less than
$1,000,000 at any time.
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ARTICLE 12 - DEFAULT
Section 12.1 EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or nongovernmental body:
(a) DEFAULT IN PAYMENT OF LOANS. The Borrower shall default in any
payment of principal of, or interest on, any Loan or Note when and as due
(whether at maturity, by reason of acceleration or otherwise).
(b) OTHER PAYMENT DEFAULT. The Borrower shall default in the payment,
as and when due, of principal of or interest on, any other Secured Obligation,
and such default shall continue for 10 days after written notice thereof has
been given to the Borrower by the Agent or any Lender.
(c) MISREPRESENTATION. Any representation or warranty made or deemed to
be made by the Borrower under this Agreement or any other Loan Document or any
amendment hereto or thereto shall at any time prove to have been incorrect or
misleading in any material respect when made.
(d) DEFAULT IN PERFORMANCE. The Borrower shall default in the
performance or observance of any term, covenant, condition or agreement
contained in (i) ARTICLES 7, 8, 9, 10 OR 11; or (ii) this Agreement (other than
as specifically provided for otherwise in this SECTION 12.1) and such default
shall continue for a period of 14 days after written notice thereof has been
given to the Borrower by the Agent or any Lender.
(e) INDEBTEDNESS CROSS-DEFAULT. (i) The Borrower shall fail to pay when
due and payable, after the expiration of any applicable grace period, the
principal of or interest on any Indebtedness (other than the Loans or Note)
where the principal amount of such Indebtedness is in excess of $150,000, or
(ii) the maturity of any such Indebtedness shall have (A) been accelerated in
accordance with the provisions of any indenture, contract or instrument
providing for the creation of or concerning such Indebtedness, or (B) been
required to be prepaid prior to the stated maturity thereof, or (iii) any event
shall have occurred and be continuing which, with or without the passage of time
or the giving of notice, or both, would permit any holder or holders of such
Indebtedness, any trustee or agent acting on behalf of such holder or holders or
any other Person so to accelerate such maturity.
(f) OTHER CROSS-DEFAULTS. The Borrower shall default in the payment
when due or in the performance or observance of any material obligation or
condition of any agreement, contract or lease (other than the Security Documents
or any such agreement, contract or lease relating to Indebtedness), if the
exercise of remedies thereunder by the other party to such agreement could have
a Materially Adverse Effect.
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(g) VOLUNTARY BANKRUPTCY PROCEEDING. The Borrower shall (i) commence a
voluntary case under the federal bankruptcy laws (as now or hereafter in
effect), (ii) commence a proceeding seeking to take advantage of any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization, winding
up or composition for adjustment of debts, (iii) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv) apply for or
consent to, or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver, custodian, trustee
or liquidator of itself or of a substantial part of its property, domestic or
foreign, (v) admit in writing its inability to pay its debts as they become due,
(vi) make a general assignment for the benefit of creditors, or (vii) take any
corporate action for the purpose of authorizing any of the foregoing.
(h) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other proceeding shall
be commenced against the Borrower in any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts, or (ii) the appointment of a
trustee, receiver, custodian, liquidator or the like of the Borrower or of all
or any substantial part of the assets, domestic or foreign, of the Borrower, and
such case or proceeding shall continue undismissed or unstayed for a period of
60 consecutive calendar days, or an order granting the relief requested in such
case or proceeding against the Borrower (including, but not limited to, an order
for relief under such federal bankruptcy laws) shall be entered.
(i) LOAN DOCUMENTS. Any event of default or Event of Default under any
other Loan Document shall occur or the Borrower shall default in the performance
or observance of any material term, covenant, condition or agreement contained
in, or the payment of any other sum covenanted to be paid by the Borrower under,
any such Loan Document or any provision of this Agreement, or of any other Loan
Document after delivery thereof hereunder, shall for any reason cease to be
valid and binding, other than a nonmaterial provision rendered unenforceable by
operation of law, or the Borrower or other party thereto (other than the Agent
or any Lender) shall so state in writing, or this Agreement or any other Loan
Document, after delivery thereof hereunder, shall for any reason (other than any
action taken independently by the Agent or any Lender and except to the extent
permitted by the terms thereof) cease to create a valid, perfected and, except
as otherwise expressly permitted herein, first priority Lien on, or security
interest in, any of the Collateral purported to be covered thereby.
(j) JUDGMENT. A judgment or order for the payment of money which
exceeds $100,000 in amount shall be entered against the Borrower by any court
and such judgment or order shall continue undischarged or unstayed for 30 days.
(k) ATTACHMENT. A warrant or writ of attachment or execution or similar
process which exceeds $100,000 in value shall be issued against any property of
the Borrower and such warrant or process shall continue undischarged or unstayed
for 30 days.
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(l) ERISA. (i) Any Termination Event with respect to a Benefit Plan
shall occur that, after taking into account the excess, if any, of (A) the fair
market value of the assets of any other Benefit Plan with respect to which a
Termination Event occurs on the same day (but only to the extent that such
excess is the property of the Borrower) over (B) the present value on such day
of all vested nonforfeitable benefits under such other Benefit Plan, results in
an Unfunded Vested Accrued Benefit in excess of $0, (ii) any Benefit Plan shall
incur an "accumulated funding deficiency" (as defined in Section 412 of the Code
or Section 302 of ERISA) for which a waiver has not been obtained in accordance
with the applicable provisions of the Code and ERISA, or (iii) the Borrower is
in "default" (as defined in Section 4219(c)(5) of ERISA) with respect to
payments to a Multiemployer Plan resulting from the Borrower's complete or
partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan.
(m) QUALIFIED AUDITS. The independent certified public accountants
retained by the Borrower shall refuse to deliver an opinion in accordance with
SECTION 10.1(A) with respect to the annual financial statements of the Borrower.
(n) CHANGE IN MANAGEMENT. George Feldenkreis and Oscar Feldenkreis
shall for any reason cease to be officers of the Borrower.
(o) MATERIAL ADVERSE CHANGE. There occurs any act, omission, event,
undertaking or circumstance or series of acts, omissions, events, undertakings
or circumstances which have, or in the sole judgment of the Required Lenders
exercised in good faith would have, either individually or in the aggregate, a
Materially Adverse Effect.
Section 12.2 REMEDIES.
(a) AUTOMATIC ACCELERATION AND TERMINATION OF FACILITIES. Upon the
occurrence of an Event of Default specified in SECTION 12.1(G) or (H), (i) the
principal of and the interest on the Loans and the Notes at the time
outstanding, and all other amounts owed to the Agent and the Lenders under this
Agreement or any of the Loan Documents and all other Secured Obligations, shall
thereupon become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived, anything in this
Agreement or any of the Loan Documents to the contrary notwithstanding, and (ii)
the Revolving Credit Facility and the commitment of the Lenders to make advances
thereunder or under this Agreement shall immediately terminate.
