<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report(Date of earliest event reported) JUNE 18, 1998
-----------------
NORTON MCNAUGHTON, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-23440 13-3747173
-------- ------- ----------
(State or other jurisdiction (Commission File (I.R.S. Employer
of incorporation or organization) Number) Identification No.)
463 SEVENTH AVENUE
NEW YORK, N.Y. 10018
------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 947-2960
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 18, 1998, Norton McNaughton, Inc. (the "Company") completed the
acquisition of Jeri-Jo Knitwear Inc. and Jamie Scott, Inc. (collectively "Jeri-
Jo"), acquiring substantially all the assets and assuming substantially all the
liabilities of the privately-held apparel importers of moderately-priced
juniors' and misses' updated sportswear. Jeri-Jo will operate as a separate
subsidiary under the direction of current management. The purchase price paid
in the Jeri-Jo acquisition was (i) $55.0 million in cash at the closing of the
acquisition, (ii) the assumption of indebtedness of $10.9 million for borrowed
money and certain other contractual obligations. In addition, the Company
agreed to pay an additional contingent payment in cash and its Common Stock,
$0.01 par value, in the event that certain earnings targets are achieved by
Jeri-Jo for the two years subsequent to the closing of the Jeri-Jo acquisition.
The Jeri-Jo purchase agreement requires that the Company pay at least 50% of the
required contingent payment in cash. The aggregate contingent payment, if any,
payable by the Company is equal to the excess of (1) the sum of (A) five times
Jeri-Jo's average EBITDA (as defined in the Jeri-Jo purchase agreement) for the
two years ended June 30, 2000, plus (B) 0.50 times any such average EBITDA
between $17.0 million and $20.0 million, plus (C) one times any such average
EBITDA over $20.0 million, over (2) $55.0 million. The foregoing purchase price
and additional contingent payment were determined pursuant to arms-length
negotiations among the parties.
Concurrent with the closing of the acquisition of Jeri-Jo, the Company
entered into a $175.0 million secured revolving credit and letter of credit
facility with NationsBanc Commercial Corporation, The CIT Group/Commercial
Services, Inc. and Fleet Bank N.A. (the "Financing Agreement"). The facility
will be used to finance ongoing working capital requirements of the combined
entity. The Financing Agreement is a three-year secured revolving credit and
letter of credit facility, with interest on outstanding borrowings determined,
at the Company's option, based upon stated margins below the prime rate or in
excess of LIBOR rates. Initially, the interest rate under the Financing
Agreement is 75 basis points below the prime rate (based upon the current prime
rate, the interest rate under the Financing Agreement will be 7.75% per annum).
Available credit under the Financing Agreement is as follows: revolving credit
advances not to exceed $60.0 million, documentary letters of credit not to
exceed $130.0 million and stand-by letters of credit not to exceed $45.0 million
(including $30.0 million of stand-by letters of credit necessary to secure the
Company's cash contingent payment obligation in connection with the Jeri-Jo
acquisition), with the aggregate credit available to the Company equal to the
lesser of (i) $175.0 million or (ii) the sum of 85% of the eligible accounts
receivable and 60% of the eligible inventory.
The Financing Agreement contains a number of restrictive covenants,
including covenants which limit incurrence of liens and indebtedness, limit
transactions with affiliates, acquisitions, sales of assets, investments and
other restricted payments, and require that the Company maintain certain fixed
charge coverage, cash flow coverage and leverage ratios and meet specified
minimum levels of working capital and net worth.
On June 18, 1998, the Company also closed the sale of $125.0 million of 12
1/2% Senior Notes due 2005 (the "Senior Notes"). The proceeds of the sale were
used to finance the Jeri-Jo acquisition and to refinance existing indebtedness
of the Company and Jeri-Jo. The Senior Notes have not been registered under the
Securities Act of 1933, as amended, and may not be offered and sold in the
United States absent registration under such act or an applicable exemption from
registration. The Company's obligations under the Senior Notes are guaranteed
by all of the Company's subsidiaries.
ITEM 5. OTHER EVENTS
See Exhibit 99 for press release issued on June 18, 1998.
<PAGE>
2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) & (b) Financial statements of business acquired and pro-forma
financial information.
The required financial statements and pro forma financial
information will be filed as soon as practicable, but not later
than 60 days after the date by which this report must be filed.
(c) Exhibit Index
4.1 Indenture dated as of June 18, 1998 between the Company, the
Subsidiary Guarantors named therein and United States Trust
Company of New York, as Trustee
4.2 Exchange and Registration Rights Agreement dated as of June 18,
1998 among the Company, NatWest Capital Markets Limited and ING
Baring (U.S.) Securities, Inc.
10.1 Lease dated June 18, 1998 between 80 Carter Drive Associates
and Jeri-Jo Knitwear, Inc.
10.2 Guaranty of Lease dated June 18, 1998 by the Company in favor
of 80 Carter Drive Associates
10.3 First Amendment dated as of November 21, 1997 to Financing
Agreement dated as of September 25, 1997 among the Company,
Norton McNaughton of Squire, Inc. ("Squire"), Miss Erika, Inc.
("Miss Erika"), the Lenders from time to time party thereto,
NationsBanc Commercial Corporation, as collateral agent for the
Lenders ("NationsBanc"), and The CIT Group/Commercial Services,
Inc., as administrative agent to the Lenders ("CIT")
10.4 Second Amendment dated as of January 30, 1998 to Financing
Agreement dated as of September 25, 1997 among the Company,
Squire, Miss Erika, the Lenders from time to time party
thereto, NationsBanc and CIT
10.5 Fourth Amendment dated as of June 18, 1998 to Financing
Agreement dated as of September 25, 1997 among the Company,
Squire, Miss Erika, the Lenders from time to time party
thereto, NationsBanc and CIT
10.6 Amended and Restated Financing Agreement dated as of June 18,
1998 among the Company, Squire, Miss Erika, Jeri-Jo Knitwear,
Inc., the Lenders from time to time party thereto, NationsBanc,
CIT and Fleet Bank N.A., as documentation agent for the Lenders
99 Norton McNaughton, Inc. Press Release dated June 18, 1998.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NORTON MCNAUGHTON, INC.
-----------------------
(Registrant)
Date: July 2, 1998 By:/s/ Sanford Greenberg
---------------------
SANFORD GREENBERG
Chairman of the Board and Chief
Executive Officer
(Principal Executive and Operating
Officer)
4
<PAGE>
EXHIBIT 4.1
================================================================================
_______________________________________
NORTON MCNAUGHTON, INC.
as Issuer,
the SUBSIDIARY GUARANTORS
named herein
and
UNITED STATES TRUST COMPANY
OF NEW YORK
as Trustee
$125,000,000
12 1/2% SENIOR NOTES DUE 2005, SERIES A
12 1/2% SENIOR NOTES DUE 2005, SERIES B
____________________________
INDENTURE
Dated as of June 18, 1998
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
310(a)(1)........................................................ 7.10
(a)(2)........................................................ 7.10
(a)(3)........................................................ N.A.
(a)(4)........................................................ N.A.
(b)........................................................... 7.8; 7.10
(c)........................................................... N.A.
311(a)........................................................... 7.11
(b)........................................................... 7.11
(c)........................................................... N.A.
312(a)........................................................... 2.5
(b)........................................................... 11.3
(c)........................................................... 11.3
313(a)........................................................... 7.6
(b)........................................................... 7.6
(c)........................................................... 7.6; 11.2
(d)........................................................... 7.6
314(a)........................................................... 4.2; 11.2
(b)........................................................... N.A.
(c)(1)........................................................ 11.4
(c)(2)........................................................ 11.4
(c)(3)........................................................ N.A.
(d)........................................................... N.A.
(e)........................................................... 11.5
315(a)........................................................... 7.1
(b)........................................................... 7.5; 11.2
(c)........................................................... 7.1
(d)........................................................... 7.1
(e)........................................................... 6.11
316(a)(last sentence)............................................ 11.6
(a)(1)(A)..................................................... 6.5
(a)(1)(B)..................................................... 6.4
(a)(2)........................................................ N.A.
(b)........................................................... 6.7
317(a)(1)........................................................ 6.8
(a)(2)........................................................ 6.9
(b)........................................................... 2.4
318(a)........................................................... 12.1
</TABLE>
N.A. means Not Applicable.
i
<PAGE>
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
ii
<PAGE>
INDENTURE dated as of June 18, 1998, between Norton McNaughton, Inc.,
a Delaware corporation (as further defined below, the "Company"), Norton
-------
McNaughton of Squire, Inc., a New York corporation, Norty's, Inc., a Delaware
corporation, Jeri-Jo Knitwear, Inc., a Delaware corporation (each a "Subsidiary
Guarantor" and collectively the "Subsidiary Guarantors") and United States Trust
Company of New York, a Delaware banking corporation, as Trustee (the "Trustee").
-------
The Company has duly authorized the creation and issuance of up to
$125,000,000 aggregate principal amount of 12 1/2% Series A Senior Notes due
2005 (the "Initial Securities") and $125,000,000 aggregate principal amount of
------------------
12 1/2% Series B Senior Notes due 2005 (the "Exchange Securities") and, to
-------------------
provide therefor, the Company and the Subsidiary Guarantors have duly authorized
the execution and delivery of this Indenture. All things necessary to make the
Securities (as defined herein), when duly issued and executed by the Company,
and authenticated and delivered hereunder, the valid obligations of the Company
and the Subsidiary Guarantors, and to make this Indenture a valid and binding
agreement of the Company and the Subsidiary Guarantors have been done.
The Company, the Subsidiary Guarantors and the Trustee agree as
follows for the benefit of each other and for the equal and ratable benefit of
the Holders of the Securities:
ARTICLE I
---------
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1 Definitions.
-----------
"Accredited Investor" means an institutional "accredited investor" as
described in Rule 501(a)(1), (2), (3) or (7) under the Securities Act.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Restricted Subsidiary of such specified Person,
including, without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming, a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Adjusted Net Assets" of a Subsidiary Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Subsidiary Guarantor exceeds the total amount of liabilities, including, without
limitation, the probable liability of such Subsidiary Guarantor with respect to
its contingent liabilities (after giving effect to all other fixed and
contingent liabilities incurred or assumed on such date), but excluding
liabilities under the Subsidiary Guarantee, of such Subsidiary Guarantor at such
date and (y) the present fair salable value of the assets of such Subsidiary
Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Subsidiary Guarantor on its debts (after giving
effect to all other fixed and contingent liabilities incurred or assumed on such
date and after
<PAGE>
giving effect to any collection from any Subsidiary by such Subsidiary Guarantor
in respect of the obligations of such Subsidiary under the Subsidiary
Guarantee), excluding debt in respect of the Subsidiary Guarantee, as it becomes
absolute and matured.
"Affiliate" of any specified Person means any other Person, directly
or indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback), other than sales of inventory in the ordinary course of
business (provided that the sale, lease, conveyance or other disposition of all
or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole will be governed by the provisions of this
Indenture in Section 4.9 and/or Section 5.1 and not by the provisions of Section
4.8), and (ii) the sale by the Company or the issuance or sale by any of its
Restricted Subsidiaries of Equity Interests of any of the Company's Restricted
Subsidiaries, in the case of either clause (i) or (ii), whether in a single
transaction or a series of related transactions (a) that have a fair market
value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a
Wholly Owned Restricted Subsidiary of the Company; (ii) an issuance of Equity
Interests by a Restricted Subsidiary to the Company or to a Wholly Owned
Restricted Subsidiary of the Company; (iii) a Restricted Payment that is
permitted under Section 4.4; (iv) transfers of damaged, worn-out or obsolete
equipment or other assets no longer used or useful in the business of the
Company or its Restricted Subsidiaries; (v) transfers of accounts receivable,
and all instruments, contract rights, chattel paper, documents and general
intangibles related thereto, pursuant to a bona fide factoring arrangement; and
(vi) licensing of intellectual property.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness, the quotient obtained by dividing (i) the sum of the product
of the numbers of years (rounded upwards to the nearest month) from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption multiplied by the amount of such payment by (ii)
the sum of all such payments.
"Bankruptcy Law" means Title 11 of the United States Code, as amended,
or any similar United States federal or state law relating to bankruptcy,
insolvency, receivership, winding-up, liquidation, reorganization or relief of
debtors or any amendment to, succession to or change in any such law.
-2-
<PAGE>
"Board of Directors" means the Board of Directors of any Person or any
committee thereof duly authorized to act on behalf of such Board of Directors.
"Board Resolution" means, with respect to any Person, a copy of a
resolution certified by the Secretary or an Assistant Secretary of such Person
to have been duly adopted by the Board of Directors of such Person and to be in
full force and effect on the date of such certification, and delivered to the
Trustee.
"Business Day" means each day which is not a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii) above
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any commercial bank having capital and surplus in excess of $500 million
and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase obligations
with a term of not more than seven days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
commercial paper having the highest rating obtainable from Moody's Investors
Service, Inc. or Standard & Poor's Corporation and in each case maturing within
six months after the date of acquisition and (vi) money market funds
substantially all of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i) through (v) of this definition.
"Cedel Bank" has the meaning set forth in Section 2.1.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole to any "person" (as such term
is used in Section 13(d)(3) of the Exchange Act);
-3-
<PAGE>
(ii) the adoption of a plan relating to the liquidation or
dissolution of the Company;
(iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above) becomes the "beneficial owner" (as such term is
defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 35% of the Voting Stock of
the Company (measured by voting power rather than number of shares); or
(iv) the first day during any consecutive two-year period on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors.
"Closing Date" means the first date on which Securities are issued
under this Indenture.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means Norton McNaughton, Inc., a Delaware corporation, until
a successor replaces it and, thereafter, means the successor.
"Commission" or "SEC" means the United States Securities and Exchange
Commission or its successor.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus, to the
extent deducted in computing such Consolidated Net Income: (i) an amount equal
to any extraordinary loss plus any net loss realized in connection with an Asset
Sale; (ii) provision for taxes based on income or profits of such Person and its
Restricted Subsidiaries; (iii) consolidated interest expense of such Person and
its Restricted Subsidiaries, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt issuance costs
and original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, commissions, discounts and other fees
and charges incurred in respect of letter of credit or bankers' acceptance
financings, net payments (if any) pursuant to Hedging Obligations and
commissions, discounts and other fees and charges incurred in respect of bona
fide factoring arrangements); (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries; less the amount of non-cash items increasing such
Consolidated Net Income for such period, in each case, on a consolidated basis
and determined in accordance with GAAP. Notwithstanding the foregoing, (a) the
provision for taxes on the income or profits of, and the depreciation and
amortization and
-4-
<PAGE>
other non-cash expenses of, a Restricted Subsidiary of the referent Person shall
be added to Consolidated Net Income to compute Consolidated Cash Flow only to
the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Restricted Subsidiary
without prior governmental approval (that has not been obtained), and without
direct or indirect restriction pursuant to the terms of its charter and all
agreements, instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to such Restricted Subsidiary or its
stockholders, and (b) the Net Income of any Unrestricted Subsidiary shall be
excluded whether or not distributed to the Company or one of its Restricted
Subsidiaries.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof, (ii) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of such Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and its consolidated Restricted Subsidiaries,
determined on a consolidated basis in accordance with GAAP, as of the end of the
most recent fiscal quarter of the Company ending prior to the taking of any
action for the purpose of which the determination is being made and for which
financial statements are available (but in no event ending more than 135 days
prior to the taking of such action), as (i) the par or stated value of all
outstanding Capital Stock of the Company plus (ii) paid-in capital or capital
surplus relating to such Capital Stock plus (iii) any retained earnings or
earned surplus less (A) any accumulated deficit and (B) any amounts attributable
to Disqualified Stock.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of the
Board of Directors on the Closing Date or (ii) was nominated for election or
elected to the Board of Directors with the approval of a majority of the
Continuing Directors who were members of the Board of Directors at the time of
such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of the
Trustee specified in Section 11.2 or such other address as to which the Trustee
may give notice to the Company.
-5-
<PAGE>
"Credit Facilities" means, with respect to the Company and its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the New Credit Agreement) or commercial paper facilities with banks
or other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables), letters of credit, bankers acceptances or other extensions of
credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness
under Credit Facilities outstanding on the date on which Securities are first
issued and authenticated under the Indenture shall be deemed to have been
incurred on such date in reliance on the exception provided by clause (i) of the
definition of Permitted Debt.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors and assigns, or such other depository institution
hereinafter appointed by the Company.
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part on or prior to the date that is 91 days after the date on which
the Securities mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock.
"Earn-out Payment" means any contingent consideration based on future
operating performance of the acquired entity or assets payable following the
consummation of an acquisition based on the criteria set forth in the
documentation governing or relating to such acquisition.
"Eligible Accounts Receivable" means eligible accounts receivable or
similar terms as defined in the documentation governing the Credit Facilities.
"Eligible Inventory" means eligible inventory or similar terms as
defined in the documentation governing the Credit Facilities.
-6-
<PAGE>
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" has the meaning set forth in Section 2.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute or statutes thereto.
"Exchange Offer" means the registration by the Company under the
Securities Act pursuant to a registration statement of the offer by the Company
to each Securityholder of the Initial Securities to exchange all the Initial
Securities held by such Securityholder for the Exchange Securities in an
aggregate principal amount equal to the aggregate principal amount of the
Initial Securities held by such Securityholder, all in accordance with the terms
and conditions of the Registration Rights Agreement.
"Exchange Securities" means the 121/2% Senior Notes due 2005, Series
B, to be issued in exchange for the Initial Securities pursuant to the
Registration Rights Agreement.
"Existing Cash Earn-out Obligation" means the amount of the Company's
and the applicable Subsidiary Guarantor's obligations to make an Earn-out
Payment that, on the Closing Date, is contractually required to be paid in cash
under (i) the Agreement of Purchase and Sale dated as of August 29, 1997, as
amended, by and among the Company, Miss Erika, Inc., f/k/a ME Acquisition Corp.,
Old ME Corp., f/k/a Miss Erika, Inc., and the stockholders of Old ME Corp. and
(ii) the Agreement of Purchase and Sale dated as of April 15, 1998, as amended,
by and among the Company, JJ Acquisition Corp., Jeri-Jo Knitwear Inc., Jamie
Scott, Inc., and the stockholders of Jamie Scott, Inc.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the New Credit Agreement
and Indebtedness being repaid with the net proceeds of the Offering) in
existence on the Closing Date, until such amounts are repaid.
"fair market value" means, with respect to any asset or property, the
price which could be negotiated in an arm's-length, free market transaction, for
cash, between a willing seller and a willing and able buyer, neither of whom is
under undue pressure or compulsion to complete the transaction. Fair market
value shall be determined by the Board of Directors of the Company acting
reasonably and in good faith and shall be evidenced by a Board Resolution of the
Board of Directors of the Company delivered to the Trustee.
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges
-7-
<PAGE>
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations), (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, (iii) any interest expense on Indebtedness of another Person
that is guaranteed by such Person or one of its Restricted Subsidiaries or
secured by a Lien on assets of such Person or one of its Restricted Subsidiaries
(whether or not such guarantee or Lien is called upon) and (iv) the product of
(a) all dividend payments, whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries, other than dividend
payments on Equity Interests payable solely in Equity Interests of the Company
(other than Disqualified Stock) or to the Company or a Restricted Subsidiary of
the Company, times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state and
local statutory tax rate of such Person, expressed as a decimal, in each case,
on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period; provided, however, that (i)
in the event that the referent Person or any of its Restricted Subsidiaries
incurs, assumes, guarantees or redeems any Indebtedness (other than revolving
credit borrowings and other than the opening of letters of credit) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period and (ii) for purposes of making the computation referred to
above, (a) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income, (b) the Consolidated Cash Flow
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, and (c) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, but only to the extent that
the obligations giving rise to such Fixed Charges will not be obligations of the
referent Person or any of its Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
-8-
<PAGE>
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States of America is
pledged.
"Group" shall mean any "group" for purposes of Section 13(d) of the
Exchange Act.
"guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest or currency exchange rates.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Incur" means issue, assume, guarantee, incur or otherwise become
liable for; provided, however, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Restricted Subsidiary (whether
by merger, consolidation, acquisition or otherwise) shall be deemed to be
incurred by such Restricted Subsidiary at the time it becomes a Restricted
Subsidiary.
"Indebtedness" means, with respect to any Person, any indebtedness of
such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or, without duplication, reimbursement agreements in respect thereof) or
banker's acceptances or representing Capital Lease Obligations or the balance
deferred and unpaid of the purchase price of any property or representing any
Hedging Obligations, except any such balance that constitutes an accrued expense
or trade payable, if and to the extent any of the foregoing (other than letters
of credit and Hedging Obligations) would appear as a liability upon a balance
sheet of such Person prepared in accordance with GAAP, as well as all
Indebtedness of others secured by a Lien on any asset of such Person (whether or
not such Indebtedness is assumed by such Person) and, to the extent not
otherwise included, the guarantee by such Person of any Indebtedness of any
other Person. The amount of any Indebtedness outstanding as of any date shall
be (i) the accreted value thereof, in the case of any Indebtedness issued with
original issue discount, and (ii) the principal amount thereof, together with
any interest thereon that is more than 30 days past due, in the case of any
other Indebtedness. Notwithstanding anything to the contrary set forth in this
definition of "Indebtedness," an Earn-out Payment shall not constitute
Indebtedness if at the time such payment is required to be made and such payment
is prohibited by Section 4.4 hereof such payment is required to be made in
common Equity Interests of the Company.
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<PAGE>
"Indenture" means this Indenture as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Securities" has the meaning set forth in the preamble to this
Indenture.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
under the Securities Act.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Securities.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding entertainment, commission, travel,
relocation and similar advances to directors, officers and employees made in the
ordinary course of business), purchases or other acquisitions for consideration
of Indebtedness, Equity Interests or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP. If the Company or any Restricted Subsidiary of the
Company sells or otherwise disposes of any Equity Interests of any direct or
indirect Restricted Subsidiary of the Company such that, after giving effect to
any such sale or disposition, such Person is no longer a Restricted Subsidiary
of the Company, the Company shall be deemed to have made an Investment on the
date of any such sale or disposition equal to the fair market value of the
Equity Interests of such Restricted Subsidiary not sold or disposed of in an
amount determined as provided in the final paragraph of Section 4.4 hereof.
"Issue Date" means the date the Securities are originally issued.
"Legal Holiday" has the meaning ascribed in Section 11.8.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Maturity Date" means June 1, 2005.
"Miss Erika Acquisition" means the acquisition by Miss Erika, Inc.,
f/k/a ME Acquisition Corp., of substantially all the assets and assumption of
substantially all the liabilities of Old ME Corp., f/k/a Miss Erika, Inc.,
pursuant to the Agreement of Purchase and Sale dated as of August 29, 1997, as
amended, by and among the Company, Miss Erika, Inc., Old ME Corp. and the
stockholders of Old ME Corp.
"Moody's" means Moody's Investors Service, Inc. and its successors.
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<PAGE>
"Net Income" means, with respect to any Person, the net income (loss)
of such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, excluding, however, (i) any gain (but not
loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Subsidiaries and
(ii) any extraordinary or nonrecurring gain (but not loss), together with any
related provision for taxes on such extraordinary or nonrecurring gain (but not
loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the (i) direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, (ii) taxes paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), (iii) any reserve for adjustment
in respect of the sale price of such asset or assets established in accordance
with GAAP and (iv) any payments to Persons having a Lien (which Lien secures
obligations in respect of borrowed money) on the assets sold or required by such
Persons to provide any required consent or approval to such Asset Sale.
"New Credit Agreement" means that certain amended and restated
financing agreement, dated as of June 18, 1998, by and among the Company, the
Subsidiary Guarantors, The CIT Group Commercial Services, Inc., NationsBanc
Commercial Corporation, Fleet Bank and the other lenders party thereto from time
to time, initially providing for up to $175.0 million of revolving credit
borrowings and letters of credit, including any related notes, guarantees,
security and other collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, modified, renewed, refunded,
replaced or refinanced from time to time.
"Non-Recourse Debt" means Indebtedness: (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a Subsidiary
Guarantor or otherwise) or (c) constitutes the lender; and (ii) no default with
respect to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Securities and other than under a Credit Facility) of the Company or any of
its Restricted Subsidiaries to declare a default on such other Indebtedness or
cause the payment thereof to be accelerated or payable prior to its stated
maturity.
"Non-U.S. Person" means any Person who is not a U.S. Person.
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<PAGE>
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering Memorandum" means the Offering Memorandum dated June 15,
1998, pursuant to which the Initial Securities were offered, and any supplements
thereto;
"Officer" means the Chairman of the Board, the Vice-Chairman of the
Board, the Chief Executive Officer, the Chief Financial Officer, the President,
any Vice-President, the Treasurer or the Secretary of the Company.
"Officer's Certificate" shall mean a certificate signed by two
Officers of the Company, at least one of whom shall be the principal executive,
financial or accounting officer of the Company and which complies with Sections
11.4 and 11.5.
"Opinion of Counsel" means a written opinion, in form and substance
acceptable to the Trustee, from legal counsel who is acceptable to the Trustee
and which complies, if applicable, with Sections 11.4 and 11.5.
"Paying Agent" has the meaning provided in Section 2.3.
"Permitted Investments" means (i) any Investment in the Company or in
a Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment or series of related Investments by the Company or any
Restricted Subsidiary of the Company in a Person if, as a result of such
Investment or series of related Investments, (a) such Person becomes a
Restricted Subsidiary of the Company or (b) such Person is merged, consolidated
or amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (iv) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with Section 4.8 hereof, (v) loans and advances to employees, officers and
directors not to exceed $1.0 million at any time outstanding; (vi) Investments
made in exchange for Equity Interests of the Company (other than Disqualified
Stock); (vii) Investments acquired by the Company or any Restricted Subsidiary
of the Company in the ordinary course of business (a) in exchange for any other
Investment or account receivable held by the Company or any Restricted
Subsidiary of the Company in connection with or as a result of a bankruptcy,
reorganization, workout or recapitalization of the issuer of such other
Investment or the obligor with respect to such account receivable or (b) as a
result of the foreclosure by the Company or any Restricted Subsidiary of the
Company with respect to any secured Investment or other transfer of title with
respect to any such secured Investment which is then in default; (viii) Hedging
Obligations otherwise permitted to be incurred under the Indenture; (ix) one or
more Investments in or to contractors, suppliers, purchasing agents or similar
persons having an aggregate fair market value (measured on the date each such
Investment was made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to this clause (ix)
that are at the time outstanding, not to exceed $5.0 million; and (x)
Investments existing on the Closing Date.
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<PAGE>
"Permitted Liens" means (i) Liens in favor of the Company or any of
its Wholly Owned Restricted Subsidiaries; (ii) Liens securing borrowings, letter
of credit reimbursement obligations and other obligations under the Credit
Facilities, provided that such borrowings and obligations were permitted by the
Indenture to be incurred; (iii) Liens on property of a Person existing at the
time such Person's Capital Stock is acquired or such Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided that such Liens were in existence prior to the contemplation of such
acquisition or merger or consolidation and do not extend to any assets other
than those of the Person merged into or consolidated with the Company; (iv)
Liens on property existing at the time of acquisition thereof by the Company or
any Restricted Subsidiary of the Company, provided that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
the performance of statutory obligations, surety or appeal bonds, performance
bonds or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens existing on the date of the Indenture; (vii) Liens for
taxes, assessments or governmental charges or claims that are not yet delinquent
or that are being contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (viii) Liens incurred in the ordinary course of business of
the Company or any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $5.0 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by the Company or such Restricted Subsidiary; (ix) Liens of landlords and Liens
of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen and
other Liens imposed by law incurred in the ordinary course of business for sums
not yet delinquent or being contested in good faith, if such reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
in respect thereof; (x) Liens incurred or deposits made in the ordinary course
of business in connection with workers' compensation, unemployment insurance and
other types of social security, including any Lien securing letters of credit
issued in the ordinary course of business in connection therewith, or to secure
the performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money bonds and
other similar obligations (exclusive of obligations for the payment of borrowed
money); (xi) judgment Liens not giving rise to an Event of Default; (xii)
easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (xiii) any interest or title of a lessor under any
Capital Lease Obligations; (xiv) purchase money Liens to finance property or
assets of the Company or any Restricted Subsidiary of the Company acquired in
the ordinary course of business; (xv) Liens upon specific items of inventory or
other goods and proceeds of any Person securing such Person's obligations in
respect of bankers' acceptances issued or created for the account of such Person
to facilitate the purchase, shipment or storage of such inventory or other
goods; (xvi) Liens securing reimbursement obligations with respect to commercial
letters of credit which encumber documents and other property relating to such
letters of credit and products and proceeds thereof; (xvii) Liens securing
Hedging Obligations that are otherwise permitted to be incurred under the
Indenture; (xviii) leases or subleases granted to others that do
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<PAGE>
not materially interfere with the ordinary course of business of the Company and
its Restricted Subsidiaries; (xix) Liens arising from filing Uniform Commercial
Code financing statements regarding leases; and (xx) Liens arising under
factoring arrangements entered into in the ordinary course of business.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or such Restricted Subsidiary (other
than intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Permitted Refinancing Indebtedness does
not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date no earlier than the final maturity date, and a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity, of the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Securities, such Permitted Refinancing Indebtedness is subordinated in right
of payment to the Securities on terms at least as favorable to the Holders of
Securities as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and (iv)
such Indebtedness is incurred by the Company and/or by the Restricted Subsidiary
who are the obligor(s) on the Indebtedness being extended, refinananced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity.
"Physical Securities" has the meaning provided in Section 2.1.
"Preferred Stock," as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"Private Exchange Note" shall have the meaning provided in the
Registration Rights Agreement.
"Private Placement Legend" has the meaning provided in Section 2.15.
"Purchase Date" has the meaning provided in Section 3.9.
"QIB" means any "qualified institutional buyer" (as defined under Rule
144A of the Securities Act).
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<PAGE>
"Record Date" means the record dates specified in the Securities,
whether or not a Legal Holiday.
"Redemption Date" when used with respect to any Security, means the
date fixed for the redemption of such Security pursuant to this Indenture and
the Securities by a notice delivered pursuant to the terms of Section 3.3 of
this Indenture.
"Registrar" has the meaning provided for in Section 2.3.
"Registration Rights Agreement" means the Exchange and Registration
Rights Agreement, dated June 18, 1998, among the Company, the Subsidiary
Guarantors, NatWest Capital Markets Limited and ING Baring (U.S.) Securities,
Inc. as amended, modified or supplemented from time to time.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Security" has the meaning set forth in Section
2.1.
"Responsible Officer" when used with respect to the Trustee, means any
officer within the corporate trust department of the Trustee (or any successor
group of the Trustee) with direct responsibility for the administration of this
Indenture and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Security" has the meaning assigned to such term in Rule
144(a)(3) under the Securities Act; provided, however, that the Trustee shall be
entitled to request and conclusively rely on an Opinion of Counsel with respect
to whether any Security constitutes a Restricted Security.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144A Global Security" has the meaning set forth in Section 2.1.
"S&P" means Standard and Poor's Ratings Group, a division of McGraw-
Hill, Inc., and its successors.
"Securities" means the Initial Securities, the Exchange Securities,
and the Private Exchange Securities, treated as a single class of securities, as
amended or supplemented from time to time in accordance with the terms hereof,
that are issued pursuant to this Indenture.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder.
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<PAGE>
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "significant subsidiary" as defined in Article I, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as such Regulation is in effect on
the Closing Date.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof; provided, that any amendment to
the original documentation governing such Indebtedness that extends the final
maturity date of such Indebtedness but makes no other amendments or alterations
to such original documentation shall be deemed to be part of the original
documentation governing such Indebtedness.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary or such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Subsidiary Guarantee" means the guarantee of the Securities by a
Subsidiary Guarantor.
"Subsidiary Guarantor" means each Subsidiary of an Issuer on the Issue
Date and each newly organized or acquired Restricted Subsidiary that executes
and delivers a supplemental indenture pursuant to Section 10.7.
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) 77aaa-
------
77bbbb) as in effect on the date of this Indenture; provided, however, that, in
the event the Trust Indenture Act of 1939 is amended after such date, "TIA"
means, to the extent required by any such amendment, the Trust Indenture Act of
1939 as so amended.
"Trustee" means the party named as such in the preamble to this
Indenture until a successor replaces it in accordance with the provisions of
Article VII of this Indenture and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned by the Trustee to administer its corporate trust matters, and also
means, with respect to a particular corporate trust matter, any other officer to
whom such trust matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated
by the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution, but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not
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party to any agreement, contract, arrangement or understanding with the Company
or any Restricted Subsidiary of the Company unless the terms of any such
agreement, contract, arrangement or understanding are no less favorable to the
Company or such Restricted Subsidiary than those that might be obtained at the
time from Persons who are not Affiliates of the Company; (c) is a Person with
respect to which neither the Company nor any of its Restricted Subsidiaries has
any direct or indirect obligation (1) to subscribe for additional Equity
Interests or (2) to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating results; (d) has
not guaranteed or otherwise directly or indirectly provided credit support for
any Indebtedness of the Company or any of its Restricted Subsidiaries; and (e)
has at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries and has
at least one executive officer that is not a director or executive officer of
the Company or any of its Restricted Subsidiaries.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment shall be legal tender for the payment of
public and private debts.
"U.S. Person" means any "U.S. Person" as defined by Regulation S under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the products obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and its other Wholly Owned Restricted
Subsidiaries.
SECTION 1.2 Other Definitions.
-----------------
<TABLE>
<CAPTION>
Defined in
Term Section
- ---- --------
<S> <C>
"AI Global Security" 2.1
"Affiliate Transaction" 4.6
"Agent Members" 2.16
"Asset Sale Offer" 4.8
"Change of Control Offer" 4.9
</TABLE>
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<TABLE>
<S> <C>
"Change of Control Payment" 4.9
"Change of Control Payment Date" 4.9
"Covenant Defeasance" 8.3
"Custodian" 6.1
"DTC" 2.15
"Event of Default" 6.1
"Excess Proceeds" 4.8(a)
"Funding Subsidiary Guarantor" 10.5
"Global Securities" 2.1
"Guaranteed Obligations 10.1
"incur" 4.3
"Legal Defeasance" 8.2
"Offer" 4.9
"Offer Amount" 3.9
"Offer Period" 3.9
"Permitted Debt" 4.3(b)
"Purchase Date" 3.9
"Redemption Price" 3.5
"Restricted Payment" 4.4
"Rule 144A" 2.1
</TABLE>
SECTION 1.3 Incorporation by Reference of Trust Indenture Act. This
-------------------------------------------------
Indenture is subject to the mandatory provisions of the TIA which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company, the
Subsidiary Guarantors and any other obligor on the securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by the TIA reference to another statute or defined under rules
promulgated by the Commission have the meanings assigned to them by such
definitions.
SECTION 1.4 Rules of Construction. Unless the context otherwise
---------------------
requires:
(1) a term has the meaning assigned to it;
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(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) references to Article and Section numbers refers to the
corresponding Articles and Sections of this Indenture unless otherwise
specified; and
(7) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.
ARTICLE II
----------
THE SECURITIES
--------------
SECTION 2.1 Form and Dating. The Initial Securities, the notation
---------------
thereon relating to the Subsidiary Guarantees and the Trustee's certificate of
authentication thereon shall be substantially in the form of Exhibit A hereto.
The Exchange Securities and the Trustee's certificate of authentication thereon
shall be substantially in the form of Exhibit B hereto. The Securities may have
notations, legends or endorsements required by law, stock exchange rule or
Depositary rule or usage. The Company, the Subsidiary Guarantors and the
Trustee shall approve the form of the Securities and any notation, legend or
endorsement on them. Each Security shall be dated the date of its
authentication.
The terms and provisions contained in the forms of the Securities
annexed hereto as Exhibits A and B, shall constitute, and are hereby expressly
made, a part of this Indenture and, to the extent applicable, the Company and
the Trustee, by their execution and delivery of this Indenture, expressly agree
to such terms and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A under the
Securities Act ("Rule 144A") shall be issued initially in the form of one or
more permanent global notes in registered form, in substantially the form set
forth in Exhibit A (the "Rule 144A Global Security"), deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The aggregate principal
amount of the Rule 144A Global Security may from time to time be increased or
decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary, or the records of DTC or its nominee, as the case may be, as
hereinafter provided (or by the issue of a further Rule 144A Global Security),
in connection with a corresponding decrease or increase in the aggregate
principal amount of the Regulation S Global Security or the AI Global Security
or in consequence of the issue of Definitive Securities or additional Rule 144A
Global Securities, as hereinafter provided. Securities offered and sold in
reliance on Regulation S under the Securities
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Act shall be issued in the form of one or more permanent global notes in
registered form in substantially the form set forth in Exhibit A (the
"Regulation S Global Security"). Such Regulation S Global Security shall be
deposited with the Trustee, as custodian for the Depositary, and registered in
the name of the Depositary or the nominee of the Depositary for the accounts of
designated agents holding on behalf of the Euroclear System ("Euroclear") or
Cedel Bank, S.A. ("Cedel Bank"). The aggregate principal amount of the
Regulation S Global Security may from time to time be increased or decreased by
adjustments made on the records of the Trustee, as custodian for the Depositary,
or the records of DTC or its nominee, as the case may be, as hereinafter
provided (or by the issue of a further Regulation S Global Security), in
connection with a corresponding decrease or increase in the aggregate principal
amount of the Rule 144A Global Security or the AI Global Security or in
consequence of the issue of Definitive Securities or additional Regulation S
Securities, as hereinafter provided. Securities offered and sold to Accredited
Investors shall be issued initially in the form of one or more permanent global
notes in registered form, in substantially the form set forth in Exhibit A (the
"AI Global Security" and together with the Regulation S Global Security and the
Rule 144A Global Security, the "Global Securities"), deposited with the Trustee,
as custodian for the Depositary, duly executed by the Company and authenticated
by the Trustee as hereinafter provided. The aggregate principal amount of the AI
Global Security may from time to time be increased or decreased by adjustments
made on the records of the Trustee, as custodian for the Depositary, or the
records of DTC or its nominee, as the case may be, as hereinafter provided (or
by the issue of a further AI Global Security), in connection with a
corresponding decrease or increase in the aggregate principal amount of the Rule
144A Global Security or the Regulation S Global Security or in consequence of
the issue of Definitive Securities or additional AI Global Securities, as
hereinafter provided.
Securities issued in exchange for interests in the Rule 144A Global
Security, the Regulation S Global Security or the AI Global Security pursuant to
Section 2.16 and Section 2.17 may be issued in the form of permanent
certificated Securities in registered form in substantially the form set forth
in Exhibit A (the "Physical Securities").
--------- -------------------
Each of the Global Securities shall represent such amount of the
outstanding Securities as shall be specified therein and each shall provide that
it shall represent the aggregate amount of outstanding Securities from time to
time endorsed thereon and that the aggregate amount of outstanding Securities
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
Security to reflect the amount of any increase or decrease in the amount of
outstanding Securities represented thereby shall be made by the Trustee in
accordance with instructions given by the Holder thereof as required by Section
2.6 hereof.
The provisions of the "Operating Procedures of the Euroclear System"
and "Terms and Conditions Governing Use of Euroclear" and the "Management
Resolutions" and "Instructions to Participants" of Cedel Bank shall be
applicable to interests in the Regulation S Global Securities that are held by
the Agent Members through Euroclear or Cedel Bank.
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SECTION 2.2 Execution and Authentication. (a) Two Officers of the
----------------------------
Company, or one Officer shall sign, and one Officer or an Assistant Secretary
(each of whom shall, in each case, have been duly authorized by all requisite
corporate actions) shall attest to, the Securities for the Company by manual or
facsimile signature. If an Officer whose signature is on a Security no longer
holds that office at the time the Security is authenticated, the Security shall
nevertheless be valid.
(b) A Security shall not be valid until authenticated by the manual
signature of an authorized signatory of the Trustee. The signature of the
Trustee shall be conclusive evidence that the Security has been authenticated
under this Indenture.
(c) The Trustee shall authenticate (i) Initial Securities for
original issue in the aggregate principal amount not to exceed $125,000,000,
(ii) Private Exchange Securities from time to time for issue only in exchange
for a like principal amount of Initial Securities and (iii) Exchange Securities
from time to time for issue only in exchange for a like principal amount of
Initial Securities, in each case upon receipt of a written order of the Company.
Each such written order shall specify the amount of Securities to be
authenticated and the date on which the Securities are to be authenticated,
whether the Securities are to be Initial Securities, Private Exchange Securities
or Exchange Securities and whether the Securities are to be issued as Physical
Securities or Global Securities and such other information as the Trustee may
reasonably request.
(d) The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate.
(e) The Securities shall be issuable in fully registered form only,
without coupons, in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3 Registrar and Paying Agent. (a) The Company shall
--------------------------
maintain an office or agency (which shall be located in the Borough of Manhattan
in The City of New York, State of New York) where (i) Securities may be
presented for registration of transfer or for exchange ("Registrar"), (ii)
Securities may be presented for payment ("Paying Agent") and (iii) notices and
demands to or upon the Company in respect of the Securities and this Indenture
may be served. The Registrar shall keep a register of the Securities and of
their transfer and exchange. The Company may appoint one or more co-registrars
and one or more additional paying agents. The term "Paying Agent" includes any
additional paying agent. The Company may change any Paying Agent, Registrar or
co-registrar without prior notice to any Securityholder. The Company shall
notify the Trustee and the Trustee shall notify, at the expense of the Company,
the Securityholders of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company may act
as Paying Agent, Registrar or co-registrar. The Company shall enter into an
appropriate agency agreement with any Agent not
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a party to this Indenture, which shall incorporate the provisions of the TIA.
The agreement shall implement the provisions of this Indenture that relate to
such Agent. The Company shall notify the Trustee of the name and address of any
such Agent. If the Company fails to maintain a Registrar or Paying Agent, or
fails to give the foregoing notice, the Trustee shall act as such, and shall be
entitled to appropriate compensation in accordance with Section 7.7.
(b) The Company initially appoints the Trustee as Registrar, Paying
Agent, authenticating agent and agent for service of notices and demands in
connection with the Securities. The Trustee's address for purposes of Section
2.3(a) is 770 Broadway, New York, NY 10003.
(c) Any of the Registrar, the Paying Agent or any other agent may
resign upon 30 days' notice to the Company. The office of the Paying Agent and
Registrar for purposes of this Section 2.3 shall initially be at 770 Broadway,
New York, NY 10003.
SECTION 2.4 Paying Agent to Hold Money in Trust. The Company or any
-----------------------------------
other obligor on the Securities shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent shall hold in trust for the
benefit of the Securityholders or the Trustee all money held by the Paying Agent
for the payment of principal of, premium, if any, and interest on the
Securities, and shall notify the Trustee of any Default by the Company or any
other obligor on the Securities in making any such payment. While any such
Default continues, the Trustee may require a Paying Agent to pay all money held
by it to the Trustee. The Company or any other obligor on the Securities at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company)
shall have no further liability for the money delivered to the Trustee. If the
Company or any other obligor on the Securities acts as Paying Agent, it shall
segregate and hold in a separate trust fund for the benefit of the
Securityholders all money held by it as Paying Agent.
SECTION 2.5 Securityholder Lists. The Trustee shall preserve in as
--------------------
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders and shall otherwise comply with
TIA (S) 312(a). If the Trustee is not the Registrar, the Company or any other
obligor on the Securities shall furnish to the Trustee at least five Business
Days before each Interest Payment Date and at such other times as the Trustee
may request in writing a list in such form and as of such date as the Trustee
may reasonably require of the names and addresses of Securityholders, including
the aggregate principal amount of the Securities held by each thereof, which
list may be conclusively relied upon by the Trustee, and the Company or any
other obligor on the Securities shall otherwise comply with TIA (S) 312(a).
SECTION 2.6 Transfer and Exchange. (a) Subject to Sections 2.16 and
---------------------
2.17 where Securities are presented to the Registrar or a co-registrar with a
request to register the transfer thereof or exchange them for an equal principal
amount of Securities of other denominations, the Registrar shall register the
transfer or make the exchange if its requirements for such transactions are met;
provided, that any Security presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
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instruction of transfer in form satisfactory to the Registrar and the Trustee
duly executed by the Securityholder thereof or his attorney duly authorized in
writing. To permit registrations of transfer and exchanges, the Company shall
issue and the Trustee shall authenticate Securities at the Registrar's request.
(b) The Company and the Registrar shall not be required (i) to issue,
to register the transfer of or to exchange Securities during a period beginning
at the opening of business on a Business Day 15 days before the day of any
selection of Securities for redemption pursuant to Article III and ending at the
close of business on the day of selection, (ii) to register the transfer of or
exchange any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part or (iii) to register
the transfer or exchange of a Security between the Record Date and the next
succeeding Interest Payment Date.
(c) No service charge shall be made for any registration of a
transfer or exchange (except as otherwise expressly permitted herein), but the
Company may require payment by the Securityholder of a sum sufficient to cover
any transfer tax or similar governmental charge payable in connection therewith
(other than such transfer tax or similar governmental charge payable upon
exchanges pursuant to Section 2.10, 3.6 or 9.5).
(d) Any Holder of any Global Security shall, by acceptance of such
Global Security, agree that transfers of beneficial interests in such Global
Security may be effected only through a book entry system maintained by the
Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in the Global Security shall be required to be reflected in
a book entry.
SECTION 2.7 Replacement Securities. (a) If any mutilated Security
----------------------
is surrendered to the Trustee, or the Company and the Trustee receives evidence
to its satisfaction of the destruction, loss or theft of any Security, the
Company shall issue and the Trustee, upon receipt by it of the written order of
the Company signed by two Officers of the Company, shall authenticate a
replacement Security if the Trustee's requirements for replacements of
Securities are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the reasonable
judgment of the Trustee and the Company to protect the Company, the Trustee, any
Agent or any authenticating agent from any loss which any of them may suffer if
a Security is replaced. The Company and the Trustee may charge a Securityholder
for reasonable out-of-pocket expenses in replacing a Security, including fees
and expenses of counsel.
(b) Every replacement Security is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
SECTION 2.8 Outstanding Securities. (a) The Securities outstanding
----------------------
at any time are all the Securities authenticated by the Trustee except for those
canceled by the Company or by the Trustee, those delivered to the Trustee for
cancellation and those described in this Section as not outstanding.
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(b) If a Security is replaced pursuant to Section 2.7, it ceases to
be outstanding unless and until the Trustee receives proof satisfactory to it
that the replaced Security is held by a bona fide purchaser.
(c) If the principal amount of any Security is considered paid under
Section 4.1, it ceases to be outstanding and interest on it ceases to accrue.
(d) Subject to Section 2.9, a Security does not cease to be
outstanding because the Company or an Affiliate of the Company holds the
Security.
(e) If on a Redemption Date or the Maturity Date the Paying Agent
holds U.S. Legal Tender sufficient to pay all of the principal, premium, if any,
and interest due on the Securities payable on that date and is not prohibited
from paying such money to the Securityholders thereof pursuant to the terms of
this Indenture, then on and after that date such Securities cease to be
outstanding and interest on them ceases to accrue.
SECTION 2.9 Treasury Securities. In determining whether the Holders
-------------------
of the required principal amount of Securities have concurred in any direction,
waiver or consent, Securities owned by the Company, by any Subsidiary Guarantor
or by any of their respective Affiliates shall be disregarded and deemed not to
be outstanding, except that, for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, waiver or consent, only
Securities which a Responsible Officer knows are so owned shall be so
disregarded. Also, subject to the foregoing, only Securities outstanding at the
time shall be considered in any such determination.
SECTION 2.10 Temporary Securities. Until definitive Securities are
--------------------
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of definitive Securities but may have variations that the Company and the
Trustee consider appropriate for temporary Securities. Without unreasonable
delay, the Company shall prepare and the Trustee, upon receipt of the written
order of the Company signed by two Officers of the Company, or one Officer shall
sign, and one Officer or an Assistant Secretary (each of whom shall, in each
case, have been duly authorized by all requisite corporate actions) shall
authenticate, pursuant to Section 2.2, definitive Securities in exchange for
temporary Securities. Until such exchange, temporary Securities shall be
entitled to the same rights, benefits and privileges under this Indenture as
definitive Securities.
SECTION 2.11 Cancellation. The Company at any time pursuant to the
------------
terms hereof may deliver Securities to the Trustee for cancellation. The
Registrar and Paying Agent shall forward to the Trustee any Securities
surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Securities, if not already cancelled, surrendered for
registration of transfer, exchange, payment, replacement or cancellation and
shall destroy cancelled Securities (subject to the record retention requirements
of the Exchange Act), and deliver certification of their destruction to the
Company, unless by a written order, signed by two Officers of the Company, or
one Officer shall sign, and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate
actions),
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the Company shall direct that canceled Securities be returned to it.