(b) OTHER REMEDIES. If any Event of Default shall have occurred and be
continuing, the Agent may, and at the direction of the Required Lenders shall,
do any of the following:
(i) declare the principal of and interest on the Loans and the
Notes at the time outstanding, and all other amounts owed to the Agent
and the Lenders under this Agreement or any of the Loan Documents and
all other Secured Obligations, to be forthwith due and payable,
whereupon the same shall immediately become due and payable without
presentment, demand, protest or other notice of any kind, all of which
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are expressly waived, anything in this Agreement or the Loan Documents
to the contrary notwithstanding;
(ii) terminate the Revolving Credit Facility and any
commitment of the Lenders to make advances hereunder;
(iii) notify, or request the Borrower to notify, in writing or
otherwise, any Account Debtor or obligor with respect to any one or
more of the Receivables to make payment to the Agent or any agent or
designee of the Agent, at such address as may be specified by the
Agent, and, if, notwithstanding the giving of any notice, any Account
Debtor or other such obligor shall make payments to the Borrower, the
Borrower shall hold all such payments it receives in trust for the
Agent, without commingling the same with other funds or property of, or
held by, the Borrower and shall deliver the same to the Agent or any
such agent or designee immediately upon receipt by the Borrower in the
identical form received, together with any necessary endorsements;
(iv) settle or adjust disputes and claims directly with
Account Debtors and other obligors on Receivables for amounts and on
terms which the Agent considers advisable and in all such cases only
the net amounts received by the Agent in payment of such amounts, after
deductions of costs and attorneys' fees, shall constitute Collateral,
and the Borrower shall have no further right to make any such
settlements or adjustments or to accept any returns of merchandise;
(v) enter upon any premises on which Inventory may be located
and, without resistance or interference by the Borrower, take physical
possession of any or all thereof and maintain such possession on such
premises or move the same or any part thereof to such other place or
places as the Agent shall choose, without being liable to the Borrower
on account of any loss, damage or depreciation that may occur as a
result thereof, so long as the Agent shall act reasonably and in good
faith
(vi) require the Borrower to and the Borrower shall, without
charge to the Agent or any Lender, assemble the Inventory and maintain
or deliver it into the possession of the Agent or any agent or
representative of the Agent at such place or places as the Agent may
designate;
(vii) at the expense of the Borrower, cause any of the
Inventory to be placed in a public or field warehouse, and neither the
Agent nor any Lender shall be liable to the Borrower on account of any
loss, damage or depreciation that may occur as a result thereof, so
long as the Agent shall act reasonably and in good faith;
(viii) without notice, demand or other process, and without
payment of any rent or any other charge, enter any of the Borrower's
premises and, without breach of the peace, until the Agent completes
the enforcement of its rights in the Collateral, take possession of
such premises or place custodians in exclusive control thereof, remain
on
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such premises and use the same and any of the Borrower's equipment, for
the purpose of (A) completing any work in process, preparing any
Inventory for disposition and disposing thereof, and (B) collecting any
Receivable, and the Agent is hereby granted a license or sublicense and
all other rights as may be necessary, appropriate or desirable to use
the Intellectual Property in connection with the foregoing, and the
rights of the Borrower under all licenses and franchise agreements
shall inure to the Agent's benefit (provided, however, that any use of
any federally registered trademarks as to any goods shall be subject to
the control as to the quality of such goods of the owner of such
trademarks and the goodwill of the business symbolized thereby);
(ix) exercise any and all of its rights under any and all of
the Security Documents;
(x) apply any cash Collateral to the payment of the Secured
Obligations in any order in which the Agent, on behalf of the Lenders
may elect or use such cash in connection with the exercise of any of
its other rights hereunder or under any of the Security Documents;
(xi) establish or cause to be established one or more
Lockboxes or other arrangement for the deposit of proceeds of
Receivables, and, in such case, the Borrower shall cause to be
forwarded to the Agent at the Agent's Office, on a daily basis, copies
of all checks and other items of payment and deposit slips related
thereto deposited in such Lockboxes, together with collection reports
in form and substance satisfactory to the Agent; and
(xii) exercise all of the rights and remedies of a secured
party under the UCC (whether or not the UCC is applicable) and under
any other applicable law, including, without limitation, the right,
without notice except as specified below and with or without taking the
possession thereof, to sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any location chosen by
the Agent, for cash, on credit or for future delivery and at such price
or prices and upon such other terms as the Agent may deem commercially
reasonable. The Borrower agrees that, to the extent notice of sale
shall be required by law, at least 10 days' notice to the Borrower of
the time and place of any public sale or the time after which any
private sale is to be made shall constitute reasonable notice, but
notice given in any other reasonable manner or at any other reasonable
time shall also constitute reasonable notification. The Agent shall not
be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Agent may adjourn any public or private
sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
Section 12.3 APPLICATION OF PROCEEDS. All proceeds from each sale of,
or other realization upon, all or any part of the Collateral following an Event
of Default shall be applied or paid over as follows:
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(a) FIRST: to the payment of all costs and expenses incurred in
connection with such sale or other realization, including attorneys' fees,
(b) SECOND: to the payment of the Secured Obligations (with the
Borrower remaining liable for any deficiency) in accordance with SECTION 4.8(D),
(d) THIRD: the balance (if any) of such proceeds shall be paid to the
Borrower or, subject to any duty imposed by law or otherwise, to whomsoever is
entitled thereto.
THE BORROWER SHALL REMAIN LIABLE AND WILL PAY, ON DEMAND, ANY DEFICIENCY
REMAINING IN RESPECT OF THE SECURED OBLIGATIONS, TOGETHER WITH INTEREST THEREON
AT A RATE PER ANNUM EQUAL TO THE HIGHEST RATE THEN PAYABLE HEREUNDER ON SUCH
SECURED OBLIGATIONS, WHICH INTEREST SHALL CONSTITUTE PART OF THE SECURED
OBLIGATIONS.
Section 12.4 POWER OF ATTORNEY. In addition to the authorizations
granted to the Agent under SECTION 8.15 or under any other provision of this
Agreement or any of the Loan Documents, upon and after an Event of Default, the
Borrower hereby irrevocably designates, makes, constitutes and appoints the
Agent (and all Persons designated by the Agent from time to time) as the
Borrower's true and lawful attorney and agent in fact, and the Agent or any
agent of the Agent may, without notice to the Borrower, and at such time or
times as the Agent or any such agent in its sole discretion may determine, in
the name of the Borrower or the Agent,
(a) demand payment of the Receivables, enforce payment thereof by legal
proceedings or otherwise, settle, adjust, compromise, extend or renew any or all
of the Receivables or any legal proceedings brought to collect the Receivables,
discharge and release the Receivables or any of them and exercise all of the
Borrower's rights and remedies with respect to the collection of Receivables,
(b) prepare, file and sign the name of the Borrower on any proof of
claim in bankruptcy or any similar document against any Account Debtor or any
notice of Lien, assignment or satisfaction of Lien or similar document in
connection with any of the Collateral,
(c) endorse the name of the Borrower upon any chattel paper, document,
instrument, notice, freight bill, bill of lading or similar document or
agreement relating to the Receivables or any other Collateral,
(d) use the stationery of the Borrower, open the Borrower's mail,
notify the post office authorities to change the address for delivery of the
Borrower's mail to an address designated by the Agent and sign the name of the
Borrower to verifications of the Receivables and on any notice to the Account
Debtors,
(e) use the information recorded on or contained in any data processing
equipment and computer hardware and software relating to the Receivables,
Inventory, or other Collateral to which the Borrower or any Subsidiary of the
Borrower has access.
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Section 12.5 MISCELLANEOUS PROVISIONS CONCERNING REMEDIES .
(a) RIGHTS CUMULATIVE. The rights and remedies of the Agent and the
Lenders under this Agreement, the Notes and each of the Loan Documents shall be
cumulative and not exclusive of any rights or remedies which it or they would
otherwise have. In exercising such rights and remedies, the Agent and the
Lenders may be selective and no failure or delay by the Agent or any Lender in
exercising any right shall operate as a waiver of such right nor shall any
single or partial exercise of any power or right preclude its other or further
exercise or the exercise of any other power or right.