Subject to Section 2.7, the Company may not issue new Securities to replace
Securities that it has redeemed or paid or that have been delivered to the
Trustee for cancellation.
SECTION 2.12 Defaulted Interest. If the Company defaults in a
------------------
payment of interest on the Securities, it shall pay the defaulted interest in
any lawful manner plus, to the extent lawful, interest payable on the defaulted
interest, to the Persons who are Securityholders on a subsequent special Record
Date, which date shall be at the earliest practicable date but in all events at
least five Business Days prior to the payment date, in each case at the rate
provided in the Securities and in Section 4.1. The Company shall, with the
consent of the Trustee, fix or cause to be fixed each such special Record Date
and payment date. At least 15 days before the special Record Date, the Company
(or the Trustee, in the name of and at the expense of the Company) shall mail to
Securityholders a notice that states the special Record Date, the related
payment date and the amount of such interest to be paid.
SECTION 2.13 CUSIP Number. The Company in issuing the Securities may
------------
use "CUSIP" numbers, and if so, the Trustee shall use the CUSIP numbers in
notices of redemption or exchange as a convenience to Securityholders; provided,
that no representation shall be deemed to be made by the Trustee as to the
correctness or accuracy of such CUSIP numbers printed in the notice or on the
Securities, and that reliance may be placed only on the other identification
numbers printed on the Securities. The Company shall promptly notify the
Trustee of any change in the CUSIP numbers.
SECTION 2.14 Deposit of Moneys. Prior to 11:00 a.m. New York City
-----------------
time on each Interest Payment Date and Maturity Date, the Company shall have
deposited with the Paying Agent in immediately available funds money sufficient
to make cash payments, if any, due on such Interest Payment Date or Maturity
Date, as the case may be, in a timely manner which permits the Paying Agent to
remit payment to the Securityholders on such Interest Payment Date or Maturity
Date, as the case may be.
SECTION 2.15 Restrictive Legends. Each Global Security and Physical
-------------------
Security that constitutes a Restricted Security shall bear the following legend
(the "Private Placement Legend") on the face thereof until June 18, 2000 unless
otherwise agreed by the Company and the Securityholder thereof:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD OR PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS OR A
BENEFICIAL INTEREST HEREIN EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
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SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR BENEFIT OF A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) UNDER THE
SECURITIES ACT AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR
OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY
THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED
STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE)
AND IF SUCH TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF
SECURITIES AT THE TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF
COUNSEL ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE), (F) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR (G) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENT OF THE SECURITIES ACT (BASED
UPON AN OPINION OF COUNSEL ACCEPTABLE TO NORTON MCNAUGHTON, INC.) AND IN
EACH CASE, IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT AN INITIAL
INVESTOR THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR PURCHASING AS
DESCRIBED IN CLAUSE (1)(B) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL ACCREDITED INVESTOR. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U. S. " PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO REGISTER
ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Security shall also bear the following legend on the face
thereof:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE
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OF THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY THE
DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY SUCH NOMINEE, TO
A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. TRANSFERS
OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN
PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE, AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
The Regulation S Global Security shall bear the following legend on
the face thereof:
THIS SECURITY MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON (AS SUCH TERM IS
DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR FOR THE ACCOUNT OR
BENEFIT OF A U.S. PERSON PRIOR TO THE EXPIRATION OF THE RESTRICTED PERIOD
(AS DEFINED IN THE INDENTURE), AND NO TRANSFER OR EXCHANGE OF THIS SECURITY
MAY BE MADE FOR AN INTEREST IN A PHYSICAL SECURITY UNTIL AFTER THE LATER OF
THE DATE OF EXPIRATION OF THE RESTRICTED PERIOD AND THE DATE ON WHICH THE
PROPER REQUIRED CERTIFICATION RELATING TO SUCH INTEREST HAS BEEN PROVIDED
IN ACCORDANCE WITH THE TERMS OF THE INDENTURE, TO THE EFFECT THAT THE
BENEFICIAL OWNER OR OWNERS OF SUCH INTEREST ARE NOT U.S. PERSONS.
SECTION 2.16 Book-Entry Provisions for Global Security. (a) Each
-----------------------------------------
Global Security initially shall (i) be registered in the name of the Depositary
or the nominee of such Depositary, (ii) be delivered to the Trustee as custodian
for such Depositary and (iii) bear legends as set forth in Section 2.15.
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under the
Global Security, and the Depositary may
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be treated by the Company, the Trustee and any agent of the Company or the
Trustee as the absolute owner of the Global Security for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the
Company, the Trustee or any agent of the Company or the Trustee from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Security.
(b) Transfers of a Global Security shall be limited to transfers in
whole, but not in part, to the Depositary, its successors or their respective
nominees. Interest of beneficial owners in a Global Security may be transferred
or exchanged for Physical Securities in accordance with the rules and procedures
of the Depositary, the provisions of Section 2.17 and the limitation set forth
in Section 2.1 with regard to the Regulation S Global Security. In addition,
Physical Securities shall be transferred to all beneficial owners in exchange
for their beneficial interests in a Global Security if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Security and a successor depository is not appointed by the
Company within 90 days of such notice or (ii) an Event of Default has occurred
and is continuing and the Registrar has received a written request from the
Depositary to issue Physical Securities.
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in the Global Securities to beneficial owners pursuant to
paragraph (b) above, the Registrar shall (if one or more Physical Securities are
to be issued) reflect on its books and records the date and a decrease in the
principal amount of the beneficial interest in the Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more Physical Securities of like tenor and amount.
(d) In connection with the transfer of an entire Global Security to
beneficial owners pursuant to paragraph (b) above, a Global Security shall be
deemed to be surrendered to the Trustee for cancellation, and the Company shall
execute, and the Trustee shall authenticate and deliver, to each beneficial
owner identified by the Depositary in exchange for its beneficial interest in
such Global Security, an equal aggregate principal amount of Physical Securities
of authorized denominations.
(e) Any Physical Security constituting a Restricted Security
delivered in exchange for an interest in the Global Security pursuant to
paragraph (b) or (c) above shall, except as otherwise provided by paragraphs
(a)(i)(x) and (c) of Section 2.17, bear the legend regarding transfer
restrictions applicable to the Physical Securities set forth in Section 2.15.
(f) The Holder of a Global Security may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Securityholder is
entitled to take under this Indenture or the Securities.
SECTION 2.17 Special Transfer Provisions. (a) Transfers of Global
--------------------------- -------------------
Securities; Transfers to Non-QIB Institutional Accredited Investors and Non-U.S.
- --------------------------------------------------------------------------------
Persons. The following provisions shall apply with respect to the registration
- -------
of any proposed transfer of a Security
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constituting a Restricted Security to any Institutional Accredited Investor
which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Security
constituting a Restricted Security, whether or not such Security bears the
Private Placement Legend, if (x) the requested transfer is after June 18,
2000; provided, however, that neither the Company nor any Affiliate of the
Company has held any beneficial interest in such Security, or portion
thereof, at any time on or prior to June 18, 2000 or (y) (1) in the case of
a transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto or
(2) in the case of a transfer to a Non-U.S. Person, the proposed transferor
has delivered to the Registrar a certificate substantially in the form of
Exhibit D hereto; and
(ii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Rule 144A Global Security, upon receipt by the
Registrar of (x) the certificate, if any, required by paragraph (i) above
and (y) instructions given in accordance with the Depositary's and the
Registrar's procedures, (a) the Registrar shall reflect on its books and
records the date and (if the transfer does not involve a transfer of
outstanding Physical Securities) a decrease in the principal amount of the
Rule 144A Global Security in an amount equal to the principal amount of the
beneficial interest in the Rule 144A Global Security to be transferred, and
(b)(1) the Company shall execute and the Trustee shall authenticate and
deliver one or more Physical Securities of like tenor and amount or (2) the
Registrar shall reflect on its books and records the date and (if the
transfer does not involve a transfer of outstanding Physical Securities) an
increase in the principal amount of the Regulation S Global Security or the
AI Global Security, as the case may be, in an amount equal to the principal
amount of the beneficial interest in the Rule 144A Global Security to be
transferred.
(iii) if the proposed transferor is an Agent Member holding a
beneficial interest in the Regulation S Global Security, upon receipt by
the Registrar of (x) the certificate, if any, required by paragraph (i)
above and (y) instructions given in accordance with the Depositary's and
the Registrar's procedures, (a) the Registrar shall reflect on its books
and records the date and (if the transfer does not involve a transfer of
outstanding Physical Securities) a decrease in the principal amount of the
Regulation S Global Security in an amount equal to the principal amount of
the beneficial interest in the Regulation S Global Security to be
transferred, and (b)(1) the Company shall execute and the Trustee shall
authenticate and deliver one or more Physical Securities of like tenor and
amount or (2) the Registrar shall reflect on its books and records the date
and (if the transfer does not involve a transfer of outstanding Physical
Securities) an increase in the principal amount of the Rule 144A Global
Security or AI Global Security, as the case may be, in an amount equal to
the principal amount of the beneficial interest in the Rule 144A Global
Security or AI Global Security, as the case may be, to be transferred.
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(b) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of a Security constituting
a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has advised the Company and the
Registrar in writing, that the sale has been effected in compliance with
the provisions of Rule 144A to a transferee who has advised the Company and
the Registrar in writing, that it is purchasing the Security for its own
account or an account with respect to which it exercises sole investment
discretion and that any such account is a QIB within the meaning of Rule
144A, and it is aware that the sale to it is being made in reliance on Rule
144A and acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined not to
request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Rule 144A Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Rule 144A Global Security in an amount equal to principal amount of the
Physical Securities to be transferred, and the Trustee shall cancel the
Physical Securities so transferred.
(c) Transfers to Non-U.S. Persons. The following provisions shall
-----------------------------
apply with respect to the registration of any proposed transfer of a Security
constituting a Restricted Security to a Non-U.S. Persons:
(i) the Registrar shall register the transfer if such transfer is
being made by a proposed transferor who has advised the Company and the
Registrar in writing, that the sale has been effected in compliance with
the provisions of Regulation S to a transferee who has advised the Company
and the Registrar in writing, that it is purchasing the Security in
compliance with Rule 904 under the Securities Act, and it is aware that the
sale to it is being made in reliance on Regulation S and that it is aware
that the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Regulation S; and
(ii) if the proposed transferee is an Agent Member and the Securities
to be transferred consist of Physical Securities which after transfer are
to be evidenced by an interest in the Regulation S Global Security, upon
receipt by the Registrar of instructions given in accordance with the
Depositary's and the Registrar's procedures, the Registrar shall reflect on
its books and records the date and an increase in the principal amount of
the Regulation S Global Security in an amount equal to principal amount of
the Physical
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Securities to be transferred, and the Trustee shall cancel the
Physical Securities so transferred.
(d) Private Placement Legend. Upon the registration of the transfer,
------------------------
exchange or replacement of Securities not bearing the Private Placement Legend,
the Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the registration of the transfer, exchange or replacement of
Securities bearing the Private Placement Legend, the Registrar shall deliver
only Securities that bear the Private Placement Legend unless (i) the
circumstance contemplated by paragraph (a)(i)(x) of this Section 2.17 exists or
(ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(e) General. By its acceptance of any Security bearing the Private
-------
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain for at least two years copies of all
letters, notices and other written communications received pursuant to Section
2.16 or this Section 2.17. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Registrar.
SECTION 2.18 Persons Deemed Owners. Prior to due presentment of a
---------------------
Security for registration of transfer and subject to Section 2.12, the Company,
the Trustee, any Paying Agent, any Registrar and any co-registrar may deem and
treat the Person in whose name any Security shall be registered upon the
register of Securities kept by the Registrar as the absolute owner of such
Security (whether or not such Security shall be overdue and notwithstanding any
notation of the ownership or other writing thereon made by anyone other than the
Company, any Registrar or any co-registrar) for the purpose of receiving
payments of principal of or interest on such Security and for all other
purposes; and none of the Company, the Trustee, any Paying Agent, any Registrar
or any co-registrar shall be affected by any notice to the contrary.
SECTION 2.19 Record Date. The Record Date for purposes of
-----------
determining the identity of Securityholders entitled to vote or consent to any
action by vote or consent authorized or permitted under this Indenture shall be
the later of (i) 30 days prior to the first solicitation of such consent or (ii)
the date of the most recent list of Holders furnished to the Trustee, if
applicable, pursuant to Section 2.5.
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ARTICLE III
-----------
REDEMPTION
----------
SECTION 3.1 Notices to Trustee. If the Company elects to redeem
------------------
Securities pursuant to paragraph 5 of the Securities and Section 3.7 of this
Indenture, it shall notify the Trustee in writing of the Redemption Date and the
principal amount of Securities to be redeemed.
The Company shall give each notice to the Trustee provided for in this
Section at least 45 days but no more than 60 days before the Redemption Date
unless the Trustee consents to a shorter period. Such notice shall be
accompanied by an Officers' Certificate from the Company to the effect that such
redemption will comply with the conditions herein.
SECTION 3.2 Selection of Securities To Be Redeemed. In the case of
--------------------------------------
any partial redemption of the Securities, selection of the Securities for
redemption will be made by the Trustee in compliance with the requirements of
the principal national securities exchange, if any, on which the Securities are
listed, or, if the securities are not so listed, on a pro rata basis, by lot or
by such other method as the Trustee in its sole discretion shall deem to be fair
and appropriate; provided, however, that if a partial redemption is made with
proceeds of one or more offerings of Equity Interests of the Company, selection
of the Securities or portion thereof for redemption shall be made by the Trustee
only on a pro rata basis, unless such method is otherwise prohibited.
Securities may be redeemed in part in multiples of $1,000 principal amount only.
Notice of redemption will be sent, by first class mail, postage prepaid, at
least 30 but not more than 60 days prior to the date fixed for redemption to
each holder whose Securities are to be redeemed at the last address for such
holder then shown on the registry books. If any Security is to be redeemed in
part only, the notice of redemption that relates to such Security shall state
the portion of the principal amount thereof to be redeemed. A new Security in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the holder thereof upon cancellation of the original Security. On and
after any Redemption Date, interest will cease to accrue on the Securities or
part thereof called for redemption as long as the Company has deposited with the
Paying Agent funds in satisfaction of the redemption price pursuant to the
Indenture. Provisions of this Indenture that apply to Securities called for
redemption also apply to portions of Securities called for redemption. The
Trustee shall notify the Company in writing promptly of the Securities or
portions of Securities to be redeemed.
SECTION 3.3 Notice of Redemption. At least 30 days but not more than
--------------------
60 days before a date for redemption of Securities, the Company shall mail a
notice of redemption by first-class mail to each Holder of Securities to be
redeemed, at such Holder's registered address.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the Redemption Date;
(2) the Redemption Price and the amount of accrued interest, if any,
to be paid;
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(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the Redemption Price;
(5) if fewer than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof) to be
redeemed, as well as the aggregate principal amount of Securities to be
redeemed and the aggregate principal amount of Securities to be outstanding
after such partial redemption;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the Redemption Date;
(7) the CUSIP number, if any, printed on the Securities being
redeemed and that no representation is made as to the correctness or
accuracy of the CUSIP, ISIN or Common Code number, if any, listed in such
notice or printed on the Securities;
(8) if any Security is being redeemed in part, the portion of the
principal amount of such Security to be redeemed and that, after the
Redemption Date upon surrender of such Security, a new Security or
Securities in principal amount equal to the unredeemed portion shall be
issued; and
(9) the paragraph of the Securities and/or Section of this Indenture
pursuant to which the Securities called for redemption are being redeemed.
At the Company's request made in writing to the Trustee at least 45
days prior to the date fixed for redemption, the Trustee shall give the notice
of redemption in the name and the expense of the Company to each Holder whose
Securities are to be redeemed at the last address for such Holder then shown on
the registry books. In such event, the Company shall provide the Trustee with
the information required by this Section.
SECTION 3.4 Effect of Notice of Redemption. Once notice of
------------------------------
redemption is mailed, Securities called for redemption become due and payable on
the designated Redemption Date and at the redemption price stated in the notice.
Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price stated in the notice, plus accrued interest to the designated
Redemption Date; provided, that if any Redemption Date is after a regular Record
Date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Securityholder of the redeemed Securities registered on the
relevant Record Date. Failure to give notice or any defect in the notice to any
Holder shall not affect the validity of the notice to any other Holder.
SECTION 3.5 Deposit of Redemption Price. (a) Prior to 11:00 a.m.,
---------------------------
New York City time, on any Redemption Date, the Company shall deposit with the
Trustee or with the Paying Agent money sufficient to pay the redemption price of
and accrued interest on all
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<PAGE>
Securities to be redeemed on such Redemption Date (the "Redemption Price"). The
Trustee or the Paying Agent shall promptly return to the Company any money
deposited with the Trustee or the Paying Agent by the Company in excess of the
amounts necessary to pay the redemption price of, and accrued interest on, all
Securities to be redeemed.
(b) Except as set forth in the last sentence of this paragraph, on
and after any Redemption Date, interest ceases to accrue on the Securities or
the portions of Securities called for redemption. If a Security is redeemed on
or after an interest Record Date but on or prior to the related Interest Payment
Date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Security was registered at the close of business on such Record Date.
If any Security called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the Redemption
Date until such principal is paid and, to the extent lawful, on any interest not
paid on such unpaid principal, in each case at the rate provided in the
Securities and in Section 4.1.
SECTION 3.6 Securities Redeemed in Part. Upon surrender of a
---------------------------
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for and in the name of the Holder (at the Company's expense),
a new Security equal in a principal amount to the unredeemed portion of the
Security surrendered.
SECTION 3.7 Optional Redemption. (a) Except as provided in Section
-------------------
3.7(b), the Securities will not be redeemable at the option of the Company prior
to June 1, 2003. On and after such date, the Securities will be redeemable, at
the Company's option, in whole or in part upon not less than 30 nor more than 60
days' notice, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, thereon to the
Redemption Date, if redeemed during the twelve-month period beginning on June 1
of the years indicated below (subject to the right of holders of record on the
relevant Record Date to receive interest due on the relevant Interest Payment
Date):
Redemption
Period Price
- ------ ----------
2003............................................................. 107.00%
2004............................................................. 103.50%
(b) Notwithstanding the foregoing, on or prior to June 1, 2001, the
Company may redeem up to 35% of the aggregate principal amount of Securities
originally issued under this Indenture at a redemption price of 112.50% of the
principal amount thereof, plus accrued and unpaid interest, if any, thereon to
the Redemption Date, with the net cash proceeds of one or more offerings of
Equity Interests (other than Disqualified Stock) of the Company; provided that
(i) at least 65% of the aggregate principal amount of Securities originally
issued under this Indenture remains outstanding immediately after the occurrence
of such redemption (excluding Securities held by the Company and its
Subsidiaries) and (ii) each such redemption shall occur within 90 days of the
date of the closing of each such offering.
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<PAGE>
SECTION 3.8 Mandatory Redemption. Except as set forth in Section 3.9
---------------------
and Section 4.9 the Company is not required to make mandatory redemption or
sinking fund payments with respect to the Securities.
SECTION 3.9 Offer to Purchase by Application of Excess Proceeds. In
---------------------------------------------------
the event that, pursuant to Section 4.8 hereof, the Company shall be required to
commence an offer to all Holders to purchase Securities, it shall follow the
procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Securities required
to be purchased pursuant to Section 4.8 hereof (the "Offer Amount") or, if less
than the Offer Amount has been tendered, all Securities tendered in response to
the Asset Sale Offer. Payment for any Securities so purchased shall be made in
the same manner as interest payments are made.
If the Purchase Date is on or after an interest Record Date and on or
before the related Interest Payment Date, any accrued and unpaid interest, if
any, shall be paid to the Person in whose name Security is registered at the
close of business on such Record Date, and no additional interest, if any, shall
be payable to Holders who tender Securities pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall send,
by first class mail, a notice to the Trustee and each of the Holders, with a
copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Securities pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section
3.9 and Section 4.8 hereof and the length of time the Asset Sale Offer shall
remain open;
(b) the Offer Amount, the purchase price, the amount of accrued and
unpaid interest, as of the Purchase Date and the Purchase Date;
(c) that any Security not tendered or accepted for payment shall
continue to accrue interest, if any;
(d) that, unless the Company defaults in making such payment, any
Security accepted for payment pursuant to the Asset Sale Offer shall cease to
accrue interest, after the Purchase Date;
(e) that Holders electing to have a Security purchased pursuant to an
Asset Sale Offer may only elect to have all of such Security purchased and may
not elect to have only a portion of such Security purchased;
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<PAGE>
(f) that Holders electing to have a Security purchased pursuant to
any Asset Sale Offer shall be required to surrender the Security, with the form
entitled "Option of Securityholder to Elect Purchase" on the reverse of the
Security completed, or transfer the Security by book-entry transfer, to the
Company, a depositary, if appointed by the Company, or a Paying Agent at the
address specified in the notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the Depositary or the Paying Agent, as the case may be, receives, not
later than the close of business on the Second Business Day prior to the
expiration of the Offer Period, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such Holder is
withdrawing his or her election to have such Security purchased;
(h) that, if the aggregate principal amount of Securities surrendered
by Holders exceeds the Offer Amount, the Company shall select the Securities to
be purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
(i) that Holders whose Securities were purchased only in part shall
be issued new Securities equal in principal amount to the unpurchased portion of
the Securities surrendered (or transferred by book-entry transfer).
On the Purchase Date for any Asset Sale Offer, the Company shall (i)
accept for payment the maximum principal amount of Securities tendered pursuant
to such Asset Sale Offer than can be purchased out of Excess Proceeds from such
Asset Sales, (ii) deposit with the Paying Agent the aggregate purchase price of
all Securities accepted for payment and any accrued and unpaid interest, on such
Securities as of the Purchase Date, and (iii) deliver or cause to be delivered
to the Trustee all Securities tendered pursuant to the Asset Sale Offer. If
less than all Securities tendered pursuant to any Asset Sale Offer are accepted
for payment by the Company for any reason, selection of the Securities to be
purchased by the Trustee shall be in compliance with the requirements of the
principal national securities exchange, if any, on which the Securities are
listed or, if the Securities are not so listed, by lot or by such method as the
Trustee shall deem fair and appropriate; provided that Securities accepted for
payment in part shall only be purchased in integral multiples of $1,000. The
Paying Agent shall promptly mail to each Holder of Securities accepted for
payment an amount equal to the purchase price for such Securities plus any
accrued and unpaid interest and the Trustee shall promptly authenticate and mail
to such Holder of Securities accepted for payment in part a new Security equal
in principal amount to any unpurchased portion of the Securities, and any
Security not accepted for payment in whole or in part shall be promptly returned
to the Holder of such Security. On and after a Purchase Date, interest shall
cease to accrue on the Securities accepted for payment. The Company shall
announce the results of the Offer to holders of the Securities on or as soon as
practicable after the Purchase Date.
Other than as specifically provided in this Section 3.9, any purchase
pursuant to this Section 3.9 shall be made pursuant to the provisions of
Sections 3.1 through 3.6 hereof.
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ARTICLE IV
----------
COVENANTS
---------
SECTION 4.1 Payment of Securities. The Company shall promptly pay
---------------------
the principal of, premium, if any, and interest on the Securities on the dates
and in the manner provided in the Securities and in this Indenture. Principal,
premium, if any, and interest shall be considered paid on the date due if on
such date the Trustee or the Paying Agent holds in accordance with this
Indenture money sufficient to pay all principal and interest then due and the
Trustee or the Paying Agent, as the case may be, is not prohibited from paying
such money to the Securityholders on that date pursuant to the terms of this
Indenture. Interest will be computed on the basis of a 360 day year comprised
of twelve 30 day months.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
installments of interest (without regard to any applicable grace period) at the
same rate to the extent lawful.
SECTION 4.2 Reports. Whether or not required by the rules and
-------
regulations of the Commission, so long as any Securities are outstanding, the
Company shall furnish to the Holders of Securities (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on forms 10-Q and 10-K if the Company were required to file such
forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and results of
operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations", the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial information and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports. In addition, whether or not
required by the rules and regulations of the Commission, the Company shall file
a copy of all such information and reports with the Commission for public
availability (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company and the Subsidiary Guarantors will agree
that, for so long as any Securities remain outstanding, they shall furnish to
Holders of the Securities and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Act. The Company shall at all times comply with TIA (S)
314(a).
SECTION 4.3 Limitation on Incurrence of Indebtedness and Issuance of
--------------------------------------------------------
Preferred Stock. (a) The Company (i) shall not, and shall not permit any of
- ---------------
its Subsidiaries to, directly or indirectly, create, incur, issue, assume,
guarantee or otherwise become directly or indirectly liable, continently or
otherwise, with respect to (collectively, "incur") any Indebtedness
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<PAGE>
(including Acquired Debt) and (ii) shall not permit any of its Subsidiaries to
issue any shares of preferred stock; provided, however, that the Company (but
not its Subsidiaries) may incur Indebtedness (including Acquired Debt) or issue
Disqualified Stock if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred would have been at least 2.0 to 1, in each case
determined on a pro forma basis (including a pro forma application of the net
proceeds therefrom), as if such additional Indebtedness had been incurred, and
such Disqualified Stock had been issued, and such application of net proceeds
had occurred at the beginning of such four-quarter period.
(b) The foregoing provisions of paragraph (a) of this Section 4.3 shall
not apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Company and its Restricted Subsidiaries of
Indebtedness pursuant to Credit Facilities in an aggregate amount not to
exceed the greater of : (a) $175.0 million, provided that the amount of
such Indebtedness that is represented by Indebtedness for borrowed money
shall not exceed $60 million; and (b) the sum of 65% of the Eligible
Inventory plus 90% of the Eligible Accounts Receivable;
(ii) the incurrence by the Company and its Restricted Subsidiaries of
Existing Indebtedness;
(iii) the incurrence by the Company and the Subsidiary Guarantors of
Indebtedness represented by the Securities, the Exchange Securities and the
Subsidiary Guarantees;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace indebtedness
(other than intercompany Indebtedness) that was permitted to be incurred
under Section 4.3(a) hereof or clauses (ii), (iii), (vi), (viii) or (ix) of
this Section 4.3(b);
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (a) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary of the Company and (b) any sale or other transfer of
any such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Subsidiary, as the case may be, that was not permitted by this clause (v);
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging currency exchange risk or interest rate risk with respect
to any floating rate Indebtedness that is permitted by the terms of this
Indenture to be outstanding;
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(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate amount not to
exceed $15.0 million at any one time outstanding;
(viii) the guarantee by the Company or any of its Restricted
Subsidiaries of Indebtedness of the Company or a Restricted Subsidiary of
the Company that was permitted to be incurred by another provision of this
covenant;
(ix) the incurrence of obligations (other than for borrowed money)
under factoring arrangements entered into in the ordinary course of
business; and
(x) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (x).
For purposes of determining compliance with this Section 4.3, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the paragraph (a) of this Section 4.3, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest, accretion of
amortization of original issue discount and the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms will not
be deemed to be an incurrence of Indebtedness for purposes of this Section 4.3;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
SECTION 4.4 Limitation on Restricted Payments. The Company shall
---------------------------------
not, and shall not permit any of its Restricted Subsidiaries to, directly or
indirectly: (i) declare or pay any dividend or make any other payment or
distribution on account of the Company's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Subsidiaries) or
to the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company or other than dividends or distributions payable to the Company or a
Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company (other than any such Equity Interests owned by the Company or any
Restricted Subsidiary of the Company); (iii) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness that is subordinated to the Securities, except a payment of
interest or a payment of principal at Stated Maturity; (iv) make any Earn-out
Payment, other than any such payment in the form of Equity Interests (other than
Disqualified Stock) of the Company; or (v) make any Restricted Investment (all
such payments and other
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actions set forth in clauses (i) through (v) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to
the Fixed Charge Coverage Ratio test set forth in Section 4.3(a); and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Closing Date (excluding (x) in the case of a
determination of whether any Restricted Payment may be made, Restricted
Payments permitted by clauses (ii), (iii) and (iv) of the next succeeding
paragraph and (y) in the case of a determination of whether a Restricted
Payment which is an Earn-out Payment may be made, clause (vi) of the next
succeeding paragraph), is less than the sum, without duplication, of (1)
50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date of the Indenture to the end of the Company's most
recently ended fiscal quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if such Consolidated
Net Income for such period is a deficit, less 100% of such deficit), plus
(2) 100% of the aggregate net cash proceeds received by the Company since
the Closing Date (A) as a contribution to its common equity capital, (B)
from the issue or sale of Equity Interests of the Company (other than
Disqualified Stock) or (C) from the issue or sale of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company), plus (3)
to the extent that any Restricted Investment that was made after the
Closing Date is sold for cash or otherwise liquidated or repaid for cash,
the lesser of (A) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) and (B) the
initial amount of such Restricted Investment.
The foregoing provisions shall not prohibit:
(i) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment would have
complied with the provisions of the Indenture;
(ii) the redemption, repurchase, retirement, defeasance or other
acquisition of subordinated Indebtedness or Equity Interests of the Company
in exchange for, or out of the net cash proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of, other
Equity Interests of the Company (other than Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any
such
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redemption, repurchase, retirement, defeasance or other acquisition shall
be excluded from clause (c)(2) of the preceding paragraph;
(iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
(iv) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata basis;
(v) the repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company held by any member of the
Company's (or any of its Subsidiaries') management; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interest shall not exceed $1.0 million in any two-year
period and no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; and
(vi) the payment of (1) any Existing Cash Earn-out Obligation and (2)
any other Earn-out Payment in connection with the Miss Erika Acquisition
provided that the aggregate amount of such other Earn-out Payment does not
exceed $10.0 million in the aggregate and at the time of each such payment
it would be permitted under clause (b) of the preceding paragraph.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Trustee, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $2.5 million. Not later than 30 days
following the end of any fiscal quarter of the Company in which the Company or
any of its Restricted Subsidiaries have made any Restricted Payments, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payments were permitted and setting forth the basis upon which the
calculations required by this Section 4.4 were computed, together with a copy of
any fairness opinion or appraisal required by the Indenture.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated will be deemed to be Restricted Payments at the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of this Section 4.4. All such outstanding
Investments will be deemed to constitute Investments in an amount equal to the
greatest of (i) the net book value of such Investments at the time of such
designation, (ii) the fair market value of such Investments at the time of such
designation and (iii) the original fair market value of such
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Investments at the time they were made. Such designation will only be permitted
if such Restricted Payment would be permitted at such time and if such
Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary.
Any such designation by the Board of Directors shall be evidenced to
the Trustee by filing with the Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions. If, at any time, any
Unrestricted Subsidiary would fail to meet the definition of an Unrestricted
Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for
purposes of this Indenture and any Indebtedness of such Subsidiary shall be
deemed to be incurred by a Restricted Subsidiary of the Company as of such date
(and, if such Indebtedness is not permitted to be incurred as of such date under
Section 4.3, the Company shall be in default of such covenant). The Board of
Directors of the Company may at any time designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided that such designation shall be deemed
to be an incurrence of Indebtedness by a Restricted Subsidiary of the Company of
any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation all only be permitted if (i) such Indebtedness is permitted under
Section 4.3, calculated on a pro forma basis as if such designation had occurred
at the beginning of the four-quarter reference period, and (ii) no Default or
Event of Default would be in existence immediately following such designation.
SECTION 4.5 Restrictions on Payments for Consent. Neither the
-------------------------------------
Company nor any of its Restricted Subsidiaries shall, directly or indirectly,
pay or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Securities for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid or is paid to
all Holders of the Securities that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to such consent, waiver
or agreement.
SECTION 4.6 Limitation on Affiliate Transactions. The Indenture will
------------------------------------
provide that the Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or such Restricted Subsidiary than those that would have been obtained
in a comparable transaction by the Company or such Restricted Subsidiary with an
unrelated Person and (ii) the Company delivers to the Trustee (a) with respect
to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $1.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate certifying that such
Affiliate Transaction complies with clause (i) above and that such Affiliate
Transaction has been approved by a majority of the Disinterested Directors and
(b) with respect to any Affiliate Transaction or series of related Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
Company of such Affiliate Transaction from a financial point of view issued by
an accounting, appraisal or investment banking firm of national
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standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment or consulting agreement entered
into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business (and any amendment thereto); (ii) transactions between or among the
Company and its Restricted Subsidiaries; (iii) reasonable director, officer and
employee compensation and other benefits and indemnification provisions approved
by the Board of Directors or the stock option or compensation committee, as
applicable, of such Board of Directors; (iv) Affiliate Transactions existing on
the Closing Date; and (v) Restricted Payments that are permitted under Section
4.4 of this Indenture.
SECTION 4.7 Limitation on Liens. The Company shall not, and shall
-------------------
not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired, or any income or profits therefrom or assign or convey any
right to receive income therefrom, except Permitted Liens.
SECTION 4.8 Limitation on Asset Sales . (a) The Company shall not,
--------------------------
and shall not permit any of its Restricted Subsidiaries to, consummate an Asset
Sale unless (i) the Company or such Restricted Subsidiary, as the case may be,
receives consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of cash; provided that the amount of (x) any liabilities (as shown
on the Company's or such Restricted Subsidiary's most recent balance sheet) of
the Company or such Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Securities or any
guarantee thereof) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases the Company or such
Restricted Subsidiary from further liability and (y) any securities, notes or
other obligations received by the Company or such Restricted Subsidiary from
such transferee that are contemporaneously (subject to ordinary settlement
periods) converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received) shall, in each case, be deemed to be cash for
purposes of this provision.
Within 180 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may either (i) apply such Net Proceeds to the acquisition of a
majority of the assets of, or all of the capital stock of, another business, the
making of a capital expenditure or the acquisition of other long-term assets
that are used or useful in the business of the Company or any of its Restricted
Subsidiaries or (ii) repay Indebtedness under Credit Facilities (and to
correspondingly reduce commitments with respect thereto in the case of revolving
credit borrowings). Pending the final application of any such Net Proceeds, the
Company may temporarily reduce revolving credit borrowings or otherwise invest
such Net Proceeds in any manner that is not prohibited by the Indenture. Any
Net Proceeds from Asset Sales that are not applied or invested as provided in
the first sentence of this paragraph will be deemed to constitute "Excess
Proceeds."
When the aggregate amount of Excess Proceeds exceeds $5.0 million, the
Company will be required to make an offer to all Holders of Securities (an
"Asset Sale Offer") to
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purchase the maximum principal amount of Securities that may be purchased out of
the Excess Proceeds at an offer price in cash in an amount equal to 100% of the
principal amount thereof, plus accrued and unpaid interest thereon, if any, to
the date of purchase, in accordance with the procedures set forth in Section
3.9. To the extent that any Excess Proceeds remain after consummation of an
Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by this Indenture. If the aggregate principal amount of
Securities tendered into such Asset Sale Offer exceeds the amount of Excess
Proceeds, the Trustee shall select the Securities to be purchased in accordance
with Section 3.9(h). Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
SECTION 4.9 Change of Control. (a) Upon the occurrence of a Change
-----------------
of Control, the Company will be required to make an offer to each Holder of
Securities to repurchase all or any part (equal to $1,000 or an integral
multiple thereof) of such Holder's Securities pursuant to the offer described
below (the "Change of Control Offer") at an offer price in cash equal to 101% of
the aggregate principal amount thereof, plus accrued and unpaid interest, if
any, thereon to the date of purchase (the "Change of Control Payment"). Within
30 days following any Change of Control, the Company shall mail to each Holder
of Securities at such Holder's registered address a notice stating: (i) that an
offer (an "Offer") is being made pursuant to this Section 4.9 as a result of a
Change of Control, the length of time the Offer shall remain open, and the
maximum aggregate principal amount of Securities that will be accepted for
payment pursuant to such Offer; (ii) the purchase price, the amount of accrued
and unpaid interest as of the purchase date, and the purchase date (which will
be no earlier than 30 days or later than 60 days from the date such notice is
mailed ) (the "Change of Control Payment Date"); (iii) the circumstances and
material facts regarding such Change of Control to the extent known to the
Company (including, but not limited to, information with respect to pro forma
and historical financial information after giving effect to such Change of
Control and information regarding the Person or Persons acquiring control); (iv)
that any Security not tendered will continue to accrue interest; (v) that,
unless the Company defaults in the payment of the Change of Control Payment, all
Securities accepted for payment pursuant to the Offer shall cease to accrue
interest after the Change of Control Payment Date; (vii) that Holders electing
to have any Securities purchased pursuant to an Offer will be required to
surrender the Securities, with the form entitled "Option of Securityholder to
Elect Purchase" on the reverse of the Securities completed, to the Paying Agent
at the address specified in the notice prior to the close of business on the
third Business Day preceding the Change of Control Payment Date; (viii) that
Holders shall be entitled to withdraw their election if the Paying Agent
receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Securities delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Securities purchased; and (ix) that Holders
whose Securities are being purchased only in part shall be issued new Securities
equal in principal amount to the unpurchased portion of the Securities
surrendered, which unpurchased portion must be equal to $1,000 in principal
amount or an integral multiple thereof. The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Securities as a result of a
Change of Control.
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(b) On the Change of Control Payment Date, the Company will, to the
extent lawful, (i) accept for payment all Securities or portions thereof
properly tendered pursuant to the Change of Control Offer, (ii) deposit with the
paying Agent an amount equal to the Change of Control Payment in respect of all
Securities or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an Officers'
Certificate stating the aggregate principal amount of Securities or portions
thereof being purchased by the Company. The Paying Agent shall promptly mail to
each Holder of Securities so tendered the Change of Control Payment for such
Securities, and the Trustee will promptly authenticate and mail (or cause to be
transferred by book entry) to each Holder a new Security equal in principal
amount to any unpurchased portion of the Securities surrendered, if any;
provided that each such new Security will be in a principal amount of $1,000 or
an integral multiple thereof. The Company will publicly announce the results of
the Change of Control Offer on or as soon as practicable after the Change of
Control Payment Date.
(c) The Company shall not be required to make a Change of Control
Offer upon a Change of Control if a third party makes the Change of Control
Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Indenture applicable to a Change of Control Offer
made by the Company and purchases all Securities validly tendered and not
withdrawn under such Change of Control Offer.
SECTION 4.10 Limitation on Dividend and Other Payment Restrictions
-----------------------------------------------------
Affecting Subsidiaries. The Company shall not, and shall not permit any of its
- ----------------------
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any encumbrance or restriction on the
ability of any Subsidiary to (i) (a) pay dividends or make any other
distributions to the Company or any of its Restricted Subsidiaries (1) on its
Capital Stock or (2) with respect to any other interest or participation in, or
measured by, its profits, or (b) pay any indebtedness owed to the Company or any
of its Restricted Subsidiaries, (ii) make loans or advances to the Company or
any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries; provided, however,
that the foregoing restrictions will not apply to encumbrances or restrictions
existing under or by reason of (A) Existing Indebtedness as in effect on the
Closing Date, (B) the New Credit Agreement as in effect as of the Closing Date,
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof or any other
Credit Facility, provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement, refinancings or other
Credit Facilities are no more restrictive, taken as a whole, with respect to
such dividend and other payment restrictions than those contained in the New
Credit Agreement as in effect on the Closing Date, (C) this Indenture and the
Securities, (D) applicable law, (E) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restrictions is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Indenture to
be incurred, (F) customary non-assignment provisions in leases entered into in
the ordinary course of business,
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(G) purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, (H) any agreement for the sale of a Restricted
Subsidiary or other assets that restricts distributions by such Restricted
Subsidiary or other assets pending sale, (I) Permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness being
refinanced, (J) secured Indebtedness otherwise permitted to be incurred pursuant
to the provisions of Section 4.7 that limits the right of the debtor to dispose
of the assets securing such Indebtedness, (K) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business,
(L) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business and (M)
customary restrictions imposed on copyrighted, trademarked or patented
materials.
SECTION 4.11 Additional Subsidiary Guarantees. If the Company or any
--------------------------------
of its Restricted Subsidiaries shall acquire or create another Restricted
Subsidiary or an Unrestricted Subsidiary of the Company is redesignated as a
Restricted Subsidiary or otherwise ceases to be an Unrestricted Subsidiary, then
such newly acquired, created or redesignated Restricted Subsidiary shall execute
and deliver to the Trustee pursuant to Section 10.7(a) a supplemental indenture
in which such Restricted Subsidiary agrees to be bound by the terms of this
Indenture as a Subsidiary Guarantor.
SECTION 4.12 Further Instruments and Acts. Upon request of the
----------------------------
Trustee, the Company and the Subsidiary Guarantor will execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purpose of this Indenture.
SECTION 4.13 Use of Proceeds. The Company shall use the net proceeds
---------------
from the sale of the Securities to consummate the transactions contemplated in
the section of the Offering Memorandum entitled "Use of Proceeds".
SECTION 4.14 Compliance Certificates. (a) The Company shall deliver
-----------------------
to the Trustee, within 120 days after the end of each fiscal year, an Officers'
Certificate signed by its principal executive officer, principal financial
officer or principal accounting officer stating that a review of the activities
of the Company and its Subsidiaries during the preceding fiscal year has been
made under the supervision of the signing Officers with a view to determining
whether each has kept, observed, performed and fulfilled its obligations under
this Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge each has kept, observed,
performed and fulfilled each and every covenant contained in this Indenture and
is not in default in the performance or observance of any of the terms,
provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action each is taking or proposes
to take with respect thereto).
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(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.2 above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements nothing has come to
their attention which would lead them to believe that the Company has violated
any provisions of Article IV or V or that there exists a Default or Event of
Default under Article VI of this Indenture insofar as they relate to accounting
matters or, if any such violation has occurred, specifying the nature and period
of existence thereof, it being understood that such accountants shall not be
liable directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, within 5 days of any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
(d) The Company shall also comply with TIA (S) 314(a)(4).
SECTION 4.15 Maintenance of Office or Agency. (a) The Company shall
-------------------------------
maintain in the Borough of Manhattan, in The City of New York, an office or
agency (which may be an office of the Trustee or an affiliate of the Trustee,
Registrar or co-registrar) where Securities may be surrendered for registration
of transfer or exchange and where notices and demands to or upon the Company in
respect of the Securities and this Indenture may be served. The Company shall
give prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in the Borough of Manhattan, in The City of New York for such purposes. The
Company shall give prior written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
(c) The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.3.
SECTION 4.16 Taxes. The Company shall pay, prior to delinquency, all
-----
material taxes, assessments, and governmental levies; provided, however, that
there shall not be required to be paid or discharged any such tax, assessment or
charge, the amount, applicability or validity of which is being contested in
good faith by appropriate proceedings and for which adequate
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provision has been made or for which adequate reserves, to the extent required
under GAAP, have been taken.
SECTION 4.17 Stay, Extension and Usury Laws. The Company covenants
------------------------------
(to the extent that it may lawfully do so) that it shall not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay, extension or usury law wherever enacted, now or at any time
hereafter in force, that may affect the covenants or the performance of this
Indenture (including, but not limited to, the payment of the principal of or
interest on the Securities); and the Company (to the extent that it may lawfully
do so) hereby expressly waive all benefit or advantage of any such law, and
covenant that they shall not, by resort to any such law, hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
SECTION 4.18 Corporate Existence. Subject to Article V, the Company
-------------------
shall do or cause to be done all things necessary to preserve and keep in full
force and effect its corporate existence, and the corporate existence of each
Subsidiary, in accordance with the respective organizational documents (as the
same may be amended from time to time) of each Subsidiary and the rights
(charter and statutory), licenses and franchises of the Company and its
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any Subsidiary, if the Board of Directors of the Company
shall determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company and its Subsidiaries, taken as a whole,
and that the loss thereof is not adverse in any material respect to the
Securityholders.
ARTICLE V
---------
SUCCESSORS
----------
SECTION 5.1 Mergers and Consolidations. Neither the Company nor any
--------------------------
Subsidiary Guarantor shall consolidate or merge with or into (whether or not the
Company or such Subsidiary Guarantor is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company or such Subsidiary
Guarantor is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company or such
Subsidiary Guarantor) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made is a corporation organized
or existing under the laws of the United States, any state thereof or the
District of Columbia; (ii) the entity or person formed by or surviving any such
consolidation or merger (if other than the Company or such Subsidiary Guarantor)
or the entity or Person to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made assumes all the obligations
of the Company or such Subsidiary Guarantor under the Securities, this Indenture
and the Registration Rights Agreement pursuant to a supplemental indenture in a
form reasonably satisfactory to the Trustee; (iii) immediately after such
transaction no Default or Event of Default exists; and (iv) except in the case
of a merger of the Company
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with or into a Wholly Owned Subsidiary of the Company, the Company or the entity
or Person formed by or surviving any such consolidation or merger (if other than
the Company or such Subsidiary Guarantor), or to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made (A) will
have Consolidated Net Worth immediately after the transaction equal to or
greater than the Consolidated Net Worth of the Company immediately preceding the
transaction and (B) shall, at the time of such transaction and after giving pro
forma effect thereto as if such transaction had occurred at the beginning of the
applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in Section 4.3(a) of this Indenture.
SECTION 5.2 Successor Corporation Substituted. Unless any
---------------------------------
consolidation or merger, or any sale, assignment, transfer, lease, conveyance or
other disposition of all or substantially all of the assets of the Company in
accordance with Section 5.1 hereof, the successor corporation formed by such
consolidation or into which or with which the Company is merged or to which such
sale, assignment, transfer, lease, conveyance or other disposition is made shall
succeed to, and be substituted for (so that from and after the date of such
consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Securities except in the case of a sale of all
of the Company's assets that meets the requirements of Section 5.1 hereof.
ARTICLE VI
----------
DEFAULTS AND REMEDIES
---------------------
SECTION 6.1 Events of Default. (a) Each of the following
-----------------
constitutes an Event of Default:
(i) default for 30 days in the payment when due of interest on the
Securities;
(ii) default in payment when due of the principal of or premium, if
any, on the Securities;
(iii) failure by the Company or any of its Restricted Subsidiaries to
comply with Sections 4.3, 4.4, 4.8, 4.9 and 5.1;
(iv) failure by the Company or any of its Restricted Subsidiaries for
30 days after notice to comply with any of its other agreements in this
Indenture or the Securities;
(v) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any
of its Restricted Subsidiaries) whether such
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Indebtedness or guarantee now exists, or is created after the date of this
Indenture, which default (a) is caused by a failure to pay principal of or
premium or interest on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of
any such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(vi) failure by the Company or any of its Restricted Subsidiaries to
pay final judgments aggregating in excess of $5.0 million, which judgments
are not paid, discharged or stayed for a period of 60 days;
(vii) default by any Subsidiary Guarantor in the performance of any
covenant set forth in its Subsidiary Guarantee, repudiation by any
Subsidiary Guarantor of its obligations under its Subsidiary Guarantee, or
the unenforceability of any Subsidiary Guarantee against a Subsidiary
Guarantor for any reason;
(viii) the Company or a Significant Subsidiary or any group of
Restricted Subsidiaries of the Company that, taken together, constitute a
Significant Subsidiary:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
(E) consents to or acquiesces in the institution of a bankruptcy or
an insolvency proceeding against it, or
(F) takes any corporate action to authorize or effect any of the
foregoing; or takes any comparable action under any foreign laws relating
to insolvency.
(ix) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
(A) is for relief against the Company or any Significant Subsidiary
in an involuntary case;
(B) appoints a Custodian of the Company or any Significant Subsidiary
or for any substantial part of the property of the Company or any of its
Significant Subsidiaries; or
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(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary; or any similar relief is granted under any foreign
laws, and in each case the order, decree or relief remains unstayed and in
effect for 60 days.
Notwithstanding anything to the contrary contained herein, a Default
under clause (iv) or (v) will not constitute an Event of Default until the
Trustee or Holders of 25% in principal amount of all outstanding series of
Securities, acting as a single class, notify the Company (and the Trustee in the
case of a notice from Holders) of the Default and the Company does not cure such
Default within the time specified in such clause (iv) or (v) after receipt of
such notice.
The foregoing will constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or is effected by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body.
The term "Custodian" means any receiver, trustee, assignee,
liquidator, custodian or similar official under any Bankruptcy Law.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have had
to pay if the Company then had elected to redeem the Securities pursuant to the
optional redemption provisions of this Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Securities, anything in this Indenture or the
Securities to the contrary notwithstanding. If an Event of Default occurs prior
to June 1, 2003 by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Securities prior to June 1, 2003, then the
premium payable for purposes of this paragraph shall be 112.50% of the amount
that would otherwise be due but for the provisions of this sentence, plus
accrued interest and, to the date of payment.
SECTION 6.2 Acceleration. If any Event of Default occurs and is
------------
continuing, the Trustee or the Holders of at least 25% in principal amount of
the then outstanding Securities may declare all the Securities to be due and
payable immediately. Notwithstanding the foregoing, in the case of an Event of
Default specified in 6.1(viii) or (ix) occurs and is continuing, the principal
of and premium and accrued and unpaid interest on all the Securities will become
due and be immediately due and payable without any declaration or act on the
part of the Trustee or any Holders. The Holders of a majority in principal
amount of all outstanding series of Securities, voting as a single class, by
notice to the Trustee may rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default have been cured or waived except non-payment of principal
interest that become due solely because of acceleration no rescission shall
affect any subsequent Default or Event of Default.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with this Indenture, and the Company is required upon
becoming aware of any
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Default or Event of Default, to deliver to the Trustee a statement specifying
such Default or Event of Default.
SECTION 6.3 Other Remedies. If an Event of Default occurs and is
--------------
continuing, the Trustee and the Securityholders may pursue any available remedy
to collect the payment of principal of or interest on the Securities or to
enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. Except as
provided in Section 2.7, no remedy is exclusive of any other remedy. All
available remedies are cumulative to the extent permitted by law.
SECTION 6.4 Waiver of Past Defaults. The Holders of a majority in
-----------------------
principal amount of all outstanding series of Securities, voting as a single
class, by notice to the Trustee may waive an existing Default or Event of
Default and its consequences except (i) a Default or Event of Default in the
payment of the principal of, premium, if any, or interest on a Security or (ii)
a Default or Event of Default in respect of a provision that under Section 9.2
cannot be amended without the consent of each Securityholder affected. When a
Default or Event of Default is waived, it is deemed cured, but no such waiver
shall extend to any subsequent or other Default or Event of Default or impair
any consequent right.
SECTION 6.5 Control by Majority. Subject to Section 2.9, the Holders
-------------------
of a majority in principal amount of all outstanding series of Securities,
voting as a single class, may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. However, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture or, subject to
Section 7.1, that the Trustee determines is unduly prejudicial to the rights of
other Securityholders or would involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion against all losses and expenses caused by taking or
not taking such action.
SECTION 6.6 Limitation on Suits. A Securityholder may not pursue any
-------------------
remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in outstanding principal amount of
all outstanding series of Securities, voting as a single class, make a
written request to the Trustee to pursue the remedy;
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(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in outstanding principal amount of all
outstanding series of Securities, voting as a single class, do not give the
Trustee a direction that, in the opinion of the Trustee, is inconsistent
with the request during such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.7 Rights of Holders to Receive Payment. Notwithstanding
------------------------------------
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.8 Collection Suit by Trustee. If an Event of Default
--------------------------
specified in Section 6.1(i) or (ii) or an acceleration pursuant to Section 6.2
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other obligor of the
Securities for the whole amount then due and owing (together with interest on
any unpaid interest to the extent lawful) and the amounts provided for in
Section 7.7.
SECTION 6.9 Trustee May File Proofs of Claim. The Trustee may file
--------------------------------
such proofs of claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee and the Securityholders
allowed in any judicial proceedings relative to the Company, its Subsidiaries,
any other obligor on the Securities or their respective creditors or properties
and, unless prohibited by law or applicable regulations, may vote on behalf of
the Holders in any election of a trustee in bankruptcy or other Person
performing similar functions, and any Custodian in any such judicial proceeding
is hereby authorized by each Holder to make payments to the Trustee and, in the
event that the Trustee shall consent to the making of such payments directly to
the Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.7.
SECTION 6.10 Priorities. If the Trustee collects any money or
----------
property pursuant to this Article VI, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.7;
SECOND: if the Securityholders are forced to proceed against the
Company directly without the Trustee, to the Securityholders for their
collection costs;
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THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or priority
of any kind, according to the amounts due and payable on the Securities for
principal and interest, respectively; and
FOURTH: to the Company.
The Trustee, upon prior notice to the Company, may fix a Record Date
and payment date for any payment to Securityholders pursuant to this Section
6.10; provided, that failure to give any such notice shall not affect the
establishment of such Record Date or payment date for Holders pursuant to this
Section 6.10. At least 15 days before such Record Date, the Company shall mail
to each Securityholder and the Trustee a notice that states the Record Date, the
payment date and amount to be paid.
SECTION 6.11 Undertaking for Costs. In any suit for the enforcement
---------------------
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section 6.11 does not apply to a suit by the
Trustee, a suit by a Holder pursuant to Section 6.7 or a suit by Holders of more
than 10% in outstanding principal amount of the Securities.
SECTION 6.12 Restoration of Rights and Remedies. If the Trustee or
----------------------------------
any Securityholder of Securities has instituted any proceeding to enforce any
right or remedy under this Indenture and such proceeding has been discontinued
or abandoned for any reason, or has been determined adversely to the Trustee or
to such Securityholder, then and in every such case the Company, the Trustee and
the Securityholders shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Securityholders shall
continue as though no such proceeding has been instituted.
ARTICLE VII
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TRUSTEE
-------
SECTION 7.1 Duties of Trustee. (a) If a Default or an Event of
-----------------
Default has occurred and is continuing, the Trustee shall exercise the rights
and powers vested in it by this Indenture and use the same degree of care and
skill in their exercise as a prudent Person would exercise or use under the
circumstances in the conduct of such Person's own affairs.
(b) Except during the continuance of a Default or an Event of
Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture or the TIA and no
implied covenants or obligations shall be read into this Indenture against
the Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(1) this paragraph does not limit the effect of paragraph (b) of
this Section;
(2) the Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer unless it is proved that the Trustee
was negligent in ascertaining the pertinent facts; and
(3) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.5.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers, if it shall have reasonable grounds to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
(h) Every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section and to the provisions of the TIA.
SECTION 7.2 Rights of Trustee. Subject to TIA (S) 315(a) through
-----------------
(d):
(a) The Trustee may conclusively rely and shall be protected in
acting or refraining from acting on any document believed by it to be
genuine and to have been signed or presented by the proper person. The
Trustee need not investigate any fact or matter stated in the document.
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(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel which shall conform to
Sections 11.4 and 11.5. The Trustee shall not be liable for any action it
takes or omits to take in good faith in reliance on the Officers'
Certificate or Opinion of Counsel.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute willful misconduct or negligence.
(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders, unless such Securityholders shall have
offered to the Trustee security or indemnity reasonably satisfactory to the
Trustee against the losses, expenses and liabilities that might be incurred
by it in compliance with such request or direction.
(g) The Trustee shall not be liable with respect to any action taken
or omitted to be taken by it good faith in accordance with the direction of
the Securityholders of a majority in aggregate principal amount of the
Securities at the time outstanding relating to the time, method and place
of conducting any proceeding for any remedy available to the Trustee or
involving the exercise of any right, duty, trust or power conferred upon
the Trustee under the TIA or this Indenture.
(h) The Trustee may rely on and shall not be liable for any action it
takes or omits to take in good faith in reliance on an Officers'
Certificate of the Company as to the accuracy of the amounts of Eligible
Accounts Receivable and Eligible Inventory.
SECTION 7.3 Individual Rights of Trustee. The Trustee, in its
----------------------------
individual or any other capacity, may become the owner or pledgee of Securities
and may make loans to, accept deposits from, perform services for and otherwise
deal with the Company, or their Affiliates with the same rights it would have if
it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying
agent may do the same with like rights. However, the Trustee must comply with
Sections 7.10 and 7.11.
SECTION 7.4 Trustee's Disclaimer. The Trustee shall not be
--------------------
responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Securities, it shall not be accountable for the Company's
use of the proceeds from the Securities, and it shall not be responsible for any
statement of the Company in this Indenture or in any document issued in
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connection with the sale of the Securities or in the Securities other than the
Trustee's certificate of authentication.
SECTION 7.5 Notice of Defaults. If a Default or Event of Default
------------------
occurs and is continuing and if a Trust Officer has actual knowledge thereof,
the Trustee shall mail to each Securityholder in the manner and to the extent
provided in TIA (S) 313(a) notice of the Default or Event of Default within 90
days after it occurs, unless such Default or Event of Default has been cured.
Except in the case of a Default or Event of Default in payment of principal,
premium, if any, or interest on any Security (including payments pursuant to the
optional redemption or required repurchase provisions of such Security, if any),
the Trustee may withhold the notice if and so long as its board of directors,
the executive committee of its board of directors or a committee of its Trust
Officers in good faith determines that withholding the notice is in the
interests of Securityholders.
SECTION 7.6 Reports by Trustee to Holders. As promptly as
-----------------------------
practicable and within 60 days after each December 15 beginning with the
December 15 following the date of this Indenture, and in any event prior to June
15 in each year, the Trustee shall mail to each Securityholder, if required by
TIA (S) 313(a) a brief report dated as of such December 15 that complies with
TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b), (c) and (d).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the Commission if required by law and each stock exchange
(if any) on which the Securities are listed. The Company agrees to notify
promptly the Trustee whenever the Securities become listed on any stock exchange
and of any delisting thereof.
SECTION 7.7 Compensation and Indemnity. The Company shall pay to the
--------------------------
Trustee from time to time reasonable compensation for its services. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee upon
request for all reasonable out-of-pocket expenses and advances incurred or made
by it, including but not limited to costs of collection, costs of preparing and
reviewing reports, certificates and other documents, costs of preparation and
mailing of notices to Securityholders and reasonable costs of counsel retained
by the Trustee in connection with the delivery of an Opinion of Counsel or
otherwise, in addition to the compensation for its services. Such expenses shall
include the reasonable compensation and expenses, disbursements and advances of
the Trustee's agents, counsel, accountants and experts. The Company shall
indemnify the Trustee for, and hold it harmless against, any and all loss,
liability or expense (including reasonable attorneys' fees) incurred by it in
connection with the administration of this trust and the performance of its
duties hereunder and under the Securities, including the costs and expenses of
enforcing this Indenture and the Securities (including this Section 7.7) and of
defending itself against any claims or liabilities (whether asserted by any
Securityholder, the Company or otherwise) and of complying with any process
served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties under this Indenture. The Trustee
shall notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Trustee to so notify the Company shall not relieve the Company of
its obligations hereunder. The Company shall defend the claim and the Trustee
may have separate counsel and
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the Company shall pay the fees and expenses of such counsel. The Company need
not reimburse any expense or indemnify against any loss, liability or expense
incurred by the Trustee through the Trustee's own willful misconduct, negligence
or bad faith.
To secure the Company's payment obligations in this Section 7.7, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities. The Trustee's right to
receive payment of any amounts due under this Section 7.7 shall not be
subordinate to any other liability or indebtedness of the Company.
The Company's payment obligations pursuant to this Section shall
survive the resignation or removal of any Trustee, the discharge of this
Indenture and any adjustment or termination under any Bankruptcy Law. When the
Trustee incurs expenses after the occurrence of a Default specified in Section
6.1(viii) or (ix) with respect to the Company, the expenses are intended to
constitute expenses of administration under any Bankruptcy Law.
SECTION 7.8 Replacement of Trustee. The Trustee may resign at any
----------------------
time by so notifying the Company in writing at least 30 days in advance of such
resignation. The Holders of a majority in principal amount of the Securities
may remove the Trustee by so notifying the Trustee in writing and may appoint a
successor Trustee. The Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
(4) the Trustee otherwise becomes incapable of acting with respect to
its duties hereunder.
If the Trustee resigns or is removed by the Company or by the Holders
of a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.7.
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A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.8.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee and the Company shall pay to any such replaced
or removed Trustee all amounts owed under Section 7.7 upon such replacement or
removal.
SECTION 7.9 Successor Trustee by Merger. If the Trustee consolidates
---------------------------
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture, any of the Securities shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Securities so
authenticated; and in case at that time any of the Securities shall not have
been authenticated, any successor to the Trustee may authenticate such
Securities either in the name of any predecessor hereunder or in the name of the
successor to the Trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Securities or in this Indenture provided
that the certificate of the Trustee shall have.
SECTION 7.10 Eligibility; Disqualification. The Indenture shall at
-----------------------------
all times have a Trustee that satisfies the requirements of TIA (S) 310(a). The
Trustee shall have a combined capital and surplus of at least $50 million as set
forth in its most recent published annual report of condition. The Trustee
shall comply with TIA (S) 310(b); provided, however, that there shall be
excluded from the operation of TIA (S) 310(b)(1) any indenture or indentures
under which other securities or certificates of interest or participation in
other securities of the Company are outstanding if the requirements for such
exclusion set forth in TIA (S) 310(b)(1) are met.
SECTION 7.11 Preferential Collection of Claims Against Company. The
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Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship
listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be
subject to TIA (S) 311(a) to the extent indicated.
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ARTICLE VIII
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DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.
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The Company may, at the option of its Board of Directors evidenced by a
resolution set forth in an officer's certificate, at any time, elect to have
either Section 8.2 or 8.3 hereof be applied to all outstanding Securities upon
compliance with the conditions set forth below in this Article VIII.
SECTION 8.2 Legal Defeasance and Discharge. Upon the Company's
------------------------------
exercise under Section 8.1 hereof of the option applicable to this Section 8.2,
the Company and the Subsidiary Guarantors shall, subject to the satisfaction of
the conditions set forth in Section 8.4 hereof, be deemed to have been
discharged from their obligations with respect to all outstanding Securities on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by the
outstanding securities, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.5 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Securities and this Indenture (and the Trustee, on demand
of and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders
of outstanding Securities to receive solely from the trust fund described in
Section 8.4 hereof, and as more fully set forth in such Section, payments in
respect of the principal, of, premium, if any, interest on such Securities when
such payments are due, (b) the Company's rights and obligations with respect to
such Securities under Sections 2.2, 2.3, 2.4, 2.5, 2.6, 2.7, 2.10, 2.12, 3.7 and
Section 4.15 hereof, (c) the rights, powers, trusts, duties and immunities of
the Trustee hereunder and the Company's obligations in connection therewith and
(d) this Article VIII. Subject to compliance with this Article VII, the Company
may exercise its option under this Section 8.2 notwithstanding the prior
exercise of its option under Section 8.3 thereof.
SECTION 8.3 Covenant Defeasance. Upon the Company's exercise under
-------------------
Section 8.1 hereof of the option applicable to this Section 8.3, the Company and
the Subsidiary Guarantors shall, subject to the satisfaction of the conditions
set forth in Sections 8.4 hereof, be released from their obligations under the
covenants contained in Sections 4.3, 4.4, 4.6, 4.7, 4.8, 4.9, 4.10, 4.11, 5.1
and 10.1 hereof with respect to the outstanding Securities on and after the date
the conditions set forth below are satisfied (hereinafter, "Covenant
Defeasance"), and the Securities shall thereafter be deemed not "outstanding"
for the purposes of any direction, waiver, consent or declaration or act of
Holders (and the consequences of any thereof) in connection with such covenants,
but shall continue to be deemed "outstanding" for all other purposes hereunder
(it being understood that such Securities shall not be deemed outstanding for
accounting purposes). For this purpose, Covenant Defeasance means that, with
respect to the outstanding Securities, the Company, its subsidiaries and any
Subsidiary Guarantor may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether director or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in
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any other document and such omission to comply shall not constitute a Default or
an Event of Default under Section 6.1 hereof, but, except as specified above,
the remainder of this Indenture and such Securities shall be unaffected thereby.
In addition, upon the Company's exercise under Section 8.1 hereof of the option
applicable to this Section 8.3 hereof, subject to the satisfaction of the
conditions set forth in Section 8.4 hereof, Sections 6.1 (iii) through 6.1 (vii)
hereof shall not constitute Events of Default.
SECTION 8.4 Conditions to Legal or Covenant Defeasance. The
------------------------------------------
following shall be the conditions to the application of either Section 8.2 or
8.3 hereof to the outstanding Securities:
(a) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of Securities, cash in U.S. dollars, non-callable
Government Securities, or a combination thereof, in such amounts as will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and interest on the Securities on
the Maturity Date or on the applicable Redemption Date, as the case may be, and
the Company must specify whether the Securities are being defeased to maturity
or to a particular Redemption Date;
(b) in the case of an election order under 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding
Securities will not recognize income, gain, or loss for federal income tax
purposes as a result of such Legal Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.3 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Securities will not recognize income, gain or loss for federal
income tax purposes as a result of such Covenant Defeasance and will be subject
to federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or Event of Default
resulting from the borrowing of funds (and related incurrence of Liens) to be
applied to such deposit) or insofar as Sections 6.1 (viii) or 6.1 (ix) hereof
are concerned, at any time in the period ending on the 91st day after the date
of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than this Indenture) to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
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(f) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' right generally;
(g) the Company shall have delivered to the Trustee an Officer's
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Securities over the other creditors of the Company
with the intent of defeating, hindering, delaying or defrauding creditors of the
Company or others; and
(h) the Company shall have delivered to the Trustee an Officer's
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.5 Application of Trust Money. The Trustee shall hold in
--------------------------
trust money or Government Securities deposited with it pursuant to this Article
VIII. It shall apply the deposited money and the money from Government
Securities through the Paying Agent and in accordance with this Indenture to the
payment of principal, premium, if any, and interest on the Securities.
SECTION 8.6 Repayment to the Company. (a) The Trustee and the
------------------------
Paying Agent shall promptly pay to the Company upon written request any excess
money or securities held by them at any time; provided, however, that the
Trustee shall not pay any such excess to the Company unless the amount remaining
on deposit with the Trustee, after giving effect to such transfer are sufficient
to pay principal, premium, if any, and interest on the outstanding Securities,
which amount shall be certified by independent public accounts.
(b) The Trustee and the Paying Agent shall pay to the Company upon
written request any money held by them for the payment of principal, premium, if
any, or interest that remains unclaimed for two years after the date upon which
such payment shall have become due; provided, however, that the Company shall
have either caused notice of such payment to be mailed to each Securityholder
entitled thereto no less the such notice in a financial newspaper of widespread
circulation published in The City of New York. After payment to the Company,
Securityholders entitled to the money must look to the Company for payment as
general creditors unless an applicable abandoned property law designates another
Person, and all liability of the Trustee and such Paying Agent with respect to
such money shall cease.
SECTION 8.7 Indemnity for Government Obligations. The Company shall
------------------------------------
pay and shall indemnify the Trustee against any tax, fee or other charge imposed
on or assessed against deposited Government Securities or the principal and
interest received on such Government Securities.
SECTION 8.8 Reinstatement. If the Trustee or Paying Agent is unable
-------------
to apply any money or Government Securities in accordance with this Article VIII
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority ending, restraining or otherwise prohibiting
such application, the Company's Obligations under this
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Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article VIII until such time as the
Trustee or Paying Agent is permitted to apply all such money or Government
Securities in accordance with this Article VIII; provided, however, that if the
Company has made any payment of principal of, premium, if any, or interest on
any Securities because of the reinstatement of its Obligations, the Company
shall be subrogated to the rights of the Securityholders to receive such payment
from the money or Government Securities held by the Trustee or Paying Agent.
ARTICLE IX
----------
AMENDMENTS
----------
SECTION 9.1 Without Consent of Holders. (a) The Company, the
--------------------------
Subsidiary Guarantors and the Trustee may amend or supplement this Indenture or
the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
provided, that such amendment or supplement does not, as evidenced by an
Opinion of Counsel delivered to the Trustee, adversely affect the rights of
any Securityholder in any material respect;
(2) to provide for uncertificated Securities in addition to or in
place of certificated Securities; provided, however, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(3) to provide for the assumption of the Company's or a Subsidiary
Guarantor's obligations to a Securityholder in the case of a merger or
consolidation or sale of all or substantially all of the Company's or such
Subsidiary Guarantor's assets pursuant to Article V, Article X or Section
4.8;
(4) to secure the Securities;
(5) to add to the covenants of the Company for the benefit of the
Holders or to surrender any right or power herein conferred upon the
Company;
(6) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(7) to make any change that would provide any additional rights or
benefits to Securityholders or that does not adversely affect the rights of
any Securityholder;
(8) to surrender any right or power conferred upon the Company;
(9) to provide for a replacement Trustee under Section 7.8 hereof;
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(10) to provide for the issuance of the Exchange Securities, which
will have terms substantially identical in all material respects to the
Initial Securities (except that the transfer restrictions contained in the
Initial Securities will be modified or eliminated, as appropriate), and
which will be treated, together with any outstanding Initial Securities, as
a single issue of securities; or
(11) to provide for a Subsidiary Guarantee by a Restricted Subsidiary
pursuant to Section 4.1, Section 10.7(a) or Section 10.8;
provided, that the Company has delivered to the Trustee an Opinion of
Counsel stating that any such amendment or supplement complies with the
provisions of this Section 9.1.
(b) Upon the request of the Company accompanied by a Board Resolution
of its Board of Directors and the Subsidiary Guarantors authorizing the
execution of any such supplemental indenture, and upon receipt by the Trustee of
the documents described in Section 9.6, the Trustee shall join with the Company
and the Subsidiary Guarantors in the execution of any supplemental indenture
authorized or permitted by the terms of this Indenture and to make any further
appropriate agreements and stipulations which may be therein contained, but the
Trustee shall not be obligated to enter into such supplemental indenture which
affects its own rights, duties or immunities under this Indenture or otherwise.
(c) After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. However, the failure to give such notice to all Securityholders, or
any defect therein, shall not impair or affect the validity of an amendment
under this Section.
SECTION 9.2 With Consent of Holders. (a) The Company, the
-----------------------
Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities
with the consent of the Holders of at least a majority in outstanding principal
amount of the Securities (including consents obtained in connection with a
tender offer or exchange offer for the Securities) and any existing Default and
its consequences (including, without limitation, an acceleration of the
Securities) or compliance with any provision of this Indenture or the Securities
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Securities (including consents obtained in connection
with a tender offer or exchange offer for the Securities). Furthermore, subject
to Sections 6.4 and 6.7, the Holders of a majority in aggregate principal amount
of the Securities then outstanding (including consents obtained in connection
with a tender offer or exchange offer for the Securities) may waive compliance
in a particular instance by the Company with any provision of this Indenture or
the Securities. However, without the consent of each Holder of a Security then
outstanding, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to
an amendment, supplement or waiver;
(2) reduce the rate of or extend the time for payment of interest
on any Security;
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(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption or repurchase
of any Security or change the time at which any Security may or shall be
redeemed or repurchased in accordance with this Indenture;
(5) make any Security payable in money other than that stated in
the Security;
(6) modify or affect in any manner adverse to the Holders, the
terms and conditions of the obligation of the Company for the due and
punctual payment of the principal of or interest on Securities or to
institute suit for the enforcement of any payment on or with respect to the
Securities;
(7) waive a Default or Event of Default in the payment of
principal of, premium, if any, or interest on, or redemption payment with
respect to, any Security (excluding any principal or interest due solely as
a result of the occurrence of a declaration of an Event of Default); or
(8) make any change in Section 6.4 or 6.7 or the third sentence
of this Section;
(9) amend, change or modify in any material respect the
obligation of the Company to make and consummate a Change of Control Offer
in the event of a Change of Control or make and consummate an offer with
respect to any Asset Sale that has been consummated or modify any of the
provisions or definitions with respect thereto;
(10) modify or change any provision of this Indenture or the
related definitions affecting the ranking of the Securities in a manner
which adversely affects the Holders; or
(11) make any change in the amendment provisions which require
each holder's consent or in the waiver provisions.
(b) Upon the request of the Company accompanied by a Board Resolution
of its respective Board of Directors authorizing the execution of any such
supplemental indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Securityholders as aforesaid,
and upon receipt by the Trustee of the documents described in Section 9.6, the
Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
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(c) It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
(d) After an amendment under this Section becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any defect
therein, shall not impair or affect the validity of an amendment under this
Section.
SECTION 9.3 Compliance with Trust Indenture Act. Every amendment to
-----------------------------------
this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.4 Revocation and Effect of Consents and Waivers. A consent
---------------------------------------------
to an amendment or a waiver by a Holder of a Security shall bind the Holder and
every subsequent Holder of that Security or portion of the Security that
evidences the same debt as the consenting Holder's Security, even if notation of
the consent or waiver is not made on the Security. However, any such Holder or
subsequent Holder may revoke the consent or waiver as to such Holder's Security
or portion of the Security if the Trustee receives the notice of revocation
before the date the amendment or waiver becomes effective. After an amendment
or waiver becomes effective, it shall bind every Securityholder.
Those Persons who were Securityholders at such Record Date as
determined in accordance with Section 2.19 herewith (or their duly designated
proxies), and only those Persons, shall be entitled to give such consent or to
revoke any consent previously given or to take any such action, whether or not
such Persons continue to be Holders after such Record Date. No such consent
shall become valid or effective more than 120 days after such Record Date.
SECTION 9.5 Notation on or Exchange of Securities. If an amendment
-------------------------------------
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms. Failure to make the appropriate
notation or to issue a new Security shall not affect the validity of such
amendment.
SECTION 9.6 Trustee To Sign Amendments. The Trustee shall sign any
--------------------------
amendment authorized pursuant to this Article IX if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may, but need not sign it. In signing such amendment
the Trustee shall be entitled to receive indemnity reasonably satisfactory to it
and to receive, and (subject to Section 7.1) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture. Such Opinion of Counsel
shall be at the expense of the Company.
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ARTICLE X
---------
SUBSIDIARY GUARANTEE OF SECURITIES
SECTION 10.1 (a) Each Subsidiary Guarantor hereby jointly and
severally irrevocably and unconditionally guarantees, as a primary obligor and
not a surety, to each Securityholder of a Security now or hereafter
authenticated and delivered by the Trustee and to the Trustee and its successors
and assigns, irrespective of the validity and enforceability of this Indenture,
the Securities or the Obligations of the Company hereunder or thereunder, (i)
the due and punctual payment of the principal, premium, if any, interest
(including post-petition interest in any proceeding under any Bankruptcy Law
whether or not an allowed claim in such proceeding) on overdue principal,
premium, if any, and interest, if lawful on such Security, and (ii) all other
monetary Obligations payable by the Company under this Indenture (including
under Section 7.7 hereof) and the Securities (all of the foregoing being
hereinafter collectively called the "Guaranteed Obligations"), when and as the
same shall become due and payable, whether by acceleration thereof, call for
redemption or otherwise (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code), in
accordance with the terms of any such Security and of this Indenture, subject,
however, in the case of (i) and (ii) above, to the limitations set forth in
Section 10.4 hereof. Each Subsidiary Guarantor hereby agrees that its
Obligations hereunder shall be absolute and unconditional, irrespective of, and
shall be unaffected by, any failure to enforce the provisions of any such
Security or this Indenture, any waiver, modification or indulgence granted to
the Company with respect thereto, the recovery of any judgment against the
Company, any action to enforce the same, by the Securityholders or the Trustee,
the recovery of any judgment against the Company, any action to enforce the
same, or any other circumstances which may otherwise constitute a legal or
equitable discharge of a surety or guarantor. Each Subsidiary Guarantor hereby
waives diligence, presentment, filing of claims with a court in the event of a
merger or bankruptcy of the Company, any right to require a proceeding first
against the Company, the benefit of discussion, protest or notice with respect
to any such Security or the Indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Subsidiary Guarantee shall not be discharged
as to any such Security except by payment in full of the principal thereof,
premium, if any, and all accrued interest thereon.
(b) Each Subsidiary Guarantor further agrees that this Subsidiary
Guarantee herein constitutes a guarantee of payment, performance and compliance
when due (and not a guarantee of collection) and waives any right to require
that any resort be had by any Securityholder or the Trustee to any Security held
for payment of the Guaranteed Obligations.
(c) Each Subsidiary Guarantor agrees that it shall not be entitled
to, and hereby irrevocably waives, any right of subrogation in relation to the
Securityholders or the Trustee in respect of any Guaranteed Obligations. Each
Subsidiary Guarantor further agrees that, as between such Subsidiary Guarantor,
on the one hand, and the Securityholders and the Trustee, on the other hand, (x)
the maturity of the Guaranteed Obligations may be accelerated as provided in
Article VI for the purposes of such Subsidiary Guarantor's Subsidiary Guarantee
herein, notwithstanding any stay, injunction or other prohibition preventing
such acceleration in respect of the Guaranteed Obligations, and (y) in the event
of any declaration of acceleration of such
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Guaranteed Obligations as provided in Article VI hereof, such Guaranteed
Obligations (whether or not due and payable) shall forthwith become due and
payable by such Subsidiary Guarantor for the purpose of this Article X.
(d) Each Subsidiary Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by the Trustee or
any Securityholder in enforcing any rights under this Article X.
(e) The Subsidiary Guarantee set forth in this Article X shall not be
valid or become obligatory for any purpose with respect to a Security until the
certificate of authentication on such Security shall have been signed by or on
behalf of the Trustee.
SECTION 10.2 Execution And Delivery Of Subsidiary Guarantee. (a) To
----------------------------------------------
evidence each Subsidiary Guarantor's Subsidiary Guarantee set forth in this
Article X, each Subsidiary Guarantor hereby agrees that a notation of such
Subsidiary Guarantee shall be placed on each Security authenticated and
delivered by the Trustee.
(b) This Indenture shall be executed on behalf of each Subsidiary
Guarantor, and an Officer of each Subsidiary Guarantor shall sign the notation
of the Subsidiary Guarantee on the Securities by manual or facsimile signature.
If an Officer whose signature is on this Indenture or the notation of Subsidiary
Guarantee no longer holds that office at the time the Trustee authenticates the
Security on which the Subsidiary Guarantee is endorsed, the Subsidiary Guarantee
shall be valid nevertheless. Each Subsidiary Guarantor hereby agrees that the
Subsidiary Guarantee set forth in Section 10.1 hereof shall remain in full force
and effect notwithstanding any failure to endorse on each Security a notation of
the Subsidiary Guarantee.
(c) The delivery of any Security by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the
Subsidiary Guarantee set forth in this Indenture on behalf of each Subsidiary
Guarantor.
SECTION 10.3 Subsidiary Guarantee Unconditional, etc. Upon failure
----------------------------------------
of payment when due of any Guaranteed Obligation for whatever reason, each
Subsidiary Guarantor will be obligated to pay the same immediately. Each
Subsidiary Guarantor hereby agrees that its obligations hereunder shall be
continuing, absolute and unconditional, irrespective of: the recovery of any
judgment against the Company or any Subsidiary Guarantor; any extension,
renewal, settlement, compromise, waiver or release in respect of any obligation
of the Company under this Indenture or any Security, by operation of law or
otherwise; any modification or amendment of or supplement to this Indenture or
any Security; any change in the corporate existence, structure or ownership of
the Company, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting the Company or its assets or any resulting release or
discharge of any obligation of the Company contained in this Indenture or any
Security; the existence of any claim, set-off or other rights which any
Subsidiary Guarantor may have at any time against the Company, the Trustee, any
Securityholder or any other Person, whether in connection herewith or any
unrelated transactions; provided, that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim; any
invalidity or unenforceability relating to or against the Company for any reason
of this Indenture or any
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Security, or any provision of applicable law or regulation purporting to
prohibit the payment by the Company of the principal, premium, if any, or
interest on any Security or any other Guaranteed Obligation; or any other act or
omission to act or delay of any kind by the Company, the Trustee, any
Securityholder or any other Person or any other circumstance whatsoever which
might, but for the provisions of this paragraph, constitute a legal or equitable
discharge of the Subsidiary Guarantors' obligations hereunder. Each Subsidiary
Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of insolvency or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest, notice and all
demand whatsoever and covenants that this Subsidiary Guarantee will not be
discharged except by the complete performance of the obligations contained in
the Securities, this Indenture and in this Article X. Each Subsidiary
Guarantor's obligations hereunder shall remain in full force and effect until
the Indenture shall have terminated and the principal of, premium, if any, and
interest on the Securities and all other Guaranteed Obligations shall have been
paid in full. If at any time any payment of the principal of or interest on any
Security or any other payment in respect of any Guaranteed Obligation is
rescinded or must be otherwise restored or returned upon the insolvency,
bankruptcy or reorganization of the Company or otherwise, each Subsidiary
Guarantor's obligations hereunder with respect to such payment shall be
reinstated as though such payment had been due but not made at such time, and
this Article X, to the extent theretofore discharged, shall be reinstated in
full force and effect. Each Subsidiary Guarantor irrevocably waives any and all
rights to which it may be entitled, by operation of law or otherwise, upon
making any payment hereunder to be subrogated to the rights of the payee against
the Company with respect to such payment or otherwise to be reimbursed,
indemnified or exonerated by the Company in respect thereof.
SECTION 10.4 Limitation of Subsidiary Guarantor's Liability. Each
----------------------------------------------
Subsidiary Guarantor and by its acceptance hereof each Securityholder hereby
confirms that it is the intention of all such parties that the guarantee by such
Subsidiary Guarantor pursuant to its Subsidiary Guarantee not constitute a
fraudulent transfer or conveyance for purposes of the Bankruptcy Law, Federal
and state fraudulent conveyance laws or other legal principles. To effectuate
the foregoing intention, the Securityholders and each Subsidiary Guarantor
hereby irrevocably agree that the obligations of such Subsidiary Guarantor under
the Subsidiary Guarantee shall be limited to the maximum amount as will, after
giving effect to all other contingent and fixed liabilities of such Subsidiary
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Subsidiary Guarantor in respect of the obligations of
such other Subsidiary Guarantor under its Subsidiary Guarantee or pursuant to
Section 10.5 hereof, result in the obligations of such Subsidiary Guarantor
under the Subsidiary Guarantee not constituting such fraudulent transfer or
conveyance under federal or state law.
SECTION 10.5 Contribution. In order to provide for just and
------------
equitable contribution among the Subsidiary Guarantors, the Subsidiary
Guarantors agree, inter se, that in the event any payment or distribution is
made by any Subsidiary Guarantor (a "Funding Subsidiary Guarantor") under the
Subsidiary Guarantee, such Funding Subsidiary Guarantor shall be entitled to a
contribution from all other Subsidiary Guarantors in a pro rata amount based on
the Adjusted Net Assets of each Subsidiary Guarantor (including the Funding
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Subsidiary Guarantor) for all payments, damages and expenses incurred by that
Funding Subsidiary Guarantor in discharging the Company's obligations with
respect to the Securities or any other Subsidiary Guarantor's obligations with
respect to the Subsidiary Guarantee.
SECTION 10.6 Release. Upon (i) any sale of or other disposition of
-------
all the assets of any Subsidiary Guarantor by way of merger, consolidation or
otherwise, (ii) or a sale or disposition of all of the Equity Interests of a
Subsidiary Guarantor to a Person which is not the Company or a Subsidiary of the
Company, which is otherwise in compliance with this Indenture or (iii) the
designation of a Subsidiary Guarantor as an Unrestricted Subsidiary in
accordance with Section 4.4 hereof, such Subsidiary Guarantor or the Person
acquiring the property (in the event of a sale or other disposition of all of
the assets of such Subsidiary Guarantor) shall be deemed released from all its
Obligations under this Indenture and its Subsidiary Guarantee without any
further action required on the part of the Trustee or any Securityholder;
provided, however, that any such termination shall occur if and only to the
extent that all Obligations of each Subsidiary Guarantor under all of its
guarantees of, and under all of its pledges of assets or other security
interests which secure, Indebtedness of the Company and the other Subsidiary
Guarantors shall also terminate upon such release, sale or transfer; provided
further, that without limiting the foregoing, any proceeds received by the
Company or any Subsidiary of the Company from such transaction shall be applied
as provided in Section 4.8 and Section 3.9. The Trustee shall execute an
appropriate instrument prepared by the Company evidencing such release upon
receipt of a request by the Company accompanied by an Officers' Certificate
certifying as to the compliance with this Section 10.6. Any Subsidiary
Guarantor not so released remains liable for the full amount of principal,
premium, if any, and interest on the Securities as provided in this Article X.
SECTION 10.7 Additional Subsidiary Guarantors. Any Person that was
--------------------------------
not a Subsidiary Guarantor on the date of this Indenture may become a Subsidiary
Guarantor by executing and delivering to the Trustee (a) a supplemental
indenture in form and substance satisfactory to the Trustee, which subjects such
Person to the provisions (including, without limitation, the representations and
warranties in this Article X and Article XI) of this Indenture as a Subsidiary
Guarantor and (b) an Opinion of Counsel to the effect that such supplemental
indenture has been duly authorized and executed by such Person and constitutes
the legal, valid, binding and enforceable obligation of such Person (subject to
such customary exceptions concerning creditors' rights and equitable principles
as may be acceptable to the Trustee in its discretion). The Subsidiary
Guarantee of each Person described in this Section 10.7 shall apply to all
Securities theretofore executed and delivered, notwithstanding any failure of
such Securities to contain a notation of such Subsidiary Guarantee thereon.
SECTION 10.8 Subsidiary Guarantors May Consolidate, etc., On Certain
-------------------------------------------------------
Terms. (a) Nothing contained in this Indenture or in any of the Securities
- -----
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
the Company or another Subsidiary Guarantor that is a Wholly Owned Restricted
Subsidiary of the Company or shall prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an entirety or substantially as an
entirety to the Company or another Subsidiary Guarantor that is a Wholly Owned
Restricted Subsidiary of the Company. Upon any such consolidation, merger, sale
or
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<PAGE>
conveyance, the Subsidiary Guarantee given by such Subsidiary Guarantor shall
no longer have any force or effect.
(b) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
a Person or Persons other than the Company or another Subsidiary Guarantor
(whether or not affiliated with the Subsidiary Guarantor), or successive
consolidations or mergers in which a Subsidiary Guarantor or its successor or
successors shall be a party or parties, or shall prevent any sale or conveyance
of the property of a Subsidiary Guarantor as an entirety or substantially as an
entirety, to a Person other than the Company or another Subsidiary Guarantor
(whether or not affiliated with the Subsidiary Guarantor); provided, however,
that, subject to Sections 10.6 and 10.8(a), (x) (i) immediately after such
transaction, and giving effect thereto, no Default or Event of Default shall
have occurred as a result of such transaction and be continuing, or (ii) such
transaction does not violate any covenants set forth in this Indenture, and (y)
(i) the respective transaction is treated as an Asset Sale for purposes of
Section 4.8 and Section 3.9 hereof or (ii) if the surviving Person is not the
Subsidiary Guarantor, each Subsidiary Guarantor hereby covenants and agrees
that, upon any such consolidation, merger, sale or conveyance, the Subsidiary
Guarantee set forth in this Article X, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture to be
performed by such Subsidiary Guarantor, shall be expressly assumed (in the event
that the Subsidiary Guarantor is not the surviving Person in the merger), by
supplemental indenture satisfactory in form to the Trustee of the due and
punctual performance of all of the covenants and conditions of this Indenture to
be performed by the Subsidiary Guarantor, and such successor Person shall
succeed to, and be substituted for, the Subsidiary Guarantor with the same
effect as if it had been named herein as a Subsidiary Guarantor.
SECTION 10.9 Successors and Assigns. This Article X shall be binding
----------------------
upon each Subsidiary Guarantor and its successors and assigns and shall inure to
the benefit of the successors and assigns of the Trustee and the Securityholders
and, in the event of any transfer or assignment of rights by any Securityholder
or the Trustee, the rights and privileges conferred upon that party in this
Indenture and in the Securities shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions of this
Indenture.
SECTION 10.10 Waiver of Stay, Extension or Usury Laws. Each
---------------------------------------
Subsidiary Guarantor covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive each such Subsidiary Guarantor from
performing its Subsidiary Guarantee as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
each such Subsidiary Guarantor hereby expressly waives all benefit or advantage
of any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
-71-
<PAGE>
ARTICLE XI
----------
MISCELLANEOUS
-------------
SECTION 11.1 Trust Indenture Act Controls. If any provision of this
----------------------------
Indenture limits, qualifies or conflicts with another provision which is
required to be included in this Indenture by the TIA, the provision required by
the TIA shall control. If any provision of this Indenture modifies or excludes
any provision of the TIA that may be so modified or excluded, the latter
provision shall be deemed to apply to this Indenture as so modified or excluded,
as the case may be.
SECTION 11.2 Notices. Any notice or communication shall be in
-------
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company and the Subsidiary Guarantors:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: Chief Financial Officer
if to the Trustee:
United States Trust Company of New York
114 West 47th Street, 25th Floor
New York, New York 10036-1532
Attention: Corporate Trust Administration
The Company, the Subsidiary Guarantors or the Trustee by notice to the
other may designate additional or different addresses for subsequent notices or
communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
All notices and communications (other than those sent to
Securityholders) shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed (except that a notice of change of address
and a notice to the Trustee shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication to a Securityholder shall be mailed by
first class mail, postage prepaid, to its address shown on the register kept by
the Registrar. Any notice or communication shall also be so mailed to any Person
described in TIA (S) 313(c) and TIA (S) 315(b), to the extent required by the
TIA. Failure to mail a notice or communication to a
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<PAGE>
Securityholder or any defect in it shall not affect its sufficiency with respect
to other Securityholders.
If a notice or communication is mailed to any Person in the manner
provided above within the time prescribed, it is duly given, whether or not the
addressee receives it.
If the Company mails a notice or communication to Securityholders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 11.3 Communication by Holders with other Holders.
-------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and anyone else shall have
the protection of TIA (S) 312(c).
SECTION 11.4 Certificate and Opinion as to Conditions Precedent. Upon
--------------------------------------------------
any request or application by the Company to the Trustee to take or refrain from
taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee (which shall include the statements set forth
in Section 11.5) stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
SECTION 11.5 Statements Required in Certificate or Opinion. Each
---------------------------------------------
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion of such
individual, such covenant or condition has been complied with and such
other opinions as the Trustee may reasonably request.
-73-
<PAGE>
SECTION 11.6 When Securities Disregarded. In determining whether the
---------------------------
Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company, by any Subsidiary
Guarantor or by any of their respective Affiliates shall be disregarded and
deemed not to be outstanding, except that, for the purpose of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities which a Responsible Officer knows are so owned shall
be so disregarded. Also, subject to the foregoing, only Securities outstanding
at the time shall be considered in any such determination.
SECTION 11.7 Rules by Trustee, Paying Agent and Registrar. The
--------------------------------------------
Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Registrar and the Paying Agent may make reasonable rules
for their functions.
SECTION 11.8 Legal Holidays. A "Legal Holiday" is a Saturday, a
--------------
Sunday or a day on which banking institutions are not required to be open in the
State of New York, or the State in which the Corporate Trust Office is located.
If a payment date is a Legal Holiday, payment shall be made on the next
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period. If a regular Record Date is a Legal Holiday, the Record
Date shall not be affected.
SECTION 11.9 Governing Law. This Indenture and the Securities shall
-------------
be governed by, and construed in accordance with, the laws of the State of New
York but without giving effect to applicable principles of conflicts of law to
the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10 No Recourse Against Others. A past, present or future
--------------------------
director, officer, employee or stockholder, as such, of the Company shall not
have any liability for any obligations of the Company under the Securities or
this Indenture or for any claim based on, in respect of or by reason of such
obligations or their creation. By accepting a Security, each Securityholder
shall waive and release all such liability. The waiver and release shall be
part of the consideration for the issue of the Securities.
SECTION 11.11 Successors. All agreements of the Company and the
----------
Subsidiary Guarantors in this Indenture and the Securities shall bind their
respective successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 11.12 Multiple Originals. The parties may sign any number of
------------------
copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
SECTION 11.13 Variable Provisions. The Company initially appoints
-------------------
the Trustee as Paying Agent and Registrar and custodian with respect to any
Global Securities.
SECTION 11.14 Qualification of Indenture. The Company shall qualify
--------------------------
this Indenture under the TIA in accordance with the terms and conditions of the
Registration Rights Agreement and shall pay all reasonable costs and expenses
(including attorneys' fees for the
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<PAGE>
Company, the Trustee and the Holders) incurred in connection therewith,
including, but not limited to, costs and expenses of qualification of the
Indenture and the Securities and printing this Indenture and the Securities. The
Trustee shall be entitled to receive from the Company any such Officers'
Certificates, Opinions of Counsel or other documentation as it may reasonably
request in connection with any such qualification of this Indenture under the
TIA.
SECTION 11.15 Table of Contents; Headings. The table of contents,
---------------------------
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
SECTION 11.16 Severability. In case any provision in this Indenture
------------
or in the Securities shall be invalid, illegal or unenforceable, in any respect
for any reason, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby, it being
intended that all of the provisions hereof shall be enforceable to the fullest
extent permitted by law.
SECTION 11.17 No Adverse Interpretation of Other Agreements. This
---------------------------------------------
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company or any of its Subsidiaries. Any such indenture, loan or debt
agreement may not be used to interpret this Indenture.
-75-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
NORTON MCNAUGHTON, INC.
By: /s/ Sanford Greenberg
____________________________________
Name: SANFORD GREENBERG
Title: CHIEF EXECUTIVE OFFICER
NORTON MCNAUGHTON OF SQUIRE, INC.
By: /s/ Sanford Greenberg
____________________________________
Name: SANFORD GREENBERG
Title: CHIEF EXECUTIVE OFFICER
MISS ERIKA, INC.
By: /s/ Sanford Greenberg
____________________________________
Name: SANFORD GREENBERG
Title: CHAIRMAN
JJ ACQUISITION CORP.
By: /s/ Sanford Greenberg
____________________________________
Name: SANFORD GREENBERG
Title: CHAIRMAN
-76-
<PAGE>
NORTY'S, INC.
By: /s/ Sanford Greenberg
____________________________________
Name: SANFORD GREENBERG
Title: CHAIRMAN
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By: /s/ Margaret M. Ciesmelewski
_______________________________
Name: MARGARET M. CIESMELEWSKI
Title: ASSISTANT VICE PRESIDENT
-77-
<PAGE>
EXHIBIT A
---------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES
ACT OF 1933, AS AMENDED (THE SECURITIES ACT"), AND ACCORDINGLY,
MAY NOT BE OFFERED OR SOLD OR PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS OR A BENEFICIAL INTEREST HEREIN EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
PERSON, IS NOT ACQUIRING THIS SECURITY FOR THE ACCOUNT OR BENEFIT
OF A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT, (2) AGREES THAT IT WILL NOT WITHIN THE TIME PERIOD REFERRED
TO IN RULE 144(k) UNDER THE SECURITIES ACT AS IN EFFECT WITH
RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THIS
SECURITY EXCEPT (A) TO THE ISSUER OR ANY SUBSIDIARY THEREOF, (B)
INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR
TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND IF SUCH TRANSFER IS
IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF SECURITIES AT THE
TIME OF TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL
ACCEPTABLE TO THE ISSUER THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE), (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (G)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (BASED UPON AN OPINION OF
COUNSEL ACCEPTABLE TO NORTON MCNAUGHTON, INC.) AND IN EACH CASE,
IN ACCORDANCE WITH APPLICABLE SECURITIES LAWS AND (3) AGREES THAT
IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT
AN INITIAL INVESTOR THAT IS AN INSTITUTIONAL
<PAGE>
ACCREDITED INVESTOR PURCHASING AS DESCRIBED IN CLAUSE (1)(B) ABOVE
SHALL NOT BE PERMITTED TO TRANSFER THIS SECURITY TO AN
INSTITUTIONAL ACCREDITED INVESTOR. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION" "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE
TO REGISTER ANY TRANSFER OF THIS SECURITY IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY
THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY SUCH
NOMINEE, TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE, AND TRANSFERS
OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE./1/
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN./1/]
_____________________
/1/ To be included in the Global Security only.
<PAGE>
Exhibit A
Page 3
CUSIP No:
(Front of Security)
No. __ $[___________]
NORTON MCNAUGHTON, INC.
12 1/2% Senior Notes due 2005
NORTON MCNAUGHTON, INC., a Delaware corporation, for value received,
promises to pay to __________, or its registered assigns, the principal sum of
$___________ on June 1, 2005.
Interest Payment Dates: June __, and December __, commencing December
1, 1998.
Record Dates: May 15 and November 15 (whether or not a Business Day).
Additional provisions of this Note are set forth on the other side of
this Note.
Dated:
NORTON MCNAUGHTON, INC.
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
<PAGE>
Exhibit A
Page 4
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By:_________________________________
Authorized Signatory
<PAGE>
Exhibit A
Page 5
(Reverse of Security)
NORTON MCNAUGHTON, INC.