(b) WAIVER OF MARSHALLING. The Borrower hereby waives any right to
require any marshalling of assets and any similar right.
(c) LIMITATION OF LIABILITY. Nothing contained in this ARTICLE 12 or
elsewhere in this Agreement or in any of the Loan Documents shall be construed
as requiring or obligating the Agent or any Lender or any agent or designee of
the Agent or any Lender to make any demand or to make any inquiry as to the
nature or sufficiency of any payment received by it or to present or file any
claim or notice or take any action with respect to any Receivable or any other
Collateral or the moneys due or to become due thereunder or in connection
therewith or to take any steps necessary to preserve any rights against prior
parties, and neither the Agent nor any Lender nor any of their agents or
designees shall have any liability to the Borrower for actions taken pursuant to
this ARTICLE 12, any other provision of this Agreement or any of the Loan
Documents, so long as the Agent, such Lender or such agent or designee shall act
reasonably and in good faith.
(d) APPOINTMENT OF RECEIVER. In any action under this ARTICLE 12, the
Agent and the Lenders shall be entitled to the appointment of a receiver,
without notice of any kind whatsoever, to take possession of all or any portion
of the Collateral and to exercise such power as the court shall confer upon such
receiver.
Section 12.6 TRADEMARK LICENSE. The Borrower hereby grants to the Agent
the nonexclusive right and license to use any trademark then used by the
Borrower for the purposes set forth in SECTION 12.2(B)(VIII) and for the purpose
of enabling the Agent to realize on the Collateral and to permit any purchaser
of any portion of the Collateral through a foreclosure sale or any other
exercise of the Agent's rights and remedies under the Loan Documents to use,
sell or otherwise dispose of the Collateral bearing any such trademark. Such
right and license is granted free of charge, without the requirement that any
monetary payment whatsoever be made to the Borrower or any other Person by the
Agent or any Lender. The Borrower hereby represents, warrants, covenants and
agrees that it presently has, and shall continue to have, the right, without the
approval or consent of others, to grant the license set forth in this SECTION
12.6.
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ARTICLE 13
ASSIGNMENTS
Section 13.1. SUCCESSORS AND ASSIGNS; PARTICIPATIONS.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower, the Lenders, the Agent, all future holders of the Notes, and their
respective successors and assigns, except that the Borrower may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of each Lender.
(b) Each Lender may, with the consent of the Agent (such consent not to
be unreasonably withheld), assign to one or more Eligible Assignees all or a
portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Loans at the time owing
to it and the Note held by it); PROVIDED, HOWEVER, that (i) each such assignment
shall be of a constant, and not a varying, percentage of all the assigning
Lender's rights and obligations under this Agreement, (ii) the amount of the
Commitment of the assigning Lender that is subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Agent) shall in no event be less than the Minimum
Commitment, (iii) in the case of a partial assignment, the amount of the
Commitment that is retained by the assigning Lender (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Agent) shall in no event be less than the Minimum Commitment, (iv) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as hereinafter defined) an Assignment
and Acceptance, together with any Note subject to such assignment, (v) such
assignment shall not, without the consent of the Borrower, require the Borrower
to file a registration statement with the Securities and Exchange Commission or
apply to or qualify the Loans or the Notes under the blue sky laws of any state,
(vi) the representation contained in SECTION 13.2 hereof shall be true with
respect to any such proposed assignee, and (vii) the parties to such assignment
shall deliver to the Agent a processing fee of $5,000. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least five
Business Days after the execution thereof, (x) the assignee thereunder shall be
a party hereto and, to the extent provided in such Assignment and Acceptance,
have the rights and obligations of a Lender hereunder, and (y) the Lender
assignor thereunder shall, to the extent provided in such assignment, be
released from its obligations under this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this
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Agreement or any other instrument or document furnished pursuant hereto; (ii)
such Lender assignor makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under this
Agreement or any other instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of this Agreement, together
with copies of the financial statements referred to in SECTION 6.1(M) and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into such Assignment and Acceptance; (iv)
such assignee will, independently and without reliance upon the Agent, such
Lender assignor or any other Lender, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such assignee appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers under this Agreement and the other Loan Documents as are delegated
to the Agent by the terms hereof and thereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) The Agent shall maintain a copy of each Assignment and Acceptance
delivered to it and a register for the recordation of the names and addresses of
the Lenders and the Commitment Percentage of, and principal amount of the Loans
owing to, each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Lenders may treat each person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Eligible Assignee together with any Note subject to such
assignment, the fee described in CLAUSE (VII) of SECTION 13.1(B), and the
written consent to such assignment, the Agent shall, if such Assignment and
Acceptance has been completed and is in the form of EXHIBIT C, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register, (iii) give prompt notice thereof to the Lenders and the Borrower, and
(iv) promptly deliver a copy of such Assignment and Acceptance to the Borrower.
Within five Business Days after receipt of notice, the Borrower shall execute
and deliver to the Agent in exchange for the surrendered Note a new Note to the
order of such Eligible Assignee in amounts equal to the Commitment Percentage
assumed by such Eligible Assignee pursuant to such Assignment and Acceptance and
a new Note to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of the assigned
Notes delivered to the assignor Lender. Each surrendered Note shall be cancelled
and returned to the Borrower.
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(f) Each Lender may, without the consent of the Borrower, sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its commitments hereunder and the Loans owing to it and the Note
held by it); PROVIDED, HOWEVER, that (i) each such participation shall be in an
amount not less than the Minimum Commitment, (ii) such Lender's obligations
under this Agreement (including, without limitation, its commitments hereunder)
shall remain unchanged, (iii) such Lender shall remain solely responsible to the
other parties hereto for the performance of such obligations, (iv) such Lender
shall remain the holder of the Note held by it for all purposes of this
Agreement, (v) the Borrower, the Agent and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement; PROVIDED, that such Lender may
agree with any participant that such Lender will not, without such participant's
consent, agree to or approve any waivers or amendments which would reduce the
principal of or the interest rate on any Loans, extend the term or increase the
amount of the commitments of such participant, reduce the amount of any fees to
which such participant is entitled, extend any scheduled payment date for
principal or release Collateral securing the Loans (other than Collateral
disposed of in accordance with the terms of this Agreement or the Security
Documents), and (vi) any such disposition shall not, without the consent of the
Borrower, require the Borrower to file a registration statement with the
Securities and Exchange Commission to apply to qualify the Loans or the Notes
under the blue sky law of any state. Any Lender selling a participation to any
bank or other entity that is not an Affiliate of such Lender shall give prompt
notice thereof to the Borrower.
(g) Any Lender may, in connection with any assignment, proposed
assignment, participation or proposed participation pursuant to this SECTION
13.1, disclose to the assignee, participant, proposed assignee or proposed
participant, any information relating to the Borrower and its Subsidiaries
furnished to such Lender by or on behalf of the Borrower; provided that, prior
to any such disclosure, each such assignee, proposed assignee, participant or
proposed participant shall agree with the Borrower or such Lender (which in the
case of an agreement with only such Lender, the Borrower shall be recognized as
a third party beneficiary thereof) to preserve the confidentiality of any
confidential information relating to the Borrower and its Subsidiaries received
from such Lender.
Section 13.2. REPRESENTATION OF LENDERS. Each Lender hereby represents
that it will make each Loan hereunder as a commercial loan for its own account
in the ordinary course of its business; PROVIDED, HOWEVER, that subject to
SECTION 13.1 hereof, the disposition of the Notes or other evidence of the
Secured Obligations held by any Lender shall at all times be within its
exclusive control.