12 1/2% SENIOR NOTE DUE 2005
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. Interest. NORTON MCNAUGHTON INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate and in the manner specified below. The Company shall pay, in cash,
interest on the principal amount of this Security at the rate per annum of 12
1/2%. The Company will pay interest semiannually in arrears on June 1 and
December 1 of each year (each an "Interest Payment Date"), commencing December
1, 1998, or if any such day is not a Business Day on the next succeeding
Business Day. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
Interest Payment Date to which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Securities. To the
extent lawful, the Company shall pay interest on overdue principal at the rate
of 2% per annum in excess of the then applicable interest rate on the
Securities; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the Record Date immediately preceding
the Interest Payment Date, even if such Securities are cancelled after such
Record Date and on or before such Interest Payment Date. Securityholders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal,
premium, if any, and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Securityholder at the Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without prior notice to any Securityholder. The Company may act
in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture,
dated as of June 18, 1998 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code (S)(S)77aaa-77bbbb) (the "TIA") as in effect
on the date the Indenture is qualified. The Securities are subject to all such
terms, and Securityholders are referred to the Indenture and the TIA for a
statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Securities. The Securities include
the Initial Securities and the Exchange Securities issued in
<PAGE>
Exhibit A
Page 6
exchange for the Initial Securities pursuant to the Indenture. The Initial
Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the TIA, as in effect on the date of the Indenture. Notwithstanding
anything to the contrary herein, the Securities are subject to all such terms,
and Securityholders of Securities are referred to the Indenture and said Act for
a statement of them. The Securities are unsecured senior obligations of the
Company limited to $125,000,000 in aggregate principal amount, except as
provided in Section 2.7 of the Indenture.
5. (a) Optional Redemption. Except as set forth below, the
Securities will not be redeemable at the option of the Company prior to June 1,
2003. On and after such date, the Securities will be redeemable, at the
Company's option, in whole or in part upon not less than 30 nor more than 60
days' notice, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, thereon to the
Redemption Date, if redeemed during the twelve-month period beginning on June 1
of the years indicated below (subject to the right of holders of record on the
relevant Record Date to receive interest due on the relevant Interest Payment
Date):
<TABLE>
<CAPTION>
Redemption
Period Price
------ ----------
<S> <C>
2003..................................... 107.00%
2004..................................... 103.50%
</TABLE>
(b) Optional Redemption Upon Offering of Equity Interests.
Notwithstanding the foregoing, on or prior to June 1, 2001, the Company may
redeem up to 35% of the aggregate principal amount of Securities originally
issued under the Indenture at a redemption price of 112.50% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
Redemption Date, with the net cash proceeds of one or more offerings of Equity
Interests (other than Disqualified Stock) of the Company; provided that (i) at
least 65% of the aggregate principal amount of Securities originally issued
under the Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Securities held by the Company and its Subsidiaries) and
(ii) each such redemption shall occur within 90 days of the date of the closing
of each such offering.
6. Mandatory Redemption. Except as set forth in Section 3.9 and
Section 4.9 of the Indenture, the Company is not required to make mandatory
redemption or sinking fund payments with respect to the Securities.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of
the Indenture provide that, after certain Asset Sales (as defined in the
Indenture) and upon the occurrence of a Change of Control (as defined in the
Indenture), and subject to the further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Securities in
accordance with procedures set forth in the Indenture.
<PAGE>
Exhibit A
Page 7
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of one or more offerings of Equity Interests of the Company,
selection of the Securities or portion thereof for redemption shall be made by
the Trustee only on a pro rata basis, unless such method is otherwise
prohibited. Securities may be redeemed in part in multiples of $1,000 principal
amount only. Notice of redemption will be sent, by first class mail, postage
prepaid, at least 30 but not more than 60 days prior to the date fixed for
redemption to each holder whose Securities are to be redeemed at the last
address for such holder then shown on the registry books. If any Security is to
be redeemed in part only, the notice of redemption that relates to such Security
shall state the portion of the principal amount thereof to be redeemed. A new
Security in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Security. On and after any Redemption Date, interest will cease to accrue on the
Securities or part thereof called for redemption as long as the Company has
deposited with the Paying Agent funds in satisfaction of the redemption price
pursuant to the Indenture.
9. Registration Rights. Pursuant to the Registration Rights
Agreement, and subject to certain terms and conditions stated therein, the
Company will be obligated to consummate an Exchange Offer pursuant to which the
Holders of the Initial Securities shall have the right to exchange Initial
Securities for Exchange Securities, which have been registered under the
Securities Act, in like principal amount and having terms identical in all
material respect to the Initial Security. In certain circumstances, and subject
to certain terms and conditions, Holders of the Initial Securities shall have
the right to receive liquidated damages if the Company shall have failed to
fulfill its obligations under the Registration Rights Agreement.
10. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Securityholder among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. The Registrar need not exchange or register the
transfer of any Security or portion of a Security selected for redemption. Also,
it need not exchange or register the transfer of any Securities during a period
beginning at the opening of business on a Business Day 15 days before the day of
any selection of Securities to be redeemed and ending at the close of business
on the day of selection or during the period between a Record Date and the
corresponding Interest Payment Date.
11. Persons Deemed Owners. Prior to due presentment to the Trustee
for registration of the transfer of this Security, the Trustee, any Agent and
the Company may deem and treat the Person in whose name this Security is
registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and
<PAGE>
Exhibit A
Page 8
for all other purposes whatsoever, whether or not this Security is overdue, and
neither the Trustee, any Agent nor the Company shall be affected by notice to
the contrary. The registered Securityholder shall be treated as its owner for
all purposes.
12. Amendments and Waivers. Subject to certain exceptions provided
in the Indenture, the Indenture or the Securities may be amended with the
written consent of the Holders of a majority in principal amount of all
outstanding series of the Securities, voting as a single class, and any existing
Default or Event of Default (except a payment default) may be waived with the
consent of the Holders of a majority in principal amount of all outstanding
series of the Securities voting as a single class. Without the consent of any
Securityholder, the Indenture or the Securities may be amended to, among other
things, cure any ambiguity, defect or inconsistency, to comply with the
requirements of the Commission in order to effect or maintain qualification of
the Indenture under the TIA or to make any change that does not adversely affect
in any material respect the rights of any Securityholder.
13. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee, by notice to the Company, or the holders of at least
25% in principal amount of all outstanding series of the Securities, voting as a
single class, by notice to the Company and the Trustee may declare the principal
of, premium, if any, and accrued and unpaid interest, if any, on all the
Securities to be due and payable. Upon such a declaration, such principal,
premium and accrued and unpaid interest shall be due and payable immediately, if
an Event of Default relating to certain events of bankruptcy, insolvency or
reorganization of the Company occurs and is continuing, the principal of and
accrued and unpaid interest on all the Securities will become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holders. Under certain circumstances, the Holders of a majority in
principal amount of all outstanding series of the Securities, voting as a single
class, may rescind any such acceleration with respect to the Securities and its
consequences.
14. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any Affiliate of the
Company and may otherwise deal with the Company and their respective Affiliates
as if it were not Trustee.
15. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, pay dividends or make certain other Restricted
Payments, consummate certain Asset Sales, enter into certain transactions with
affiliates, incur Liens, create restrictions on the ability of a subsidiary to
pay dividends or make certain payments, sell or issue Preferred Stock of
Subsidiaries to third parties, merge or consolidate with any other person or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of the Company. Such limitations are subject to
a number of important qualifications and exceptions provided for in the
Indenture. The Company must annually report to the Trustee on compliance with
such limitations.
<PAGE>
Exhibit A
Page 9
16. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. Subsidiary Guarantee. Each Subsidiary Guarantor has jointly and
severally irrevocably and unconditionally guaranteed the payment of principal,
premium, if any, and interest (including interest on overdue principal and
overdue interest, if lawful) on the Securities; provided, however, that each
Subsidiary Guarantor that makes a payment or distribution under a Subsidiary
Guarantee shall be entitled to a contribution from each other Subsidiary
Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Subsidiary Guarantor.
18. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or Government Securities for the payment of principal, premium (if any)
and interest on the Securities to redemption or maturity, as the case may be.
19. Governing Law. The Laws of the State of New York shall govern
this Security and the Indenture, without regard to principles of conflict of
laws.
20. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
21. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessors under the Securities and the
Indenture, the predecessor will be released from those obligations.
22. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Securityholder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Securities.
23. Abbreviations. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
24. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the
<PAGE>
Exhibit A
Page 10
accuracy of such numbers either as printed on the Securities or as contained in
any notice of redemption and reliance may be placed only on the other
identification numbers placed thereon.
<PAGE>
Exhibit A
Page 11
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Request may be made to:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: Chief Financial Officer
<PAGE>
EXHIBIT A
Page 12
FORM OF NOTATION ON SECURITY
RELATING TO SUBSIDIARY GUARANTEE
SUBSIDIARY GUARANTEE
--------------------
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) (i) have jointly and
severally irrevocably and unconditionally guaranteed as a primary obligor and
not a surety (such guarantee by each Subsidiary Guarantor being referred to
herein as the "Subsidiary Guarantee"), (a) the due and punctual payment of the
principal, premium, if any, and interest on the Securities, whether at Stated
Maturity or an Interest Payment Date, by acceleration, call for redemption or
otherwise, (b) the due and punctual payment of interest on the overdue principal
of and interest, if any, on the Securities, to the extent lawful, (c) the due
and punctual performance of all other monetary Obligations of the Issuers under
the Indenture and the Securities to the Securityholders or the Trustee, all in
accordance with the terms set forth in Article X of the Indenture and (d) in
case of any extension of time of payment or renewal of any Securities or any
such Obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise and (ii) have agreed to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Securityholder in enforcing any rights under this Subsidiary
Guarantee.
The Obligations of each Subsidiary Guarantor to the Securityholders of
Securities and to the Trustee pursuant to this Subsidiary Guarantee and the
Indenture are expressly set forth in Article X of the Indenture and reference is
hereby made to such Indenture for the precise terms of this Subsidiary
Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of any Subsidiary Guarantor shall have any liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Subsidiary Guarantee and, except as otherwise
expressly provided for in Section 10.6 of the Indenture, shall remain in full
force and effect and shall be binding upon the Subsidiary Guarantor and its
successors and assigns until full and final payment of all of the Company's
Obligations under the Securities and the Indenture and shall inure to the
benefit of the successors and assigns of the Trustee and the Securityholders
and, in the event of any transfer or assignment of rights by any Securityholder
or the Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a Subsidiary Guarantee of
payment and not of collectability.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Security upon which this
Subsidiary Guarantee is noted
<PAGE>
EXHIBIT A
Page 13
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
THE TERMS OF ARTICLE X OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Subsidiary Guarantors:
NORTON MCNAUGHTON OF SQUIRE, INC.
By:_______________________________________
Name:
Title:
MISS ERIKA, INC.
By:_______________________________________
Name:
Title:
JJ ACQUISITION CORP.
By:_______________________________________
Name:
Title:
NORTY'S, INC.
By:_______________________________________
Name:
Title:
<PAGE>
EXHIBIT A
Page 14
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to Act for him.
Date:______________
Your Signature: __________________________________
(Sign exactly as your name appears on the face of
this Security)
Signature Guarantee:
__________________________
(Signatures must be guaranteed by
an "eligible guarantor institution"
meeting the requirements of the Registrar,
which requirements will include membership
participation in the Securities Transfer
Agents Medallion Program (`STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar
in addition to, or in substitution for, STAMP,
all in accordance with the
Securities Exchange Act of 1934, as amended.)
<PAGE>
EXHIBIT A
Page 15
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date of the declaration by the
Commission of the effectiveness of a registration statement under the Securities
Act of 1933, as amended (the "Securities Act") covering resales of this Security
(which effectiveness shall not have been suspended or terminated at the date of
the transfer) and (ii) June 18, 2000, the undersigned confirms that it has not
utilized any general solicitation or general advertising in connection with the
transfer and that this Security is being transferred:
Check One
---------
(1) _____ to the Company or a subsidiary thereof; or
(2) _____ pursuant to and in compliance with Rule 144A under the Securities
Act; or
(3) _____ to an institutional 501(a)(1),(2),(3) or (7) Trustee a signed
letter (the form of "accredited investor" under the Securities
Act) containing certain which letter can (as defined in Rule that
has furnished to the representations and be obtained from
agreements the Trustee); or
(4) _____ outside the United States to a "foreign person" in 904 of
Regulation S compliance with Rule under the Securities Act; or
(5) _____ pursuant to the exemption from registration the provided by Rule
144 under Securities Act; or
(6) _____ pursuant to an effective registration statement under the
Securities Act; or
(7) _____ pursuant to another available exemption from the registration
requirements of the Securities Act.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any Person other
than the registered Securityholder thereof; provided that if box (3), (4), (5)
or (7) is checked, the Company or the Trustee may require, prior to registering
any such transfer of the securities, in its sole discretion, such legal
opinions, certifications (including an investment letter in the case of box (3)
or (4)) and other information as the Trustee or the Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act. If none of the foregoing boxes is checked, the Trustee or
Registrar shall not be obligated to register this Security in the name of any
person other than the Securityholder hereof unless and until the conditions to
any such transfer of registration set forth herein and in Section 2.17 of the
Indenture shall have been satisfied.
<PAGE>
EXHIBIT A
Page 16
Dated:____________________________ Signed:_______________________
(Sign exactly as name
appears on the other
side of this Security)
Signature Guarantee:____________________________________________________________
____________________________________
(Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar,
which requirements will include membership
participation in the Securities Transfer
Agents Medallion Program (`STAMP") or
such other "signature guarantee program" as
may be determined by the Registrar
in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange
Act of 1934, as amended.)
TO BE COMPLETED BY PURCHASER IF (2) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated:______________________________ __________________________________
NOTICE: To be executed by an
executive officer
<PAGE>
EXHIBIT A
Page 17
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.8 or Section 4.9 of the Indenture
check the appropriate box:
[_] Section 4.8 [_] Section 4.9
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.9 of the Indenture, state the amount you elect to have
purchased:
$[______________________]
Date:[_________________]
Your Signature: _________________________________
(Sign exactly as your name appears on the face of
this Security)
Signature Guarantee:
____________________________________
(Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements will include membership
participation in the Securities Transfer
Agents Medallion Program (`STAMP") or
such other "signature guarantee program" as
may be determined by the Registrar
in addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.)
<PAGE>
SCHEDULE A/1/
-------------
Exchanges of portions of this Global Security for definitive
Securities and of definitive Securities for portions of this Global Security:
<TABLE>
<CAPTION>
Amount of Amount of Principal Amount
decrease in increase in of this Global
Principal Amount Principal Amount Security following Signature of
Date of of the Global of the Global such decrease (or authorized
Transaction Security Security increase) officer of Trustee
-------------- ---------- ---------- ----------------- ------------------
<S> <C> <C> <C> <C>
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
_______ _____________ _____________ ______________ _____________
</TABLE>
____________________________
/1/ This should be included only if the Security is issued in global form.
<PAGE>
EXHIBIT B
---------
[UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE
TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A NOMINEE OF
THE DEPOSITARY, OR BY ANY SUCH NOMINEE OF THE DEPOSITARY, OR BY
THE DEPOSITARY OR NOMINEE OF SUCH SUCCESSOR DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW
YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
INDENTURE.]/1/
_____________________________
/1/ To be included in Global Security only.
<PAGE>
EXHIBIT B
Page 2
CUSIP No:
(Front of Security)
No. __ $[__________]
NORTON MCNAUGHTON, INC.
12 1/2% Senior Notes due 2005
NORTON MCNAUGHTON, INC., a Delaware corporation, for value received, promises to
pay to __________, __________________________________________, or its registered
assigns, the principal sum of $[__________] on June 1, 2005.
Interest Payment Dates: June __, and December __, commencing December 1, 1998.
Record Dates: May 15 and November 15 (whether or not a Business Day).
Additional provisions of this Security are set forth on the other side of this
Security.
Dated:
NORTON MCNAUGHTON, INC.
By: ________________________
Name:
Title:
By: ________________________
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the Securities referred
to in the within-mentioned Indenture
UNITED STATES TRUST COMPANY
OF NEW YORK,
as Trustee
By:_________________________________
Authorized Signatory
<PAGE>
EXHIBIT B
Page 3
(Reverse of Security)
NORTON MCNAUGHTON, INC.
12 1/2% SENIOR NOTE DUE 2005
Capitalized terms used herein have the meanings assigned to them in
the Indenture (as defined below) unless otherwise indicated.
1. Interest. NORTON MCNAUGHTON INC., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Security at
the rate and in the manner specified below. The Company shall pay, in cash,
interest on the principal amount of this Security at the rate per annum of 12
1/2%. The Company will pay interest semiannually in arrears on June 1 and
December 1 of each year (each an "Interest Payment Date"), commencing December
1, 1998, or if any such day is not a Business Day on the next succeeding
Business Day. Interest will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Interest shall accrue from the most recent
Interest Payment Date to which interest has been paid or, if no interest has
been paid, from the date of the original issuance of the Securities. To the
extent lawful, the Company shall pay interest on overdue principal at the rate
of 2% per annum in excess of the then applicable interest rate on the
Securities; it shall pay interest on overdue installments of interest (without
regard to any applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment. The Company shall pay interest on the
Securities (except defaulted interest) to the Persons who are registered Holders
of Securities at the close of business on the Record Date immediately preceding
the Interest Payment Date, even if such Securities are cancelled after such
Record Date and on or before such Interest Payment Date. Securityholders must
surrender Securities to a Paying Agent to collect principal payments. The
Company shall pay principal, premium, if any, and interest in money of the
United States that at the time of payment is legal tender for payment of public
and private debts ("U.S. Legal Tender"). However, the Company may pay principal,
premium, if any, and interest by its check payable in such U.S. Legal Tender.
The Company may deliver any such interest payment to the Paying Agent or to a
Securityholder at the Securityholder's registered address.
3. Paying Agent and Registrar. Initially, the Trustee will act as
Paying Agent and Registrar. The Company may change any Paying Agent, Registrar
or co-registrar without prior notice to any Securityholder. The Company may act
in any such capacity.
4. Indenture. The Company issued the Securities under an Indenture,
dated as of June 18, 1998 (the "Indenture"), among the Company, the Subsidiary
Guarantors and the Trustee. The terms of the Securities include those stated in
the Indenture and those made part of the Indenture by reference to the TIA as in
effect on the date the Indenture is qualified. The Securities are subject to
all such terms, and Securityholders are referred to the Indenture and the TIA
for a statement of such terms. The terms of the Indenture shall govern any
inconsistencies between the Indenture and the Securities. The Securities
include the Initial Securities and the Exchange Securities issued in exchange
for the Initial Securities pursuant to the Indenture. The
<PAGE>
EXHIBIT B
Page 4
Initial Securities and the Exchange Securities are treated as a single class of
securities under the Indenture. Capitalized terms herein are used as defined in
the Indenture unless otherwise defined herein. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939 (15 U.S. Code (S)(S) 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture. Notwithstanding anything
to the contrary herein, the Securities are subject to all such terms, and
Securityholders of Securities are referred to the Indenture and said Act for a
statement of them. The Securities are unsecured senior obligations of the
Company limited to $125,000,000 in aggregate principal amount, except as
provided in Section 2.7 of the Indenture.
5. (a) Optional Redemption. Except as set forth below, the
Securities will not be redeemable at the option of the Company prior to June 1,
2003. On and after such date, the Securities will be redeemable, at the
Company's option, in whole or in part upon not less than 30 nor more than 60
days' notice, at the following redemption prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, thereon to the
Redemption Date, if redeemed during the twelve-month period beginning on June 1
of the years indicated below (subject to the right of holders of record on the
relevant Record Date to receive interest due on the relevant Interest Payment
Date):
<TABLE>
<CAPTION>
Redemption
Period Price
- ------ -----------
<S> <C>
2003............................................................. 107.00%
2004............................................................. 103.50%
</TABLE>
(b) Optional Redemption Upon Offering of Equity Interests.
Notwithstanding the foregoing, on or prior to June 1, 2001, the Company may
redeem up to 35% of the aggregate principal amount of Securities originally
issued under the Indenture at a redemption price of 112.50% of the principal
amount thereof, plus accrued and unpaid interest, if any, thereon to the
Redemption Date, with the net cash proceeds of one or more offerings of Equity
Interests (other than Disqualified Stock) of the Company; provided that (i) at
least 65% of the aggregate principal amount of Securities originally issued
under the Indenture remains outstanding immediately after the occurrence of such
redemption (excluding Securities held by the Company and its Subsidiaries) and
(ii) each such redemption shall occur within 90 days of the date of the closing
of each such offering.
6. Mandatory Redemption. Except as set forth in Section 3.9 and
Section 4.9 of the Indenture, the Company is not required to make mandatory
redemption or sinking fund payments with respect to the Securities.
7. Repurchase at Option of Securityholder. Sections 4.8 and 4.9 of
the Indenture provide that, after certain Asset Sales (as defined in the
Indenture) and upon the occurrence of a Change of Control (as defined in the
Indenture), and subject to the further limitations contained therein, the
Company will make an offer to purchase certain amounts of the Securities in
accordance with procedures set forth in the Indenture.
<PAGE>
EXHIBIT B
Page 5
8. Selection and Notice of Redemption. In the case of any partial
redemption, selection of the Securities for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which such Securities are listed, or if such Securities are
not then listed on a national securities exchange, on a pro rata basis, by lot
or by such other method as the Trustee in its sole discretion shall deem to be
fair and appropriate; provided, however, that if a partial redemption is made
with the proceeds of one or more offerings of Equity Interests of the Company,
selection of the Securities or portion thereof for redemption shall be made by
the Trustee only on a pro rata basis, unless such method is otherwise
prohibited. Securities may be redeemed in part in multiples of $1,000 principal
amount only. Notice of redemption will be sent, by first class mail, postage
prepaid, at least 30 but not more than 60 days prior to the date fixed for
redemption to each holder whose Securities are to be redeemed at the last
address for such holder then shown on the registry books. If any Security is to
be redeemed in part only, the notice of redemption that relates to such Security
shall state the portion of the principal amount thereof to be redeemed. A new
Security in principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Security. On and after any Redemption Date, interest will cease to accrue on
the Securities or part thereof called for redemption as long as the Company has
deposited with the Paying Agent funds in satisfaction of the redemption price
pursuant to the Indenture.
9. Denominations, Transfer, Exchange. The Securities are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Securities may be registered and Securities
may be exchanged as provided in the Indenture. The Registrar and the Trustee
may require a Securityholder among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not exchange or register
the transfer of any Security or portion of a Security selected for redemption.
Also, it need not exchange or register the transfer of any Securities during a
period beginning at the opening of business on a Business Day 15 days before the
day of any selection of Securities to be redeemed and ending at the close of
business on the day of selection or during the period between a Record Date and
the corresponding Interest Payment Date.
10. Persons Deemed Owners. Prior to due presentment to the Trustee
for registration of the transfer of this Security, the Trustee, any Agent and
the Company may deem and treat the Person in whose name this Security is
registered as its absolute owner for the purpose of receiving payment of
principal of, premium, if any, and interest on this Security and for all other
purposes whatsoever, whether or not this Security is overdue, and neither the
Trustee, any Agent nor the Company shall be affected by notice to the contrary.
The registered Securityholder shall be treated as its owner for all purposes.
11. Amendments and Waivers. Subject to certain exceptions provided
in the Indenture, the Indenture or the Securities may be amended with the
written consent of the Holders of a majority in principal amount of all
outstanding series of the Securities, voting as a single class, and any existing
Default or Event of Default (except a payment default) may be waived with the
consent of the Holders of a majority in principal amount of all outstanding
series
<PAGE>
EXHIBIT B
Page 6
of the Securities, voting as a single class. Without the consent of any
Securityholder, the Indenture or the Securities may be amended to, among other
things, cure any ambiguity, defect or inconsistency, to comply with the
requirements of the Commission in order to effect or maintain qualification of
the Indenture under the TIA or to make any change that does not adversely affect
in any material respect the rights of any Securityholder.
12. Defaults and Remedies. If an Event of Default occurs and is
continuing, the Trustee by notice to the Company, or the holders of at least 25%
in principal amount of all outstanding series of the Securities, voting as a
single class, by notice to the Company and the Trustee, may declare the
principal of and accrued and unpaid interest, if any, on all the Securities to
be due and payable. Upon such a declaration, such principal, premium and
accrued and unpaid interest shall be due and payable immediately, if an Event of
Default relating to certain events of bankruptcy, insolvency or reorganization
of the Company occurs and is continuing, the principal of, premium, if any, and
accrued and unpaid interest on all the Securities will become and be immediately
due and payable without any declaration or other act on the part of the Trustee
or any holders. Under certain circumstances, the Holders of a majority in
principal amount of all outstanding series of the Securities, voting as a single
class, may rescind any such acceleration with respect to the Securities and its
consequences.
13. Trustee Dealings with the Company. The Trustee under the
Indenture, in its individual or any other capacity, may make loans to, accept
deposits from, and perform services for the Company or any Affiliate of the
Company and may otherwise deal with the Company and their respective Affiliates
as if it were not Trustee.
14. Restrictive Covenants. The Indenture imposes certain limitations
on the ability of the Company and its Subsidiaries to, among other things, incur
additional Indebtedness, make payments in respect of its Capital Stock or
certain Indebtedness, pay dividends or make certain other Restricted Payments,
consummate certain Asset Sales, enter into certain transactions with Affiliates,
incur Liens, create restrictions on the ability of a subsidiary to pay dividends
or make certain payments, sell or issue preferred stock of subsidiaries to third
parties, merge or consolidate with any other person or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of the assets of
the Company. Such limitations are subject to a number of important
qualifications and exceptions provided for in the Indenture. The Company must
annually report to the Trustee on compliance with such limitations.
15. Authentication. This Security shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
16. Defeasance. Subject to certain conditions provided for in the
Indenture, the Company at any time may terminate some or all of its obligations
under the Securities and the Indenture if the Company deposits with the Trustee
money or Government Securities for the payment of principal, premium (if any)
and interest on the Securities to redemption or maturity, as the case may be.
17. Subsidiary Guarantee. Each Subsidiary Guarantor has jointly and
severally irrevocably and unconditionally guaranteed the payment of principal,
premium, if any, and
<PAGE>
EXHIBIT B
Page 7
interest (including interest on overdue principal and overdue interest, if
lawful) on the Securities; provided, however, that each Subsidiary Guarantor
that makes a payment or distribution under a Subsidiary Guarantee shall be
entitled to a contribution from each other Subsidiary Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Subsidiary Guarantor.
17. Governing Law. The Laws of the State of New York shall govern
this Security and the Indenture, without regard to principles of conflict of
laws.
18. Abbreviations. Customary abbreviations may be used in the name
of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TEN
ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
19. Unclaimed Money. If money for the payment of principal or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company. After that, all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
20. Successors. When a successor assumes, in accordance with the
Indenture, all the obligations of its predecessors under the Securities and the
Indenture, the predecessor will be released from those obligations.
21. No Recourse Against Others. No stockholder, director, officer,
employee or incorporator, as such, of the Company shall have any liability for
any obligation of the Company under the Securities or the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Note by accepting a Security waives and releases all
such liability. The waiver and release are part of the consideration for the
issuance of the Securities.
22. CUSIP Numbers. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Securities and has directed the Trustee to
use CUSIP numbers in notices of redemption as a convenience to Securityholders.
No representation is made as to the accuracy of such numbers either as printed
on the Securities or as contained in any notice of redemption and reliance may
be placed only on the other identification numbers placed thereon.
The Company will furnish to any Securityholder upon written request
and without charge a copy of the Indenture. Request may be made to:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, NY 10018
Attention: Chief Financial Officer
<PAGE>
EXHIBIT B
Page 8
FORM OF NOTATION ON SECURITY
RELATING TO SUBSIDIARY GUARANTEE
SUBSIDIARY GUARANTEE
--------------------
The Subsidiary Guarantors (as defined in the Indenture (the
"Indenture") referred to in the Security upon which this notation is endorsed
and each hereinafter referred to as a "Subsidiary Guarantor," which term
includes any successor Person under the Indenture) (i) have jointly and
severally irrevocably and unconditionally guaranteed as a primary obligor and
not a surety (such guarantee by each Subsidiary Guarantor being referred to
herein as the "Subsidiary Guarantee"), (a) the due and punctual payment of the
principal, premium, if any, and interest on the Securities, whether at Stated
Maturity or an Interest Payment Date, by acceleration, call for redemption or
otherwise, (b) the due and punctual payment of interest on the overdue principal
of and interest, if any, on the Securities, to the extent lawful, (c) the due
and punctual performance of all other monetary Obligations of the Issuers under
the Indenture and the Securities to the Securityholders or the Trustee, all in
accordance with the terms set forth in Article X of the Indenture and (d) in
case of any extension of time of payment or renewal of any Securities or any
such Obligations, the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at Stated
Maturity, by acceleration or otherwise and (ii) have agreed to pay any and all
costs and expenses (including reasonable attorneys' fees) incurred by the
Trustee or any Securityholder in enforcing any rights under this Subsidiary
Guarantee.
The Obligations of each Subsidiary Guarantor to the Securityholders of
Securities and to the Trustee pursuant to this Subsidiary Guarantee and the
Indenture are expressly set forth in Article X of the Indenture and reference is
hereby made to such Indenture for the precise terms of this Subsidiary
Guarantee.
No stockholder, officer, director or incorporator, as such, past,
present or future of any Subsidiary Guarantor shall have any liability under
this Subsidiary Guarantee by reason of his or its status as such stockholder,
officer, director or incorporator.
This is a continuing Subsidiary Guarantee and, except as otherwise
expressly provided for in Section 10.6 of the Indenture, shall remain in full
force and effect and shall be binding upon the Subsidiary Guarantor and its
successors and assigns until full and final payment of all of the Company's
Obligations under the Securities and the Indenture and shall inure to the
benefit of the successors and assigns of the Trustee and the Securityholders
and, in the event of any transfer or assignment of rights by any Securityholder
or the Trustee, the rights and privileges herein conferred upon that party shall
automatically extend to and be vested in such transferee or assignee, all
subject to the terms and conditions hereof. This is a Subsidiary Guarantee of
payment and not of collectability.
This Subsidiary Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Security upon which this
Subsidiary Guarantee is noted
<PAGE>
EXHIBIT B
Page 9
shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized officers.
THE TERMS OF ARTICLE X OF THE INDENTURE ARE INCORPORATED HEREIN BY
REFERENCE.
Capitalized terms used herein have the same meanings given in the
Indenture unless otherwise indicated.
Subsidiary Guarantors:
NORTON MCNAUGHTON OF SQUIRE, INC.
By:_____________________________
Name:
Title:
MISS ERIKA, INC.
By:_____________________________
Name:
Title:
JJ ACQUISITION CORP.
By:_____________________________
Name:
Title:
NORTY'S, INC.
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT B
Page 10
ASSIGNMENT FORM
To assign this Security, fill in the form below: (I) or (we) assign
and transfer this Security to
________________________________________________________________________________
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint _____________________________________________________
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date:[______________]
Your Signature:
(Sign exactly as your name appears on the face of
this Security)
Signature Guarantee:
__________________________
(Signatures must be guaranteed by
an "eligible guarantor institution"
meeting the requirements of the Registrar,
which requirements will include membership
participation in the Securities Transfer Agents
Medallion Program (`STAMP") or such other
"signature guarantee program" as may be
determined by the Registrar in addition to,
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.)
<PAGE>
EXHIBIT B
Page 11
OPTION OF SECURITYHOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Security
purchased by the Company pursuant to Section 4.9 of the Indenture check the
appropriate box:
[_] Section 4.8 [_] Section 4.9
If you want to have only part of the Security purchased by the Company
pursuant to Section 4.9 of the Indenture, state the amount you elect to have
purchased:
$[______________________]
Date:[_________________]
Your Signature:
(Sign exactly as your name appears on the face of
this Security)
Signature Guarantee:
____________________________________
(Signatures must be guaranteed by an
"eligible guarantor institution" meeting
the requirements of the Registrar, which
requirements will include membership
participation in the Securities Transfer
Agents Medallion Program (`STAMP") or
such other "signature guarantee program"
as may be determined by the Registrar
in addition to, or in substitution for,
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.)
<PAGE>
Exhibit B
Page 12
SCHEDULE A
----------
Exchanges of portions of this Global Security for definitive
Securities and of definitive Securities for portions of this Global Security:
<TABLE>
<CAPTION>
Principal Amount
Amount of Amount of of this Global
decrease in increase in Security
Principal Principal following such Signature of
Date of Amount of the Amount of the decrease (or authorized
Transaction Global Security Global Security increase) officer of Trustee
- ------------- ----------------- ----------------- ------------------ --------------------
<S> <C> <C> <C> <C>
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
________ _______________ ______________ ______________ _________________
</TABLE>
<PAGE>
EXHIBIT C
---------
Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
United States Trust Company of New York
114 West 47th Street - 25th Floor
New York, NY 10036-1532
Attention: Corporate Trust Administration
Re: NORTON MCNAUGHTON, INC.
12 1/2% Senior Notes due 2005
-----------------------------
Ladies and Gentlemen:
In connection with our proposed purchase of 12 1/2% Senior Notes due
2005 (the "Securities") of NORTON MCNAUGHTON, INC. (the "Company"), we confirm
that:
1. We have received a copy of the Offering Memorandum (the "Offering
Memorandum"), dated June 15, 1998 relating to the Securities and such other
information as we deem necessary in order to make our investment decision. We
acknowledge that we have read and agreed to the matters stated on pages (i) and
(ii) of the Offering Memorandum and in the section entitled "Transfer
Restrictions" of the Offering Memorandum including the restrictions on
duplication and circulation of the Offering Memorandum.
2. We understand that any subsequent transfer of the Securities is
subject to certain restrictions and conditions set forth in the Indenture
relating to the Securities (as described in the Offering Memorandum) and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Securities except in compliance with, such restrictions and
conditions and the Securities Act of 1933, as amended (the "Securities Act").
3. We understand that the offer and sale of the Securities have not
been registered under the Securities Act, and that the Securities may not be
offered or sold except as permitted in the following sentence. We agree, on our
own behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell or otherwise transfer any Securities prior to the
date which is within the time period referred to in Rule 144(k) under the
Securities Act as in effect with respect to such transfer, we will do so only
(i) to the Company or any of its subsidiaries, (ii) inside the United States in
accordance with Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined in Rule 144A under the Securities Act), (iii) inside the
United States to an institutional "accredited investor" (as defined below) that,
prior to such transfer, furnishes to the Trustee (as defined in the Indenture
relating to the Securities), a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the Securities and if
such transfer is in respect of an aggregate principal amount of Securities at
the time of transfer of less than $250,000, an Opinion of Counsel acceptable to
the Company that such transfer is in compliance with the Securities Act, (iv)
outside the United States in accordance with Rule 904 of Regulation S under the
Securities Act, (v) pursuant to the
<PAGE>
Exhibit C
Page 2
exemption from registration provided by Rule 144 under the Securities Act (if
available), or (vi) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person purchasing any of
the Securities from us a notice advising such purchaser that resales of the
Securities are restricted as stated herein.
4. We are not acquiring the Securities for or on behalf of, and will
not transfer the Securities to, any pension or welfare plan (as defined in
Section 3 of the Employee Retirement Income Security Act of 1974), except as
permitted in the section entitled "Transfer Restrictions" of the Offering
Memorandum.
5. We understand that, on any proposed resale of any Securities, we
will be required to furnish to the Trustee and the Company such certification,
legal opinions and other information as the Trustee and the Company may
reasonably require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Securities purchased by us will
bear a legend to the foregoing effect.
6. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and have
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of our investment in the Securities, and we
and any accounts for which we are acting are each able to bear the economic risk
of our or their investment, as the case may be.
7. We are acquiring the Securities purchased by us for our account or
for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
By:___________________________
Name:
<PAGE>
EXHIBIT D
---------
Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------------------------
_______________, ____
United States Trust Company of New York
114 West 47th Street - 25th Floor
New York, NY 10036-1532
Attention: Corporate Trust Administration
Re: NORTON MCNAUGHTON, INC.
(the "Company") 12 1/2% Senior
Notes due 2005 (the "Securities")
---------------------------------
Ladies and Gentlemen:
In connection with our proposed sale of $[_____________] aggregate
principal amount of the Securities, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the U.S. Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Securities was not made to a Person in the
United States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on our
behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been pre-
arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
(5) we have advised the transferee of the transfer restrictions
applicable to the Securities.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
<PAGE>
Exhibit D
Page 2
Very truly yours,
[Name of Transferor]
By:______________________________
Authorized Signature
(2)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
---------
DEFINITIONS AND INCORPORATION BY REFERENCE.................................. 1
SECTION 1.1 Definitions............................................... 1
SECTION 1.2 Other Definitions......................................... 17
SECTION 1.3 Incorporation by Reference of Trust Indenture Act......... 18
SECTION 1.4 Rules of Construction..................................... 18
ARTICLE II
----------
THE SECURITIES.............................................................. 19
SECTION 2.1 Form and Dating........................................... 19
SECTION 2.2 Execution and Authentication.............................. 21
SECTION 2.3 Registrar and Paying Agent................................ 21
SECTION 2.4 Paying Agent to Hold Money in Trust....................... 22
SECTION 2.5 Securityholder Lists...................................... 22
SECTION 2.6 Transfer and Exchange..................................... 22
SECTION 2.7 Replacement Securities.................................... 23
SECTION 2.8 Outstanding Securities.................................... 23
SECTION 2.9 Treasury Securities....................................... 24
SECTION 2.10 Temporary Securities..................................... 24
SECTION 2.11 Cancellation............................................. 24
SECTION 2.12 Defaulted Interest....................................... 25
SECTION 2.13 CUSIP Number............................................. 25
SECTION 2.14 Deposit of Moneys........................................ 25
SECTION 2.15 Restrictive Legends...................................... 25
SECTION 2.16 Book-Entry Provisions for Global Security................ 27
SECTION 2.17 Special Transfer Provisions.............................. 28
SECTION 2.18 Persons Deemed Owners.................................... 31
SECTION 2.19 Record Date.............................................. 31
ARTICLE III
-----------
REDEMPTION.................................................................. 32
SECTION 3.1 Notices to Trustee........................................ 32
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 3.2 Selection of Securities To Be Redeemed................... 32
SECTION 3.3 Notice of Redemption..................................... 32
SECTION 3.4 Effect of Notice of Redemption........................... 33
SECTION 3.5 Deposit of Redemption Price.............................. 33
SECTION 3.6 Securities Redeemed in Part.............................. 34
SECTION 3.7 Optional Redemption...................................... 34
SECTION 3.8 Mandatory Redemption..................................... 35
SECTION 3.9 Offer to Purchase by Application of Excess Proceeds...... 35
ARTICLE IV
----------
COVENANTS.................................................................. 37
SECTION 4.1 Payment of Securities.................................... 37
SECTION 4.2 Reports.................................................. 37
SECTION 4.3 Limitation on Incurrence of Indebtedness and Issuance
of Preferred Stock..................................... 37
SECTION 4.4 Limitation on Restricted Payments........................ 39
SECTION 4.5 Restrictions on Payments for Consent..................... 42
SECTION 4.6 Limitation on Affiliate Transactions..................... 42
SECTION 4.7 Limitation on Liens...................................... 43
SECTION 4.8 Limitation on Asset Sales................................ 43
SECTION 4.9 Change of Control........................................ 44
SECTION 4.10 Limitation on Dividend and Other Payment Restrictions
Affecting Subsidiaries................................. 45
SECTION 4.11 Additional Subsidiary Guarantees........................ 46
SECTION 4.12 Further Instruments and Acts............................ 46
SECTION 4.13 Use of Proceeds......................................... 46
SECTION 4.14 Compliance Certificates................................. 46
SECTION 4.15 Maintenance of Office or Agency......................... 47
SECTION 4.16 Taxes................................................... 47
SECTION 4.17 Stay, Extension and Usury Laws.......................... 48
SECTION 4.18 Corporate Existence..................................... 48
ARTICLE V
---------
SUCCESSORS................................................................. 48
SECTION 5.1 Mergers and Consolidations............................... 48
SECTION 5.2 Successor Corporation Substituted........................ 49
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI
----------
DEFAULTS AND REMEDIES....................................................... 49
SECTION 6.1 Events of Default......................................... 49
SECTION 6.2 Acceleration.............................................. 51
SECTION 6.3 Other Remedies............................................ 52
SECTION 6.4 Waiver of Past Defaults................................... 52
SECTION 6.5 Control by Majority....................................... 52
SECTION 6.6 Limitation on Suits....................................... 52
SECTION 6.7 Rights of Holders to Receive Payment...................... 53
SECTION 6.8 Collection Suit by Trustee................................ 53
SECTION 6.9 Trustee May File Proofs of Claim.......................... 53
SECTION 6.10 Priorities............................................... 53
SECTION 6.11 Undertaking for Costs.................................... 54
SECTION 6.12 Restoration of Rights and Remedies....................... 54
ARTICLE VII
-----------
TRUSTEE..................................................................... 54
SECTION 7.1 Duties of Trustee......................................... 54
SECTION 7.2 Rights of Trustee......................................... 55
SECTION 7.3 Individual Rights of Trustee.............................. 56
SECTION 7.4 Trustee's Disclaimer...................................... 56
SECTION 7.5 Notice of Defaults........................................ 57
SECTION 7.6 Reports by Trustee to Holders............................. 57
SECTION 7.7 Compensation and Indemnity................................ 57
SECTION 7.8 Replacement of Trustee.................................... 58
SECTION 7.9 Successor Trustee by Merger............................... 59
SECTION 7.10 Eligibility; Disqualification............................ 59
SECTION 7.11 Preferential Collection of Claims Against Company........ 59
ARTICLE VIII
------------
DISCHARGE OF INDENTURE; DEFEASANCE.......................................... 60
SECTION 8.1 Option to Effect Legal Defeasance or Covenant Defeasance.. 60
SECTION 8.2 Legal Defeasance and Discharge............................ 60
SECTION 8.3 Covenant Defeasance....................................... 60
SECTION 8.4 Conditions to Legal or Covenant Defeasance................ 61
SECTION 8.5 Application of Trust Money................................ 62
SECTION 8.6 Repayment to the Company.................................. 62
SECTION 8.7 Indemnity for Government Obligations...................... 62
SECTION 8.8 Reinstatement............................................. 62
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IX
----------
AMENDMENTS.................................................................. 63
SECTION 9.1 Without Consent of Holders................................ 63
SECTION 9.2 With Consent of Holders................................... 64
SECTION 9.3 Compliance with Trust Indenture Act....................... 66
SECTION 9.4 Revocation and Effect of Consents and Waivers............. 66
SECTION 9.5 Notation on or Exchange of Securities..................... 66
SECTION 9.6 Trustee To Sign Amendments................................ 66
ARTICLE X
---------
SUBSIDIARY GUARANTEE OF SECURITIES.......................................... 67
SECTION 10.1........................................................... 67
SECTION 10.2 Execution And Delivery Of Subsidiary Guarantee........... 68
SECTION 10.3 Subsidiary Guarantee Unconditional, etc.................. 68
SECTION 10.4 Limitation of Subsidiary Guarantor's Liability........... 69
SECTION 10.5 Contribution............................................. 69
SECTION 10.6 Release.................................................. 70
SECTION 10.7 Additional Subsidiary Guarantors......................... 70
SECTION 10.8 Subsidiary Guarantors May Consolidate, etc., On
Certain Terms........................................... 70
SECTION 10.9 Successors and Assigns................................... 71
SECTION 10.10 Waiver of Stay, Extension or Usury Laws................. 71
ARTICLE XI
----------
MISCELLANEOUS............................................................... 72
SECTION 11.1 Trust Indenture Act Controls............................. 72
SECTION 11.2 Notices.................................................. 72
SECTION 11.3 Communication by Holders with other Holders.............. 73
SECTION 11.4 Certificate and Opinion as to Conditions Precedent....... 73
SECTION 11.5 Statements Required in Certificate or Opinion............ 73
SECTION 11.6 When Securities Disregarded.............................. 74
SECTION 11.7 Rules by Trustee, Paying Agent and Registrar............. 74
SECTION 11.8 Legal Holidays........................................... 74
SECTION 11.9 Governing Law............................................ 74
SECTION 11.10 No Recourse Against Others.............................. 74
SECTION 11.11 Successors.............................................. 74
SECTION 11.12 Multiple Originals...................................... 74
SECTION 11.13 Variable Provisions..................................... 74
SECTION 11.14 Qualification of Indenture.............................. 74
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exhibit A - Form of Series A Security.................................. A-1
Exhibit B - Form of Series B Security.................................. B-1
Exhibit C - Form of Certificate To Be Delivered in Connection with
Transfers to Non-QIB Accredited Investors.................. C-1
Exhibit D - Form of Certificate To Be Delivered in Connection with
Transfers Pursuant to Regulation S......................... D-1
</TABLE>
___________________
Note: This Table of Contents shall not, for any purpose, be deemed to be part
of the Indenture.
(v)
<PAGE>
EXHIBIT 4.2
=====================================
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
Dated as of June 18, 1998
by and between
NORTON McNAUGHTON, INC.
and
NATWEST CAPITAL MARKETS LIMITED
and
ING BARING (U.S.) SECURITIES, INC.
As the Initial Purchasers
=====================================
$125,000,000
12 1/2% SENIOR NOTES DUE 2005
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions........................................................ 1
-----------
2. Exchange Offer..................................................... 4
--------------
3. Shelf Registration................................................. 7
------------------
4. Additional Interest................................................ 8
-------------------
5. Registration Procedures............................................ 9
-----------------------
6. Registration Expenses.............................................. 17
---------------------
7. Indemnification.................................................... 18
---------------
8. Rules 144 and 144A................................................. 21
------------------
9. Underwritten Registrations......................................... 21
--------------------------
10. Miscellaneous...................................................... 21
-------------
(a) No Inconsistent Agreements.................................... 21
--------------------------
(b) Adjustments Affecting Registrable Notes....................... 22
---------------------------------------
(c) Amendments and Waivers........................................ 22
----------------------
(d) Notices....................................................... 22
-------
(e) Successors and Assigns........................................ 23
----------------------
(f) Counterparts.................................................. 23
------------
(g) Headings...................................................... 23
--------
(h) Governing Law................................................. 23
-------------
(i) Severability.................................................. 24
------------
(j) Notes Held by the Company or its Affiliates................... 24
-------------------------------------------
(k) Third Party Beneficiaries..................................... 23
-------------------------
</TABLE>
(i)
<PAGE>
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
This Exchange and Registration Rights Agreement (the "Agreement") is
dated as of June 18, 1998, by and among Norton McNaughton, Inc., a Delaware
corporation (the "Company") the subsidiary guarantors listed in the signature
pages hereto (collectively, the "Subsidiary Guarantors") and NatWest Capital
Markets Limited and ING Baring (U.S.) Securities, Inc. (each an "Initial
Purchaser" and collectively, the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated June 15, 1998, among the Company, the Subsidiary Guarantors and
the Initial Purchasers (the "Purchase Agreement"), which provides for the sale
by the Company to the Initial Purchasers of $125,000,000 aggregate principal
amount of the Company's 12 1/2% Senior Notes due 2005 (the "Notes"), which notes
will be guaranteed by the Subsidiary Guarantors. The Company and the Subsidiary
Guarantors are collectively referred to herein as the "Issuers." In order to
induce the Initial Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide the registration rights set forth in this Agreement for
the benefit of the Initial Purchasers and their direct and indirect transferees.
The execution and delivery of this Agreement is a condition to the obligation of
the Initial Purchasers to purchase the Notes under the Purchase Agreement.
The parties hereby agree as follows:
1. Definitions
-----------
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: Has the meaning provided in Section 4(a) hereof.
-------------------
Advice: Has the meaning provided in the last paragraph of Section 5
------
hereof.
Agreement: Has the meaning provided in the first introductory
---------
paragraph hereto.
Applicable Period: Has the meaning provided in Section 2(b) hereof.
-----------------
Closing Date: Has the meaning provided in the Purchase Agreement.
------------
Company: Has the meaning provided in the first introductory paragraph
-------
hereto.
Effectiveness Date: The 150th day after the Issue Date.
------------------
Effectiveness Period: Has the meaning provided in Section 3(a)
--------------------
hereof.
Event Date: Has the meaning provided in Section 4(b) hereof.
----------
<PAGE>
Exchange Act: The Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations of the SEC promulgated thereunder.
Exchange Notes: Has the meaning provided in Section 2(a) hereof.
--------------
Exchange Offer: Has the meaning provided in Section 2(a) hereof.
--------------
Exchange Offer Registration Statement: Has the meaning provided in
-------------------------------------
Section 2(a) hereof.
Filing Date: The 60th day after the Issue Date.
-----------
Holder: Any holder of a Registrable Note or Registrable Notes.
------
Indemnified Person: Has the meaning provided in Section 7(c) hereof.
------------------
Indemnifying Person: Has the meaning provided in Section 7(c) hereof.
-------------------
Indenture: The Indenture, dated as of June 18, 1998 among the
---------
Company, the Subsidiary Guarantors and United States Trust Company of New York
as trustee, pursuant to which the Notes are being issued, as amended or
supplemented from time to time in accordance with the terms thereof.
Initial Purchasers: Has the meaning provided in the first
------------------
introductory paragraph hereto.
Inspectors: Has the meaning provided in Section 5(o) hereof.
----------
Issue Date: The date on which the original Notes were sold to the
----------
Initial Purchasers pursuant to the Purchase Agreement.
Issuers: Has the meaning provided in the second introductory
-------
paragraph hereto.
NASD: Has the meaning provided in Section 5(s) hereof.
----
Notes: Has the meaning provided in the second introductory paragraph
-----
hereto.
Participant: Has the meaning provided in Section 7(a) hereof.
-----------
Participating Broker-Dealer: Has the meaning provided in Section 2(b)
---------------------------
hereof.
Persons: An individual, trustee, corporation, partnership, limited
-------
liability company, joint stock company, trust, unincorporated association,
union, business association, firm or other legal entity.
Private Exchange: Has the meaning provided in Section 2(b) hereof.
----------------
Private Exchange Notes: Has the meaning provided in Section 2(b)
----------------------
hereof.
-2-
<PAGE>
Prospectus: The prospectus included in any Registration Statement
----------
(including, without limitation, any prospectus subject to completion and a
prospectus that includes any information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A
promulgated under the Securities Act), as amended or supplemented by any
prospectus supplement, and all other amendments and supplements to the
Prospectus, with respect to the terms of the offering of any portion of the
Registrable Notes covered by such Registration Statement including post-
effective amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: Has the meaning provided in the second
------------------
introductory paragraph hereto.
Records: Has the meaning provided in Section 5(o) hereof.
-------
Registrable Notes: Each Note upon original issuance of the Notes and
-----------------
at all times subsequent thereto and each Private Exchange Note upon original
issuance thereof and at all times subsequent thereto, until in the case of any
such Note, Exchange Note or Private Exchange Note, as the case may be, the
earliest to occur of (i) a Registration Statement covering such Note, Exchange
Note or Private Exchange Note, as the case may be, has been declared effective
by the SEC and such Note (unless such Note was not tendered for exchange by the
Holder thereof), Exchange Note or Private Exchange Note, as the case may be, has
been disposed of in accordance with such effective Registration Statement, (ii)
such Note, Exchange Note or Private Exchange Note, as the case may be, is, or
may be, sold in compliance with Rule 144, or (iii) such Note, Exchange Note or
Private Exchange Note, as the case may be, ceases to be outstanding for purposes
of the Indenture.
Registration Statement: Any registration statement of the Company,
----------------------
including, but not limited to, the Exchange Offer Registration Statement, that
covers any of the Registrable Notes pursuant to the provisions of this
Agreement, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated by reference
in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule (other than Rule 144A) or
regulation hereafter adopted by the SEC providing for offers and sales of
securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as such
---------
Rule may be amended from time to time, or any similar rule (other than Rule 144)
or regulation hereafter adopted by the SEC.
Rule 415: Rule 415 promulgated under the Securities Act, as such Rule
--------
may be amended from time to time, or any similar rule or regulation hereafter
adopted by the SEC.
-3-
<PAGE>
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended, and the rules
--------------
and regulations of the SEC promulgated thereunder.
Shelf Request: Has the meaning provided in Section 2(c) hereof.
-------------
Shelf Registration: Has the meaning provided in Section 3(a) hereof.
------------------
Shelf Registration Statement: shall mean a "shelf" registration
----------------------------
statement of the Company which covers all of the Registrable Notes on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule that may
be adopted by the SEC, and all amendments and supplements to such registration
statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material incorporated
by reference therein.
TIA: The Trust Indenture Act of 1939, as amended.
---
Trustee(s): The trustee under the Indenture and, if existent, the
----------
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A registration in
--------------------------------------------------
which securities of the Company are sold to an underwriter for reoffering to the
public.
2. Exchange Offer
--------------
(a) The Issuers agree to file with the SEC no later than the Filing
Date an offer to exchange (the "Exchange Offer") any and all of the Registrable
Notes (other than the Private Exchange Notes, if any) for a like aggregate
principal amount of debt securities of the Company, guaranteed by the Subsidiary
Guarantors, which are identical in all material respects to the Notes (the
"Exchange Notes") (and which are entitled to the benefits of the Indenture or a
trust indenture which is identical in all material respects to the Indenture
(other than such changes to the Indenture or any such identical trust indenture
as are necessary to comply with any requirements of the SEC to effect or
maintain the qualification thereof under the TIA) and which, in either case, has
been qualified under the TIA), except that the Exchange Notes (other than
Private Exchange Notes, if any) shall have been registered pursuant to an
effective Registration Statement under the Securities Act and shall contain no
restrictive legend thereon. The Exchange Offer shall be registered under the
Securities Act on the appropriate form (the "Exchange Offer Registration
Statement") and the Issuers shall use their best efforts to cause the Exchange
Offer to comply with all applicable tender offer rules and regulations under the
Exchange Act. The Issuers agree to use their best efforts to (x) cause the
Exchange Offer Registration Statement to be declared effective under the
Securities Act no later than the 150th day after the Issue Date; (y) keep the
Exchange Offer open for at least 20 business days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
the Holders; and (z) consummate the Exchange Offer on or prior to the 180th day
following the
-4-
<PAGE>
Issue Date. If after such Exchange Offer Registration Statement is declared
effective by the SEC, the Exchange Offer or the issuance of the Exchange Notes
thereunder is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such Exchange
Offer Registration Statement shall be deemed not to have become effective for
purposes of this Agreement until such stop order, injunction or other order or
requirement is no longer in effect. Each Holder who participates in the Exchange
Offer will be required to represent that any Exchange Notes received by it will
be acquired in the ordinary course of its business, that at the time of the
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution of the Exchange
Notes in violation of the provisions of the Securities Act, and that such Holder
is not an "affiliate" of the Issuers within the meaning of the Securities Act.
Upon consummation of the Exchange Offer in accordance with this Section 2, the
Issuers shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes) pursuant to Section 3 hereof. No securities other
than the Exchange Notes shall be included in the Exchange Offer Registration
Statement.
(b) The Issuers shall include within the Prospectus contained in the
Exchange Offer Registration Statement a section entitled "Plan of Distribution,"
reasonably acceptable to the Initial Purchasers, which shall contain a summary
statement of the positions taken or policies made by the Staff of the SEC with
respect to the potential "underwriter" status of any broker-dealer that is the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange
Notes received by such broker-dealer in the Exchange Offer (a "Participating
Broker-Dealer"), whether such positions or policies have been publicly
disseminated by the Staff of the SEC or such positions or policies, in the
judgment of the Initial Purchasers, represent the prevailing views of the Staff
of the SEC. Such "Plan of Distribution" section shall also expressly permit the
use of the Prospectus by all Persons subject to the prospectus delivery
requirements of the Securities Act, including all Participating Broker-Dealers,
and include a statement describing the means by which Participating Broker-
Dealers may resell the Exchange Notes.
Each of the Issuers shall use their best efforts to keep the Exchange
Offer Registration Statement effective and to amend and supplement the
Prospectus contained therein, in order to permit such Prospectus to be lawfully
delivered by any Participating Broker-Dealer subject to the prospectus delivery
requirements of the Securities Act for such period of time as is necessary to
comply with applicable law in connection with any resale of the Exchange Notes;
provided, however, that such period shall not exceed 180 days after the
- -------- -------
consummation of the Exchange Offer (or such longer period if extended pursuant
to the last paragraph of Section 5 hereof) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by it and having the status of an unsold
allotment in the initial distribution, the Issuers shall, upon the request of
the Initial Purchasers, simultaneously with the delivery of the Exchange Notes
in the Exchange Offer issue and deliver to the Initial Purchasers in exchange
(the "Private Exchange") for such Notes held by the Initial Purchasers a like
principal amount of debt securities of the Company, guaranteed by the Subsidiary
Guarantors, that are identical in all material respects to the Exchange Notes
(the "Private Exchange Notes") (and which are issued
-5-
<PAGE>
pursuant to the same Indenture as the Exchange Notes) except that the Private
Exchange Notes shall be subject to the transfer restrictions set forth in the
Indenture and except for the placement of a restrictive legend on such Private
Exchange Notes. The Private Exchange Notes shall if permissible bear the same
CUSIP number as the Exchange Notes.
Interest on the Exchange Notes and the Private Exchange Notes will
accrue from the last interest payment date on which interest was paid on the
Notes surrendered in exchange therefor or, if no interest has been paid on the
Notes, from the Issue Date.
In connection with the Exchange Offer, the Issuers shall:
(1) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(2) utilize the services of a depositary for the Exchange Offer with
an address in the Borough of Manhattan, The City of New York;
(3) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Exchange Offer shall remain open; and
(4) use its best efforts to otherwise comply in all material respects
with all applicable laws, rules and regulations.
As soon as practicable after the close of the Exchange Offer or the
Private Exchange, as the case may be, the Issuers shall:
(1) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Exchange Offer or the Private Exchange;
(2) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(3) cause the Trustee to authenticate and deliver promptly to each
Holder Notes, Exchange Notes or Private Exchange Notes, as the case may be,
equal in principal amount to the Notes of such Holder so accepted for
exchange.
The Exchange Notes and the Private Exchange Notes are to be issued
under (i) the Indenture or (ii) an indenture identical in all material respects
to the Indenture, which in either event shall provide that (1) the Exchange
Notes shall not be subject to the transfer restrictions set forth in the
Indenture and (2) the Private Exchange Notes shall be subject to the transfer
restrictions set forth in the Indenture. The Indenture or such indenture shall
provide that the Exchange Notes, the Private Exchange Notes and the Notes shall
vote and consent together on all matters as to which they have the right to vote
or consent as one class and that none of the
-6-
<PAGE>
Exchange Notes, the Private Exchange Notes or the Notes will have the right to
vote or consent as a separate class on any matter.
(c) If, (i) because of any change in law or in currently prevailing
interpretations of the Staff of the SEC, the Issuers are not permitted to effect
an Exchange Offer, (ii) the Exchange Offer is not consummated within 180 days
after the Issue Date, (iii) any holder of Private Exchange Notes so requests at
any time after the consummation of the Private Exchange, or (iv) any Holder
(other than the Initial Purchasers) is not eligible by applicable law or SEC
policy to participate in the Exchange Offer, then the affected Holders shall
promptly deliver to the Issuers and the Trustee written notice thereof (the
"Shelf Request") and thereafter the Issuers shall file a Shelf Registration
pursuant to Section 3 hereof; provided, however, that in the case of clause
-------- -------
(iii) above such Holders shall pay all reasonable registration expenses of the
Issuers as described in Section 6 hereof in connection with such Shelf
Registration.
3. Shelf Registration
------------------
If a Shelf Request is delivered as contemplated by Section 2(c)
hereof, then:
(a) Shelf Registration. The Issuers shall as promptly as reasonably
------------------
practicable file with the SEC a Registration Statement for an offering to be
made on a continuous basis pursuant to Rule 415 covering all of the Registrable
Notes which are subject to a Shelf Request (the "Shelf Registration"). If the
Issuers shall not have yet filed an Exchange Offer Registration Statement, the
Issuers shall use their best efforts to file with the SEC the Shelf Registration
on or prior to the Filing Date. The Shelf Registration shall be on Form S-3 or
another appropriate form permitting registration of such Registrable Notes for
resale by Holders in the manner or manners designated by them (including,
without limitation, subject to Section 9 hereof one or more underwritten
offerings). The Issuers shall not permit any securities other than the
Registrable Notes to be included in the Shelf Registration.
The Issuers shall use their best efforts to cause the Shelf
Registration to be declared effective under the Securities Act by the 150th day
after the Shelf Request and to keep the Shelf Registration continuously
effective under the Securities Act until the date which is two years from the
Issue Date, subject to extension pursuant to the last paragraph of Section 5
hereof, or such shorter period ending when all Registrable Notes covered by the
Shelf Registration have been sold in the manner set forth and as contemplated in
the Shelf Registration or when the Notes become eligible for sale without volume
restrictions, pursuant to Rule 144 under the Securities Act (the "Effectiveness
Period").
(b) Withdrawal of Stop Orders. If the Shelf Registration ceases to be
-------------------------
effective for any reason at any time during the Effectiveness Period (other than
because of the sale of all of the securities registered thereunder), each of the
Issuers shall use its best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof.
(c) Supplements and Amendments. The Issuers shall promptly supplement
--------------------------
and amend the Shelf Registration if required by the rules, regulations or
instructions applicable to
-7-
<PAGE>
the registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested for such purpose by the Holders of a
majority in aggregate principal amount of the Registrable Notes covered by such
Registration Statement or by any underwriter of such Registrable Notes.
4. Additional Interest
-------------------
(a) The Issuers and the Initial Purchasers agree that the Holders
of Registrable Notes will suffer damages if the Issuers fail to fulfill their
obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Issuers agree to pay, as liquidated damages and as the sole and exclusive
remedy therefor, additional interest on the Notes ("Additional Interest") under
the circumstances and to the extent set forth below:
(i) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not filed within, in the case of the Exchange
Offer Registration Statement, 60 days following the Issue Date or , in the
case of the Shelf Registration Statement, 60 days following a Shelf
Request, Additional Interest shall accrue on the Notes over and above the
stated interest at a rate of 0.50% per annum for the first 30 days
commencing on the 61st day after the Issue Date or the Shelf Request,
respectively, such Additional Interest rate increasing by an additional
0.50% per annum at the beginning of each subsequent 30-day period; or
(ii) if the Exchange Offer Registration Statement or Shelf
Registration Statement is not declared effective within, in the case of the
Exchange Offer Registration Statement, 150 days following the Issue Date
or, in the case of the Shelf Registration Statement, 150 days following a
Shelf Request, Additional Interest shall accrue on the Notes over and above
the stated interest at a rate of 0.50% per annum for the first 30 days
commencing on the 151st day after the Issue Date or the Shelf Request,
respectively, such Additional Interest rate increasing by an additional
0.50% per annum at the beginning of each subsequent 30-day period; or
(iii) if (A) the Issuers have not exchanged all Notes validly
tendered in accordance with the terms of the Exchange Offer on or prior to
180 days after the Issue Date or (B) the Exchange Offer Registration
Statement ceases to be effective at any time prior to the time that the
Exchange Offer is consummated or (C) if applicable, the Shelf Registration
Statement has been declared effective and such Shelf Registration Statement
ceases to be effective at any time prior to the second anniversary of the
Issue Date (unless all the Notes have been sold thereunder), then
Additional Interest shall accrue on the Notes over and above the stated
interest at a rate of 0.50% per annum for the first 30 days commencing on
(x) the 181st day after the Issue Date with respect to the Notes validly
tendered and not exchanged by the Company, in the case of (A) above, or (y)
the day the Exchange Offer Registration Statement ceases to be effective or
usable for its intended purpose in the case of (B) above, or (z) the day
such Shelf Registration Statement ceases
-8-
<PAGE>
to be effective in the case of (C) above, such Additional Interest rate
increasing by an additional 0.50% per annum at the beginning of each
subsequent 30-day period;
provided, however, that the Additional Interest rate on the Notes under
clauses (i), (ii) or (iii) above, may not exceed in the aggregate 2.0% per
annum; and provided further, that (1) upon the filing of the Exchange Offer
Registration Statement or Shelf Registration Statement (in the case of
clause (i) above), (2) upon the effectiveness of the Exchange Offer
Registration Statement or Shelf Registration Statement (in the case of (ii)
above), or (3) upon the exchange of Exchange Notes for all Notes tendered
(in the case of clause (iii)(A) above), or upon the effectiveness of the
Exchange Offer Registration Statement which had ceased to remain effective
(in the case of clause (iii)(B) above), or upon the effectiveness of the
Shelf Registration Statement which had ceased to remain effective (in the
case of clause (iii)(C) above), Additional Interest on the Notes as a
result of such clause (or the relevant subclause thereof), as the case may
be, shall cease to accrue.
(b) The Issuers shall notify the Trustee within one business day
after each and every date on which an event occurs in respect of which
Additional Interest is required to be paid (an "Event Date"). The Issuers shall
pay the Additional Interest due on the transfer restricted Notes by depositing
with the paying agent (which shall not be the Company or any of its subsidiaries
for these purposes) for the transfer restricted Notes, in trust, for the benefit
of the holders thereof, prior to 11:00 A.M. on the next interest payment date
specified by the Indenture (or such other indenture), sums sufficient to pay the
Additional Interest then due. Any amounts of Additional Interest due pursuant to
clauses (a)(i), (a)(ii) or (a)(iii) of this Section 4 will be payable to the
Holders of affected Notes in cash semi-annually on each interest payment date
specified by the Indenture (or such other indenture) to the record holders
entitled to receive the interest payment to be made on such date, commencing
with the first such date occurring after any such Additional Interest commences
to accrue. The amount of Additional Interest will be determined by multiplying
the applicable Additional Interest rate by the principal amount of the affected
Registrable Notes of such Holders, multiplied by a fraction, the numerator of
which is the number of days such Additional Interest rate was applicable during
such period (determined on the basis of a 360-day year comprised of twelve 30-
day months and, in the case of a partial month, the actual number of days
elapsed), and the denominator of which is 360.
5. Registration Procedures
-----------------------
In connection with the filing of any Registration Statement pursuant
to Sections 2 or 3 hereof, subject to the terms and conditions hereof, the
Issuers shall effect such registration(s) to permit the sale of the securities
covered thereby in accordance with the intended method or methods of disposition
thereof, and pursuant thereto and in connection with any Registration Statement
filed by the Issuers hereunder, the Issuers shall:
(a) Prepare and file with the SEC prior to the Filing Date a
Registration Statement or Registration Statements as prescribed by Sections
2 or 3 hereof, and use their best efforts to cause each such Registration
Statement to become effective and remain effective as provided herein;
provided, however, that, if (1) such filing is pursuant
-------- -------
-9-
<PAGE>
to section 3 hereof, or (2) a Prospectus contained in an Exchange Offer
Registration Statement filed pursuant to Section 2 hereof is required to be
delivered under the Securities Act by any Participating Broker-Dealer who
seeks to sell Exchange Notes during the Applicable Period, before filing
any Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall, if requested in writing, furnish to and afford
the Holders of the Registrable Notes covered by such Registration Statement
or each such Participating Broker-Dealer, as the case may be, their counsel
and the managing underwriters, if any, a reasonable opportunity to review
copies of all such documents (including copies of any documents to be
incorporated by reference therein and all exhibits thereto) proposed to be
filed (in each case at least three business days prior to such filing) at
the Company's executive offices. The Issuers shall not file any
Registration Statement or Prospectus or any amendments or supplements
thereto in respect of which the Holders must be afforded an opportunity to
review prior to the filing of such document under the immediately preceding
sentence, if the Holders of a majority in aggregate principal amount of the
Registrable Notes covered by such Registration Statement, or any such
Participating Broker-Dealer, as the case may be, their counsel, or the
managing underwriters, if any, shall object thereto in writing, which
writing shall set forth a reasonable basis for such objection.
(b) Prepare and file with the SEC such amendments and post-effective
amendments to each Shelf Registration or Exchange Offer Registration
Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness Period
or the Applicable Period or until consummation of the Exchange Offer, as
the case may be; cause the related Prospectus to be supplemented by any
Prospectus supplement required by applicable law, and as so supplemented to
be filed pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of the
Securities Act and the Exchange Act applicable to it with respect to the
disposition of all securities covered by such Registration Statement as so
amended or in such Prospectus as so supplemented and with respect to the
subsequent resale of any securities being sold by a Participating Broker-
Dealer covered by any such Prospectus; the Issuers shall be deemed not to
have used its best efforts to keep a Registration Statement effective
during the Applicable Period if it voluntarily takes any action that would
result in selling Holders of the Registrable Notes covered thereby or
Participating Broker-Dealers seeking to sell Exchange Notes not being able
to sell such Registrable Notes or such Exchange Notes during that period
unless such action is required by applicable law or unless the Company
complies with this Agreement, including without limitation, the provisions
of paragraph 5(k) hereof and the last paragraph of this Section 5.
(c) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, notify the selling
Holders of Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, their counsel and the managing underwriters, if any,
promptly after notice of
-10-
<PAGE>
the applicable event (but in any event within five business days of having
notice of the occurrence of the applicable event), and confirm such notice
in writing, (i) when a Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become
effective under the Securities Act (including in such notice a written
statement that any Holder may, upon request, obtain, at the sole expense of
the Issuers, one conformed copy of such Registration Statement or post-
effective amendment including financial statements and schedules, documents
incorporated or deemed to be incorporated by reference and exhibits), (ii)
of the issuance by the SEC of any stop order suspending the effectiveness
of a Registration Statement or of any order preventing or suspending the
use of any preliminary prospectus or the initiation of any proceedings for
that purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the Registrable
Notes or resales of Exchange Notes by Participating Broker-Dealers the
representations and warranties of the Issuers contained in any agreement
(including any underwriting agreement), contemplated by Section 5(m) hereof
cease to be true and correct in any material respect, (iv) of the receipt
by any of the Issuers of any notification with respect to the suspension of
the qualification or exemption from qualification of a Registration
Statement or any of the Registrable Notes or the Exchange Notes to be sold
by any Participating Broker-Dealer for offer or sale in any jurisdiction,
or the initiation or threatening of any proceeding for such purpose, (v) of
the happening of any event, the existence of any condition or any
information becoming known that makes any statement made in such
Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or that requires the making of any changes in or amendments or
supplements to such Registration Statement, Prospectus or documents so
that, in the case of the Registration Statement, it will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
and (vi) of the determination by the Issuers that a post-effective
amendment to a Registration Statement would be appropriate.
(d) Use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Notes or the Exchange Notes for sale in any jurisdiction, and, if any such
order is issued, to use its best efforts to obtain the withdrawal of any
such order at the earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 hereof and
if requested by the managing underwriter or underwriters (if any), or the
Holders of a majority in aggregate principal amount of the Registrable
Notes being sold in connection with an underwritten offering, (i) promptly
incorporate in a prospectus supplement or post-
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<PAGE>
effective amendment such information as the managing underwriter or
underwriters (if any), such Holders, or counsel for any of them reasonably
request to be included therein, (ii) make all required filings of such
prospectus supplement or such post-effective amendment as soon as
practicable after any of the Issuers has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes and to each such Participating Broker-Dealer
who so requests and to counsel and each managing underwriter, if any, at
the sole expense of the Issuers, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment
thereto, including financial statements and schedules, and, if requested,
all documents incorporated or deemed to be incorporated therein by
reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker-Dealer, as
the case may be, their respective counsel, and the underwriters, if any, at
the sole expense of the Issuers, as many copies of the Prospectus or
Prospectuses (including each form of preliminary prospectus) and each
amendment or supplement thereto and any documents incorporated by reference
therein as such Persons may reasonably request; and, subject to the last
paragraph of this Section 5, the Issuers hereby consent to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders of Registrable Notes or each such Participating Broker-Dealer, as
the case-may be, and the underwriters or agents, if any, and dealers (if
any), in connection with the offering and sale of the Registrable Notes
covered by, or the sale by Participating Broker-Dealers of the Exchange
Notes pursuant to, such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any delivery
of a Prospectus contained in the Exchange Offer Registration Statement by
any Participating Broker-Dealer who seeks to sell Exchange Notes during the
Applicable Period, to use its best efforts to register or qualify such
Registrable Notes (and to cooperate with selling Holders of Registrable
Notes or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if any, and their respective counsel
in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Notes) for offer
and sale under the securities or Blue Sky laws of such jurisdictions within
the United States as any selling Holder, Participating Broker-Dealer, or
the managing underwriter or underwriters reasonably
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<PAGE>
request in writing; provided, however, that where Exchange Notes held by
-------- -------
Participating Broker-Dealers or Registrable Notes are offered other than
through an underwritten offering, the Issuers agree to cause their counsel
to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective and do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Exchange
Notes held by Participating Broker-Dealers or the Registrable Notes covered
by the applicable Registration Statement; provided, however, that the
-------- -------
Issuers shall not be required to (A) qualify generally to do business in
any jurisdiction where it is not then so qualified, (B) take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) subject itself to
taxation in excess of a nominal dollar amount in any such jurisdiction
where it is not then so subject.
(i) If a Shelf Registration is filed pursuant to Section 3 hereof,
cooperate with the selling Holders of Registrable Notes and the managing
underwriter or underwriters, if any, to facilitate the timely preparation
and delivery of certificates representing Registrable Notes to be sold,
which certificates shall not bear any restrictive legends and shall be in a
form eligible for deposit with The Depository Trust Company; and enable
such Registrable Notes to be in such denominations and registered in such
names as the managing underwriter or underwriters, if any, or Holders may
reasonably request.
(j) Use its best efforts to cause the Registrable Notes covered by
the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
Holders thereof or the underwriter or underwriters, if any, to dispose of
such Registrable Notes, except to the extent as may be required as a
consequence of the nature of a selling Holder's business, in which case the
Company will cooperate, at such Holders' expense, in all reasonable
respects with the filing of such Registration Statement and the granting of
such approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, upon the occurrence of
any event contemplated by paragraph 5(c)(v) or 5(c)(vi) hereof, as promptly
as practicable, in the exercise of management's good faith judgment,
prepare and (subject to Section 5(a) hereof) file with the SEC, at the sole
expense of the Issuers, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, or
file any other required document so that, as thereafter delivered to the
purchasers of the Registrable Notes being sold thereunder or to the
purchasers of the Exchange Notes to whom such Prospectus will be delivered
by a Participating Broker-Dealer, any such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
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<PAGE>
statements therein, in light of the circumstances under which they were
made, not misleading; provided, that this Section 5(k) shall not be deemed
to require the Issuers to disclose any information that, in the good faith
opinion of the management of the Company, is not yet required to be
disclosed or would not be in the best interests of the Company to disclose,
so long as the Issuers comply with all applicable laws and government
regulations and the last paragraph of this Section 5.
(l) Prior to the effective date of the first Registration Statement
relating to the Registrable Notes, (i) provide the Trustee with
certificates for the Registrable Notes or Exchange Notes, as the case may
be, in a form eligible for deposit with The Depositary Trust Company and
(ii) provide a CUSIP number for the Registrable Notes or Exchange Notes, as
the case may be.
(m) In connection with any underwritten offering initiated by the
Issuers of Registrable Notes pursuant to a Shelf Registration, negotiate in
good faith to enter into an underwriting agreement as is customary in
underwritten offerings of debt securities similar to the Notes and take all
such other actions as are reasonably requested by the managing underwriter
or underwriters in order to facilitate the registration of such Registrable
Notes and, in such connection, (i) make such representations and warranties
to, and covenants with, the underwriters with respect to the business of
the Company and its respective subsidiaries and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated
by reference therein, in each case, as are customarily made by the Issuers
to underwriters in underwritten offerings of debt securities similar to the
Notes, and confirm the same in writing if and when requested; (ii) obtain
the written opinion of counsel to the Issuers and written updates thereof
in form, scope and substance reasonably satisfactory to the managing
underwriter or underwriters, addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings
of debt similar to the Notes and such other matters as may be reasonably
requested by the managing underwriter or underwriters; (iii) obtain "cold
comfort" letters and updates thereof in form, scope and substance
reasonably satisfactory to the managing underwriter or underwriters from
the independent certified public accountants of the Issuers (and, if
necessary, any other independent certified public accountants of any
subsidiary of the Issuers or of any business acquired by the Issuers for
which financial statements and financial data are, or are required to be,
included or incorporated by reference in the Registration Statement),
addressed to each of the underwriters, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings of debt similar to the
Notes and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is
entered into, the same shall contain indemnification provisions and
procedures no less favorable than those set forth in Section 7 hereof (or
such other provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall
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<PAGE>
be done at each closing under such underwriting agreement, or as and to the
extent required thereunder.
(n) If (1) a Shelf Registration is filed pursuant to Section 3
hereof, or (2) a Prospectus contained in an Exchange Offer Registration
Statement filed pursuant to Section 2 hereof is required to be delivered
under the Securities Act by any Participating Broker-Dealer who seeks to
sell Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold, or
each such Participating Broker-Dealer, as the case may be, any underwriter
participating in any such disposition of Registrable Notes, if any, and any
attorney, accountant or other agent retained by such selling Holders or
each such Participating Broker-Dealers, as the case may be, or underwriter
(collectively, the "Inspectors"), at the offices where normally kept,
during reasonable business hours, all financial and other records,
pertinent corporate documents and instruments of the Issuers and their
respective subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities. Records which any of the Issuers determine, in
good faith, to be confidential and any Records which an Issuer notifies the
Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of the information contained in such Records is
necessary in the opinion of counsel addressed to the Issuers to avoid or
correct a misstatement or omission in such Registration Statement and then
only to the extent so necessary, (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is, in the opinion of
counsel (a copy of which shall be addressed to the Company) for any
Inspector, necessary or advisable in connection with any action, claim,
suit or proceeding, directly or indirectly, involving or potentially
involving such Inspector and arising out of, based upon, relating to, or
involving this Agreement, or any transactions contemplated hereby or
arising hereunder, or (iv) the information in such Records has been made
generally available to the public by the Issuers. Each selling Holder of
such Registrable Securities and each such Participating Broker-Dealer will
be required to agree that information obtained by it as a result of such
inspections shall be deemed confidential and shall not be used by it as the
basis for any market transactions in the securities of the Company unless
and until such information is generally available to the public. Each
selling Holder of such Registrable Notes and each such Participating
Broker-Dealer will be required to further agree that it will, upon learning
that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company to undertake
appropriate action to prevent disclosure of the Records deemed confidential
at the Company's sole expense.
(o) Provide an indenture trustee for the Registrable Notes or the
Exchange Notes, as the case may be, and cause the Indenture or the trust
indenture provided for in Section 2(a) hereof, as the case may be, to be
qualified under the TIA not later than the effective date of the Exchange
Offer or the first Registration Statement relating to the Registrable
Notes; and in connection therewith, cooperate with the trustee under any
such indenture and the Holders of the Registrable Notes, to effect such
changes to such indenture as may be required for such indenture to be so
qualified in accordance with the
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<PAGE>
terms of the TIA; and execute, and use its best efforts to cause such
trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the
SEC to enable such indenture to be so qualified in a timely manner.
(p) Comply with all applicable rules and regulations of the SEC and
make generally available to its securityholders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule
158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90 days
after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Notes are
sold to underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(q) If an Exchange Offer or a Private Exchange is to be consummated,
upon delivery of the Registrable Notes by Holders to the Company (or to
such other Person as directed by the Company) in exchange for the Exchange
Notes or the Private Exchange Notes, as the case may be, the Issuers shall
mark, or cause to be marked, on such Registrable Notes that such
Registrable Notes are being cancelled in exchange for the Exchange Notes or
the Private Exchange Notes, as the case may be; in no event shall such
Registrable Notes be marked as paid or otherwise satisfied.
(r) Cooperate in all reasonable respects with each seller of
Registrable Notes covered by any Registration Statement and each
underwriter, if any, participating in the disposition of such Registrable
Notes and their respective counsel in connection with any filings required
to be made with the National Association of Securities Dealers, Inc. (the
"NASD").
(s) Use its best efforts to take all other steps necessary or
advisable to effect the registration of the Registrable Notes covered by a
Registration Statement contemplated hereby.
The Issuers may require each seller of Registrable Notes as to which
any Registration Statement is being effected to furnish to the Issuers such
information regarding such seller and the distribution of such Registrable Notes
as the Issuers may, from time to time, reasonably request. The Issuers may
exclude from such Registration Statement the Registrable Notes of any seller who
unreasonably fails to furnish such information within a reasonable time after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Issuers all information required to
be disclosed in order to make the information previously furnished to the
Issuers by such seller not materially misleading.
Each Holder of Registrable Notes and each Participating Broker-Dealer
agrees by acquisition of such Registrable Notes or Exchange Notes to be sold by
such Participating Broker-Dealer, as the case may be, that, upon actual receipt
of any notice from the Company of the
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<PAGE>
happening of any event of the kind described in Section 5(c)(ii), 5(c)(iv),
5(c)(v), or 5(c)(vi) hereof, such Holder will forthwith discontinue disposition
of such Registrable Notes or Exchange Notes, as the case may be, covered by such
Registration Statement or Prospectus to be sold by such Holder or Participating
Broker-Dealer, as the case may be, until such Holder's or Participating Broker-
Dealer's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) hereof, or until it is advised in writing (the
"Advice") by the Issuers that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto. In
the event the Issuers shall give any such notice, each of the Effectiveness
Period and the Applicable Period shall be extended by the number of days during
such periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Notes covered by such
Registration Statement or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 5(k) hereof or (y)
the Advice. In the event the Issuers do not give any such notice within five
business days, each Holder shall return such Registration Statement or
Prospectus to the Company or destroy all copies of such Registration Statement
or Prospectus; and if so requested by the Issuers, shall certify that all copies
of the Registration Statement or Prospectus were destroyed.
6. Registration Expenses
---------------------
(a) All fees and expenses incident to the performance of or compliance
with this Agreement by the Issuers shall be borne by the Issuers whether or not
the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connection with an underwritten offering and (B) fees and expenses
of compliance with state securities or Blue Sky laws (including, without
limitation, reasonable fees and disbursements of the Issuers' counsel in
connection with Blue Sky qualifications of the Registrable Notes or Exchange
Notes and determination of the eligibility of the Registrable Notes or Exchange
Notes for investment under the laws of such jurisdictions (x) where the holders
of Registrable Notes are located, in the case of the Exchange Notes, or (y) as
provided in Section 5(h) hereof, in the case of Registrable Notes or Exchange
Notes to be sold by a Participating Broker-Dealer during the Applicable
Period)), (ii) printing expenses, including, without limitation, expenses of
printing certificates for Registrable Notes or Exchange Notes in a form eligible
for deposit with The Depository Trust Company and of printing Prospectuses if
the printing of Prospectuses is reasonably requested by the managing underwriter
or underwriters, if any, by the Holders of a majority in aggregate principal
amount of the Registrable Notes included in any Registration Statement or sold
by any Participating Broker-Dealer, as the case may be, (iii) messenger,
telephone and delivery expenses, (iv) fees and disbursements of counsel for the
Company, (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(m)(iii) hereof (including, without
limitation, the expenses of any special audit and "cold comfort" letters
required by or incident to such performance by or incident to such performance),
(vi) rating agency fees, if any, and any fees associated with making the
Registrable Notes or Exchange Notes eligible for trading through The Depository
Trust Company, (vii) fees and expenses of all other Persons retained by the
Issuers, (viii) internal
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<PAGE>
expenses of the Issuers (including, without limitation, all salaries and
expenses of officers and employees of the Issuers performing legal or accounting
duties), (ix) the expense of any annual audit, (x) the fees and expenses
incurred in connection with the listing of the securities to be registered on
any securities exchange or any inter-dealer quotation system, if applicable, and
(xi) the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement; provided that in no event shall the Issuers be obligated to pay
underwriting discounts or commission fees or expenses.
(b) The Issuers shall reimburse the Holders of the Registrable Notes
being registered in a Shelf Registration for the reasonable fees and
disbursements of not more than one counsel chosen in writing by the Holders of a
majority in aggregate principal amount of the Registrable Notes to be included
in such Registration Statement. In addition, the Issuers shall reimburse the
Initial Purchasers for the reasonable fees and expenses of one counsel in
connection with the Exchange Offer which shall be White & Case, and shall not be
required to pay any other legal expenses of the Initial Purchasers in connection
therewith.
7. Indemnification. (a) Each of the Issuers jointly and severally
---------------
agrees to indemnify and hold harmless each Holder of Registrable Notes offered
pursuant to a Shelf Registration Statement and each Participating Broker-Dealer
selling Exchange Notes during the Applicable Period, the affiliates, directors,
officers, agents, representatives and employees of each such Person or its
affiliates, and each other Person, if any, who controls any such Person or its
affiliates within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act (each, a "Participant") from and against any and
all losses, claims, damages and liabilities (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted) caused by, arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement pursuant to which the offering of
such Registrable Notes or Exchange Notes, as the case may be, is registered (or
any amendment thereto) or related Prospectus (or any amendments or supplements
thereto) or any related preliminary prospectus, or caused by, arising out of or
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading; provided,
--------
however, that the Issuers will not be required to indemnify a Participant if (i)
- -------
such losses, claims, damages or liabilities are caused by any untrue statement
or omission or alleged untrue statement or omission made in reliance upon and in
conformity with information furnished to the Issuers in writing by or on behalf
of such Participant expressly for use therein or (ii) if such Participant sold
to the person asserting the claim the Registrable Notes or Exchange Notes which
are the subject of such claim and such untrue statement or omission or alleged
untrue statement or omission was contained or made in any preliminary prospectus
and corrected in the Prospectus or any amendment or supplement thereto and the
Prospectus does not contain any other untrue statement or omission or alleged
untrue statement or omission of a material fact that was the subject matter of
the related proceeding and such Participant failed to deliver or provide a copy
of the Prospectus (as amended or supplemented) to such Person with or prior to
the confirmation
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<PAGE>
of the sale of such Registrable Notes or Exchange Notes sold to such Person if
required by applicable laws, unless such failure to deliver or provide a copy of
the Prospectus (as amended or supplemented) was a result of noncompliance by the
Company with Section 5 of this Agreement.
(b) Each Participant agrees, severally and not jointly, to indemnify
and hold harmless the Issuers, their respective directors and officers and each
Person who controls any Issuers within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Issuers to each Participant, but only (i) with
reference to information furnished to the Issuers in writing by or on behalf of
such Participant expressly for use in any Registration Statement or Prospectus,
any amendment or supplement thereto, or any preliminary prospectus or (ii) with
respect to any untrue statement or representation made by such Participant in
writing to the Company.
(c) If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted against
any Person in respect of which indemnity may be sought pursuant to either of the
two preceding paragraphs, such Person (the "Indemnified Person") shall promptly
notify the Person against whom such indemnity may be sought (the "Indemnifying
Person") in writing, and the Indemnifying Person, shall have the right to retain
counsel reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may reasonably
designate in such proceeding and shall pay the reasonable fees and expenses
actually incurred by such counsel related to such proceeding; provided, however,
-------- -------
that the failure to so notify the Indemnifying Person shall not relieve it of
any obligation or liability which it may have hereunder or otherwise (unless and
only to the extent that such failure results in the loss or compromise of any
material rights or defenses by the Indemnifying Person). In any such
proceeding, any Indemnified Person shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Person unless (i) the Indemnifying Person and the Indemnified
Person shall have mutually agreed in writing to the contrary, (ii) the
Indemnifying Person shall have failed within a reasonable period of time to
retain counsel reasonably satisfactory to the Indemnified Person, (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and representation of
both parties by the same counsel would be inappropriate due to actual or
potential differing interests between them or (iv) such indemnified party or
parties shall have reasonably concluded upon the written advice of counsel that
there may be defenses available to it or them which are different from or
additional to those available to one or all of the indemnifying parties (in
which case the indemnifying party or parties shall not have the right to direct
the defense of such action on behalf of the indemnified party or parties. It is
understood that, unless there exists a conflict among Indemnified Persons, the
Indemnifying Person shall not, in connection with any one such proceeding or
separate but substantially similar related proceeding in the same jurisdiction
arising out of the same general allegations, be liable for the fees and expenses
of more than one separate firm (in addition to any local counsel) for all
Indemnified Persons, and that all such reasonable fees and expenses shall be
reimbursed promptly as they are incurred. Any such separate firm for the
Participants and such control Persons of Participants shall be designated in
writing by Participants who sold a majority in interest of Registrable Notes and
Exchange Notes sold by all such Participants and any such
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<PAGE>
separate firm for the Issuers, their directors, officers and such control
Persons of the Issuers shall be designated in writing by the Issuers. The
Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its prior written consent, but if settled with such consent or
if there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Agreement,
the Indemnifying Person agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, and indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of any
Indemnified Person.
(d) If the indemnification provided for in Sections 7(a) and 7(b)
hereof is for any reason unavailable to, or insufficient to hold harmless, an
Indemnified Person in respect of any losses, claims, damages or liabilities
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder and in order to provide
for just and equitable contribution, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims, damages
or liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Indemnifying Person or Persons on the one hand and the
Indemnified Person or Persons on the other from the offering of the Notes or
(ii) if the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the Indemnifying Person or Persons on the one hand and the Indemnified Person or
Persons on the other in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative fault of the parties
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Issuers on the
one hand or such Participant or such other Indemnified Person, as the case may
be, on the other, the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
(e) The parties agree that it would not be just and equitable if
contribution pursuant to this Section 7 were determined by pro rata allocation
--- ----
(even if the Participants were treated as one entity for such purposes) or by
any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an Indemnified Person as a result of the losses, claims,
damages and liabilities referred to in the immediately preceding paragraph shall
be deemed to include, subject to the limitations set forth above, any reasonable
legal or other expenses actually incurred by such Indemnified Person in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant
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<PAGE>
from sales of Registrable Notes or Exchange Notes, as the case may be, exceeds
the amount of any damages that such Participant has otherwise been required to
pay or has paid by reason of such untrue or alleged untrue statement or omission
or alleged omission. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
(f) The indemnity and contribution agreements contained in this
Section 7 will be in addition to any liability which the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
8. Rules 144 and 144A. The Issuers covenant that they will file the
------------------
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the SEC thereunder in a timely manner
in accordance with the requirements of the Securities Act and the Exchange Act
and, if at any time the Issuers are not required to file such reports, it will,
upon the request of any Holder of Registrable Notes, make publicly available
annual reports and such information, documents and other reports of the type
specified in Sections 13 and 15(d) of the Exchange Act. The Issuers further
covenant for so long as any Registrable Notes remain outstanding, to make
available to any Holder or beneficial owner of Registrable Notes in connection
with any sale thereof and any prospective purchaser of such Registrable Notes
from such Holder or beneficial owner the information required by Rule 144(d)(4)
under the Securities Act in order to permit resales of such Registrable Notes
pursuant to Rule 144A.
9. Underwritten Registrations. If any of the Registrable Notes
--------------------------
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Holders of a majority in aggregate
principal amount of such Registrable Notes included in such offering and shall
be reasonably acceptable to the Issuers. Notwithstanding the foregoing or
anything else contained herein to the contrary, the decision as to whether any
offering hereunder is to be an underwritten offering is entirely at the
Company's discretion.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the Persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
10. Miscellaneous. (a) No Inconsistent Agreements. None of the
------------- --------------------------
Issuers have entered, as of the date hereof, and none of the Issuers shall,
after the date of this Agreement, enter into any agreement with respect to any
of its securities that conflicts with the provisions hereof. Other than as
provided in Schedule A attached hereto the Issuers have not entered and
-21-
<PAGE>
the Issuers will not enter into any agreement with respect to any of its
securities which will grant to any Person piggy-back registration rights with
respect to a Registration Statement.
(b) Adjustments Affecting Registrable Notes. Other than as provided
---------------------------------------
in Schedule B attached hereto none of the Issuers shall, directly or indirectly,
take any action with respect to the Registrable Notes as a class that would
adversely affect the ability of the Holders of Registrable Notes to include such
Registrable Notes in a registration undertaken pursuant to this Agreement.
(c) Amendments and Waivers. The provisions of this Agreement may not
----------------------
be amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Holders of not less than a majority in aggregate principal amount
of the then outstanding Registrable Notes. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Holders of Registrable Notes whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Holders of Registrable Notes may be given by Holders of at least a majority in
aggregate principal amount of the Registrable Notes being sold by such Holders
pursuant to such Registration Statement; provided, however, that the provisions
-------- -------
of this sentence may not be amended, modified or supplemented except in
accordance with the provisions of the immediately preceding sentence.
(d) Notices. All notices and other communications (including, without
-------
limitation, any notices or other communications to the Trustee) provided for or
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, next-day air courier or facsimile:
1. if to a Holder of the Registrable Notes or any Participating
Broker-Dealer, at the most current address of such Holder or Participating
Broker-Dealer, as the case may be, set forth on the records of the
registrar under the Indenture, with a copy in like manner to the Initial
Purchasers as follows:
NatWest Capital Markets Limited
135 Bishopsgate
London, EC2M 3XT
United Kingdom
Attention: N.S. Coulbeck
with a copy to:
White & Case
1155 Avenue of the Americas
New York, NY 10036
Facsimile No: (212) 354-8113
Attention: Timothy B. Goodell, Esq.
-22-
<PAGE>
2. if to the Initial Purchasers, at the addresses specified in
Section 10(d)(1);
3. if to the Company, as follows:
Norton McNaughton, Inc.
463 Seventh Ave.
New York, NY 10018
Attention: Peter Boneparth
with a copy to:
Haythe & Curley
237 Park Avenue
New York, NY 10017-3142
Attention: Bradley P. Cost, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; one business day after
being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address and in the manner specified in such Indenture.
(e) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and assigns of each of the parties hereto;
provided, however, that this Agreement shall not inure to the benefit of or be
- -------- -------
binding upon a successor or assign of a Holder unless and to the extent such
successor or assign holds Registerable Notes.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning thereof.
(h) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE PARTIES HERETO AGREES TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
-23-
<PAGE>
(i) Severability. If any term, provision, covenant or restriction of
------------
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) Notes Held by the Company or its Affiliates. Whenever the consent
-------------------------------------------
or approval of Holders of a specified percentage of Registerable Notes is
required hereunder, Registerable Notes held by the Company or its affiliates (as
such term is defined in Rule 405 under the Securities Act) shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage.
(k) Third Party Beneficiaries. Holders of Registerable Notes and
-------------------------
Participating Broker-Dealers are intended third party beneficiaries of this
Agreement and this Agreement may be enforced by such Persons.
-24-
<PAGE>
IN WITNESS WHEREOF, the parties have executed the Agreement as of the
date first written above.
NORTON MCNAUGHTON, INC.
By:_________________________________
Name:
Title:
NORTON MCNAUGHTON OF SQUIRE, INC.
By:_________________________________
Name:
Title:
MISS ERIKA, INC.
By:_________________________________
Name:
Title:
JJ ACQUISITION CORP.
By:_________________________________
Name:
Title:
NORTY'S, INC.
By:_________________________________
Name:
Title:
-25-
<PAGE>
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written:
NATWEST CAPITAL MARKETS LIMITED
By:__________________________
Name:
Title:
ING BARING (U.S.) SECURITIES, INC.
By:__________________________
Name:
Title:
-26-
<PAGE>
SCHEDULE A
----------
Piggy-Back Registration Rights
------------------------------
<PAGE>
SCHEDULE B
----------
Adjustments Reflecting Registrable Notes
- ----------------------------------------
(i)
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Definitions........................................................ 1
-----------
2. Exchange Offer..................................................... 4
--------------
3. Shelf Registration................................................. 7
------------------
4. Additional Interest................................................ 8
-------------------
5. Registration Procedures............................................ 9
-----------------------
6. Registration Expenses.............................................. 17
---------------------
7. Indemnification.................................................... 18
---------------
8. Rules 144 and 144A................................................. 21
------------------
9. Underwritten Registrations......................................... 21
--------------------------
10. Miscellaneous...................................................... 21
-------------
(a) No Inconsistent Agreements.................................... 21
--------------------------
(b) Adjustments Affecting Registrable Notes....................... 22
---------------------------------------
(c) Amendments and Waivers........................................ 22
----------------------
(d) Notices....................................................... 22
-------
(e) Successors and Assigns........................................ 23
----------------------
(f) Counterparts.................................................. 23
------------
(g) Headings...................................................... 23
--------
(h) Governing Law................................................. 23
-------------
(i) Severability.................................................. 24
------------
(j) Notes Held by the Company or its Affiliates................... 24
-------------------------------------------
(k) Third Party Beneficiaries..................................... 24
-------------------------
</TABLE>
(i)
<PAGE>
EXHIBIT 10.1
LEASE
-----
- between -
LANDLORD
--------
80 CARTER DRIVE ASSOCIATES
- and -
TENANT
------
JERI-JO KNITWEAR INC.
f/k/a JJ Acquisition Corp.
Dated: June 18, 1998
Premises: 80 Carter Drive
Edison, New Jersey
<PAGE>
THIS LEASE (this "Lease") made and executed the 18th day of June, 1998
-----
between 80 CARTER DRIVE ASSOCIATES, a New Jersey general partnership having an
address at 80 Carter Drive, Edison, New Jersey 08817 ("Landlord") and JERI-JO
--------
KNITWEAR INC., f/k/a JJ Acquisition Corp., a Delaware corporation having an
address at 1407 Broadway, Room 2909, New York, New York 10018 ("Tenant").