ARTICLE 14 - AGENT
Section 14.1. APPOINTMENT OF AGENT. Each of the Lenders hereby
irrevocably designates and appoints NationsBank, N.A. as the Agent of such
Lender under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the Agent, as the agent for
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such Lender to take such action on its behalf under the provisions 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 such other Loan Documents, including, without limitation, to make
determinations as to the eligibility of Inventory and Receivables and to adjust
the advance ratios contained in the definition of "Borrowing Base" (so long as
such advance ratios, as adjusted, do not exceed those set forth in the
definition of "Borrowing Base"), together with such other powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
elsewhere in this Agreement or such other Loan Documents, the Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Agreement or the other Loan Documents or otherwise exist
against the Agent.
Section 14.2. 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.
Section 14.3. EXCULPATORY PROVISIONS. Neither the Agent nor any of its
trustees, officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable to any Lender (or any Lender's participants) for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct), or (ii) responsible
in any manner to any Lender (or any Lender's participants) for any recitals,
statements, representations or warranties made by the Borrower or any of its
Subsidiaries or any officer thereof contained in this Agreement or the other
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Borrower or any of its
Subsidiaries 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 conditions
of, this Agreement, or to inspect the properties, books or records of the
Borrower or any of its Subsidiaries.
Section 14.4. 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, affidavit, letter, cablegram, telegram, telecopy,
telex or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower or any of its
Subsidiaries), 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 such Note shall have been transferred
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in accordance with SECTION 14.1. The Agent shall be fully justified in failing
or refusing to take any action under this Agreement and the other Loan Documents
unless it shall first receive such advice or concurrence of the Required 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 any such action. The Agent shall in
all cases be fully protected in acting, or in refraining from acting, under this
Agreement and the Notes in accordance with a request of the Required 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.
Section 14.5. 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 the 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 promptly give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default or Event
of Default as shall be reasonably directed by the Required Lenders; PROVIDED
that unless and until the Agent shall have received such directions, the Agent
may (but shall not be obligated to) continue making Revolving Credit Loans to
the Borrower on behalf of the Lenders in reliance on the provisions of SECTION
4.7 and take such other 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.
Section 14.6. 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 the Borrower and its Subsidiaries,
shall be deemed to constitute any representation or warranty by the Agent to any
Lender. Each Lender represents to the Agent that it has, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrower and its Subsidiaries and made its
own decision to make its Loans hereunder and enter into this Agreement. Each
Lender also represents that it will, independently and without reliance upon the
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Loan Documents, and to make such investigation as it deems necessary
to inform itself as to the business, operations, property, financial and other
condition and creditworthiness of the Borrower and its Subsidiaries. Except for
notices, reports and other documents expressly required to be furnished to the
Lenders by the Agent hereunder or by the other Loan Documents, the Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, operations, property, financial and
other condition or creditworthiness of the Borrower and its Subsidiaries which
may come into the possession of the Agent or any of its officers, directors,
employees, agents,
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attorneys-in-fact or Affiliates.
Section 14.7. INDEMNIFICATION. The Lenders agree to indemnify the Agent
in its capacity as such (to the extent not reimbursed by the Borrower and
without limiting the obligation of the Borrower to do so), ratably according to
their respective Commitment Percentages, 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 or 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 or
resulting solely from transactions or occurrences that occur at a time after
such Lender has assigned all of its interests, rights and obligations under this
Agreement pursuant to SECTION 13.1 or, in the case of a Lender to which an
assignment is made hereunder pursuant to SECTION 13.1, at a time before such
assignment. The agreements in this subsection shall survive the payment of the
Notes, the Secured Obligations and all other amounts payable hereunder and the
termination of this Agreement.
Section 14.8. AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Borrower and its Subsidiaries (including the extension
to the Borrower and its Subsidiaries of any credit facility designed to
refinance the Loans and other Secured Obligations hereunder) as if the Agent
were not the Agent hereunder. With respect to its Commitment, the Loans made or
renewed by it and any Note issued to it and any Standby Letter of Credit issued
by it, the Agent shall have and may exercise the same rights and powers under
this Agreement and the other Loan Documents and is subject to the same
obligations and liabilities as and to the extent set forth herein and in the
other Loan Documents for any other Lender. The terms "Lenders" or "Required
Lenders" or any other term shall, unless the context clearly otherwise
indicates, include the Agent in its individual capacity as a Lender or one of
the Required Lenders.
Section 14.9. SUCCESSOR AGENT. The Agent may resign as Agent upon 5
days written notice to the Lenders and the Borrower; provided, however, that
such resignation shall not take effect until a successor agent has been
appointed. If the Agent shall resign as Agent under this Agreement, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders which successor agent shall be approved by the Borrower (which approval
shall not be unreasonably withheld), 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 further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. If the Required Lenders
have failed to appoint a successor agent within 30 days after the resignation
notice given by the Agent as
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provided above, then the Agent shall be entitled to appoint a successor agent
from among the Lenders. After any Agent's resignation hereunder as Agent, the
provisions of ARTICLE 14 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent under this Agreement.
Section 14.10. NOTICES FROM AGENT TO LENDERS. The Agent shall forward
to each Lender, promptly after request therefor, copies of any material written
notices, reports or other information supplied to it by the Borrower (but which
the Borrower is not required to supply directly to the Lenders).
ARTICLE 15 - MISCELLANEOUS
Section 15.1 NOTICES.
(a) METHOD OF COMMUNICATION. Except as specifically provided in this
Agreement or in any of the Loan Documents, all notices and the communications
hereunder and thereunder shall be in writing or by telephone subsequently
confirmed in writing. Notices in writing shall be delivered personally or sent
by overnight courier service, by certified or registered mail, postage pre-paid,
or by facsimile transmission and shall be deemed received, in the case of
personal delivery, when delivered, in the case of overnight courier service, on
the next Business Day after delivery to such service, in the case of mailing, on
the third day after mailing (or, if such day is a day on which deliveries of
mail are not made, on the next succeeding day on which deliveries of mail are
made) and, in the case of facsimile transmission, upon transmittal; provided
that in the case of notices to the Agent, the Agent shall be charged with
knowledge of the contents thereof only when such notice is actually received by
the Agent. A telephonic notice to the Agent as understood by the Agent will be
deemed to be the controlling and proper notice in the event of a discrepancy
with or failure to receive a confirming written notice.
(b) ADDRESSES FOR NOTICES. Notices to any party shall be sent to it at
the following addresses, or any other address of which all the other parties are
notified in writing.
If to the Borrower: Supreme International Corporation
3000 N.W. 107th Avenue
Miami, Florida 33172
Attention: Vice-President - Finance
Facsimile No.: (305) 406-0585
With a copy to: Broad and Cassel
201 So. Biscayne Boulevard, Suite 3000
Miami, Florida 33131
Attention: Dale S. Bergman
Facsimile No.: (305) 373-9443
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If to the Agent: NationsBank N.A.
c/o NationsBank Business Credit
600 Peachtree Street, 13th Floor
Atlanta, Georgia 30308
Attention: Stuart Hall, Vice-President
Facsimile No.: (404) 607-6439
If to a Lender: At the address of such Lender set
forth on the signature page hereof or in the
Assignment and Acceptance under which such
Lender becomes a party hereto
(c) AGENT'S OFFICE. The Agent hereby designates its office located at
600 Peachtree Street, 13th Floor, Atlanta, Georgia 30308, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrower and the Lenders, as the office to which payments due are to be made and
at which Loans will be disbursed.