------
W I T N E S S E T H:
- - - - - - - - - -
ARTICLE 1
DEMISED PREMISES; AND TERM OF LEASE
-----------------------------------
Section 1.01 Landlord, in consideration of the premises and of the
------------
rents hereinafter reserved and of the covenants, agreements and conditions
herein contained, to be kept and performed on the part of Tenant, hereby leases
to Tenant and Tenant hereby hires from Landlord premises consisting of
approximately 93, 149 square feet (the "Demised Premises") of a warehouse and
----------------
office building (the "Building") which is located on certain piece(s) or
--------
parcel(s) of land particularly described in Exhibit A annexed hereto and a part
---------
hereof (the "Land"), such Land, Building and the other structures and
----
improvements located on such Land being commonly known as 80 Carter Drive,
situate, lying and being in the City of Edison, State of New Jersey
(collectively, the "Property");
--------
TO HAVE AND TO HOLD the Demised Premises unto Tenant, and, subject to
the provisions hereof, Tenant's successors and permitted assigns, for a term
commencing on June 18, 1998 and expiring on the 30th day of June, 2003, unless
this Lease shall sooner terminate as hereinafter provided.
Section 1.02 If Landlord shall be unable to give possession of the
------------
Demised Premises on the date of the commencement of the term hereof for any
reason whatsoever, Landlord shall not be subject to any liability therefor,
Tenant hereby expressly waiving the provisions of any law to the contrary. Under
such circumstances, the rent reserved and covenanted to be paid as in this Lease
provided, and the term hereof shall not commence until the possession of the
Demised Premises is given or the Demised Premises are available for occupancy by
Tenant, and no such failure to give possession on the date of commencement of
the term hereinbefore stated shall in any wise affect the validity of this Lease
or the obligations of Tenant hereunder, nor shall same be construed in any wise
to extend the term of this Lease.
ARTICLE 2
RENT
----
Section 2.01 Tenant covenants and agrees to pay to Landlord, in such
------------
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts, at Landlord's
address specified in or furnished pursuant to Article 22 hereof, during the term
specified in Section 1.01 a net rental computed at the annual rate of Three
Hundred Ninety-five Thousand Eight Hundred Eighty-three and 25/100 ($395,883.25)
Dollars per annum. Such annual rental (the "Rent") shall be in addition to all
----
other payments to be made by Tenant as hereinafter provided and shall be paid in
equal monthly installments of Thirty-two Thousand Nine Hundred Ninety and 27/100
($32,990.27) Dollars in advance on the first day of each calendar month during
the term of this Lease, the Rent for the first month of the term being due and
payable by Tenant to Landlord upon the execution and delivery of this Lease.
Section 2.02 Tenant will pay the Rent without demand or notice and
------------
without abatement, deduction or set-off, except as may be required or permitted
by this Lease, and will
<PAGE>
similarly pay, as additional rent, all other payments which Tenant in any of the
provisions of this Lease assumes or agrees to pay, and, in the event of any non-
payment thereof, Landlord shall have (in addition to all other rights and
remedies) all the rights and remedies provided herein or by law in the case of
non-payment of the Rent.
Section 2.03 Should Tenant fail to pay within ten (10) days of the
------------
date when due any installment of Rent, additional rent, or any other sum payable
to Landlord under the terms of this Lease, then interest on such sum shall
accrue from and after the date on which any such sum shall be due and payable,
and such interest, shall be paid by Tenant to Landlord at the time of payment of
the delinquent sum. If Tenant shall issue a check to Landlord which is returned
unpaid for any reason, Tenant shall pay Landlord an additional charge of $50.00
for Landlord's expenses in connection therewith and thereafter all payments to
Landlord herein shall be made by unendorsed certified or official bank checks.
Section 2.04 Whenever this Lease refers to "interest", the same shall
------------
be computed at an annual rate equal to the "Prime Rate" (as hereinafter defined)
plus four (4%) percent except where otherwise in this Lease a different rate is
specifically set forth. If, however, payment of interest at any such rate by
Tenant (or by the tenant then in possession having succeeded to the Tenant's
interest in accordance with the terms of this Lease) should be unlawful, i.e.,
violative of any usury statutes or otherwise, then "interest" shall, as against
such party, be computed at the maximum lawful rate payable by such party. "Prime
-----
Rate" shall mean the base rate at the time in question quoted or announced by
- ----
Citibank, N.A. in New York, New York.
ARTICLE 3
IMPOSITIONS
-----------
Section 3.01 Tenant shall pay, before any fine, penalty, interest or
------------
cost may be added thereto or become due or be imposed by operation of law for
the non-payment thereof, all real estate taxes and assessments, water and sewer
rents, rates and charges, transit taxes, vault taxes, charges and fees, charges
for public utilities, electricity, gas, oil and water, excises, levies, license
and permit fees and other charges relating to (i) the Property or any part
thereof or any appurtenances thereto or the sidewalk or streets in front of or
adjoining the Property, or upon any personal property located in, on or used in
connection with the Property (the "Reimbursable Impositions"), (ii) the rent,
------------------------
income or other payments received by Tenant or anyone claiming by, through or
under Tenant, (iii) such franchise as may be appurtenant to the use of the
Demised Premises, (iv) this transaction, or any document to which Tenant is a
party creating or transferring an interest or estate in the Demised Premises;
provided that Tenant shall not pay or be responsible for payments arising out of
any mortgages or industrial revenue bonds affecting the Property or Landlord's
income or franchise taxes (all such real estate taxes and assessments, water and
sewer rents, rates and charges, vault taxes, charges and fees, charges for
public utilities, electricity, gas, oil and water, excises, levies, license and
permit fees and other charges, except as otherwise excluded in this Section,
being herein referred to as "Impositions", and any of the same being herein
-----------
referred to as an "Imposition").
----------
ARTICLE 4
SURRENDER
---------
Section 4.01 Upon the expiration of the term of this Lease or upon
------------
the earlier termination of this Lease, Tenant shall peaceably surrender the
Demised Premises, including all changes, additions and improvements constructed,
erected, added or placed by Tenant thereon, unto the possession and use of
Landlord without delay and, except for reasonable wear and tear and subject to
the provisions of Article 15, in good order, condition and repair for premises
of the type, class and character of the Demised Premises, broomclean, free and
clear of all lettings and
-2-
<PAGE>
occupancies and free and clear of all liens and encumbrances other than those,
if any, to which this Lease is now subject or which may hereafter be permitted
by this Lease or created or consented to by Landlord.
Section 4.02 Any work, alteration, addition or improvement made by
------------
Tenant shall, if Landlord so elects, be removed prior to the expiration or
termination of this Lease and the Demised Premises shall be restored to the
condition existing prior to the performance of such work, alteration, addition
or improvement, and all damage to the Demised Premises caused by or resulting
from such removal shall be repaired by Tenant. Where furnished by or at the
expense of Tenant or any subtenant, furniture, trade fixtures and equipment (not
constituting part of the Demised Premises) may be removed by Tenant or such
subtenant at or prior to the termination of this Lease, provided, however, that
Tenant shall with due diligence, and without expense to Landlord, cause the
Building to be promptly restored to its condition prior to the installation and
removal of such furniture, trade fixtures and equipment and cause any damage due
to such removal to be promptly repaired.
Section 4.03 Any personal property of Tenant or any subtenant which
------------
shall remain in the Demised Premises after the termination of this Lease and the
removal of Tenant from the Demised Premises may, at the option of Landlord, be
deemed to have been abandoned by Tenant or any such subtenant and either may be
retained by Landlord as its property, stored by Landlord at Tenant's expense and
risk, or be disposed of without accountability in such manner as Landlord may
see fit.
Section 4.04 Landlord shall not be responsible for any loss or damage
------------
occurring to any property owned by Tenant or any subtenant, except where arising
out of Landlord's gross negligence or willful misconduct.
Section 4.05 The provisions of this Article 4 shall survive the
------------
expiration of this Lease.
ARTICLE 5
INSURANCE
---------
Section 5.01 Tenant, at its sole cost and expense, shall maintain:
------------
(a) comprehensive general public liability insurance
continuously in effect against claims for bodily injury, death or property
damage, occurring on, in or about the Property, including, without limitation,
the parking areas, if any, and any vehicles operated or parked thereon or the
elevators or any escalator therein, and on, in or about the adjoining streets,
property and passageways, such insurance to afford minimum protection, during
the term of this Lease, in single limit of not less than $10,000,000 in respect
of bodily injury or death to any one person and of not less than $10,000,000 in
any one accident, and of not less than $2,000,000 for property damage.
(b) comprehensive casualty and hazard insurance continuously
(including during any period or periods of time that the Building or any
structures or improvements located on the Land are in the process of
construction) in effect on a one hundred percent (100%) replacement cost basis
(without deduction for physical depreciation) against all risk perils,
including, but not limited to, insurance (with extended coverage endorsement)
against (i) loss or damage by fire, windstorm, hail, explosion, malicious
mischief, riot, riot attending a strike, civil commotion, aircraft, vehicle,
smoke, sprinkler leakage and vandalism, (ii) war risks as, when and to the
extent such insurance is obtainable from the United States of America or an
agency thereof, (iii) loss by flood if the Property is located in an area
identified by the Secretary of Housing and Urban Development as an area having
special flood hazards and in which flood insurance has been made available under
the National Flood Insurance Act of 1968, as now or hereafter amended, (iv) such
other risk perils
-3-
<PAGE>
customarily insured against and reasonably requested by Landlord, and (v) such
other risk perils required to be insured against by the holder of any mortgage
on the Property ("Casualty and Hazard Insurance").
-----------------------------
Section 5.02 Tenant may effect for its own account any insurance not
------------
required under the provisions of this Lease, provided same does not directly or
indirectly result in a diminution of the insurance coverage required to be
furnished to Landlord. Tenant shall promptly notify Landlord of the issuance of
any such insurance and of the details thereof.
Section 5.03 All insurance provided for in this Article shall be
------------
effected under standard form valid and enforceable policies issued by insurers
of recognized responsibility, which are well rated by a national rating
organization, and are licensed to do business in the State of New Jersey and
approved by Landlord, which approval shall not be unreasonably withheld. Upon
the execution of this Lease, and thereafter not less than thirty (30) days prior
to the expiration dates of the expiring policies theretofore furnished pursuant
to this Article, originals or copies of the policies, or certificates of the
insurers satisfactory to Landlord, bearing notations evidencing the payment of
premiums, or accompanied by other evidence of such payment satisfactory to
Landlord, shall be delivered by Tenant to Landlord.
Section 5.04 All policies of insurance provided for in Section 5.01
------------
hereof shall name Landlord, Tenant and Creative Retailers, Inc. as parties
insured, and shall also name the holders of all fee mortgages as parties
insured. Each such policy shall contain (if obtainable) a provision that no act
or omission of Tenant or Creative Retailers, Inc. shall affect or limit the
obligation of the insurance company so to pay the amount of any loss sustained
and an agreement by the insurer that such policy shall not be cancelled without
at least thirty (30) days' prior written notice to Landlord and the holder of
each fee mortgage.
Tenant shall deliver to Landlord, or as Landlord may direct (subject
to the provisions of any fee mortgage), the original or a certified copy of each
such policy.
ARTICLE 6
LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS
----------------------------------------------
Section 6.01 If Tenant shall at any time fail to pay any Imposition
------------
in accordance with the provisions of Article 3 hereof, or to pay for or maintain
any of the insurance policies provided for in Article 5 hereof, or to make any
other payment or perform any other act on its part to be made or performed
hereunder, then Landlord, after five (5) days' notice to Tenant (or, in case of
any emergency, on such notice, or without notice, as may be reasonable under the
circumstances) and without waiving, or releasing Tenant from, any obligation of
Tenant hereunder, may (but shall not be required to):
(a) pay any Imposition payable by Tenant pursuant to the
provisions of Article 3 hereof, or
(b) pay for and maintain any of the insurance policies provided
for in Article 5 hereof, or
(c) make any other payment or perform any other act on Tenant's
part to be made or performed as in this Lease provided,
and may enter upon the Demised Premises for the purpose and take all such action
thereon as may be necessary therefor.
-4-
<PAGE>
Section 6.02 All sums so paid by Landlord and all costs and expenses
------------
incurred by Landlord in connection with the performance of any such act,
together with interest thereon from the respective dates of Landlord's making of
each such payment or incurring of each such cost and expense, shall constitute
additional rent payable by Tenant under this Lease and shall be paid by Tenant
to Landlord on demand.
ARTICLE 7
REPAIR AND MAINTENANCE OF THE PROPERTY
--------------------------------------
Section 7.01 (a) Except as hereinafter provided in this subsection
------------
and subsection (b) of this Section 7.01, Tenant shall, at all times during the
term of this Lease, and at its own cost and expense, put, keep, replace, rebuild
and maintain in repair and in a neat, good and safe order and condition, free of
vermin, the Building, any other structures and improvements located on the Land,
parking areas, driveways, sidewalks, loading docks, landscaping, shrubbery and
plantings on the Property at the commencement of the term and thereafter erected
on the Property, or forming part thereof, and their full systems (including,
without limitation, electrical, plumbing, mechanical and HVAC systems),
equipment, fixtures and appurtenances, both inside and outside, extraordinary
and ordinary, howsoever the necessity or desirability for repairs may occur, and
whether or not necessitated by wear, tear, obsolescence or defects, latent or
otherwise; and shall use all reasonable precaution to prevent waste, damage or
injury. Tenant shall not be responsible for the repair and maintenance of the
interior faces of the walls, floor or ceiling of Creative Retailers, Inc.'s
space in the Building or any of its trade fixtures in such space, except where
any such repair or maintenance relates to any change, alteration, work or
improvement performed by Tenant pursuant to the preceding sentence, or is
necessitated by the acts, negligence or failure to act of Tenant, its
contractors, employees, agents, servants, invitees or licensees, in which case
such repairs and maintenance shall be done by Tenant, at Tenant's cost and
expense. Tenant shall also, at its sole cost and expense, put, keep, replace and
maintain in thorough repair and in a neat, good and safe order and condition,
and free from dirt, snow, ice, rubbish and other obstructions or encumbrances,
the sidewalks, areas, fuel chutes, sidewalk hoists, railings, gutters and curbs
in front of and adjacent to the Property, water and sewer connections, gas
pipes, wires or conduits for electricity and the like, and retaining walls and
fences, if any.
(b) Landlord agrees that it will make all roof repairs, all repairs
to the load bearing walls and beams and all repairs to the foundation to the
Building and any other structures and improvements located on the Land (herein
collectively referred to as "Structural Repairs"). Anything in the preceding
------------------
sentence to the contrary notwithstanding, where any Structural Repair relates to
any change, alteration, work or improvement performed by Tenant, or is
necessitated by the act or negligence of Tenant, its contractors, employees,
agents, servants, invitees or licensees, such repair shall be made by Tenant, at
Tenant's cost and expense. Landlord shall not be required to furnish to Tenant
any facilities or services of any kind whatsoever during the term of this Lease,
such as, but not limited to, water, steam, heat, gas, hot water, electricity,
light and power, and Tenant covenants to provide and pay for same for itself
and, subject to the terms and conditions of Section 32.01 and to the extent
consistent with Creative Retailers, Inc.'s current use of such services, to
Creative Retailers, Inc. (including wages of employees engaged in the operation
and maintenance of the Property).
(c) Except as may be specifically provided in this Lease to the
contrary, Landlord shall in no event be required to make any alterations,
rebuildings, replacements, changes, additions, improvements or repairs during
the term of this Lease.
ARTICLE 8
COMPLIANCE WITH LAWS, ORDINANCES, ETC.
--------------------------------------
-5-
<PAGE>
Section 8.01 Tenant shall not use or occupy or permit the Demised
------------
Premises to be used or occupied, nor do or permit anything to be done in or on
the Demised Premises, in whole or in part, in a manner which would in any way
violate any certificate of occupancy affecting the Demised Premises, or make
void or voidable any insurance then in force with respect thereto, or which may
make it difficult or impossible to obtain fire or other insurance thereon
required to be furnished by Tenant hereunder, or as will cause or be apt to
cause structural injury to the buildings or any part thereof, or as will
constitute a public or private nuisance. Except with respect to or arising out
of Creative Retailers, Inc.'s tenancy and operations at the Property, during the
term of this Lease, Tenant, at its sole cost and expense, shall promptly comply
with all present and future laws, environmental statutes, ordinances, orders,
rules, regulations and requirements of all federal, state and municipal
governments, courts, departments, commissions, boards and officers, any national
or local Board of Fire Underwriters, any insurance underwriting board or
insurance inspection bureau, and of all insurance carriers in respect of the
Property, or any other body exercising functions similar to those of any of the
foregoing, foreseen or unforeseen, ordinary as well as extraordinary, which may
be applicable to the Property or any part thereof and the sidewalks, curbs,
streets and roads adjoining the Property or to the use or manner of use of the
Demised Premises or the owners, tenants or occupants thereof, even though such
law, ordinance, rule, order, regulation or requirement shall necessitate
structural changes, repairs or improvements, or the use or application of
portions of the Demised Premises for compliance therewith, or the removal of
hazardous waste or other materials on, under or adjacent to the Property due to
the action or inaction of Tenant, or its employees, agents or contractors, or
the removal of any encroachments or projections, ornamental, structural or
otherwise, onto or over the streets adjacent to the Property, or onto or over
other property contiguous or adjacent thereto, and even though compliance with
the provisions of this Section 8.01 may interfere with the use and enjoyment of
the Demised Premises. Notwithstanding the foregoing, any Structural Repairs
which are not required as a result of the manner of use of the Demised Premises,
shall be Landlord's obligation to perform and comply with. Tenant shall protect,
hold harmless and indemnify Landlord of and from all fines, penalties, claims
for damages of every kind and nature, including, but not limited to clean up
costs, arising out of any failure to comply with any such law, ordinance, order,
rule, regulation or requirement, the intention of the parties being with respect
thereto that, except as hereinafter specifically provided, Tenant during the
term of this Lease shall discharge and perform all the obligations of Landlord,
as well as all the obligations of Tenant, arising as aforesaid, and save
harmless Landlord therefrom, so that at all times the rental of the Demised
Premises shall be net to Landlord without deduction or expenses on account of
any such law, ordinance, rule, order, regulation or requirement, whatever it may
be.
Section 8.02 Tenant shall have the right to contest by appropriate
------------
proceedings diligently conducted in good faith, in the name of Tenant or
Landlord or both, without cost or expense to Landlord, the validity or
application of any law, ordinance, order, rule, regulation or requirement of the
nature referred to in Section 8.01 hereof. If by the terms of any such law,
ordinance, order, rule, regulation or requirement, compliance therewith pending
the prosecution of any such proceeding may legally be delayed without the
incurrence of any lien, charge or liability of any kind against the Property or
the Demised Premises or Tenant's leasehold interest in the Demised Premises and
without subjecting Tenant or Landlord to any liability, civil or criminal, for
failure so to comply therewith and without violating the provisions of any fee
mortgage, Tenant may delay compliance therewith until the final determination of
such proceeding. If any lien, charge or civil liability would be incurred by
reason of any such delay, Tenant nevertheless, with the prior consent of
Landlord, may contest and delay as aforesaid, provided that such delay would not
subject Landlord to criminal liability and Tenant (i) furnishes to Landlord
security, satisfactory to Landlord, against any loss or injury by reason of such
contest or delay, and (ii) prosecutes the contest with due diligence.
Landlord shall not be required to join in any proceeding referred to
in this Section unless the provisions of any applicable law, rule or regulation
at the time in effect shall require that such proceeding be brought by and/or in
the name of Landlord, in which event Landlord shall join in such proceeding or
permit the same to be brought in its name, but Tenant shall reimburse
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Landlord for any reasonable out-of-pocket expense incurred by Landlord in
connection therewith (including reasonable attorneys' fees).
ARTICLE 9
CHANGES AND ALTERATIONS
-----------------------
Section 9.01 Except as hereinafter provided, Tenant shall not,
------------
without Landlord's prior written consent, make any changes, alterations,
improvements or additions to the Demised Premises or any portion thereof.
Provided that there shall not then exist any Event of Default (as hereinafter
defined) hereunder, Tenant shall have the right at any time and from time to
time during the term of this Lease to make, at its sole cost and expense,
interior, non-structural changes and alterations in or to the Demised Premises,
subject, however, in all cases to the following (except to the extent that
compliance with the following would prevent or interfere with the performance of
Tenant's obligations under Section 8.01 hereof):
(a) no change or alteration of any kind shall be made which
would tend to reduce or impair the value, rental, rental value, gross sales,
rentability, structural strength or usefulness of the Property or any part
thereof (any dispute in connection therewith to be determined by arbitration);
(b) no change or alteration of any kind shall be made which
would give to any owner, lessee or occupant of any other property or to any
other person or corporation any easement, right-of-way or any other right over
the Property or any part thereof;
(c) no change or alteration affecting the roof of the Building
or any portion thereof, shall be made without Landlord's prior written consent;
(d) no change or alteration involving an estimated cost of more
than $25,000 shall be made without the prior consent of Landlord and the prior
consent of any mortgagee of the fee interest in the Property, if any, if
required by the applicable mortgage;
(e) no change or alteration affecting the roof of the Building,
or any portion thereof, shall be performed by any person or entity (a
"Contractor") unless said Contractor shall have been first approved by Landlord
----------
in writing and the contract pursuant to which said Contractor is to perform such
work shall have first been approved by Landlord in writing;
(f) no change or alteration shall be undertaken until, to the
extent required by applicable laws, rules, ordinances or regulations, all plans
and specifications shall be filed with and approved by all municipal departments
and governmental subdivisions having jurisdiction and Tenant shall have procured
and paid for, so far as the same may be required from time to time, all permits
and authorizations of all municipal departments and governmental subdivisions
having jurisdiction and Landlord shall join in the application for such permits
or authorizations whenever such joinder is necessary, but without any liability
or expense to Landlord;
(g) any change or alteration involving in the aggregate an
estimated cost of more than $25,000 shall be conducted under the supervision of
an architect or engineer selected and paid for by Tenant and approved in writing
by Landlord, and no such change or alteration shall be made except in accordance
with detailed plans and specifications and cost estimates prepared and approved
by such architect or engineer and by Landlord;
(h) any change or alteration shall be made promptly and in good
and workmanlike manner and in compliance with all applicable permits and
authorizations and building and zoning laws and with all other laws, ordinances,
orders, rules, regulations and requirements of all federal, state and municipal
governments, departments, commissions, boards and officers, any
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national or local Board of Fire Underwriters, or any other body hereafter
exercising functions similar to those of any of the foregoing, and the consent
of the holder of each fee mortgage shall be obtained if required under the terms
of any such mortgage;
(i) before the commencement of any work Tenant shall (i) pay the
increase in any insurance premiums caused by the work and worker's compensation
insurance covering all persons employed in connection with the work and with
respect to whom death or bodily injury claims could be asserted against
Landlord, Tenant or the Property, and (ii) in the case of any change,
alteration, demolition or reconstruction having an estimated cost of $25,000 or
more, purchase builder's risk insurance, which shall be maintained or caused to
be maintained by Tenant at Tenant's sole cost and expense at all times when any
work is in progress in connection with any such change, alteration, demolition
or reconstruction and all such insurance shall be in a company or companies of
recognized responsibility approved by Landlord and shall meet the requirements
of Article 5 hereof, and all policies or certificates therefor issued by the
respective insurers, bearing notations evidencing the payment of premiums or
accompanied by other evidence satisfactory to Landlord of such payment, shall be
delivered to Landlord;
(j) if the estimated cost of any such change or alteration shall
be in excess of $50,000, Tenant, before commencing any work, at Tenant's sole
cost and expense, shall furnish to Landlord a surety company performance and
payment bond, issued by a surety company acceptable to Landlord, in an amount at
least equal to the estimated cost of such change, alteration, demolition and
reconstruction, guaranteeing the completion thereof within a reasonable time,
free and clear of all liens, encumbrances, chattel mortgages, security
agreements, financing statements, conditional bills of sale and other charges,
and in accordance with the plans and specifications approved by Landlord or, in
lieu of such performance and payment bond, other security satisfactory to
Landlord;
(k) if the estimated cost of such a change or alteration shall
be in excess of $25,000, Tenant shall pay to Landlord the reasonable fees and
expenses of any architect or engineer selected by Landlord to review the plans
and specifications and inspect the work on behalf of Landlord;
(l) the Property shall at all times be free of liens,
encumbrances, chattel mortgages, security agreements, financing statements and
conditional bills of sale, for labor and materials supplied to the Property; and
(m) all work shall be done in accordance with the provisions of
any mortgage on the fee interest in the Property to the extent provided by
Landlord to Tenant.
In no event shall Tenant be entitled to any abatement, allowance,
reduction or suspension of the Rent, Impositions, additional rent and other
charges by reason of such changes or alterations, nor shall Tenant be released
of or from any other obligations imposed upon Tenant under this Lease.
Section 9.02 The floor area of the Building as changed or altered
------------
shall be equal to or greater than the floor area of the Building immediately
prior to such change or alteration, and such Building shall be located on the
Land only and shall constitute an independent building having a value of not
less than the Building theretofore located on the Property. Any dispute under
this Section shall be determined by arbitration.
Title to such Building as changed or altered, together with associated
fixtures and personal property, shall immediately upon affixation vest in
Landlord, without payment therefor by Landlord, subject to Tenant's rights under
this Lease.
ARTICLE 10
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DISCHARGE OF LIENS
------------------
Section 10.01 Tenant will not create or permit to be created or to
-------------
remain, and will discharge, any lien, encumbrance or charge (levied on account
of any Imposition or any mechanic's or materialman's lien or any conditional
sale, title retention agreement, chattel mortgage, security agreement, financing
statement, or otherwise) which might be or become a lien, encumbrance or charge
upon the Property or any part thereof or the income therefrom, having any
priority or preference over or ranking on a parity with the estate, rights and
interest of Landlord in the Property or any part thereof or the income
therefrom, and Tenant will not suffer any other matter or thing whereby the
estate, rights and interest of Landlord in the Property or any part hereof,
might be impaired; provided that any mechanic's or materialman's lien may be
discharged in accordance with Section 10.02 hereof. The provisions of this
Section 10.01 shall not apply to liens, encumbrances or charges created by
Landlord, Creative Retailers, Inc. or any other tenant (other than subtenants,
if any, of Tenant) at the Property or any of their respective employees, agents
or contractors.
Section 10.02 If any mechanic's or materialman's lien which is the
-------------
responsibility of Tenant hereunder shall at any time be filed against the
Property or any part thereof, Tenant, within twenty (20) days after notice or
knowledge of the filing thereof, will cause the same to be discharged of record
by payment, deposit, bond, order of a court of competent jurisdiction or
otherwise. If Tenant shall fail to cause such lien to be discharged within the
period aforesaid, then, in addition to any other right or remedy, Landlord may,
but shall not be obligated to, discharge the same either by paying the amount
claimed to be due or by procuring the discharge of such lien by deposit or by
bonding proceedings, and in any such event Landlord shall be entitled, if
Landlord so elects, to compel the prosecution of an action for the foreclosure
of such lien by the lienor and to pay the amount of the judgment in favor of the
lienor with interest, costs and allowances. Any amount so paid by Landlord and
all costs and expenses incurred by Landlord in connection therewith, together
with interest thereon from the respective dates of Landlord's making of the
payment or incurring of the cost and expense, shall constitute additional rent
payable by Tenant under this Lease and shall be paid by Tenant to Landlord on
demand. The provisions of this Section shall not apply to liens, encumbrances or
charges created by Landlord or Creative Retailers, Inc. or any other tenant at
the Property, or any of their respective agents or contract vendors.
Section 10.03 Nothing in this Lease contained shall be deemed or
-------------
construed in any way as constituting the consent or request of Landlord, express
or implied by inference or otherwise, to any contractor, subcontractor, laborer
or materialman for the performance of any labor or the furnishing of any
materials for any specific improvement, alteration to or repair of the Property
or any part thereof, nor as giving Tenant any right, power or authority to
contract for or permit the rendering of any services or the furnishing of any
materials that would give rise to the filing of any lien against the Property or
any part thereof.
ARTICLE 11
USE OF PREMISES
---------------
Section 11.01 Tenant shall use the Demised Premises solely for
-------------
general warehouse, office and retail uses, and uses incidental and related
thereto, each in connection with Tenant's design, importing, marketing,
merchandising, distribution and sale of women's apparel and accessories, to the
extent permitted by law and the certificate of occupancy (a copy of which has
been delivered by Landlord to Tenant) issued for the Property, and for no other
purpose. Tenant shall not use or occupy, nor permit or suffer, the Demised
Premises or any part thereof to be used or occupied for any unlawful or illegal
business, use or purpose, nor for any business, use or purpose deemed by
Landlord disreputable or extrahazardous, nor in such manner as to constitute a
nuisance of any kind, nor for any purpose or in any way in violation of any
present or future governmental laws, ordinances, requirements, orders,
directions, rules or regulations. Tenant shall immediately
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upon the discovery of any such unlawful, illegal, disreputable or extrahazardous
use take all necessary steps, legal and equitable, to compel the discontinuance
of such use and to oust and remove any subtenants, occupants, or other persons
guilty of such unlawful, illegal, disreputable or extrahazardous use. Tenant
shall not have the right to place any advertising or signs on the outside of the
Building or any where else on the Property, except inside the Demised Premises,
without Landlord's prior written consent. Tenant, at the expiration of this
Lease, shall remove such advertising or signs and shall repair any damage caused
by such installation and removal.
ARTICLE 12
NO WASTE
--------
Section 12.01 Tenant shall not commit or suffer any waste to the
-------------
Property or any part thereof.
ARTICLE 13
ENTRY ON DEMISED PREMISES BY LANDLORD
-------------------------------------
Section 13.01 Landlord and its authorized representatives shall have
-------------
the right to enter the Demised Premises at all reasonable times on reasonable
advance notice for the purpose of (a) inspecting the same and (b) making any
necessary repairs thereto and performing any work therein that may be necessary
by reason of Tenant's failure to make any such repairs or perform any such work
or to commence the same within ten (10) days after written notice from Landlord
or without notice in case of an emergency. Nothing herein contained shall create
or imply any duty upon the part of Landlord to do any such work; and the
performance thereof by Landlord shall not constitute a waiver of Tenant's
default in failing to perform the same.
Section 13.02 Landlord may, during the progress of any work in the
-------------
Demised Premises, keep and store therein or elsewhere upon the Property all
materials, tools, supplies and equipment made necessary by the performance of
work pursuant to Section 13.01(b). Landlord shall not be liable for
inconvenience, annoyance, disturbance, loss of business or other damage of
Tenant, or any subtenant or other occupant by reason of making such repairs or
the performance of any such work, or on account of bringing materials, tools,
supplies and equipment into or through the Demised Premises during the course
thereof, and the obligations and liabilities of Tenant under this Lease shall
not be affected or released thereby. In making any such repairs or performing
any such work, Landlord shall proceed with a minimum of inconvenience to Tenant,
any subtenant or other occupant, as is reasonable under the circumstances.
Section 13.03 Landlord shall have the right to enter the Demised
-------------
Premises at all reasonable times on reasonable advance notice for the purpose of
showing the same to prospective purchasers and mortgagees thereof, and, at any
time within one (1) year prior to the expiration of this Lease, for the purpose
of showing the same to prospective tenants of all or any part of the Demised
Premises.
ARTICLE 14
INDEMNIFICATION OF LANDLORD
---------------------------
Section 14.01 Tenant will indemnify and save harmless Landlord
-------------
against and from all liabilities, obligations, damages, penalties, claims,
costs, charges and expenses, including reasonable architects' and attorneys'
fees, which may be imposed upon or incurred by or asserted against Landlord by
reason of any of the following during the term of this Lease:
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(a) any work or thing done in, on or about the Property or any
part thereof by or on behalf of Tenant;
(b) any use, non-use, possession, occupation, condition,
operation, maintenance or management of (i) the Demised Premises or any part
thereof, or (ii) any other portion of the Property or any street, alley,
sidewalk, curb, vault, passageway or space adjacent thereto by or on behalf of
Tenant;
(c) any negligence on the part of Tenant or any of its agents,
contractors, servants, employees, subtenants, licensees, franchisees or
invitees;
(d) any accident, injury or damage to any person or property
occurring in, on or about the Demised Premises or any part thereof or any
street, alley, sidewalk, curb, vault, passageway or space adjacent thereto,
except where arising out of the gross negligence or willful misconduct of
Tenant, Creative Retailers, Inc. or either of their employees, agents or
contractors;
(e) any failure by Tenant to perform or comply with any of the
covenants, agreements, terms or conditions contained in this Lease on its part
to be performed or complied with; or
(f) any tax attributable to the execution, delivery or recording
of this Lease or any modification hereof. In case any action or proceeding is
brought against Landlord by reason of any such claim, Tenant upon written notice
from Landlord will at Tenant's expense resist or defend such action or
proceeding by counsel approved by Landlord.
ARTICLE 15
DAMAGE OR DESTRUCTION
---------------------
Section 15.01 (a) Tenant shall give prompt notice to Landlord in
-------------
case of fire or other damage to the Demised Premises.
(b) If (i) the Building or the Demised Premises shall be damaged
to the extent of more than thirty-five (35%) percent of the cost of replacement
thereof, or (ii) the net proceeds of the Casualty and Hazard Insurance recovered
or recoverable (subject to the rights of the holders of any mortgage covering
the Property) as a result of the damage described in subsection (i) preceding
shall be insufficient to pay fully for the cost of replacement of the Building
or the Demised Premises, or (iii) the Building or the Demised Premises shall be
damaged as a result of a risk which is not covered by the Casualty and Hazard
Insurance, or (iv) the Building or the Demised Premises shall be damaged to the
extent of more than ten (10%) percent of the cost of replacement thereof, during
the last year of the term or of any renewal term hereof, then in any such event,
Landlord may terminate this Lease by notice given within ninety (90) days after
such event and upon the date specified in such notice, which shall be not less
than thirty (30) days nor more than sixty (60) days after the giving of said
notice, this Lease shall terminate, and Tenant shall vacate and surrender the
Demised Premises to Landlord. If the casualty, repairing, or rebuilding shall
render the Demised Premises untenantable, in whole or in part, then, to the
extent Landlord receives the proceeds of any rental income insurance carried by
Tenant, a proportionate abatement of Rent shall be allowed from the date when
the damage occurred until the earlier of (i) five (5) days after Landlord has
substantially completed the work required to build and restore the Building or
the Demised Premises, as set forth in Subsection (c) of this Article, or (ii)
the date of termination by Landlord, in the event Landlord elects to terminate
this Lease. Said proportion shall be computed on the basis of the ratio which
the amount of floor space rendered untenantable bears to the total floor space
of the Demised Premises.
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(c) If this Lease shall not be terminated as provided in
Subsection (b) hereof, Landlord shall, at its expense, to the extent of
insurance proceeds received by Landlord, repair or restore the Building or the
Demised Premises with reasonable diligence and dispatch, to the condition
obtaining immediately prior to the casualty except that Landlord shall not be
required to repair or restore any of Tenant's leasehold improvements or
betterments, property, machinery, fixtures, furniture, furnishing, decorations
or any other installations made by Tenant. All insurance proceeds payable to
Tenant shall be held in trust by Tenant and upon the completion by Landlord of
repair or restoration, Tenant shall prepare the Demised Premises for occupancy
by Tenant in the manner obtaining immediately prior to the damage or destruction
in accordance with plans and specifications approved by Landlord. All work of
restoration or repair by Tenant shall be subject to the provisions of Article 9.
(d) If repair or restoration of the Building or the Demised
Premises, as the case may be, by Landlord in accordance with the terms and
conditions of Section 15.01(c) has not been completed within one hundred twenty
(120) days after the insurance proceeds have been made available to Landlord for
such repair or restoration, Tenant, within thirty (30) days thereafter, may
terminate this Lease by notice to Landlord and upon the date specified in such
notice, which shall not be less than thirty (30) days nor more than sixty (60)
days after the giving of such notice, this Lease shall terminate, and Tenant
shall vacate and surrender the Demised Premises to Landlord; provided that if
Landlord completes such repair or restoration prior to the termination date
specified in such notice, such notice shall be null and void and this Lease
shall not terminate.
Section 15.02 Except as hereinabove specifically provided, no
-------------
destruction of or damage to the entire Building or any part thereof by fire or
any other casualty, or the untenantability of all or part of the Demised
Premises, shall terminate or permit Tenant to surrender this Lease or shall
relieve Tenant from its liability to pay the full Rent, Impositions and
additional rent and other charges payable under this Lease (except to the extent
that Rent, Impositions and additional rent shall be paid by the application
thereto by Landlord of the proceeds of rent insurance), or from any of its
other obligations under this Lease, and Tenant waives any rights now or
hereafter conferred to it by any law or statute to cancel or surrender this
Lease or to quit or surrender the Demised Premises or any part thereof, or to
any suspension, diminution, abatement or reduction of rent, on account of any
such destruction or damage.
ARTICLE 16
CONDEMNATION
------------
Section 16.01 (a) If twenty-five (25%) percent or more of the floor
-------------
space of the Building shall be taken or condemned by any competent authority for
any public or quasi-public use or purpose, either party may elect, by giving
notice to the other, not more than sixty (60) days after the date on which title
shall vest in such authority, to terminate this Lease and, in either such event,
the term of this Lease shall cease and terminate, the entire award shall be the
property of Landlord and Tenant hereby assigns to Landlord all its rights, title
and interest in and to any such award. Tenant shall, however, be entitled to
claim, prove and receive in the condemnation proceeding such awards as may be
allowed for moving expense, fixtures and other equipment installed by it but
only if such awards shall be made by the condemnation court in addition to the
award made by it for the Land and the Building or part thereof so taken.
The Rent, in the case of any taking or condemnation, shall be
apportioned as of the date of vesting of title and, if the term of this Lease
shall not have ceased and have been terminated as of said date, Tenant shall be
entitled to a pro rata reduction in the Rent payable hereunder based on the
proportion which the floor space of the Demises Premises space taken bears to
the entire floor space of the Demised Premises immediately prior to such taking.
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(b) If this Lease is not terminated pursuant to the provisions
of this Section, Landlord shall, at its expense, but only to the extent of an
equitable proportion of the net award or other compensation received by Landlord
(after deducting legal and all other fees in connection with obtaining said
award) for the portion taken or conveyed, of the Demised Premises (excluding
award for Land) make such repairs or alterations as are in Landlord's reasonable
judgment necessary to constitute the Demised Premises a complete architectural
and tenantable unit.
ARTICLE 17
SUBORDINATION: COMPLIANCE WITH MORTGAGES
----------------------------------------
Section 17.01 This Lease and all rights of Tenant hereunder shall be
-------------
subject and subordinate to the lien of any and all mortgages which may now or
hereafter affect the Property, or any part thereof, and any consolidation,
modification, renewal, replacement or extension of any such mortgages. Upon
request by Tenant, Landlord shall use reasonable efforts to have the holder of
any such mortgage enter into a non-disturbance and attornment agreement with
Tenant.
Section 17.02 Tenant covenants and agrees that it will duly and
-------------
punctually observe, perform and comply with all of the terms, covenants and
conditions of all fee mortgages (excluding, however, the payment of principal
and interest thereunder, and the observance, performance or compliance with any
term, covenant or condition that materially and adversely effects Tenant's
financial, maintenance or other obligations under this Lease), including,
without limitation, assisting Landlord in complying with any covenants
thereunder or under any document, agreement or instrument executed or delivered
in connection with any such fee mortgages, and Tenant further covenants that it
will not, directly or indirectly, do any act or suffer or permit any condition
or thing to occur which would or might constitute a default under any fee
mortgage.
Section 17.03 The provisions of Section 17.01 shall be self-
-------------
operative, but Tenant shall upon demand at any time or times execute,
acknowledge and deliver to Landlord, without expense to Landlord, any and all
instruments that may be necessary or proper to subordinate this Lease and all
rights hereunder to the lien of any such mortgage or mortgages and each such
renewal, modification, consolidation, replacement and extension, and, if Tenant
shall fail at any time to execute, acknowledge and deliver any such
subordination instrument, Landlord, in addition to any other remedies available
to it in consequence thereof, may execute, acknowledge and deliver the same as
the attorney-in-fact of Tenant and in Tenant's name, place and stead, and Tenant
hereby irrevocably makes, constitutes and appoints Landlord, it successors and
assigns, such attorney-in-fact for that purpose.
ARTICLE 18
ASSIGNMENTS, SUBLEASES AND TRANSFERS OF TENANT'S INTEREST
---------------------------------------------------------
Section 18.01 (a) Tenant, for itself, its successors and assigns,
-------------
expressly covenants that it shall not assign, mortgage or encumber this Lease,
voluntarily or involuntarily, by operation of law or otherwise, nor sublet or
suffer or permit the Demised Premises or any part thereof to be used by others,
without the prior written consent of Landlord in each instance.
If the sale, assignment, transfer or other disposition of any of the
issued and outstanding capital stock of Tenant (or of any successor or assignee
of Tenant which is a corporation), or of the interest of any general partner in
a partnership owning the leasehold estate created hereby, or of the interest of
any member of a limited liability company owning the leasehold estate created
hereby, or of the interest of any member of a joint venture, syndicate or other
group which may collectively own such leasehold estate, shall result in changing
the control of Tenant or such other corporation or such partnership, joint
venture, syndicate or other group, such sale,
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assignment, transfer or other disposition shall be deemed an assignment of this
Lease and shall be subject to all of the provisions of this Lease with respect
to assignments. For the purposes of this Section 18.01, "control" of any
-------
corporation shall be deemed to have changed if any person or group of persons
purchases or otherwise succeeds to more than fifty (50%) percent of the voting
power for the election of the Board of Directors of such corporation and
"control" of a partnership, limited liability company, joint venture, syndicate
-------
or other group shall be deemed to have changed if any person or group of persons
purchases or otherwise succeeds to more than fifty (50%) percent of the general
partners', members' or other active interest in such partnership, limited
liability company, joint venture, syndicate or other group.
If Tenant violates the provisions of this Section, Landlord may accept
from any assignee, sublessee or any one who claims a right to the interest of
Tenant under this Lease, or who occupies any part(s) or the whole of the Demised
Premises, the payment of rent and/or the performance of any of the other
obligations of Tenant under this Lease, but such acceptance shall not be deemed
to be a waiver by Landlord of the breach by Tenant of the provisions of this
Section, nor a recognition by Landlord that any such assignee, sublessee,
claimant or occupant has succeeded to the rights of Tenant hereunder, nor a
release by Landlord of Tenant from further performance by Tenant of the
covenants on Tenant's part to be performed under this Lease; provided, however,
that the net amount of rent collected from any such assignee, sublessee,
claimant or occupant shall be applied by Landlord to the Rent, Impositions and
additional rent to be paid hereunder. If this Lease be assigned or transferred
in any manner whatsoever, such assignment or transfer shall be upon and subject
to all of the covenants, provisions and conditions contained in this Lease and,
notwithstanding any consent by Landlord to any such assignment or transfer or
any subletting by Tenant, Tenant shall continue to be and remain liable
thereunder. Any consent by Landlord to any such assignment, transfer, subletting
or other matter or thing contained in this Article shall not in any wise be
construed to relieve Tenant from obtaining the prior consent of Landlord to any
other or further such assignment, transfer, subletting, matter or thing.
(b) Tenant may request Landlord's consent to the subletting of
the entire Demised Premises, provided that any sublease is subject to the
provisions of this Lease and the sublessee assumes the performance of all of
Tenant's obligations under this Lease. Tenant shall submit in writing to
Landlord, at the time it requests such consent:
(i) the name and address of the proposed subtenant;
(ii) the terms and conditions of the proposed subletting,
and a true, complete and accurate copy of any proposed agreement between Tenant
and a prospective subtenant;
(iii) the nature and character of the business of the
proposed subtenant; and
(iv) banking, financial and other credit information
relating to the proposed subtenant, reasonably sufficient to enable Landlord to
determine the proposed subtenant's financial responsibility.
(c) If the nature and character of the business and the
financial responsibility of the proposed subtenant be reasonably acceptable to
Landlord, its consent to a proposed subletting of the entire Demised Premises
shall not be unreasonably withheld, provided, however, that each of the
following conditions are first complied with:
(i) Tenant shall be current with all Rent and additional
rent due and owing under this Lease and Tenant shall not then be in default
under this Lease;
(ii) the sublease agreement shall require the sublessee to
perform all of Tenant's obligations under this Lease, shall prohibit any further
subletting by the sublessee or assignment of the sublease, shall incorporate the
language in paragraph (a) of this Section 18.01, and
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shall specifically prohibit the use of the Demised Premises for any purpose not
permitted pursuant to the terms of this Lease;
(iii) that a duplicate, executed original of the instrument
of sublease duly executed by the appropriate parties, shall be delivered to
Landlord before the sublessee shall be let into possession of the Demised
Premises;
(iv) Tenant shall pay any reasonable expenses, including,
but not limited to, reasonable attorney's fees incurred in connection with the
review and/or preparation and/or execution of any documents submitted to
Landlord relating to the proposed subletting.
(d) Each of the foregoing provisions and conditions shall apply
to each and every subletting. A subletting as above provided, shall not
discharge or release from liability hereunder Tenant or any other person, firm
or corporation which shall have previously assumed Tenant's obligations
hereunder, such liability to remain and continue for the balance of the term
with the same force and effect as though no subletting had been affected.
(e) Notwithstanding the foregoing terms and conditions of this
Section 18.01, provided Tenant is not in default under any of the terms,
conditions or covenants of this Lease, and provided Norton McNaughton, Inc.
remains the Guarantor under this Lease, Landlord's consent shall not be required
to (i) the assignment of this Lease or the subletting of the entire Demised
Premises to any parent corporation wholly-owning Tenant or any wholly-owned
subsidiary of Tenant, provided, however, that in the event such parent or
subsidiary shall at any time after the date of such assignment or subletting no
longer be a parent or subsidiary of Tenant, then such event shall constitute an
assignment and shall be subject to the consent of Landlord and the foregoing
provisions of this Section 18.01; (ii) the assignment of this Lease or the
subletting of the entire Demised Premises to a purchaser of all or substantially
all of the assets of Tenant (and Tenant's parent company, if any); (iii) the
transfer of this Lease to the new or surviving corporation in the event of the
merger or consolidation of Tenant (and Tenant's parent company, if any); or (iv)
the assignment of this Lease by operation of law due to the sale of all or
substantially all of all of the classes of stock of Tenant in connection with
the sale of Tenant's business; provided that in the case of (ii) or (iii) above,
the assignee shall have a certified (by a Certified Public Accountant reasonably
approved by Landlord) net worth equal to or greater than Tenant (and Tenant's
parent company, if any) as of the date of this Lease, or at the time of the
proposed assignment, whichever is greater, and provided further that in the case
of (i), (ii) or (iii) above: (A) Tenant shall remain liable for the performance
of all of the terms, covenants and conditions of this Lease on the part of
Tenant to be performed and observed; (B) the assignee shall assume in writing
the performance of all of the terms, covenants and conditions of this Lease on
the part of Tenant to be performed and observed; (C) the assignee shall continue
to operate the Demised Premises in accordance with the permitted uses described
in Article 11; (D) a copy of the assignment and assumption agreement or sublease
shall be delivered to Landlord no later than thirty (30) days prior to the
proposed effective date of such documents, (E) the sublease shall be in
compliance with the terms and conditions in Section 18.01(c)(ii); and (F) a copy
of the fully executed assignment and assumption agreement or sublease shall be
delivered to Landlord no later than ten (10) days after the effective date of
the same.
ARTICLE 19
CONDITIONAL LIMITATIONS DEFAULT PROVISIONS
------------------------------------------
Section 19.01 If any one or more of the following events (herein
-------------
sometimes called "Events of Default" or individually called an "Event of
----------------- --------
Default") shall happen:
- -------
(a) default shall be made in the due and punctual payment of any
Rent, Impositions or additional rent payable under this Lease or any part
thereof when and as the same shall become due and payable in accordance with the
terms of this Lease; or
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(b) default shall be made by Tenant in the performance of or
compliance with any of the covenants, agreements, terms or provisions contained
in this Lease, other than those referred to in the foregoing subdivision (a),
and such default shall continue for a period of ten (10) days after notice
thereof from Landlord to Tenant, except that in connection with a default not
susceptible of being cured with due diligence within ten (10) days, the time of
Tenant within which to cure the same shall be extended for such time as may be
necessary to cure the same with all due diligence, provided Tenant commences
promptly and proceeds diligently to cure the same, and further provided that
such period of time shall not be so extended as to subject Landlord to any civil
or criminal liability or create a default under any fee mortgage; provided that
for purposes of this subdivision (b) no default under any such mortgage shall be
deemed to exist until five (5) days prior to the expiration of the period
allowed by the holder of such mortgage for the curing thereof; or
(c) the making by Tenant or any guarantor of this Lease
("Guarantor") of an assignment for the benefit of creditors, or its admitting in
---------
writing its inability to pay its debts as they mature, or if Tenant or any
Guarantor shall file a voluntary petition in bankruptcy or insolvency, or shall
be adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under the present or any future federal bankruptcy
act or any other present or future applicable federal, state or other statute or
law, or shall seek or consent to or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or any Guarantor or of all or any part of
Tenant's or any Guarantor's property; or
(d) if, within thirty (30) days after the commencement of any
proceeding against Tenant or any Guarantor, whether by the filing of a petition
or otherwise, seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under the present or
any future federal bankruptcy act or any other present or future applicable
federal, state or other statute or law, such proceeding shall not have been
dismissed, or if, within thirty (30) days after the appointment of any trustee,
receiver or liquidator of Tenant or any Guarantor, or of all or any part of
Tenant's or any Guarantor's property, without the consent or acquiescence of
Tenant or said Guarantor, such appointment shall not have been vacated or
otherwise discharged, or if any execution or attachment shall be issued against
Tenant or any of Tenant's property pursuant to which the Demised Premises or any
part thereof shall be taken or occupied or attempted to be taken or occupied; or
(e) if Tenant shall vacate or abandon the Demised Premises; or
(f) if this Lease or the estate of Tenant hereunder shall be sublet,
assigned or otherwise transferred to or shall devolve upon any other person,
whether by operation of law or otherwise, except in a manner permitted under
Article 18 hereof;
(g) if a default or breach shall occur in the payment or performance
of any obligation of Norton McNaughton, Inc. or JJ Acquisition Corp. contained
in or contemplated by any of the documents described in Exhibit B annexed hereto
---------
and made a part hereof or any of the transactions described therein, and such
default or breach is not cured within the grace period, if any, provided for
therein;
then and in any such event Landlord at any time thereafter during the
continuance of such Event of Default may give a five (5) day's notice of
termination of this Lease in the manner required by Article 22 hereof
(regardless of whether Landlord prior to the giving of such notice shall have
accepted rent or any other payment, however designated, for the use and
occupancy of the Demised Premises from or on behalf of Tenant or from any other
person) to Tenant specifying such Event or Events of Default and stating that
this Lease and the term hereby demised shall expire and terminate on the date
specified in such notice, which date shall be at least five (5) days after the
giving of such notice. In the event such notice is given, this Lease and the
term hereby demised and all rights of Tenant under this Lease shall expire and
terminate upon the date specified in such notice with the
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same effect as if the date specified in such notice were the date set forth in
this Lease for the expiration of the term hereby demised, but Tenant shall
remain liable as provided in Section 19.03 hereof.
Section 19.02 Upon any such expiration or termination of this
-------------
Lease, Tenant shall quit and peacefully surrender the Demised Premises to
Landlord, and Landlord, upon or at any time after any such expiration or
termination, may, without further notice, enter upon and re-enter the Demised
Premises and possess and repossess itself thereof, by force, summary
proceedings, ejectment or otherwise, and may dispossess Tenant and remove Tenant
and all other persons and property from the Demised Premises and may have, hold
and enjoy the Demised Premises and the right to receive all rental income of and
from the same.
Section 19.03 No such expiration or termination of this Lease,
-------------
including the re-entry of Landlord, shall relieve Tenant of its liability and
obligations to pay the Rent, Impositions, insurance premiums and additional rent
theretofore accrued or thereafter accruing, to the extent set forth in Section
19.11, and such liability and obligations shall survive any such expiration or
termination.
Section 19.04 Tenant hereby expressly waives, so far as
-------------
permitted by law, the service of any notice of intention to reenter provided for
in any statute, and Tenant, for and on behalf of itself and all persons claiming
through or under Tenant, also waives any and all right of redemption or reentry
or repossession or to restore the operation of this Lease in case Tenant shall
be dispossessed by a judgment or by warrant of any court or judge or in case of
reentry or repossession by Landlord or in case of any expiration or termination
of this Lease. The terms "enter," "reenter," "entry," or "reentry," as used in
this Lease, are not restricted to their technical legal meaning.
Section 19.05 No failure by Landlord to insist upon the strict
-------------
performance of any covenant, agreement, term or condition of this Lease or to
exercise any right or remedy consequent upon a breach thereof shall constitute a
waiver of any such breach or of such covenant, agreement, term or condition. No
covenant, agreement, term or condition of this Lease to be performed or complied
with by Tenant, and no breach thereof, shall be waived, altered or modified
except by a written instrument executed by Landlord. No waiver of any breach
shall affect or alter this Lease, but each and every covenant, agreement, term
and condition of this Lease shall continue in full force and effect with respect
to any other then existing or subsequent breach thereof.
Section 19.06 In the event of any breach or threatened breach by
-------------
Tenant of any of the covenants, agreements, terms or conditions contained in
this Lease, Landlord shall be entitled to enjoin such breach or threatened
breach and shall have the right to invoke any right and remedy allowed at law or
in equity or by statute or otherwise as though reentry, summary proceedings and
other remedies were not provided for in this Lease.
Section 19.07 Tenant shall pay upon demand all reasonable costs,
-------------
charges and expenses, including reasonable fees of counsel and others retained
by Landlord, incurred by Landlord in enforcing Tenant's obligations hereunder or
incurred by Landlord in any litigation in which Tenant causes Landlord, without
Landlord's fault, to become involved or concerned.
Section 19.08 The rights and remedies given to Landlord in this
-------------
Lease are distinct, separate and cumulative, and no one of them, whether or not
exercised by Landlord, shall be deemed to be in exclusion of any of the others
herein or by law or in equity provided and the exercise by Landlord of any one
or more of the rights or remedies provided for in this Lease shall not preclude
the simultaneous or later exercise by Landlord of any or all other rights or
remedies. In particular, nothing in Section 19.01 hereof shall be deemed to
require Landlord to give any notice therein provided for prior to the
commencement of a summary proceeding for non-payment of Rent, Impositions or
additional rent, it being intended that the notices therein provided for are for
the
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purpose of creating a conditional limitation hereunder pursuant to which this
Lease shall terminate and Tenant shall become a holdover tenant.
Section 19.09 In all cases hereunder, and in any suit, action or
-------------
proceeding of any kind between the parties, it shall be presumptive evidence of
the fact of the existence of a charge being due, if Landlord shall produce a
bill, notice or certificate of any public official entitled to give the same to
the effect that such charge appears of record on the books in his office and has
not been paid.
Section 19.10 No receipt of monies by Landlord from Tenant,
-------------
after the cancellation or termination hereof in any lawful manner, shall
reinstate, continue or extend the term, or affect any notice theretofore given
to Tenant or operate as a waiver of the right of Landlord to enforce the payment
of Rent, Impositions and additional rent then due or thereafter falling due, or
operate as a waiver of the right of Landlord to recover possession of the
Demised Premises by proper suit, action, proceeding or other remedy; it being
agreed that, after the service of notice to cancel or terminate as herein
provided and the expiration of the time therein specified, after the
commencement of any suit, action, proceeding or other remedy or after a final
order or judgment for possession of the Demised Premises, Landlord may demand,
receive and collect any monies due, or thereafter falling due, without in any
manner affecting such notice, suit, action, proceeding, order or judgment; and
any and all such monies so collected shall be deemed to be payments on account
of the use and occupation of the Demised Premises, or at the election of
Landlord, on account of Tenant's liability hereunder.
Section 19.11 In the event of the expiration or termination of
-------------
this Lease as provided in this Article 19 or by operation of law or issuance of
a dispossessory warrant or otherwise, Tenant shall remain liable under this
Lease for the payment of the Rent, Impositions and all additional rent and the
observance and performance of all other covenants on its part to be performed;
and Landlord shall have the right to alter, change or remodel the improvements
on the Demised Premises and to divide and subdivide the same in any manner
Landlord may determine and to lease or let the same, or portions thereof, or not
to lease or let the same, for such periods of time and at such rentals and for
such use and upon such covenants and conditions as Landlord may elect, applying
the net rentals or avails of such letting, if any, first to the payment of
Landlord's expenses in dispossessing Tenant and the costs or expenses of making
such improvements in the Demised Premises as may be reasonably necessary in
order to enable Landlord to relet the same, and then to the payment of any
brokerage commissions or other expenses of Landlord in connection with such
reletting; and the balance, if any, shall be applied by Landlord at least once a
month, on account of the payments due or payable by Tenant hereunder, if any,
with the right reserved to Landlord to bring such action(s) or proceeding(s) for
the recovery of any deficits remaining unpaid without being obliged to await the
end of the term of this Lease for a final determination of Tenant's account, and
the commencement or maintenance of any one or more actions shall not bar
Landlord from bringing other or subsequent actions for further accruals pursuant
to the provisions of this Section. Any balance remaining, however, after full
payment and liquidation of Landlord's accounts for the remainder of the term of
this Lease as aforesaid, shall be paid to Tenant with the right reserved to
Landlord at any time, if it has not theretofore terminated this Lease, to give
notice to Tenant of Landlord's election to cancel this Lease and discharge all
the obligations thereunder of either party to the other, and the giving of such
notice and the simultaneous payment by Landlord to Tenant of any credit balance
in Tenant's favor that may at such time be owing, shall constitute a final and
effective cancellation of this Lease and a discharge of the obligations thereof
on the part of either party to the other. Tenant agrees to pay, in addition to
the rent and other sums required to be paid hereunder, such additional sums as
the court may adjudge reasonable as attorneys' fees in any successful suit or
action instituted by Landlord to enforce the provisions of this Lease or the
collections of the amounts due Landlord hereunder. Should any rent collected by
Landlord be insufficient to fully pay to Landlord a sum equal to all Rent,
Impositions and additional rent reserved herein and other charges payable
hereunder for the remainder of the term herein originally demised, the balance
or deficiency shall be paid by Tenant on the rent days herein specified, that
is, upon each of such rent days Tenant shall pay to Landlord the amount of the
deficiency then existing; and
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Tenant shall be and remain liable for any such deficiency, and the right of
Landlord to recover from Tenant the amount thereof, or a sum equal to all such
Rent, Impositions and additional rent and other charges payable hereunder, if
there shall be no reletting, shall survive the issuance of any dispossessory
warrant or other cancellation or termination hereof, and Landlord shall be
entitled to retain any overplus; and Tenant hereby expressly waives any defense
that might be predicated upon the issuance of such dispossessory warrant or
other cancellation or termination hereof.
Section 19.12 In any of the circumstances mentioned in Section
-------------
19.11 in which Landlord shall have the right to hold Tenant liable upon the
several rent days as therein provided, Landlord shall have the election, in
place and instead of holding Tenant so liable, forthwith to recover against
Tenant as damages for loss of the bargain and not as a penalty, in addition to
any other damages becoming due, an aggregate sum which, at the time of the
termination of this Lease or of the recovery of possession of the Demised
Premises by Landlord, as the case may be, represents the then present worth of
the excess (computed by discounting such excess at the simple rate of six (6%)
percent per annum), if any, of the aggregate of the Rent, Impositions and
additional rent and all other charges payable by Tenant hereunder that would
have accrued for the balance of the term over the aggregate rental value of the
Demised Premises (such rental value to be computed on the basis of a tenant
paying not only a rent to Landlord for the use and occupation of the Demised
Premises, but also such additional rent and other charges as are required to be
paid by Tenant under the terms of this Lease) for the balance of such term.
Section 19.13 Suit or suits for the recovery of the deficiency
-------------
or damages referred to in Sections 19.11 and 19.12, or for any installment or
installments of Rent, Impositions and additional rent hereunder, or for a sum
equal to any such installment or installments may be brought by Landlord, from
time to time at Landlord's election, and nothing in this Lease contained shall
be deemed to require Landlord to await the date whereon this Lease or the term
hereof would have expired by limitation had there been no such default by Tenant
or no such cancellation or termination.
Section 19.14 If this Lease shall be cancelled and terminated as
-------------
provided in Section 19.01, or if there shall be any breach of this Lease
referred to in paragraphs (c) or (d) of said Section 19.01, Tenant covenants and
agrees, any other covenant in this Lease to the contrary notwithstanding:
(a) that the Demised Premises shall be then in the same
condition as that in which Tenant has agreed to surrender them to Landlord at
the expiration of the term hereof;
(b) that Tenant, on or before the occurrence of any such
event, shall perform any covenant contained in this Lease for the making of any,
repair, corrective change, improvement, alteration or betterment to the
Property, or for restoring any part thereof; and
(c) that, for the breach of any covenant above stated in
this Section, Landlord shall be entitled ipso facto without notice or without
---- -----
action by Landlord to recover and Tenant shall pay as and for liquidated damages
therefor the then cost for performing such covenant.
Each and every covenant contained in this Section 19.14 shall be
deemed separate and independent and not dependent upon other provisions of this
Lease, and the performance of any such covenant shall not be considered to be
rent or other payment for the use of the Demised Premises. The damages for
failure to perform the same shall be deemed in addition to and separate and
independent of the damages accruing by reason of the breach of any other
covenant contained in this Lease.
Section 19.15 Nothing in this Article 19 contained shall limit
-------------
or prejudice the right of Landlord to prove and obtain as liquidated damages in
any bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding an amount equal to the maximum allowed by any statute or rule of law
governing such proceeding and in effect at the time when such damages are to be
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proved, whether or not such amount be greater, equal to or less than Tenant's
default or the right of Landlord to take such action as may be otherwise
permissible hereunder in the case of such default.
ARTICLE 20
STATEMENTS
----------
Section 20.01 At any time and from time to time, Landlord, on at
-------------
least ten (10) days' prior request by Tenant, and Tenant, on at least ten (10)
days' prior request by Landlord, will deliver, without charge, to the party
making such request, addressed to that party or to any proposed mortgagee or
purchaser from Landlord (as Landlord may designate), a duly executed and
acknowledged statement certifying that this Lease is unmodified and in full
force and effect (or, if there shall have been modifications, that the same is
in full force and effect as modified and stating the modifications) and the
dates to which the Rent and other charges have been paid and stating whether or
not, to the best knowledge of the party executing such certificate, the party
requesting such statement is in default in performance of any covenant,
agreement or condition contained in this Lease or whether any offsets,
counterclaims or defenses exist and, if so, specifying each such default,
offset, counterclaim or defense of which the executing party may have knowledge.
ARTICLE 21
INVALIDITY OF PARTICULAR PROVISIONS
-----------------------------------
Section 21.01 If any term or provision of this Lease or the
-------------
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Lease, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
other term and provision of this Lease shall be valid and be enforced to the
fullest extent permitted by law.
ARTICLE 22
NOTICES
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Section 22.01 All notices, demands, approvals, requests,
-------------
statements and directives (hereinafter collectively called "notices"), permitted
-------
or required under this Lease, shall be in writing. All such notices, shall be
deemed to have been properly given if sent by United States certified or
registered mail, return receipt requested, postage prepaid, addressed as
hereinafter provided. All such notices mailed to Landlord shall be addressed to
Landlord at the address first above written, Attention: President, with a copy
to Parker Chapin Flattau & Klimpl, LLP, 1211 Avenue of the Americas, New York,
New York 10036, Attention: James Alterbaum, Esq., or at such other address as
Landlord may from time to time designate by written notice to Tenant. All such
notices mailed to Tenant shall be addressed to Tenant at the Demised Premises or
its address first above written or at such other address as Tenant may from time
to time designate by written notice to Landlord, with a copy to Haythe & Curley,
237 Park Avenue, New York, New York 10017-3142, Attention: Adam Veltri, Esq.
Section 22.02 Notices which shall be sent by registered or
-----------
certified mail to Landlord and Tenant in the manner aforesaid, shall be deemed
sufficiently given for all purposes hereunder on the second day following the
date such notice shall be mailed by United States certified or registered mail
as aforesaid in any Post Office or Branch Post Office regularly maintained by
the United States Government within the continental United States.
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Section 22.03 All payments required to be made hereunder by
-------------
either party to the other shall be made to the address designated from time to
time by Landlord and Tenant.
ARTICLE 23
CONDITION OF AND TITLE TO PROPERTY: QUIET ENJOYMENT
---------------------------------------------------
Section 23.01 Tenant represents and agrees that the Demised
-------------
Premises, the Building, the Property, the title thereto, the sidewalks and
structures adjoining the same, any subsurface conditions thereof, and the
present uses and nonuses thereof, have been examined by Tenant and that Tenant
accepts the same in the condition or state in which they or any of them now are
or in which they will be at the commencement of the term of this Lease, and
except as otherwise provided herein, without representation or warranty, express
or implied, in fact or by law, by Landlord and without recourse to Landlord, as
to the title thereto, the conformity to or compliance with any Governmental
Regulations (as hereinafter defined), the nature, condition or usability thereof
or the use or uses to which the Demised Premises or any part thereof may be put
and except as otherwise provided herein, Landlord shall have no liability
whatsoever in respect of the condition of the Demised Premises, the Building,
the Property or any part thereof. Landlord shall not be liable for any failure
of water supply, gas or electric current, nor for any injury or damage to person
or property caused by or resulting from gasoline, oil, steam, gas, electricity,
or hurricane, tornado, flood, wind or similar storms or disturbances, or water,
rain or snow which may leak or flow from the street, sewer, gas mains or
subsurface area of from any part of the Building or buildings, or leakage of
gasoline or oil form pipes, appliances, sewer or plumbing works therein, or from
any other place, nor for interference with light or other incorporeal
hereditaments by anybody, or caused by operations by or of any public or quasi-
public work.
Section 23.02 Landlord covenants and agrees that Tenant, upon
-------------
paying the Rent and all additional rent, Impositions and other charges herein
provided for and observing and keeping all covenants, agreements and conditions
of this Lease on its part to be observed and kept, shall quietly have and enjoy
the Demised Premises during the term of this Lease without hindrance or
molestation by anyone claiming by or through Landlord, subject, however, to the
exceptions, reservations and conditions of this Lease, all covenants, easements,
restrictions, agreements and encumbrances of record and all laws, ordinances,
regulations, orders and requirements of all federal, state, municipal or other
governmental authorities now or hereafter in existence ("Governmental
------------
Regulations").
- -----------
Section 23.03 In case Landlord shall convey the Property, all
-------------
liabilities and obligations on the part of Landlord under this Lease accruing
after such conveyance shall terminate upon such conveyance, and thereupon, all
such liabilities and obligations shall, subject to the provisions of Article 29
hereof, be binding upon the grantee. Any funds held by Landlord under this
Lease in which Tenant has an interest shall be turned over to such grantee
simultaneously with any conveyance by Landlord.
ARTICLE 24
ARBITRATION
-----------
Section 24.01 In any case in which it is provided by the terms
-------------
of this Lease that any matter shall be determined by arbitration, such
arbitration shall be conducted in New York City by a three-member panel in
accordance with the rules then obtaining of the American Arbitration
Association, and shall be a condition precedent to any court action or
proceeding brought by either party relating to such matter. Judgment upon the
award or determination rendered in such arbitration may be entered in any court
having jurisdiction thereof.
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ARTICLE 25
LANDLORD NOT LIABLE FOR INJURY OR DAMAGE
----------------------------------------
Section 25.01 Tenant is and shall be in exclusive control and
-------------
possession of the Demised Premises as provided herein, and Landlord shall not in
any event whatsoever be liable for any injury or damage to any property or to
any person happening on or about the Demised Premises, nor for any injury or
damage to any property of Tenant, or of any other person contained therein,
except in the case of Landlord's gross negligence or willful misconduct. The
provisions hereof permitting Landlord to enter and inspect the Demised Premises
are made for the purpose of enabling Landlord to be informed as to whether
Tenant is complying with the agreements, terms, covenants and conditions hereof,
and to do such acts as Tenant shall fail to do and no obligation exists on the
part of Landlord to enter or inspect the Demised Premises or upon such
inspection, to cause the remedying of any condition contained therein.
ARTICLE 26
NO RENT ABATEMENT
-----------------
Section 26.01. No abatement, diminution or reduction of Rent,
-------------
Impositions, additional rent, charges or other compensation shall be claimed by
or allowed to Tenant, or any persons claiming under it, under any circumstances,
whether for inconvenience, discomfort, interruption of business, or otherwise,
arising from the making of alterations, changes, additions, improvements or
repairs to the Building, by virtue or because of any present or future
governmental laws, ordinances, requirements, orders, directions, rules or
regulations or by virtue or arising from, and during, the restoration of the
Building after the destruction or damage thereof by fire or other cause or the
taking or condemnation of a portion only of the Building (except as provided in
Article 16) or arising from any other cause or reason.
ARTICLE 27
SHORING
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Section 27.01 In the event that an excavation shall be made for
-------------
building or other purposes upon land (including land in the bed of a street)
adjacent to the Property or shall be contemplated to be so made, Tenant shall
afford to the person or persons causing or authorized to cause such excavation a
license to enter upon the Demised Premises for the purpose of doing such work as
said person or persons shall deem to be necessary to preserve the wall or walls,
structure or structures of the Demised Premises from injury or damage and to
support the same by proper foundations.
ARTICLE 28
ENVIRONMENTAL REQUIREMENTS
--------------------------
Section 28.01 Tenant shall, at Tenant's own expense, comply with
-------------
any now and hereafter enacted environmental cleanup responsibility laws
affecting Tenant's operation at the Property ("Cleanup Laws"). In connection
------------
therewith, Tenant shall, at Tenant's own expense, make all submissions to,
provide all information to, and comply with all requirements of the appropriate
governmental authority (the "Authority") under such Cleanup Laws. Should the
---------
Authority determine that a cleanup plan be prepared and that a cleanup be
undertaken because of any spills, deposits, releases or discharges of hazardous
substances or wastes at the Property by Tenant or its employees, agents or
contractors which occur during the term of this Lease, then Tenant shall, at
Tenant's own expense, prepare and submit the required plans and financial
assurances and carry out the approved
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<PAGE>
plans. At no expense to Landlord, Tenant shall promptly provide all information
requested by Landlord for preparation of affidavits or other documents required
by Landlord to determine the applicability of the Cleanup Laws to the Property,
and shall sign the affidavits promptly when requested to do so by Landlord.
Tenant shall indemnify, defend, and hold harmless Landlord from all fines,
suits, procedures, claims, and actions of any kind arising out of or in any way
connected with any spills, releases, deposits or discharges of hazardous
substances or wastes at the Property by Tenant or its employees, agents or
contractors that occur during the term of this Lease; and from all fines, suits,
procedures, claims, and actions of any kind arising out of Tenant's failure to
provide all information, make all submissions, and take all steps required by
the Authority under the Cleanup Laws or any other environmental law applicable
to such matters. Tenant's obligations and liabilities under this Article shall
survive the termination of this Lease and shall continue so long as Landlord
remains responsible for any spills, releases, deposits or discharges of
hazardous substances or wastes at the Property that occur during the term of
this Lease. Tenant's failure to abide by the terms of this Article shall be
restrainable by injunction.
Section 28.02 Tenant shall promptly supply Landlord with any
-------------
notices, correspondence, and submissions made by Tenant to appropriate
governmental authorities of the State of New Jersey, the United States
Environmental Protection Agency ("EPA"), the United States Occupational Safety
---
and Health Administration ("OSHA"), or any other local, state, or federal
----
authority that requires submission of any information concerning environmental
matters or hazardous wastes or substances.
Section 28.03 Tenant shall permit Landlord and Landlord's
-------------
agents, servants, and employees, including but not limited to legal counsel,
environmental consultants, and engineers, access to the Demised Premises for the
purposes of environmental inspections and sampling during regular business
hours, or during other hours either by agreement of the parties or in the event
of any environmental emergency. Tenant shall not restrict access to any part of
the Demised Premises, and Tenant shall not impose any conditions to access. If
Landlord's environmental inspection shall include sampling and testing of the
Demised Premises, Landlord shall use its best efforts to avoid interfering with
Tenant's use of the Demised Premises, and upon completion of sampling and
testing shall repair and restore the affected areas of the Demised Premises from
any damage caused by the sampling and testing.
Section 28.04
-------------
(a) Prior to the termination of the Lease term Tenant
shall, at Landlord's option, hire a consultant satisfactory to Landlord to
undertake sampling at the Property at potential spill location, if any,
sufficient to determine whether or not Tenant's operations have resulted in a
spill, release, deposit or discharge of a hazardous substance or waste at or
around the Property. Such sampling shall be undertaken only if potential areas
of environmental concern are identified by the consultant. Tenant's sampling
shall, at a minimum, establish the integrity of all underground storage tanks,
if any, at the Property. Should the sampling reveal any spill, release, deposit
or discharge of a hazardous substance or waste emanating from Tenant's
operations, then Tenant shall, at Tenant's expense, promptly clean up the
Property to the satisfaction of Landlord and any applicable Authority.
(b) If Tenant fails to clean up the Property pursuant to
subparagraph (a) above, prior to the expiration or earlier termination of the
Lease term, then upon the expiration or earlier termination of the Lease term
Landlord shall have the option either to consider the Lease as having ended or
to treat Tenant as a holdover tenant in possession of the Demised Premises. If
Landlord considers the Lease as having ended, then Tenant shall nevertheless be
obligated to promptly fulfill the obligations set forth in subparagraph (a)
above. If Landlord treats Tenant as a holdover tenant in possession of the
Demised Premises, then Tenant shall monthly pay to Landlord one and one-half the
regular and additional monthly rent which Tenant would otherwise have paid,
until such time as Tenant fulfills its obligations under subparagraph (a) above,
and during the
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<PAGE>
holdover period all of the terms of this Lease shall remain in full force and
effect, with the exception of Article 31, which Article shall be deemed deleted.
(c) Tenant represents and warrants to Landlord that Tenant
intends to use the Demised Premises solely and only for the purposes herein
permitted, which operations have the following Standard Industrial
Classification ("S.I.C.") numbers as defined by the most recent edition of the
-----
Standard Industrial Classification Manual published by the Federal Executive
Office of the President, Office of Management and Budget: 5137. Tenant's use of
the Demised Premises shall be restricted to the classifications set forth above
unless Tenant obtains Landlord's prior written consent to any change in use of
the Demised Premises. Prior to the commencement date of Tenant's Lease term,
Tenant shall supply to Landlord an affidavit of an officer of Tenant ("Officer's
---------
Affidavit") setting forth Tenant's S.I.C. numbers and a detailed description of
- ---------
the operations and processes Tenant will undertake at the Demised Premises,
organized in the form of a narrative report including a description and
quantification of hazardous substances and wastes to be generated, manufactured,
refined, transported, treated, stored, handled, or disposed of at the Demised
Premises. Following the commencement of the Lease term, Tenant shall notify
Landlord by way of Officer's Affidavit as to any changes in Tenant's operation,
S.I.C. number, or use or generation of hazardous substances and wastes, by way
of a supplemental Officer's Affidavit. Tenant shall not commence or alter any
operations at the Demised Premises prior to (i) obtaining all required operating
and discharge permits or approvals from all governmental or public authorities
having jurisdiction over Tenant's operations or the Demised Premises; and (ii)
providing copies of permits or approvals to Landlord.
(d) Tenant shall indemnify, defend, and hold harmless Landlord from
and against all claims, liabilities, losses, damages, and costs, foreseen or
unforeseen, including without limitation counsel, engineering, and other
professional or expert fees, which Landlord may incur by reason of Tenant's
breach of Tenant's obligations under this Article.
(e) Tenant shall promptly supply Landlord with copies of all
notices, reports, correspondence, and submissions made by Tenant to the United
States Occupational Safety and Health Administration, or any other local, state,
or federal authority that requires the submission of any information concerning
environmental matters or hazardous wastes or substances pursuant to laws
including but not limited to the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)9601 et seq. and the regulations
promulgated thereunder, and the Resource Conservation and Recovery Act, 42
U.S.C. (S)6901 et seq. and the regulations promulgated thereunder.
(f) Tenant shall promptly notify Landlord as to any liens threatened
or attached against the Property pursuant to any environmental law that are due
or related to Tenant's operation at the Property or Tenant's action or nonaction
with regard to Tenant's obligations under this Article. If such a lien is filed
against the Property, then Tenant shall, within thirty days from the date that
the lien is placed against the Property, and at any rate prior to the date any
governmental authority commences proceedings to sell the Property pursuant to
the lien, either: (a) pay the claim and remove the lien from the Property; or
(b) furnish (i) a bond satisfactory to Landlord in the amount of the claim out
of which the lien arises, (ii) a cash deposit in the amount of the claim out of
which the lien arises, or (iii) other security satisfactory to Landlord in an
amount sufficient to discharge the claim out of which the lien arises.
ARTICLE 29
LIMITATION ON LANDLORD'S LIABILITY
----------------------------------
Section 29.01 Tenant hereby agrees that the promises and
-------------
obligations of Landlord contained herein are made for the sole purpose of
establishing the existence of said promises and obligations, Tenant's source of
satisfaction of said promises and obligations in the event of Landlord's breach
thereof being limited to Landlord's interest in the Demised Premises, the rents,
-24-
<PAGE>
issues and profits therefrom, the fixtures and equipment contained in the
Demised Premises belonging to Landlord and the rights of Landlord in
condemnation awards and insurance proceeds and policies, all as described
herein, and Tenant agrees it shall not seek to enforce out of any other assets
of Landlord any judgment for any sum of money which is or may be payable
hereunder.
ARTICLE 30
BROKERAGE
---------
Section 30.01 Tenant and Landlord each warrants and represents
-------------
to the other that no real estate agent, broker, salesperson, or any other
person, firm or corporation has acted on behalf of it or will be entitled to any
brokerage commission, finder's fee or other compensation in connection with the
consummation of this Lease or the Demised Premises. Tenant and Landlord each
agrees to indemnify and hold the other harmless from and against any and all
loss, costs, damage, claim, expense (including, without limitation, reasonable
attorneys' fees) and liability which the other may sustain or which may be
asserted against the other by reason of a claim for a brokerage commission,
finder's fee or other compensation made by any person, firm or corporation with
whom Tenant or Landlord, as applicable, has dealt in connection with this Lease
or the Demised Premises.
ARTICLE 31
OPTION TO RENEW
---------------
Section 31.01 Tenant at its option may renew the term of this
-------------
Lease for an additional term of five (5) years, by serving written notice of the
exercise thereof upon Landlord no later than six (6) months prior to the
expiration of the initial term (time being of the essence); provided, however,
that Tenant's option to renew shall be deemed ipso facto deleted and null and
void and the renewal of the term of this Lease shall be and become null and void
automatically without the need for any further action notwithstanding the
exercise or attempted exercise of such renewal option by Tenant if this Lease
shall not be in full force and effect, or any Event of Default shall exist on
the last day of the initial term hereof or the date upon which Tenant exercises
such renewal option. If the term of this Lease is renewed as provided above,
such renewal shall be upon all the same terms, covenants and conditions as
herein provided, insofar as then in force and applicable to such renewal term
(including all provisions as to the payment of Impositions and additional rent),
except that the Rent shall be as provided in Section 31.02 and except that such
renewal shall not contain a provision for a further renewal.
Section 31.02 During the renewal term, the Rent shall be
-------------
computed at the annual rate of Four Hundred Sixty-five Thousand Seven Hundred
forty-five and 00/100 ($465,745.00) Dollars, and shall be paid by Tenant in
accordance with the terms and conditions of Article 2 in equal monthly
installments of Thirty-eight Thousand Eight Hundred Twelve and 08/100
($38,812.08) Dollars.
ARTICLE 32
CHARGES PAYABLE BY CREATIVE RETAILERS, INC.
-------------------------------------------
Section 32.01 Creative Retailers, Inc. shall pay Tenant Three
-------------
Thousand Eight Hundred Sixty-one and 00/100 ($3,861.00) Dollars per annum in
consideration of the Reimbursable Impositions, the premiums for the insurance
policies described in Section 5.01, the costs and expenses associated with
Tenant's maintenance and repair obligations described in Section 7.01(a) and
Tenant's compliance with laws obligations described in Section 8.01, and all
other costs and
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<PAGE>
expenses payable by Tenant in connection with the operation of the Property.
Such payment shall be paid annually in advance on the first day of each January
during the term of this Lease.
ARTICLE 33
MISCELLANEOUS
-------------
Section 33.01 Landlord and Tenant, so far as permitted by law,
-------------
waive and will waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way connected with this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of said premises,
or any claim of injury or damage.
Section 33.02 The captions of this Lease and any index preceding
-------------
this Lease are for convenience and reference only and in no way define, limit or
describe the scope or intent of this Lease.
Section 33.03 All terms and words used in this Lease regardless
-------------
of the number and gender in which they are used shall be deemed and construed to
include any other number, and any other gender, masculine, feminine, or neuter,
as the context or sense of this Lease or any Article, Section, paragraph or
clause herein may require, with the same effect as if such numbers and words had
been fully properly written in the required number and gender.
Section 33.04 This Lease contains the entire agreement between
-------------
the parties and cannot be changed, modified or terminated orally, but only by an
instrument in writing executed by Landlord and Tenant.
Section 33.05 This Lease may be executed in several
-------------
counterparts, each of which shall be deemed an original, and all such
counterparts shall constitute but one and the same instrument.
Section 33.06 The covenants and agreements herein contained
-------------
shall bind and inure to the benefit of Landlord, its successors and assigns, and
Tenant, its successors and assigns, except as otherwise provided herein.
Section 33.07 Landlord hereby consents to any collateral
-------------
assignment for security by Tenant of its rights and benefits under this Lease to
any existing or future lender of Tenant or, if any, of Tenant's affiliates.
Landlord agrees to execute and deliver simultaneously with the execution and
delivery of this Lease a Landlord's Waiver of Lien and Right of Access as to
Tenant's personal property from time to time located at the Demised Premises in
favor of Tenant's lender in the form attached hereto as Exhibit C.
---------
-26-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be signed and sealed the day and year first above written.
LANDLORD:
80 CARTER DRIVE ASSOCIATES
By: /s/ Leonard Schneder
-------------------------------
Title: GENERAL PARTNER
---------------------------
TENANT
JERI-JO KNITWEAR INC.
f/k/a JJ Acquisition Corp.
By:/s/ Amanda J. Bokman
-------------------------------
Title: VICE PRESIDENT
---------------------------
AGREED AND CONSENTED TO
WITH RESPECT TO ARTICLE 32:
CREATIVE RETAILERS, INC.
By: /s/ Leslie Schneider
-------------------------------
Title: PRESIDENT
---------------------------
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<PAGE>
EXHIBIT A
---------
(legal description)
The Project consists of the approximately 101,000 square foot industrial
building situated at 80 Carter Drive, Edison, New Jersey and the tract of land
underlying said building described in greater detail below:
Said Property is described in accordance with the survey of Goodman, Allgair &
Scott dated September 18, 1984 as follows:
BEGINNING at a point in the Northerly sideline of Carter Drive (60 feet wide),
said point being distant S 67 45' 7" W 539.89 feet from the intersection of said
Northerly line of Carter Drive with the Westerly line of Talmadge Road and from
said beginning point running thence:
(1) South 61 - 30' - 13" West, along the Northerly line of Carter Drive, 607.00
feet to a point and running thence;
(2) North 28 - 29' - 47" West, 154.91 feet to a point and running thence;
(3) North 21 - 01' - 02" West, 248.73 feet to a point and running thence;
(4) North 68 - 58' - 52" East, 622.00 feet to a point and running thence;
(5) South 21 - 01' - 02" East, 323.34 feet to a point, said being the true
point and place of BEGINNING.
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<PAGE>
EXHIBIT B
---------
(cross default documents)
1. the Agreement of Purchase and Sale, dated as of April 15, 1998,
among Jeri-Jo Knitwear Inc., Jamie Scott, Inc., the Stockholders of Jamie Scott,
Inc., JJ Acquisition Corp. and Norton McNaughton, Inc., as amended by two letter
agreements, dated respectively May 27, 1998 and June 18, 1998, among such
parties.
2. the Employment Agreement, dated June 18, 1998, between JJ
Acquisition Corp. and Susan Schneider.
3. the Employment Agreement, dated June 18, 1998, between JJ
Acquisition Corp. and Leslie Schneider.
4. the Employment Agreement, dated June 18, 1998, between JJ
Acquisition Corp. and Scott Schneider.
5. the Guaranty, dated April 15, 1998, made by Norton McNaughton,
Inc., re: above-referenced Agreement of Purchase and Sale and Employment
Agreements.
6. the Guaranty of Lease, dated June 18, 1998, made by Naughton
McNaughton, Inc.
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<PAGE>
EXHIBIT C
---------
(Landlord's Waiver of Lien and Right of Access)
-30-
<PAGE>
EXHIBIT 10.2
GUARANTY OF LEASE
-----------------
In consideration of, and as an inducement for the granting, execution and
delivery of that certain Lease, dated June 18, 1998 (said lease, as the same may
hereafter be amended, assigned, modified, extended, and/or restated, being
hereafter called the "Lease"), between 80 Carter Drive Associates, as landlord
-----
("Landlord") and Jeri-Jo Knitwear Inc., f/k/a JJ Acquisition Corp., as tenant
--------
("Tenant"), and in further consideration of the sum of One ($1.00) Dollar and
------
other good and valuable consideration paid by Landlord to the undersigned, the
receipt and sufficiency of which are hereby acknowledged, the undersigned,
NORTON MCNAUGHTON, INC., a Delaware corporation having an office at 463 Seventh
Avenue, New York, New York 10018 (hereinafter and in the Lease called the
"Guarantor"), hereby guarantees to Landlord, its successors and assigns, the
---------
full and prompt payment of Rent, Impositions and any and all other sums and
charges payable by Tenant, its successors and assigns, under the Lease, and
hereby further guarantees the full and timely performance and observance of all
the covenants, terms, conditions and agreements therein provided to be performed
and observed by Tenant, its successors and assigns; and the Guarantor hereby
covenants and agrees to and with Landlord, its successors and assigns, that if
default shall at any time be made by Tenant, its successors or assigns, in the
payment of any such Rent, Impositions or other sums and charges, or if Tenant,
its successors or assigns, should default in the performance and observance of
any of the terms, covenants, provisions or conditions contained in the Lease,
the Guarantor shall and will forthwith pay such Rent, Impositions and other sums
and charges to Landlord, its successors and assigns, and any arrears thereof,
and shall and will forthwith faithfully perform and fulfill all of such terms,
covenants, conditions and provisions, and will forthwith pay to Landlord all
damages that may arise in consequence of any default by Tenant, its successors
or assigns, under the Lease, including, without limitation, all reasonable
attorney's fees and disbursements incurred by Landlord or caused by any such
default and/or by the enforcement of this Guaranty.
This Guaranty is an absolute and unconditional Guaranty of payment and of
performance. It shall be enforceable against the Guarantor, its successors and
assigns, without the necessity for any suit or proceedings on Landlord's part of
any kind or nature whatsoever against Tenant, its successors and assigns, and
without the necessity of any notice of non-payment, non-performance or non-
observance or of any notice of acceptance of this Guaranty or of any other
notice or demand to which the Guarantor might otherwise be entitled, all of
which the Guarantor hereby expressly waives; and the Guarantor hereby expressly
agrees that the validity of this Guaranty and the obligations of the Guarantor
hereunder shall in nowise be terminated, affected, diminished or impaired by
reason of the assertion or the failure to assert by Landlord against Tenant, or
against Tenant's successors or assigns, of any of the rights or remedies
reserved to Landlord pursuant to the provisions of the Lease or by relief of
Tenant, its successors or assigns, or any other guarantor from any of their
respective obligations under the Lease. Without in any way limiting the
foregoing, the Guarantor shall and does hereby waive any other act or omission
of Landlord which changes the scope of the Guarantor's risk or any other event
that otherwise might constitute a legal or equitable counterclaim, defense or
discharge of surety or guarantor.
This Guaranty shall be a continuing Guaranty, and the liability of the
Guarantor hereunder shall in no way be affected, modified or diminished by
reason of any assignment, renewal,
<PAGE>
modification or extension of the Lease or by reason of any modification or
waiver of or change in any of the terms, covenants, conditions or provisions of
the Lease by Landlord and Tenant, its successors or assigns, or by reason of any
extension of time that may be granted by Landlord to Tenant, its successors or
assigns, or by reason of any dealings or transactions or matter or thing
occurring between Landlord and Tenant, its successors or assigns, or by reason
of any bankruptcy, insolvency, reorganization, arrangement, assignment for the
benefit of creditors, receivership or trusteeship affecting Tenant or any other
guarantor, or their successors and assigns, whether or not notice thereof or of
any thereof is given to the Guarantor.
All of Landlord's rights and remedies under the Lease and under this
Guaranty are intended to be distinct, separate and cumulative and no such right
or remedy therein or herein mentioned is intended to be in exclusion of or a
waiver of any of the others.
As a further inducement to Landlord to make and enter into the Lease and in
consideration thereof, Landlord and the Guarantor covenant and agree that in any
action or proceeding brought on, under or by virtue of this Guaranty, Landlord
and the Guarantor shall and do hereby waive trial by jury.
The Guarantor hereby consents and agrees that the Supreme Court of the
State of New York for the County of New York and the United States District
Court for the Southern District of New York each shall have personal
jurisdiction and proper venue with respect to any dispute between Landlord and
the Guarantor; provided that the foregoing consent shall not deprive Landlord of
-------- ----
the right in its discretion to voluntarily commence or participate in any
action, suit or proceeding in any other court having jurisdiction and venue. In
any dispute with Landlord, the Guarantor will not raise, and hereby expressly
waives, any objection or defense to any such jurisdiction as an inconvenient
forum.
The Guarantor hereby covenants and agrees to and with Landlord, its
successors and assigns, that the Guarantor may be joined in any action against
Tenant, its successors or assigns, or against any one or more other guarantors
in connection with the Lease and that recovery may be had against the Guarantor
without Landlord, its successors or assigns, first pursuing or exhausting any
remedy or claim against Tenant, its successors or assigns or against any one or
more other guarantors on the Lease. The Guarantor hereby also expressly agrees
that, in any jurisdiction, it will conclusively be bound by the judgment in any
such action by Landlord against Tenant, its successors or assigns, (wherever
brought) as if the Guarantor were a party to such action even though the
Guarantor is not joined as a party in such action.
Any notice, demand or request by either party to the other shall be in
writing, and shall be deemed to have been duly given if given by any of the
means permitted for notices under Article 22 of the Lease, addressed to the
other party in the case of the Guarantor at its address set forth above or to
such other address as the Guarantor shall have given notice of to Landlord, and
in the case of Landlord at its address set forth in Section 22.01 of the Lease
or to such other address as Landlord shall have given notice of to the
Guarantor.
-2-
<PAGE>
This Guaranty shall inure to the benefit of Landlord and Landlord's
successors and assigns, and shall be binding upon and enforceable against the
Guarantor and the Guarantor's successors, assigns, heirs (and, if the Guarantor
is a natural person, his/her heirs and legal representatives).
The Guarantor has unconditionally delivered this Guaranty to Landlord, and
the failure to sign any other guarantee by any other person intended to be a
guarantor of Tenant's, its successor's or assign's, obligations under the Lease
or any portion thereof shall not discharge the liability of the Guarantor.
In the event that this Guaranty shall be held ineffective or unenforceable
by any court of competent jurisdiction, the Guarantor shall be deemed to be a
tenant under the Lease with the same force and effect as if the Guarantor were
expressly named in the Lease as a joint tenant with joint and several liability.
Additionally, in the event that any term, condition or other provision
contained in this Guaranty shall be held to be invalid, illegal or
unenforceable, such invalidity, illegality or unenforceability shall not affect
any other term, condition or provision contained in this Guaranty.
This Guaranty shall be governed by and construed in accordance with the
laws of the State of New York. Terms printed with initial capital letters in
this Guaranty shall have the same meaning as defined in the Lease.
NORTON MCNAUGHTON, INC.
Dated: June 18, 1998 By: /s/ Amanda J. Bokman
----------------------------------
Name: Amanda J. Bokman
Title: Vice President
-3-
<PAGE>
EXHIBIT 10.3
FIRST AMENDMENT
TO
FINANCING AGREEMENT
First Amendment, dated as of November 21, 1997 to the Financing
Agreement, dated as of September 25, 1997, as amended and supplemented prior to
the date hereof, (as so amended and supplemented, the "Financing Agreement"), by
and among Norton McNaughton, Inc., a Delaware corporation (the "Company"),
Norton McNaughton of Squire, Inc., a New York corporation ("Squire"), Miss
Erika, Inc., a Delaware corporation formerly known as ME Acquisition Corp.
("Miss Erika" and together with Squire, each a "Borrower" and collectively, the
"Borrowers"), the lenders listed on Schedule I hereto under the captions
"Continuing Lenders" (the "Continuing Lenders") and "Additional Lenders" (the
"Additional Lenders" and together with the Continuing Lenders, each a "Lender"
and collectively the "Lenders"), NationsBanc Commercial Corporation, as
collateral agent for the Lenders (in such capacity, the "Collateral Agent") and
The CIT Group/Commercial Services, Inc., as administrative agent for the Lenders
(in such capacity, the "Administrative Agent" and together with the Collateral
Agent, each an "Agent" and collectively, the "Agents").
The Company, the Borrowers, the Lenders and the Agents desire to (i)
amend the definition of the term "Required Lenders" in the Financing Agreement,
(ii) add the Additional Lenders as parties to the Financing Agreement, and (iii)
amend certain other terms and conditions hereafter set forth.
In addition, the Continuing Lenders wish to assign a portion of their
interests in the total Revolving Credit Commitment and the Loans and Letter of
Credit Obligations outstanding under the Financing Agreement to the Additional
Lenders and the Additional Lenders wish to accept such assignments.
Accordingly, the Company, the Borrowers, the Agent and the Lenders
hereby agree as follows:
1. Definitions. All capitalized terms used herein and not otherwise
-----------
defined herein are used herein as defined in the Financing Agreement.
2. Existing Definitions. (a) The definition of the term "Loan
--------------------
Documents" in Section 1.01 of the Financing Agreement is hereby amended by
adding the words ",including, without limitation, any intercompany notes pledged
to the Collateral Agent" to end thereof.
(b) The definition of the term "Required Lenders" in Section 1.01
of the Financing Agreement is hereby amended in its entirety to read as follows:
<PAGE>
"Required Lenders" means, at any time, Lenders whose
----------------
Pro Rata Shares aggregate at least 60%, provided that,
until such time as the aggregate Pro Rata Shares of CIT
and NationsBanc are less than 60%, CIT and NationsBanc
shall not constitute Required Lenders without being
joined by one additional Lender."
3. Amendments. Clause (iii) of Section 12.03 of the Financing
----------
Agreement is hereby amended by deleting the words "or the Guarantors (other than
inactive Guarantors)" therein and substituting in lieu thereof "or any of the
Guarantors (other than inactive Guarantors)".
4. Assignments. (a) On and as of the Amendment Effective Date,
-----------
each of the Continuing Lenders shall assign and each of the Additional Lenders
shall purchase, at the principal amount thereof, such interests in the Term
Loan, Revolving Credit Loans and Letter of Credit Obligations outstanding on
such date as shall be necessary in order that, after giving effect to all such
assignments and purchases, the Term Loan, Revolving Credit Loans and Letter of
Credit Obligations outstanding will be held by the Lenders ratably in accordance
with their Pro Rata Shares in the Term Loan outstanding as of the Amendment
Effective Date (the "Outstanding Term Loan") and the Total Revolving Credit
Commitment, as set forth in Annex I to this Amendment. Such assignments and
purchases shall be without recourse, representation or warranty, except that (i)
each Continuing Lender represents that it is the legal and beneficial owner of
the interests assigned by it free and clear of any Lien and (ii) paragraphs 2
(other than clauses (i) and (v) thereof), 4 and 5 of Exhibit I to the Financing
Agreement are hereby incorporated by reference as if set forth herein and each
Continuing Lender shall be deemed to have made the representations, warranties
and statements of Assignor in such paragraphs and each Additional Lender shall
be deemed to have made the representations, warranties and statements of
Assignee in such paragraphs.
(b) On the Amendment Effective Date, (i) the Additional Lenders
shall pay the purchase price for the Term Loan and Revolving Credit Loans
purchased by it pursuant to paragraph (a) of this Section 4 by wire transfer of
immediately available funds to the Administrative Agent in New York, New York,
not later than 12:00 noon, New York City time, and (ii) the Administrative Agent
shall promptly pay to each Continuing Lender, out of the amounts received by it
pursuant to clause (i) of this paragraph (b), the purchase price for the
interests assigned by it pursuant to such paragraph (a) by wire transfer of
immediately available funds to an account designated by such Lender.
(c) The Company and the Borrowers hereby consent to the
assignments and purchases provided for in paragraphs (a) and (b) of this Section
4 and agree that each Additional Lender shall have all of the rights of a Lender
under the Financing Agreement with respect to the interests purchased by it
pursuant to such paragraphs. Commencing on the Amendment Effective Date, each
Additional Lender will be a party to the Financing Agreement, agrees to be bound
by the terms and conditions of the Financing Agreement and the Loan Documents
and will have all of the rights and obligations of a Lender under the Financing
Agreement and the Loan Documents.