Section 15.2 EXPENSES. The Borrower agrees to pay or reimburse on
demand all costs and expenses incurred by the Agent, including, without
limitation, the reasonable fees and disbursements of counsel, in connection with
(a) the negotiation, preparation, execution, delivery, administration,
enforcement and termination of this Agreement and each of the other Loan
Documents, whenever the same shall be executed and delivered, including, without
limitation (i) the out-of-pocket costs and expenses incurred in connection with
the administration and interpretation of this Agreement and the other Loan
Documents; (ii) the costs and expenses of appraisals of the Collateral; (iii)
the costs and expenses of lien searches; and (iv) taxes, fees and other charges
for filing the Financing Statements and continuations and the costs and expenses
of taking other actions to perfect, protect, and continue the Security
Interests;
(b) the preparation, execution and delivery of any waiver, amendment,
supplement or consent by the Agent and the Lenders relating to this Agreement or
any of the Loan Documents;
(c) sums paid or incurred to pay any amount or take any action required
of the Borrower under the Loan Documents that the Borrower fails to pay or take;
(d) costs of inspections and verifications of the Collateral,
including, without limitation, standard per diem fees charged by the Agent for
travel, lodging, and meals for inspections of the Collateral and the Borrower'
operations and books and records by the Agent's employees or agents up to four
times per year and whenever an Event of Default exists;
(e) costs and expenses of forwarding loan proceeds, collecting checks
and other items of payment, and establishing and maintaining each Controlled
Disbursement Account, Agency Account and Lockbox;
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(f) costs and expenses of preserving and protecting the Collateral; and
(g) consulting, after the occurrence of a Default, with one or more
Persons, including appraisers, accountants and lawyers, concerning the value of
any Collateral for the Secured Obligations or related to the nature, scope or
value of any right or remedy of the Agent or any Lender hereunder or under any
of the Loan Documents, including any review of factual matters in connection
therewith, which expenses shall include the fees and disbursements of such
Persons.
The Borrower agrees to pay or reimburse on demand all costs and expenses
incurred by the Agent and the Lenders, including, without limitation, the
reasonable fees and disbursements of counsel, experts and other consultants to
the Agent and any Lender, in connection with actions taken with respect to any
Default or Event of Default hereunder or any "workout" of the Loans made
hereunder, to obtain payment of the Secured Obligations, to enforce the Security
Interests, to sell or otherwise realize upon the Collateral, and otherwise to
enforce the provisions of the Loan Documents, or to prosecute or defend any
claim in any way arising out of, related to or connected with, this Agreement or
any of the Loan Documents.
The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrower. The Borrower
hereby authorizes the Agent and each Lender to debit the Borrower's Loan
Accounts (by increasing the principal amount of the Revolving Credit Loan) in
the amount of any such costs and expenses owed by the Borrower when due.
Section 15.3 STAMP AND OTHER TAXES. The Borrower will pay any and all
stamp, registration, recordation and similar taxes, fees or charges and shall
indemnify the Agent and each Lender against any and all liabilities with respect
to or resulting from any delay in the payment or omission to pay any such taxes,
fees or charges, which may be payable or determined to be payable in connection
with the execution, delivery, performance or enforcement of this Agreement and
any of the Loan Documents or the perfection of any rights or security interest
thereunder.
Section 15.4 SETOFF. In addition to any rights now or hereafter granted
under applicable law, and not by way of limitation of any such rights, upon and
after the occurrence of any Default or Event of Default, each Lender, each
Affiliate of the Lenders, and any participant with any Lender in the Loans are
hereby authorized by the Borrower at any time or from time to time, without
notice to the Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
deposits (general or special, time or demand, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured)
and any other indebtedness at any time held or owing by such Lender, Affiliate
or participant to or for the credit or the account of the Borrower against and
on account of the Secured Obligations irrespective or whether or not (a) the
Agent or any Lender shall have made any demand under this Agreement or any of
the Loan Documents, or (b) the Agent or any Lender shall have declared any or
all of the Secured
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Obligations to be due and payable as permitted by SECTION 12.2 and although such
Secured Obligations shall be contingent or unmatured.
Section 15.5 LITIGATION. EACH OF THE AGENT, EACH LENDER AND THE
BORROWER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVES TRIAL BY JURY IN
ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH AN ACTION
MAY BE COMMENCED BY OR AGAINST THE BORROWER, THE AGENT OR ANY LENDER ARISING OUT
OF THIS AGREEMENT, THE COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY
OTHER CAUSE OR DISPUTE WHATSOEVER BETWEEN THE BORROWER, THE AGENT OR ANY LENDER
OF ANY KIND OR NATURE. THE BORROWER, THE AGENT AND EACH LENDER HEREBY AGREE THAT
THE FEDERAL COURT OF THE NORTHERN DISTRICT OF GEORGIA OR, AT THE OPTION OF THE
AGENT OR ANY LENDER, ANY COURT IN WHICH THE AGENT OR ANY LENDER SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER
THE MATTER IN CONTROVERSY AND WHICH SITS IN A JURISDICTION IN WHICH THE BORROWER
TRANSACTS BUSINESS SHALL HAVE NON-EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE
ANY CLAIMS OR DISPUTES BETWEEN THE BORROWER, THE AGENT OR ANY LENDER, PERTAINING
DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN DOCUMENTS OR TO ANY MATTER
ARISING THEREFROM. THE BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO
SUCH JURISDICTION IN ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS, HEREBY
WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS
ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS AND COMPLAINT OR OTHER
PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE
BORROWER AND ITS COUNSEL AT THE RESPECTIVE ADDRESSES SET FORTH IN SECTION
15.1(B), WHICH SERVICE SHALL BE DEEMED MADE UPON RECEIPT THEREOF. THE
NON-EXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF
ANY ACTION UNDER THIS AGREEMENT TO ENFORCE THE SAME IN ANY APPROPRIATE
JURISDICTION.
Section 15.6 WAIVER OF RIGHTS. THE BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH THE BORROWER HAS UNDER
CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW TO NOTCE AND TO A JUDICIAL HEARING PRIOR TO THE
ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE AGENT, ITS SUCCESSORS AND ASSIGNS
TO POSSESSION OF THE COLLATERAL UPON DEFAULT OR EVENT OF DEFAULT. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT
WHICH THE AGENT OR ANY LENDER MAY HAVE, THE BORROWER CONSENTS THAT, IF THE AGENT
FILES A PETITION FOR AN
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IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH SECTIONS 44-14-261 AND 44-14-262
OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR PROVISION OF APPLICABLE LAW
AND THIS WAIVER OR A COPY HEREOF IS ALLEGED IN SUCH PETITION AND ATTACHED
THERETO, THE COURT BEFORE WHICH SUCH PETITION IS FILED MAY DISPENSE WITH ALL
RIGHTS AND PROCEDURES HEREIN WAIVED AND MAY ISSUE FORTHWITH AN IMMEDIATE WRIT OF
POSSESSION IN ACCORDANCE WITH CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF
GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF APPLICABLE LAW, WITHOUT
THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE REQUIRED BY SECTION 44-14-263
OF THE OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF
APPLICABLE LAW. THE BORROWER HEREBY ACKNOWLEDGES THAT IT HAS READ AND FULLY
UNDERSTANDS THE TERMS OF THIS WAIVER AND THE EFFECT HEREOF.
Section 15.7 REVERSAL OF PAYMENTS. To the extent the Borrower makes a
payment or payments to the Agent or any Lender or the Agent or any Lender
receives any payment or proceeds of the Collateral for the Borrower's benefit,
which payment(s) or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then, the Agent and such Lender
shall have the continuing and exclusive right to apply, reverse and re-apply any
and all payments to any portion of the Secured Obligations, and, to the extent
of such payment or proceeds received, the Secured Obligations or part thereof
intended to be satisfied shall be revived and continued in full force and
effect, as if such payment or proceeds had not been received by the Agent or
such Lender.
Section 15.8 INJUNCTIVE RELIEF. The Borrower recognizes that, in the
event the Borrower fails to perform, observe or discharge any of its obligations
or liabilities under this Agreement, any remedy of law may prove to be
inadequate relief to the Agent and the Lenders; therefore, the Borrower agrees
that the Agent and the Lenders, at their option, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages.
Section 15.9 ACCOUNTING MATTERS. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrower to determine whether it is in compliance with any covenant contained
herein, shall, unless there is an express written direction or consent by the
Required Lenders to the contrary, be performed in accordance with GAAP.
Section 15.10 AMENDMENTS; WAIVERS.
(a) Except as set forth in SUBSECTION (B) below, any term, covenant,
agreement or condition of this Agreement or any of the Loan Documents may be
amended or waived, and any departure therefrom may be consented to by the
Required Lenders, if, but only if, such amendment, waiver or consent is in
writing signed by the Required Lenders and, in the case of
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an amendment (other than an amendment described in SECTION 15.10(D)), by the
Borrower, and in any such event, the failure to observe, perform or discharge
any such term, covenant, agreement or condition (whether such amendment is
executed or such waiver or consent is given before or after such failure) shall
not be construed as a breach of such term, covenant, agreement or condition or
as a Default or an Event of Default. Unless otherwise specified in such waiver
or consent, a waiver or consent given hereunder shall be effective only in the
specific instance and for the specific purpose for which given. In the event
that any such waiver or amendment is requested by the Borrower, the Agent and
the Lenders may require and charge a fee in connection therewith and
consideration thereof in such amount as shall be determined by the Agent and the
Required Lenders in their discretion.
(b) Except as otherwise set forth in this Agreement, without the prior
unanimous written consent of the Lenders,
(i) no amendment, consent or waiver shall affect the amount or
extend the time of the obligation of the Lenders to make Loans or
extend the originally scheduled time or times of payment of the
principal of any Loan or alter the time or times of payment of interest
on any Loan or the amount of the principal thereof or the rate of
interest thereon or the amount of any commitment fee payable hereunder
or permit any subordination of the principal or interest on such Loan,
permit the subordination of the Security Interests in any material
Collateral or amend the provisions of ARTICLE 13 or of this SECTION
15.10(B),
(ii) no material Collateral shall be released by the Agent
other than as specifically permitted in this Agreement,
(iii) no amendment shall be made to the definitions of
"Commitment", "Commitment Percentage", "Eligible Assignee" or "Secured
Obligations", or, except to the extent expressly provided herein, the
definition of "Borrowing Base" shall not be amended, and,
(iv) neither the Agent nor any Lender shall consent to any
amendment to or waiver of the amortization, deferral or subordination
provisions of any instrument or agreement evidencing or relating to
obligations of the Borrower that are expressly subordinate to any of
the Secured Obligations if such amendment or waiver would be adverse to
the Lenders in their capacities as Lenders hereunder;
PROVIDED, HOWEVER, that anything herein to the contrary notwithstanding, the
Required Lenders shall have the right to waive any Default or Event of Default
and the consequences hereunder of such Default or Event of Default and shall
have the right to enter into an agreement with the Borrower providing for the
forbearance from the exercise of any remedies provided hereunder or under the
other Loan Documents without waiving any Default or Event of Default.
(c) The making of Loans hereunder by the Lenders during the existence
of a Default
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or Event of Default shall not be deemed to constitute a waiver of such Default
or Event of Default.
(d) Notwithstanding any provision of this Agreement or any other Loan
Document to the contrary, no consent, written or otherwise, of the Borrower
shall be necessary or required in connection with any amendment to ARTICLE 14 or
SECTION 4.7, and any amendment to such provisions shall be effected solely by
and among the Agent and the Lenders, provided that no such amendment shall
impose any obligation on the Borrower.
Section 15.11 PERFORMANCE OF BORROWER'S DUTIES. The Borrower's
obligations under this Agreement and each of the Loan Documents shall be
performed by the Borrower at its sole cost and expense. If the Borrower shall
fail to do any act or thing which it has covenanted to do under this Agreement
or any of the Loan Documents, the Agent may (but shall not be obligated to) do
the same or cause it to be done either in the name of the Agent or in the name
and on behalf of the Borrower, and the Borrower hereby irrevocably authorizes
the Agent so to act.
Section 15.12 INDEMNIFICATION. The Borrower agrees to reimburse the
Agent and each Lender for all reasonable costs and expenses, including counsel
fees and disbursements, incurred and to indemnify and hold the Agent and each
Lender harmless from and against all losses suffered by the Agent or any Lender,
other than losses resulting from the Agent's or such Lender's gross negligence
or willful misconduct, in connection with (a) the exercise by the Agent or any
Lender of any right or remedy granted to it under this Agreement or any of the
Loan Documents, (b) any claim, and the prosecution or defense thereof, arising
out of or in any way connected with this Agreement or any of the Loan Documents,
except in the case of a dispute between the Borrower and the Agent or such
Lender in which the Borrower prevails in a final unappealed or unappealable
judgment, and (c) the collection or enforcement of the Secured Obligations or
any of them.
Section 15.13 ALL POWERS COUPLED WITH INTEREST. All powers of attorney
and other authorizations granted to the Agent or any Lender and any Persons
designated by the Agent or any Lender pursuant to any provisions of this
Agreement or any of the Loan Documents shall be deemed coupled with an interest
and shall be irrevocable so long as any of the Secured Obligations remain unpaid
or unsatisfied or the Revolving Credit Facility has not been terminated.
Section 15.14 SURVIVAL. Notwithstanding any termination of this
Agreement, (a) until all Secured Obligations have been paid in full and the
Revolving Credit Facility terminated, the Agent for the benefit of the Lenders
shall retain its Security Interest and the Agent and the Lenders shall retain
all rights under this Agreement and each of the Security Documents with respect
to the Collateral as fully as though this Agreement had not been terminated, and
(b) the indemnities to which the Agent and each Lender is entitled under the
provisions of this ARTICLE 15 and any other provision of this Agreement and the
Loan Documents shall continue in full force and effect and shall protect the
Agent and each Lender against events arising after
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such termination as well as before.
Section 15.15 SEVERABILITY OF PROVISIONS. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
Section 15.16 GOVERNING LAW. This Agreement, the Notes and the other
Loan Documents shall be construed in accordance with and governed by the law of
the State of Georgia.
Section 15.17 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns, and all of which taken
together shall constitute one and the same agreement.
Section 15.18 REPRODUCTION OF DOCUMENTS. This Agreement, each of the
Loan Documents and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Agent or any Lender, and (c) financial
statements, certificates and other information previously or hereafter furnished
to the Agent or any Lender, may be reproduced by the Agent or any Lender by any
photographic, Photostat, microcard, microfilm, miniature photographic or other
similar process, and the Agent or any Lender may destroy any original document
so reproduced. Each party hereto stipulates that, to the extent permitted by
applicable laws any such reproduction shall be as admissible in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original shall be in existence and whether or not such reproduction was made by
the Agent or any Lender in the regular course of business), and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence.
Section 15.19. CONSENT TO ADVERTISING AND PUBLICITY. With the prior
written consent of the Borrower, which consent shall not be unreasonably
withheld, the Agent, on behalf of the Lenders, may issue and disseminate to the
public information describing the credit accommodation entered into pursuant to
this Agreement, including the name and address of the Borrower, the amount,
interest rate, maturity, collateral and a general description of the Borrower's
business.
Section 15.20. PRO-RATA PARTICIPATION.
(a) Each Lender agrees that if, as a result of the exercise of a right
of setoff, banker's lien or counterclaim or other similar right or the receipt
of a secured claim it receives any payment in respect of the Secured
Obligations, it shall promptly notify the Agent thereof (and the Agent shall
promptly notify the other Lenders). If, as a result of such payment, such Lender
86
<PAGE>
receives a greater percentage of the Secured Obligations owed to it under this
Agreement than the percentage received by any other Lender, such Lender shall
purchase a participation (which it shall be deemed to have purchased
simultaneously upon the receipt of such payment) in the Secured Obligations then
held by such other Lenders so that all such recoveries of principal and interest
with respect to all Secured Obligations owed to each Lender shall be pro rata on
the basis of its respective amount of the Secured Obligations owed to all
Lenders, PROVIDED that if all or part of such proportionately greater payment
received by such purchasing Lender is thereafter recovered by or on behalf of
the Borrower from such Lender, such purchase shall be rescinded and the purchase
price paid for such participation shall be returned to such Lender to the extent
of such recovery, but without interest.
(b) Each Lender which receives such a secured claim shall exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this SECTION 15.20 to share in the benefits of any
recovery on such secured claim.
(c) The Borrower expressly consents to the foregoing arrangements and
agrees that any holder of a participation in any Secured Obligation so purchased
or otherwise acquired may exercise any and all rights of banker's lien, set-off
or counterclaim with respect to any and all monies owing by the Borrower to such
holder as fully as if such holder were a holder of such Secured Obligation in
the amount of the participation held by such holder.
87
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed under seal by their duly authorized officers in several counterparts
all as of the day and year first written above.
BORROWER:
SUPREME INTERNATIONAL
CORPORATION
[CORPORATE SEAL]
By:_____________________________
Name:________________________
Title:_______________________
LENDERS:
Revolving Credit NATIONSBANK, N.A.
Commitment: $32,500,000
By:
Name:
Title:
Address: 600 Peachtree Street, N.E.
13 Plaza
Atlanta, Georgia 30308
Attn.: Business Credit
Facsimile No.: 404-607-6439
Revolving Credit SUNTRUST BANK, MIAMI, N.A.
Commitment: $7,500,000
By:
Name:
Title:
Address: MC1042
777 Brickell Avenue
1
<PAGE>
Miami, Florida 33131-2803
Attn: Manuel Perdomo
Facsimile No.: 305-577-5017
Revolving Credit SOUTHTRUST BANK, NATIONAL
Commitment: $7,500,000 ASSOCIATION
By:
Name:
Title:
Address: 420 N. 20th Street, 9th Floor
Birmingham, Alabama 35203
Attn: Steven W. Davis
Facsimile No.: 205-254-4240
Revolving Credit FIRST UNION NATIONAL BANK
Commitment: $7,500,000
By:
Name:
Title:
Address: FL6011
200 Biscayne Boulevard
Miami, Florida 33131
Attn: Charles Klenk
Facsimile No.: 305-789-4902
AGENT:
NATIONSBANK, N.A.
By:
Name:
Title:
Address: 600 Peachtree Street, N.E.
13 Plaza
2
<PAGE>
Atlanta, Georgia 30308
Attn.: Business Credit
Facsimile No.: 404-607-6439
3
<PAGE>
NOTARY JURAT FOR EXECUTION OF
NOTES AND OTHER
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of March, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of Fulton, _______________
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of SUPREME INTERNATIONAL
CORPORATION, who executed the foregoing Amended and Restated Loan and Security
Agreement on behalf of such corporation and acknowledged to me that such
corporation executed the foregoing pursuant to its by-laws or a resolution of
its board of directors, said execution taking place in the State of Georgia,
County of Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
4
<PAGE>
EXHIBIT "A"
REVOLVING CREDIT NOTE
$_______________ Date: March __, 1998
FOR VALUE RECEIVED, on the Termination Date (as defined in the
below-described Loan Agreement) the undersigned promises to pay to the order of
____________________ (hereinafter, together with any holder hereof, called
"Holder"), at the office of the Agent (as hereafter defined) (or at such other
place as the Holder may designate in writing to the undersigned) the principal
amount of $_______________ or so much thereof as has been advanced hereunder.
The undersigned shall pay interest as provided in that certain Amended
and Restated Loan and Security Agreement among the undersigned, the Holder and
the other financial institutions from time to time party thereto (the
"Lenders"), and NationsBank, N.A., as agent for the Lenders (the "Agent"), dated
as of March __, 1998 (the "Loan Agreement").
It is contemplated that the principal sum evidenced by this Note may be
reduced from time to time and that additional advances may be made from time to
time, as provided in the Loan Agreement.
This Note is subject to the terms and conditions of the Loan Agreement.
No delay or failure on the part of the Agent or the Holder in the
exercise of any right or remedy hereunder, under the Loan Agreement, the
Security Documents or at law or in equity, shall operate as a waiver thereof,
and no single or partial exercise by the Agent or the Holder of any right or
remedy hereunder, under the Loan Agreement, the Security Documents, or at law or
in equity shall preclude or estop another or further exercise thereof or the
exercise of any other right or remedy.
Principal and interest on this Note shall be payable and paid in lawful
money of the United States of America.
Time is of the essence of this Note and, in case this Note is collected
by law or through an attorney at law, or under advice therefrom, the undersigned
agrees to pay all costs of collection, including reasonable attorneys' fees if
collected by or through an attorney.
The provisions of this Note shall be construed and interpreted and all
rights and obligations
1
<PAGE>
of the parties hereunder determined in accordance with the laws of the State of
Georgia.
IN WITNESS WHEREOF, the undersigned has caused this Note to be
executed, sealed and delivered in Atlanta, Georgia, in its corporate name, by
and through its respective duly authorized officers, as of the day and year
first above written.
SUPREME INTERNATIONAL
CORPORATION
By:________________________
(Title)
ATTEST:
By:_________________________
(Title)
[CORPORATE SEAL]
2
<PAGE>
NOTARY JURAT FOR EXECUTION OF
NOTES AND OTHER
WRITTEN OBLIGATIONS TO PAY MONEY
BY FLORIDA BORROWERS
On this the ____ day of March, 1998, before me, the undersigned, a
Notary Public in and for the State of Georgia, County of Fulton,________________
personally appeared, personally known to me or proved to me on the basis of
satisfactory evidence to be the ____________________ of SUPREME INTERNATIONAL
CORPORATION, who executed the foregoing Amended and Restated Loan and Security
Agreement on behalf of such corporation and acknowledged to me that such
corporation executed the foregoing pursuant to its by-laws or a resolution of
its board of directors, said execution taking place in the State of Georgia,
County of Fulton.
- ----------------------------------
Notary Signature
My Commission Expires:
- ---------------------------------
[Affix Notarial Seal]
3
<PAGE>
EXHIBIT "B"
BORROWING BASE CERTIFICATE
<PAGE>
EXHIBIT C
FORM OF ASSIGNMENT AND ACCEPTANCE
___________________, Assignee
Dated: _____________ ____, ______
Reference is made to the Amended and Restated Loan and
Security Agreement dated as of March __, 1998 (as amended to the date hereof,
the "Loan Agreement"), among SUPREME INTERNATIONAL CORPORATION, a Florida
corporation (the "Borrower"), the financial institutions party to the Loan
Agreement from time to time (the "Lenders"), and NationsBank, N.A., a national
banking association, as agent for the Lenders (the "Agent"). Terms used herein
that are defined in the Loan Agreement are used with the meanings therein
ascribed to them.
____________________________ (the "Assignor") and
_________________________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, without recourse
(except with respect to any representation of the Assignor expressly set forth
herein or in the Loan Agreement), an interest in and to such of the Assignor's
rights and obligations as a Lender under the Loan Agreement as of the Effective
Date (as hereinafter defined) as represent a _____% interest in and to all of
the outstanding rights and obligations of the Lenders thereunder as of the
Effective Date (including, without limitation, such percentage interest in the
Loans owing to the Lenders outstanding on the Effective Date, and such
percentage interest in the Notes). The Assignee shall have no interest in any
interest that is payable with respect to a period prior to the Effective Date.
2. The Assignor (i) represents that as of the date hereof, its
Commitment under the Loan Agreement is $_____________, the outstanding balance
of its Revolving Credit Loans is $_____________, and the aggregate amount of its
interest in the Standby Letter of Credit is $____________ (in each case
unreduced by any assignments thereof which have not yet become effective); (ii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Loan Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Loan Agreement or any other instrument
or document furnished pursuant thereto, other than that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim, lien or encumbrance; and (iii)
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Borrower or any other Person or the
performance or observance by the Borrower or any other Person of any of its
obligations under the Loan Agreement or any other Loan Documents.
1
<PAGE>
3. The Assignee (i) represents and warrants that it is legally
authorized to enter into this Assignment and Acceptance; (ii) confirms that it
has received a copy of the Loan Agreement, together with copies of the most
recent financial statements delivered pursuant to SECTION 10.1 thereof and such
other documents and information as it has deemed appropriate to make its own
credit analysis and decision to enter into this Assignment and Acceptance; (iii)
agrees that it will, independently and without reliance upon the Agent, the
Assignor or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under the Loan Agreement; (iv) confirms that it is
an Eligible Assignee; (v) appoints and authorizes the Agent to take such action
as agent on its behalf and to exercise such powers under the Loan Agreement as
are delegated to the Agent by the terms thereof, together with such powers as
are reasonably incidental thereto; (vi) agrees that it will perform in
accordance with their terms all the obligations which by the terms of the Loan
Agreement are required to be performed by it as a Lender; and (vii) specifies as
its address for notices the office set forth beneath its name on the signature
pages hereof.
4. The effective date for this Assignment and Acceptance shall be
__________________, ______ (the "Effective Date"). Following the execution of
this Assignment and Acceptance, it will be delivered to the Agent for acceptance
and recording by the Agent.
5. Upon such acceptance and recording, and the payment to the Agent of
the processing fee described in SECTION 13.1 of the Loan Agreement, from and
after the Effective Date, (i) the Assignee shall be a party to the Loan
Agreement and, to the extent provided in this Assignment and Acceptance, shall
have the rights and obligations of a Lender thereunder, and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released form its obligations under the Loan Agreement.
6. Upon such acceptance and recording, from and after the Effective
Date, the Agent shall make all payments in respect of the interest assigned
hereby (including payments of principal, interest, fees and other amounts) to
the Assignee. Assignor and Assignee shall make all appropriate adjustments in
payments for periods prior to the Effective Date by the Agent or with respect to
the making of this Assignment and Acceptance directly between themselves.
2
<PAGE>
7. This Assignment and Acceptance shall be governed by, and construed
in accordance with, the laws of the State of Georgia, without reference to any
provision which would render such choice invalid.
ASSIGNOR:
_____________________________________
By:__________________________________
Name:_____________________________
Title:____________________________
ASSIGNEE:
By:__________________________________
Name:_____________________________
Title:____________________________
Address:
__________________________________
__________________________________
Accepted this ____ day of
_______________, 199_.
NationsBank, N.A., as Agent
By:__________________________________
Name:_____________________________
Title:____________________________
3
<PAGE>
EXHIBIT D
FORM OF
SETTLEMENT REPORT
Pursuant to SECTION 4.8 of the Amended and Restated Loan and Security
Agreement dated as of March __, 1998, as amended, restated, supplemented or
otherwise modified through and including the date hereof (the "Loan Agreement",
terms defined in the Loan Agreement and not otherwise defined herein being used
herein as therein defined), among SUPREME INTERNATIONAL CORPORATION, a Florida
corporation, the financial institutions party to the Loan Agreement from time to
time (the "Lenders"), and NationsBank, N.A., a national banking association, as
agent for the Lenders (the "Agent"), the Agent hereby delivers this report to
the Lenders for the ____________ ____, [199___/20___] Settlement Date.
1. Principal amount of Revolving Credit
Loans outstanding as of Settlement
Date (before settlement) $______________________
(a) NationsBank, N.A. ` $______________________
(b) [Lender] $______________________
(c) [Lender] $______________________
(d) Total $______________________
2. Principal amount of Revolving Credit Loans outstanding as of next
preceding Settlement Date (after settlement on such date)
(a) NationsBank, N.A. $______________________
(b) [Lender] $______________________
(c) [Lender] $______________________
(d) Total $______________________
1
<PAGE>
3. Commitment Amount of each Lender (line 1(d) x Commitment Percentage)
(a) NationsBank, N.A. $______________________
(b) [Lender] $______________________
(c) [Lender] $______________________
4. Excess (shortfall) of each Lender's Commitment Amount over its
outstandings
(a) NationsBank, N.A. (line
3(a) minus line 1(a) $______________________
(b) [Lender] (line
3(b) minus line 1(b))] $______________________
(c) [Lender (line 3(c)
minus line 1(c))] $______________________
5. Each Lender for which an excess (a positive dollar amount) is shown in
item 4 shall pay an amount equal to such excess to the Agent, for
payment by the Agent to each Lender for which a shortfall (a negative
dollar amount) is shown in item 4 to the extent of such shortfall.
NATIONSBANK, N.A., as Agent
By:______________________________
Name:____________________________
Title:___________________________
2
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-98464 of Supreme International Corporation and subsidiaries (the "Company")
on Form S-8 of our report dated April 10, 1998, appearing in this Annual Report
on Form 10-K of the Company for the year ended January 31, 1998.
Deloitte & Touche LLP
Miami, Florida
April 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 1,010,256
<SECURITIES> 0
<RECEIVABLES> 35,502,607
<ALLOWANCES> 0
<INVENTORY> 35,799,388
<CURRENT-ASSETS> 75,437,579
<PP&E> 4,899,656
<DEPRECIATION> 0
<TOTAL-ASSETS> 101,367,046
<CURRENT-LIABILITIES> 9,554,027
<BONDS> 0
0
0
<COMMON> 65,556
<OTHER-SE> 55,089,289
<TOTAL-LIABILITY-AND-EQUITY> 101,367,046
<SALES> 190,689,212
<TOTAL-REVENUES> 190,689,212
<CGS> 145,991,132
<TOTAL-COSTS> 145,991,132
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,781,509
<INCOME-PRETAX> 10,063,006
<INCOME-TAX> 2,884,844
<INCOME-CONTINUING> 7,178,162
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,178,162
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.08
</TABLE>