-2-
<PAGE>
5. Delivery of Notes. The Continuing Lenders shall deliver to the
-----------------
Administrative Agent, for delivery to and cancellation by the Borrowers, all
Notes issued by the Borrowers and held by the Continuing Lenders under the
Financing Agreement (collectively, the "Old Notes"), which Old Notes are hereby
deemed cancelled effective from delivery of the New Notes to the Administrative
Agent. The Borrowers shall execute and deliver to the Administrative Agent for
the account of each Lender the Notes which such Lender is entitled to receive
pursuant to Section 2.04 of the Financing Agreement, in the forms of Exhibits A
and B thereto and in the principal amount for each Lender equal to its Pro Rata
Share of the Outstanding Term Loan and the Total Revolving Credit Commitment,
each as set forth in Annex I to this Amendment (the "New Notes"). The
Administrative Agent shall release and deliver the Old Notes to the Borrowers
for cancellation and deliver the New Notes to the Lenders.
6. Accrued Interest and Fees. At the times and pursuant to the
-------------------------
terms contained in the Financing Agreement, the Administrative Agent will pay
all accrued interest and fees payable pursuant to Section 3.03(b) of the
Financing Agreement to the Lenders entitled thereto after giving effect to the
assignments and purchases made pursuant to Section 4 above.
7. Schedule. Schedule 1.01A to the Financing Agreement is hereby
--------
amended in its entirety to read as set forth in Annex I to this Amendment.
8. Conditions to Effectiveness. This Amendment shall become
---------------------------
effective only upon satisfaction in full of the following conditions precedent
(the first date upon which all such conditions shall have been satisfied being
herein called the "Amendment Effective Date"):
(i) The representations and warranties contained in this
Amendment and in Article VI of the Financing Agreement shall be correct in
all material respects on and as of the Amendment Effective Date as though
made on and as of such date (except where such representations and
warranties relate to an earlier date in which case such representations and
warranties shall be true and correct as of such earlier date); no Event of
Default or Default shall have occurred and be continuing on the Amendment
Effective Date, or result from this Amendment becoming effective in
accordance with its terms.
(ii) The Agents shall have received counterparts of this
Amendment which bear the signatures of the Company, the Borrowers and each
of the Lenders.
(iii) The Administrative Agent shall have received the New
Notes, duly executed by each of the Borrowers.
(iv) The Agents shall have received an acknowledgment to
the agreement among the Lenders duly executed by each Additional Lender.
(v) All legal matters incident to this Amendment shall be
satisfactory to the Agents and their counsel.
-3-
<PAGE>
9. Representations and Warranties. Each of the Company and the
------------------------------
Borrowers represents and warrants to the Lenders as follows:
(a) The Company and each Borrower (i) is duly organized, validly
existing and in good standing under the laws of the state of its organization
and (ii) has all requisite power, authority and legal right to execute, deliver
and perform this Amendment, the New Notes, in the case of the Borrowers, all
other documents executed by it in connection with this Amendment, and to perform
the Financing Agreement, as amended hereby.
(b) The execution, delivery and performance by the Company and
the Borrowers of this Amendment and all other documents executed by it in
connection with this Amendment, the execution, delivery and performance by each
Borrower of the New Notes and the performance by the Company and the Borrowers
of the Financing Agreement as amended hereby (i) have been duly authorized by
all necessary action, (ii) do not and will not violate or create a default under
the Company's or any Borrower's organizational documents, any applicable law or
any contractual restriction binding on or otherwise affecting the Company or any
Borrower or any of the Company's or such Borrower's properties, and (iii) except
as provided in the Loan Documents, do not and will not result in or require the
creation of any Lien, upon or with respect to the Company's or any Borrower's
property.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required in connection with the due execution, delivery and performance by the
Company or any of the Borrowers of this Amendment and all other documents
executed by it in connection with this Amendment, the execution, delivery and
performance by each Borrower of the New Notes and the performance by the Company
and the Borrowers of the Financing Agreement as amended hereby.
(d) This Amendment and the Financing Agreement, as amended
hereby, and all other documents executed in connection with this Amendment
constitute the legal, valid and binding obligations of the Company and the
Borrowers party thereto, enforceable against such Persons in accordance with
their terms except to the extent the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect affecting generally the enforcement of
creditors' rights and remedies and by general principles of equity.
(e) The representations and warranties contained in Article VI of
the Financing Agreement are correct on and as of the Amendment Effective Date as
though made on and as of the Amendment Effective Date (except to the extent such
representations and warranties expressly relate to an earlier date), and no
Event of Default or Default, has occurred and is continuing on and as of the
Amendment Effective Date.
10. Continued Effectiveness of Financing Agreement. Each of the
----------------------------------------------
Company and the Borrowers hereby (i) confirms and agrees that each Loan Document
to which it is a party is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects except that on and after
the Amendment Effective Date of this Amendment all
-4-
<PAGE>
references in any such Loan Document to "the Financing Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Financing
Agreement shall mean the Financing Agreement as amended by this Amendment, and
(ii) confirms and agrees that to the extent that any such Loan Document purports
to assign or pledge to the Collateral Agent, or to grant to the Collateral Agent
a Lien on any collateral as security for the Obligations of the Company and the
Borrowers from time to time existing in respect of the Financing Agreement and
the Loan Documents, such pledge, assignment and/or grant of a Lien is hereby
ratified and confirmed in all respects.
11. Miscellaneous.
-------------
a. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
b. Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
c. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
d. The Borrowers will pay on demand all reasonable out-of-pocket
costs and expenses of the Agents in connection with the preparation, execution
and delivery of this Amendment, including, without limitation, the reasonable
fees, disbursements and other charges of Schulte Roth & Zabel LLP, counsel to
the Agents.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
NORTON MCNAUGHTON, INC.
By:________________________________
Title:_____________________________
NORTON MCNAUGHTON OF SQUIRE, INC.
By:________________________________
Title:_____________________________
MISS ERIKA, INC.
By:________________________________
Title:_____________________________
AGENTS AND LENDERS
------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Administrative Agent
By:________________________________
Title:_____________________________
NATIONSBANC COMMERCIAL
CORPORATION, as Collateral Agent
By:________________________________
Title:_____________________________
-6-
<PAGE>
LENDERS
-------
BANKBOSTON, N.A.
By:________________________________
Title:_____________________________
Address:
100 Federal Street
Asset Based Lending
Mail Stop: 01-09-06
Boston, Massachusetts 02110
Attn.: Joseph L. Becker
Vice President
Telephone:(617) 434-0079
Telecopier:(617) 434-2309
Wiring Instructions:
The First National Bank of Boston
ABA #: 011-000-390
REF: Norton McNaughton
ATTN: Patty Gaine
Commercial Loan Services
Telephone:(617) 467-2060
-7-
<PAGE>
FLEET BANK, N.A.
By:___________________________________________
Title:________________________________________
Address:
1185 Avenue of the Americas
New York, New York 10036
Attn.: Mr. Anthony Santoro, Vice President
Telephone: (212) 819-5518
Telecopier: (212) 819-4106
Wiring Instructions:
Loan Transactions:
-----------------
Fleet Bank, NA
ABA # 021300019
Credit to G/L # 1510351-03102
Attn: Mae Wong-Bressler
Obligor #479501
Letters of Credit Transactions:
-------------------------------
Fleet Bank, NA
ABA #021200339
Credit to G/L #2014340-03102
Attn: Mae Wong-Bressler
Obligor #479501
-8-
<PAGE>
SCHEDULE I
CONTINUING LENDERS:
- ------------------
The CIT Group/Commercial Services, Inc.
NationsBanc Commercial Corporation
ADDITIONAL LENDERS:
- ------------------
BankBoston, N.A.
Fleet Bank, N.A.
<PAGE>
ANNEX I
-------
Schedule 1.01A
--------------
Lenders and Lenders' Commitments
<TABLE>
<CAPTION>
Revolving
Credit Term Loan
------
Lender Commitment Commitment Percentage
------ ------------ ----------- ----------
<S> <C> <C> <C>
NationsBanc Commercial Corporation $ 53,572,500 $ 6,428,700 42.858%
The CIT Group/Commercial Services, Inc. $ 44,642,500 $ 5,357,100 35.714%
BankBoston, N.A. $ 13,392,500 $ 1,607,100 10.714%
Fleet Bank, N.A. $ 13,392,500 $ 1,607,100 10.714%
------------ ----------- ------
$125,000,000 $15,000,000 100%
</TABLE>
<PAGE>
EXHIBIT 10.4
SECOND AMENDMENT
TO
FINANCING AGREEMENT
Second Amendment, dated as of January 30, 1998 to the Financing
Agreement, dated as of September 25, 1997, as amended and supplemented prior to
the date hereof, (as so amended and supplemented, the "Financing Agreement"), by
and among Norton McNaughton, Inc., a Delaware corporation (the "Company"),
Norton McNaughton of Squire, Inc., a New York corporation ("Squire"), Miss
Erika, Inc., a Delaware corporation formerly known as ME Acquisition Corp.
("Miss Erika" and together with Squire, each a "Borrower" and collectively, the
"Borrowers"), the lenders listed on Schedule I to the Financing Agreement (each
a "Lender" and collectively the "Lenders"), NationsBanc Commercial Corporation,
as collateral agent for the Lenders (in such capacity, the "Collateral Agent")
and The CIT Group/Commercial Services, Inc., as administrative agent for the
Lenders (in such capacity, the "Administrative Agent" and together with the
Collateral Agent, each an "Agent" and collectively, the "Agents").
The Company, the Borrowers, the Lenders and the Agents desire to amend
the Financing Agreement on the terms and conditions hereafter set forth.
Accordingly, the Company, the Borrowers, the Agents and the Lenders hereby agree
as follows:
1. Definitions. All capitalized terms used herein and not otherwise
-----------
defined herein are used herein as defined in the Financing Agreement.
2. Schedule. After giving effect to all assignments made prior to
--------
the date of this Second Amendment, Schedule 1.01A to the Financing Agreement now
reads as set forth in Annex I to this Amendment.
3. Financial Covenants. Section 7.02(p)(ii) of the Financing
-------------------
Agreement is hereby amended to read in its entirety as follows:
"(ii) Leverage Ratio. Permit the ratio of Consolidated
--------------
Total Liabilities to Consolidated Tangible Net Worth of the Company and its
Consolidated Subsidiaries as of the end of each Fiscal Quarter to be
greater than the amount set forth below opposite each such Fiscal Quarter
end:
<PAGE>
<TABLE>
<CAPTION>
Fiscal Maximum
Quarter End Leverage Ratio
----------- --------------
<S> <C>
November 1, 1997 2.70:1.0
January 31, 1998 2.25:1.0
May 2, 1998 2.55:1.0
August 1, 1998 2.20:1.0
October 31, 1998 1.90:1.0
</TABLE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agents shall negotiate in good faith to
determine the ratio of Consolidated Total Liabilities to Consolidated
Tangible Net Worth of the Company and its Consolidated Subsidiaries as of
the end of each Fiscal Quarter covered by such financial projections and,
in the event that the Company and the Required Lenders are unable to agree
upon such ratio on or before the date that is 30 days after the date that
the Lenders have received such projections, such ratio as of the end of
each Fiscal Quarter of the Fiscal Year covered by such financial
projections shall not be greater than the ratio set forth for the last
Fiscal Quarter end set forth above."
4. Assignments. Paragraph (d) of Section 12.08 of the Financing
-----------
Agreement is hereby amended by adding the following new sentence at the end of
such paragraph.
"Promptly after each such Assignment and Acceptance becomes
effective, the Administrative Agent shall prepare and distribute to each
Lender and the Borrower a revised Schedule 1.01A hereto after giving effect
to such assignment, which revised Schedule 1.01A shall replace the prior
Schedule 1.01A and become part of this Agreement."
5. Waivers and Consents. (a) Pursuant to the request of the Company
--------------------
and the Borrowers and in accordance with Section 12.03 of the Financing
Agreement, the Agents and the Lenders hereby consent to, and waive any Event of
Default that would otherwise arise under Section 10.01 of the Financing
Agreement from, any non-compliance by the Company and the Borrowers with the
provisions of (i) Section 7.01(a)(i) of the Financing Agreement by reason of the
failure of the Company and the Borrowers to provide to the Lenders the balance
sheets, statements of income and statements of retained earnings and cash flow
for the Fiscal Quarter of the Company ended November 1, 1997, provided that such
financial statements are delivered to the Lenders on or before February 15,
1998, (ii) Section 7.01(a)(iii) of the Financing Agreement by reason of the
failure of the Company and the Borrowers to provide to the Lenders the balance
sheets and statements of income for the Fiscal Months of the Company ended
November 1, 1997, November 29, 1997 and December 27, 1997, provided that such
financial statements are delivered to the Lenders on or before February 15,
1998, (iii) Section 7.01(a)(iv) of the Financing Agreement by reason of the
failure of the Company and the Borrowers to provide to the Lenders a certificate
of the chief financial officer of the Company in connection with the financial
-2-
<PAGE>
statements required to be delivered to the Lenders pursuant to Sections
7.01(a)(i) and 7.01(a)(iii) of the Financing Agreements for the Fiscal Quarter
of the Company ended November 1, 1997 and for the Fiscal Months of the Company
ended November 1, 1997, November 29, 1997 and December 27, 1997, provided that
such certificates are delivered to the Lenders on or before February 15, 1998,
(iv) Section 7.01(a)(v) of the Financing Agreement by reason of the failure of
the Company and the Borrowers to provide to the Lenders the Inventory breakdowns
and Borrowing Base Certificates for the Fiscal Months of the Company ended
November 29, 1997 and December 27, 1997, provided that such Inventory breakdowns
and Borrowing Base Certificates are delivered to the Lenders on or before
February 15, 1998, (vi) Section 7.01(k) of the Financing Agreement by reason of
the failure of the Company to provide to the Agents evidence of and to maintain
key man life insurance policies on the lives of Stanford Greenberg, Peter
Boneparth and Howard Zwilling in accordance with the terms of such Section on or
before November 25, 1997, provided that evidence of such insurance is provided
to the Agents on or before February 15, 1998; and (vii) Section 7.02(p)(ii) of
the Financing Agreement by reason of the failure of the Company and its
Consolidated Subsidiaries to maintain a ratio of Consolidated Total Liabilities
to Consolidated Tangible Net Worth of less than or equal to 1.8:1.0 for the
Fiscal Quarter ended November 1, 1997, provided that such ratio is not greater
than 2.70 to 1.0.
(b) The Agents and the Lenders hereby agree that, for purposes of
the financial covenants contained in paragraph (ii) (Leverage Ratio) and (iv)
(Fixed Charge Coverage Ratio) of Section 7.02(p) of the Financing Agreement, the
Fiscal Quarter ended November 1, 1997 shall be the period from September 28,
1997 through and including November 1, 1997.
(c) The waivers and consents in this Section 5 shall be effective
only in this specific instance and for the specific purposes set forth herein
and do not allow for any other or further departure from the terms and
conditions of the Financing Agreement or any other Loan Document, which terms
and conditions shall continue in full force and effect.
6. Conditions to Effectiveness. This Amendment shall become
---------------------------
effective only upon satisfaction in full of the following conditions precedent
(the first date upon which all such conditions shall have been satisfied being
herein called the "Amendment Effective Date"):
(i) The representations and warranties contained in this
Amendment and in Article VI of the Financing Agreement shall be correct in
all material respects on and as of the Amendment Effective Date as though
made on and as of such date (except where such representations and
warranties relate to an earlier date in which case such representations and
warranties shall be true and correct as of such earlier date); no Event of
Default or Default shall have occurred and be continuing on the Amendment
Effective Date, or result from this Amendment becoming effective in
accordance with its terms.
-3-
<PAGE>
(ii) The Agents shall have received counterparts of this
Amendment which bear the signatures of the Company, the Borrowers and each
of the Lenders.
(iii) All legal matters incident to this Amendment shall be
satisfactory to the Agents and their counsel.
7. Representations and Warranties. Each of the Company and the
------------------------------
Borrowers represents and warrants to the Lenders as follows:
(a) The Company and each Borrower (i) is duly organized, validly
existing and in good standing under the laws of the state of its organization
and (ii) has all requisite power, authority and legal right to execute, deliver
and perform this Amendment, and to perform the Financing Agreement, as amended
hereby.
(b) The execution, delivery and performance by the Company and
the Borrowers of this Amendment and the performance by the Company and the
Borrowers of the Financing Agreement as amended hereby (i) have been duly
authorized by all necessary action, (ii) do not and will not violate or create a
default under the Company's or any Borrower's organizational documents, any
applicable law or any contractual restriction binding on or otherwise affecting
the Company or any Borrower or any of the Company's or such Borrower's
properties, and (iii) except as provided in the Loan Documents, do not and will
not result in or require the creation of any Lien, upon or with respect to the
Company's or any Borrower's property.
(c) No authorization or approval or other action by, and no
notice to or filing with, any Governmental Authority or other regulatory body is
required in connection with the due execution, delivery and performance by the
Company or any of the Borrowers of this Amendment and the performance by the
Company and the Borrowers of the Financing Agreement as amended hereby.
(d) This Amendment and the Financing Agreement, as amended
hereby, constitute the legal, valid and binding obligations of the Company and
the Borrowers party thereto, enforceable against such Persons in accordance with
their terms except to the extent the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect affecting generally the enforcement of
creditors' rights and remedies and by general principles of equity.
(e) The representations and warranties contained in Article VI of
the Financing Agreement are correct on and as of the Amendment Effective Date as
though made on and as of the Amendment Effective Date (except to the extent such
representations and warranties expressly relate to an earlier date), and no
Event of Default or Default, has occurred and is continuing on and as of the
Amendment Effective Date.
-4-
<PAGE>
8. Continued Effectiveness of Financing Agreement. Each of the
----------------------------------------------
Company and the Borrowers hereby (i) confirms and agrees that each Loan Document
to which it is a party is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects except that on and after
the Amendment Effective Date of this Amendment all references in any such Loan
Document to "the Financing Agreement", "thereto", "thereof", "thereunder" or
words of like import referring to the Financing Agreement shall mean the
Financing Agreement as amended by this Amendment, and (ii) confirms and agrees
that to the extent that any such Loan Document purports to assign or pledge to
the Collateral Agent, or to grant to the Collateral Agent a Lien on any
collateral as security for the Obligations of the Company and the Borrowers from
time to time existing in respect of the Financing Agreement and the Loan
Documents, such pledge, assignment and/or grant of a Lien is hereby ratified and
confirmed in all respects.
9. Miscellaneous.
-------------
a. This Amendment may be executed in any number of counterparts
and by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together shall constitute one
and the same agreement.
b. Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
c. This Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
d. The Borrowers will pay on demand all reasonable out-of-pocket
costs and expenses of the Agents in connection with the preparation, execution
and delivery of this Amendment, including, without limitation, the reasonable
fees, disbursements and other charges of Schulte Roth & Zabel LLP, counsel to
the Agents.
-5-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed by their respective officers thereunto duly authorized as of the day
and year first above written.
NORTON MCNAUGHTON, INC.
By:________________________________
Title:_____________________________
NORTON MCNAUGHTON OF SQUIRE, INC.
By:________________________________
Title:_____________________________
MISS ERIKA, INC.
By:________________________________
Title:_____________________________
AGENTS AND LENDERS
------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Administrative Agent and Lender
By:________________________________
Title:_____________________________
NATIONSBANC COMMERCIAL
CORPORATION, as Collateral Agent and Lender
By:________________________________
Title:_____________________________
-6-
<PAGE>
LENDERS
BANKBOSTON, N.A.
By:________________________________
Title:_____________________________
FLEET BANK, N.A.
By:________________________________
Title:_____________________________
PNC BANK, NATIONAL ASSOCIATION
By:________________________________
Title:_____________________________
-7-
<PAGE>
ANNEX I
-------
Schedule 1.01A
--------------
Lenders and Lenders' Commitments
<TABLE>
<CAPTION>
Revolving
Credit Term Loan
Lender Commitment Commitment Percentage
------ ------------ ----------- ----------
<S> <C> <C> <C>
NationsBanc Commercial Corporation $ 50,595,000 $ 6,071,400 40.476%
The CIT Group/Commercial Services, Inc. $ 38,691,250 $ 4,642,950 30.953%
BankBoston, N.A. $ 13,392,500 $ 1,607,100 10.714%
Fleet Bank, N.A. $ 13,392,500 $ 1,607,100 10.714%
PNC Bank, National Association $ 8,928,750 $ 1,071,450 7.143%
------------ ----------- ------
$125,000,000 $15,000,000 100%
</TABLE>
<PAGE>
EXHIBIT 10.5
FOURTH AMENDMENT
TO
FINANCING AGREEMENT
Fourth Amendment, dated as of June 18, 1998 to the Financing
Agreement, dated as of September 25, 1997, as amended and supplemented prior to
the date hereof (as so amended and supplemented, the "Financing Agreement"), by
and among Norton McNaughton, Inc., a Delaware corporation (the "Company"),
Norton McNaughton of Squire, Inc., a New York corporation ("Squire"), Miss
Erika, Inc., a Delaware corporation formerly known as ME Acquisition Corp.
("Miss Erika" and together with Squire, each a "Borrower" and collectively, the
"Borrowers"), the lenders listed on Schedule I hereto under the captions
"Continuing Lenders" (the "Continuing Lenders") and "Departing Lenders" (the
"Departing Lenders" and together with the Continuing Lenders, each a "Lender"
and collectively the "Lenders"), NationsBanc Commercial Corporation, as
collateral agent for the Lenders (in such capacity, the "Collateral Agent") and
The CIT Group/Commercial Services, Inc., as administrative agent for the Lenders
(in such capacity, the "Administrative Agent" and together with the Collateral
Agent, each an "Agent" and collectively, the "Agents").
The Company, the Borrowers, the Lenders and the Agents desire to amend
and restate the Financing Agreement to among other things (a) prepay the term
loan in full, (b) increase the revolving credit facility to $175,000,000, (c)
extend the maturity date of the revolving credit facility to June 18, 2001, (d)
add JJ Acquisition Corp. as a Borrower, and (e) add Fleet Bank, NA as the
documentation agent, in each case on the terms and conditions hereafter set
forth. In addition, the Departing Lenders wish to assign their interests,
rights and obligations under the Financing Agreement to the Continuing Lenders
and the Continuing Lenders wish to accept such assignments.
Accordingly, the Company, the Borrowers, the Agents and the Lenders
hereby agree as follows:
1. Definitions. All capitalized terms used herein and not otherwise
-----------
defined herein are used herein as defined in the Financing Agreement as amended
and restated by this Fourth Amendment (the Financing Agreement as amended and
restated by this Fourth Amendment being called the "Restated Financing
Agreement").
2. Amendment of the Financing Agreement. The Financing Agreement
------------------------------------
(including all Exhibits and Schedules thereto) is hereby amended and restated to
read in its entirety as set forth in Annex A hereto. As used therein, the terms
"Agreement", "this Agreement", "herein", "hereinafter", "hereto", "hereof", and
words of similar import shall, unless the context otherwise requires, mean the
Financing Agreement as amended and restated by this Fourth Amendment.
<PAGE>
3. Assignments. (a) On and as of the Amendment Effective Date (as
-----------
hereafter defined), each of the Departing Lenders shall assign and each of the
Continuing Lenders shall purchase, at the principal amount thereof, such
interests in the Revolving Credit Loans and Letter of Credit Obligations
outstanding on such date as shall be necessary in order that, after giving
effect to all such assignments and purchases, the Loans and Letter of Credit
Obligations outstanding will be held by the Continuing Lenders ratably in
accordance with their Pro Rata Shares in the Revolving Credit Commitment, as set
forth in Schedule 1.01A attached to Annex A to this Amendment. Such assignments
and purchases shall be without recourse, representation or warranty, except that
(i) each Departing Lender represents that it is the legal and beneficial owner
of the interests assigned by it free and clear of any Lien and (ii) paragraphs 2
(other than clauses (i) and (v) thereof), 4 and 5 of Exhibit I to the Existing
Financing Agreement are hereby incorporated by reference as if set forth herein
and each Departing Lender shall be deemed to have made the representations,
warranties and statements of Assignor in such paragraphs and each Continuing
Lender shall be deemed to have made the representations, warranties and
statements of Assignee in such paragraphs.
(b) On the Amendment Effective Date (i) each of the Continuing
Lenders shall pay the purchase price for the Revolving Credit Loans purchased by
it pursuant to paragraph (a) of this Section 3 by wire transfer of immediately
available funds to the Administrative Agent in New York, New York, not later
than 12:00 noon, New York City time, and (ii) the Administrative Agent shall
promptly pay to each Departing Lender, out of the amounts received by it
pursuant to clause (i) of this paragraph (b), the purchase price for the
interests assigned by it pursuant to such paragraph (a) by wire transfer of
immediately available funds to an account designated by such Departing Lender.
(c) The Company and the Borrowers hereby consent to the
assignments and purchases provided for in paragraphs (a) and (b) of this Section
3 and agree that each Continuing Lender shall have all of the rights of a Lender
under the Financing Agreement with respect to the interests purchased by it
pursuant to such paragraphs. Commencing on the Amendment Effective Date, each
Departing Lender will cease to be a party to, and shall be released from its
obligations under, the Financing Agreement and the other Loan Documents, and the
Departing Lenders shall have no further rights to or interest in any of the
Collateral.
(d) On the Amendment Effective Date the Administrative Agent
shall pay to the Departing Lenders all accrued and unpaid interest and fees due
to such Departing Lenders pursuant to the terms of the Financing Agent and the
Administrative Agent is hereby authorized to charge the Loan Account for such
amounts.
4. Delivery of Notes. The Lenders shall deliver to the
-----------------
Administrative Agent, for delivery to and cancellation by the Borrowers, all
Notes issued by the Borrowers and held by the Lenders under the Financing
Agreement (collectively, the "Old Notes"), which Old Notes are hereby deemed
canceled effective from delivery of the New Notes to the Administrative Agent.
The Borrowers (including Jeri-Jo) shall execute and deliver to the
Administrative Agent for the account of each Continuing Lender the Notes which
such Lender is entitled to receive pursuant to Section 2.04 of the Restated
Financing Agreement, in the form of Exhibit A thereto and in the
<PAGE>
principal amount for each Lender equal to its Revolving Credit Commitment (the
"New Notes"). The Administrative Agent shall release and deliver the Old Notes
to the Borrowers for cancellation and deliver the New Notes to the Continuing
Lenders.
5. Conditions to Effectiveness. This Fourth Amendment shall become
---------------------------
effective only upon satisfaction in full of the following conditions precedent
(the first date upon which all such conditions shall have been satisfied being
herein called the "Amendment Effective Date"):
(i) The Agents shall have received counterparts of this
Fourth Amendment and the Restated Financing Agreement which bear the
signatures of the Company, the Borrowers (including Jeri-Jo) and each of
the Lenders, as appropriate.
(ii) The Administrative Agent shall have received payment
in full of the Term Loan and all accrued interest thereon.
(iii) Each of the conditions set forth in Section 5.01 of
the Restated Financing Agreement shall be satisfied to the satisfaction of
the Agents.
(iv) All legal matters incident to this Fourth Amendment
and the Restated Financing Agreement shall be satisfactory to the Agents
and their counsel.
6. Representations and Warranties. Each of the Company and the
------------------------------
Borrowers represents and warrants to the Lenders as follows:
(a) The execution, delivery and performance by the Company and
the Borrowers of this Fourth Amendment and all other documents executed by it in
connection with this Fourth Amendment, the execution, delivery and performance
by each Borrower of the New Notes and the performance by the Company and the
Borrowers of the Restated Financing Agreement (i) have been duly authorized by
all necessary corporate action, (ii) do not violate or create a default under
the Company's or any Borrower's organizational documents, any applicable law or
any contractual restriction binding on or otherwise affecting the Company or any
Borrower or any of the Company's or such Borrower's properties, and (iii) except
as provided in the Loan Documents, do not result in or require the creation of
any Lien, upon or with respect to the Company's or any Borrower's property.
(b) No authorization or approval or other action by, and no
notice to or except for filings of UCC-1 Financing Statements and filing in the
US Patent and Trademark Office, filing with, any Governmental Authority or other
regulatory body is required in connection with the due execution, delivery and
performance by the Company or any of the Borrowers of this Amendment and all
other documents executed by it in connection with this Fourth Amendment, the
execution, delivery and performance by each Borrower of the New Notes and the
performance by the Company and the Borrowers of the Restated Financing
Agreement.
<PAGE>
(c) This Fourth Amendment and the Restated Financing Agreement
and all other documents executed in connection with this Fourth Amendment
constitute the legal, valid and binding obligations of the Company and the
Borrowers party thereto, enforceable against such Persons in accordance with
their terms except to the extent the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect affecting generally the enforcement of
creditors' rights and remedies and by general principles of equity.
7. Continued Effectiveness of Financing Agreement. Each of the
----------------------------------------------
Company and the Borrowers hereby (i) confirms and agrees that each Loan Document
to which it is a party is, and shall continue to be, in full force and effect
and is hereby ratified and confirmed in all respects except that on and after
the Amendment Effective Date all references in any such Loan Document to "the
Financing Agreement", "thereto", "thereof", "thereunder" or words of like import
referring to the Financing Agreement shall mean the Restated Financing
Agreement, and (ii) confirms and agrees that to the extent that any such Loan
Document purports to collaterally assign or pledge to the Collateral Agent, or
to grant to the Collateral Agent a Lien on any collateral as security for the
Obligations of the Company and the Borrowers from time to time existing in
respect of the Existing Financing Agreement and the Loan Documents, such pledge,
collateral assignment and/or grant of a Lien is hereby ratified and confirmed in
all respects.
8. Miscellaneous.
-------------
a. This Fourth Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which shall be deemed to be an original, but all of which taken together shall
constitute one and the same agreement.
b. Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Fourth
Amendment for any other purpose.
c. This Fourth Amendment shall be governed by, and construed in
accordance with, the laws of the State of New York.
d. The Borrowers will pay on demand all reasonable out-of-pocket
costs and expenses of the Agents in connection with the preparation, execution
and delivery of this Fourth Amendment, including, without limitation, the
reasonable fees, disbursements and other charges of Schulte Roth & Zabel LLP,
counsel to the Agents.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
Amendment to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
NORTON MCNAUGHTON, INC.
By:________________________________
Title:_____________________________
NORTON MCNAUGHTON OF SQUIRE, INC.
By:________________________________
Title:_____________________________
MISS ERIKA, INC.
By:________________________________
Title:_____________________________
AGENTS AND LENDERS
------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Administrative Agent
By:________________________________
Title:_____________________________
NATIONSBANC COMMERCIAL
CORPORATION, as Collateral Agent
By:________________________________
Title:_____________________________
<PAGE>
LENDERS
-------
FLEET BANK, NA
By:________________________________
Title:_____________________________
BANKBOSTON, N.A.
By:________________________________
Title:_____________________________
PNC BANK, NATIONAL ASSOCIATION
By:________________________________
Title:_____________________________
<PAGE>
LENDERS
-------
FLEET BANK, NA
By:________________________________
Title:_____________________________
BANKBOSTON, N.A.
By:________________________________
Title:_____________________________
<PAGE>
SCHEDULE I
----------
CONTINUING LENDERS
- ------------------
NationsBanc Commercial Corporation
The CIT Group/Commercial Services, Inc.
Fleet Bank, NA
PNC Bank, National Association
DEPARTING LENDERS
- -----------------
Bank Boston, N.A.
<PAGE>
EXHIBIT 10.6
AMENDED AND RESTATED FINANCING AGREEMENT
Dated as of June 18, 1998
by and among
NORTON McNAUGHTON, INC.,
NORTON McNAUGHTON OF SQUIRE, INC.,
MISS ERIKA, INC.,
JJ ACQUISITION CORP.,
THE FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
NATIONSBANC COMMERCIAL CORPORATION,
as Collateral Agent,
THE CIT GROUP/COMMERCIAL SERVICES, INC.,
as Administrative Agent
and
FLEET BANK, NA,
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS; CERTAIN TERMS....................................... 2
SECTION 1.01. Definitions................................................... 2
SECTION 1.02. Accounting and Other Terms.................................... 24
SECTION 1.03. Time References............................................... 25
ARTICLE II THE LOANS........................................................ 25
SECTION 2.01. Commitments................................................... 25
SECTION 2.02. Loans......................................................... 26
SECTION 2.03. Making the Loans.............................................. 26
SECTION 2.04. Notes; Repayment of Loans..................................... 26
SECTION 2.05. Funding and Settlement Procedures............................. 26
SECTION 2.06. Interest...................................................... 29
SECTION 2.07. Reduction of Commitment; Prepayment of Loans.................. 29
SECTION 2.08. Fees.......................................................... 33
SECTION 2.09. Eurodollar Rate Not Determinable; Illegality or
Impropriety................................................. 33
SECTION 2.10. Indemnity..................................................... 34
SECTION 2.11. Continuation and Conversion of Loans.......................... 35
SECTION 2.12. Taxes......................................................... 36
SECTION 2.13. Joint and Several Liability of the Borrowers.................. 37
ARTICLE III LETTERS OF CREDIT................................................ 39
SECTION 3.01. Letter of Credit Guaranty..................................... 39
SECTION 3.02. Participations................................................ 43
SECTION 3.03. Letters of Credit............................................. 44
ARTICLE IV FEES, PAYMENTS AND OTHER COMPENSATION............................ 46
SECTION 4.01. Audit and Collateral Monitoring Fees.......................... 46
SECTION 4.02. Payments; Computations and Statements......................... 46
SECTION 4.03. Sharing of Payments, Etc...................................... 47
SECTION 4.04. Apportionment of Payments..................................... 48
SECTION 4.05. Increased Costs and Reduced Return............................ 48
ARTICLE V CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT ISSUANCE AND
LENDING........................................................ 50
SECTION 5.01. Conditions Precedent to Effectiveness......................... 50
SECTION 5.02. Conditions Precedent to Loans and Letters of Credit........... 55
ARTICLE VI REPRESENTATIONS AND WARRANTIES................................... 56
SECTION 6.01. Representations and Warranties................................ 56
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII COVENANTS OF THE BORROWER........................................ 64
SECTION 7.01. Affirmative Covenants......................................... 64
SECTION 7.02. Negative Covenants............................................ 72
ARTICLE VIII MANAGEMENT, COLLECTION AND STATUS OF ACCOUNTS RECEIVABLE AND
OTHER COLLATERAL............................................... 84
SECTION 8.01. Management of Collateral...................................... 84
SECTION 8.02. Accounts Receivable Documentation............................. 85
SECTION 8.03. Status of Accounts Receivable and Other Collateral............ 86
SECTION 8.04. Collateral Custodian.......................................... 87
ARTICLE IX THE AGENTS....................................................... 88
SECTION 9.01. Authorization and Action...................................... 88
SECTION 9.02. Borrower's Default............................................ 88
SECTION 9.03. Agents' Reliance, Etc......................................... 89
SECTION 9.04. CIT, NationsBanc and Fleet.................................... 89
SECTION 9.05. Lender Credit Decision........................................ 90
SECTION 9.06. Indemnification............................................... 90
SECTION 9.07. Successor Agents.............................................. 90
SECTION 9.08. Collateral Matters............................................ 91
ARTICLE X EVENTS OF DEFAULT................................................ 92
SECTION 10.01. Events of Default............................................. 92
SECTION 10.02. Deposit for Letters of Credit................................. 95
ARTICLE XI GUARANTY......................................................... 95
SECTION 11.01. Guaranty...................................................... 95
SECTION 11.02. Obligations Unconditional..................................... 95
SECTION 11.03. Waivers....................................................... 96
SECTION 11.04. Subrogation................................................... 97
SECTION 11.05. No Waiver; Remedies........................................... 97
SECTION 11.06. Stay of Acceleration.......................................... 97
ARTICLE XII MISCELLANEOUS.................................................... 97
SECTION 12.01. Termination................................................... 97
SECTION 12.02. Notices, Etc.................................................. 99
SECTION 12.03. Amendments, Etc............................................... 100
SECTION 12.04. No Waiver; Remedies, Etc...................................... 101
SECTION 12.05. Expenses; Taxes; Attorneys' Fees.............................. 101
SECTION 12.06. Right of Set-off.............................................. 102
SECTION 12.07. Severability.................................................. 103
SECTION 12.08. Assignments and Participations................................ 103
SECTION 12.09. Counterparts.................................................. 104
SECTION 12.10. Headings...................................................... 105
SECTION 12.11. Governing Law................................................. 105
SECTION 12.12. WAIVER OF JURY TRIAL, ETC..................................... 105
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 12.13. Consent by the Agents, Lenders................................ 106
SECTION 12.14. No Party Deemed Drafter....................................... 106
SECTION 12.15. Reinstatement; Certain Payments............................... 106
SECTION 12.16. Indemnification............................................... 106
SECTION 12.17. Binding Effect................................................ 107
SECTION 12.18. Releases of Collateral........................................ 107
SECTION 12.19. Confidentiality............................................... 108
SECTION 12.20. No Novation................................................... 109
</TABLE>
SCHEDULE 1.01A Lenders and Lenders' Commitments
SCHEDULE 1.01B Fiscal Year, Fiscal Month, Fiscal Quarter
SCHEDULE 1.01C Prior Season Inventory
SCHEDULE 1.01D Pricing Grid
SCHEDULE 3.03(c) Existing Letters of Credit
SCHEDULE 5.01(d)(iv) Additional Pledged Stock
SCHEDULE 6.01(e) Inventory Locations
SCHEDULE 6.01(f) Subsidiaries
SCHEDULE 6.01(g) Litigation
SCHEDULE 6.01(j) ERISA
SCHEDULE 6.01(k) Taxes, Etc.
SCHEDULE 6.01(s) Operating Lease Obligations
SCHEDULE 6.01(y) Tradenames
SCHEDULE 6.01(aa) Material Contracts
SCHEDULE 7.02(a)(ii) Liens
SCHEDULE 7.02(b)(ii) Indebtedness
SCHEDULE 7.02(c)(iii) Guaranties
SCHEDULE 7.02(f)(ii) Investments
SCHEDULE 7.02(g) Capitalized Lease Obligations
SCHEDULE 7.02(k)(ii) Promissory Notes
SCHEDULE 7.02(m) Transactions with Affiliates
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B-1 Form of Subsidiary Guaranty
EXHIBIT B-2 Form of Borrower Guaranty
EXHIBIT C-1 Form of Borrower Security Agreement
EXHIBIT C-2 Form of Guarantor Security Agreement
EXHIBIT D-1 Form of Borrower Pledge Agreement
EXHIBIT D-2 Form of Parent Pledge Agreement
EXHIBIT E Form of Letter of Credit Application
EXHIBIT F Form of New York Counsel Opinion
EXHIBIT G Form of Local Counsel Opinion
EXHIBIT H Form of Assignment and Acceptance
EXHIBIT I Form of Notice of Borrowing
(iii)
<PAGE>
EXHIBIT J Form of Borrowing Base Certificate
EXHIBIT K Form of Release Certificate
EXHIBIT L-1 Form of Subordinated Intercompany Revolving Credit Note
EXHIBIT L-2 Form of Subordinated Intercompany Revolving Credit Note
(Squire)
EXHIBIT L-3 Form of Subordinated Intercompany Revolving Credit Note
(Jeri-Jo)
(iv)
<PAGE>
SCHEDULE 1.01A
LENDERS AND LENDERS' COMMITMENTS
--------------------------------
<TABLE>
<CAPTION>
Lender Commitment Percentage
------ ---------- ----------
<S> <C> <C>
NationsBanc Commercial Corporation $ 56,410,300 32.235%
The CIT Group/Commercial Services, Inc. $ 51,794,850 29.597%
Fleet Bank, NA $ 51,794,850 29.597%
PNC Business Credit $ 15,000,000 8.571%
---------------------------------------
175,000,000 100.000%
---------------------------------------
</TABLE>
<PAGE>
SCHEDULE 1.01B
FISCAL YEAR, FISCAL MONTH, FISCAL QUARTER
-----------------------------------------
PART A: "FISCAL YEAR"
Each fiscal year end for the Company and its Consolidated
Subsidiaries is October 31st, if such date falls on a Saturday,
or the first Saturday following October 31st. The Company and its
Consolidated Subsidiaries operate on a 52 or 53-week fiscal year.
See below for examples of actual fiscal years.
PART B: "FISCAL MONTH"
Each fiscal month end for the Company and its Consolidated
Subsidiaries is the 30th or 31st of such month, if such date
falls on a Saturday, or the first Saturday following the 30th
or 31st.
See below for examples of actual fiscal months.
PART C: "FISCAL QUARTER"
Each fiscal quarter end for the Company and its Consolidated
Subsidiaries is January 31st, April 30th, July 31st and October
31st, if such date falls on a Saturday, or the first Saturday
following January 31st, April 30th, July 31st and October 31st.
The Company and its Consolidated Subsidiaries operate on a 13-
week quarter (4 weeks, 4 weeks, 5 weeks).
See below for examples of actual fiscal quarters.
<TABLE>
<CAPTION>
FY PERIOD ENDING DATES FOR:
------------------------------------------------------
# WKS/ 1997 1998 1999 2000
QUARTER PERIOD # MONTH MTH 96-97 97-98 98-99 99-00
- ------------ -------- --------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
------------
1 November 4 11/29/97 11/28/98 12/04/99
1st 2 December 4 12/27/97 12/26/98 1/01/00
- ---
3 January 5 01/31/98 01/30/99 02/05/00
------------
------------
4 February 4 02/28/98 02/27/99 03/04/00
2nd 5 March 4 03/28/98 03/27/99 04/01/00
- --- 6 April 5 05/02/98 05/01/99 05/06/00
------------
------------
7 May 4 05/30/98 05/29/99 06/03/00
3rd 8 June 4 06/27/98 06/26/99 07/01/00
- --- 9 July 5 08/02/97 08/01/98 07/31/99 08/05/00
------------
------------
August 4 08/30/97 08/29/98 08/28/99 09/02/00
September 4 09/27/97 09/26/98 09/25/99 09/30/00
4th November 5 11/01/97 10/31/98 11/06/99 11/04/00
- --- ------------
</TABLE>
Note: Fiscal 1999 is a 53-wk year
<PAGE>
SCHEDULE 1.01C
PRIOR SEASON INVENTORY
----------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
DATE ELIGIBLE AMOUNT INELIGIBLE
---- --------------- ----------
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
1. July 1 - Sept. 30 Year 2 . 75% Fall Year 1 without . All Prior Season Inventory not
confirmed purchase order set forth in Eligible Amount
column
. 50% Holiday, Spring and
Transition Year 1 without
confirmed purchase order
. 100% Prior Season Inventory
with confirmed purchase order
- -----------------------------------------------------------------------------------------------------
2. Oct. 1 - Nov. 30 Year 2 . 75% Fall and Holiday Year 1 . All Prior Season Inventory not
without confirmed purchase set forth in Eligible Amount
order column
. 50% Spring and Transition Year
1 without confirmed purchase
order
. 100% Prior Season Inventory
with confirmed purchase order
- -----------------------------------------------------------------------------------------------------
3. Dec. 1 - Dec. 31 Year 2 . 75% Holiday Year 1 without . All Prior Season Inventory not
confirmed purchase order set forth in Eligible Amount
column
. 50% Spring, Transition and
Fall Year 1 without confirmed
purchase order
. 100% Prior Season Inventory
with confirmed purchase order
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
4. Jan. 1 - Mar. 31 Year 2 . 75% Spring Year 1 without . All Prior Season Inventory not
confirmed purchase order set forth in Eligible Amount
column
. 50% Transition, Fall and
Holiday Year 1 without
confirmed purchase order
. 100% Prior Season Inventory
with confirmed purchase order
- -----------------------------------------------------------------------------------------------------
5. Apr. 1 - May 31 Year 2 . 75% Spring and Transition Year . All Prior Season Inventory not
1 without confirmed purchase set forth in Eligible Amount
order column
. 50% Fall and Holiday Year 1
without confirmed purchase
order
. 100% Prior Season Inventory
with confirmed purchase order
- -----------------------------------------------------------------------------------------------------
6. Jun. 1 - Jun. 30 Year 2 . 75% Transition Year 1 without . All Prior Season Inventory not
confirmed purchase order set forth in Eligible Amount
column
. 50% Fall, Holiday and Spring
Year 1 without confirmed
purchase order
. 100% Prior Season Inventory
with confirmed purchase order
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 1.01D
PRICING GRID
------------
<TABLE>
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
If the ratio of If the ratio of If the ratio of If the ratio of
Consolidated Funded Consolidated Funded Consolidated Funded Consolidated Funded
Debt to EBITDA is Debt to EBITDA is Debt to EBITDA is Debt to EBITDA is
greater than or greater than or greater than or less than 2.75
equal to 4.00 equal to 3.25 and equal to 2.75 and
less than 4.00 less than 3.25
- -----------------------------------------------------------------------------------------------------------------------
Applicable Base Rate (-, minus) 50 basis (-, minus) 75 basis (-, minus) 100 basis (-, minus) 125 basis
Margin points points points points
- -----------------------------------------------------------------------------------------------------------------------
Applicable 250 basis points 225 basis points 200 basis points 175 basis points
Eurodollar Rate
Margin
- -----------------------------------------------------------------------------------------------------------------------
Applicable L/C .875% .75% .625% .50%
Percentage
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Commencing on the Pricing Grid Effective Date, changes in the Applicable Base
Rate Margin, the Applicable Eurodollar Rate Margin or the Applicable L/C
Percentage resulting from changes in the ratio of Consolidated Funded Debt to
EBITDA shall become effective on the first day of the month following the date
of delivery to the Agents of the financial statements pursuant to Sections
7.01(a)(i) of this Agreement and shall remain in effect until the next change to
be effected pursuant to this paragraph. If any financial statements referred to
above are not delivered within the time period specified in Sections 7.01(a)(i),
then, until such financial statements are delivered, the ratio of Consolidated
Funded Debt to EBITDA as at the end of the Fiscal Quarter that would have been
covered thereby shall for the purposes hereof be deemed to be equal to or
greater than 4.00. Each determination of the ratio of Consolidated Funded Debt
to EBITDA pursuant to this paragraph shall be made with respect to the period of
four consecutive Fiscal Quarters ending at the end of the period covered by the
relevant financial statements, provided that with respect to the determination
of the ratio of Consolidated Funded Debt to EBITDA for (i) the fourth Fiscal
Quarter of 1998 and the first and second Fiscal Quarters of 1999, if the
Effective Date is on or prior to August 1, 1998 or (ii) the first, second and
third Fiscal Quarters of 1999, if the Effective Date is after August 1, 1998,
EBITDA shall equal the rolling four quarter EBITDA of the Company, Squire and
Miss Erika plus an annualized EBITDA of Jeri-Jo based upon EBITDA from the first
day of the first Fiscal Quarter following the Effective Date.
<PAGE>
AMENDED AND RESTATED
FINANCING AGREEMENT
AMENDED AND RESTATED FINANCING AGREEMENT, dated as of June 18, 1998,
by and among Norton McNaughton, Inc., a Delaware corporation (the "Company"),
-------
Norton McNaughton of Squire, Inc., a New York corporation ("Squire"), Miss
------
Erika, Inc., a Delaware corporation ("Miss Erika"), JJ Acquisition Corp., a
----------
Delaware corporation to be known as Jeri-Jo Knitwear, Inc. ("Jeri-Jo" and
-------
together with Squire and Miss Erika, each a "Borrower" and collectively the
--------
"Borrowers"), the financial institutions from time to time party hereto (each a
- ----------
"Lender" and collectively the "Lenders"), NationsBanc Commercial Corporation, as
------ -------
collateral agent for the Lenders (in such capacity, the "Collateral Agent"), The
----------------
CIT Group/Commercial Services, Inc., as administrative agent for the Lenders (in
such capacity, the "Administrative Agent"), and Fleet Bank, NA, as documentation
--------------------
agent for the Lenders (in such capacity, the "Documentation Agent" and together
-------------------
with the Collateral Agent and the Administrative Agent, each an "Agent" and
-----
collectively the "Agents").
------
RECITALS
The Company, Squire, Miss Erika, certain lenders (the "Existing
Lenders"), NationsBanc Commercial Corporation, as collateral agent for the
Existing Lenders, and The CIT Group/Commercial Services, Inc., as administrative
agent for the Existing Lenders, are parties to a Financing Agreement, dated as
of September 25, 1997, as amended by the First Amendment dated as of November
21, 1997 and the Second Amendment dated as of January 30, 1998 (as so amended,
the "Existing Financing Agreement") pursuant to which the Existing Lenders
----------------------------
extended credit to Squire and Miss Erika consisting of (a) a term loan to Squire
in the original principal amount of $15,000,000 and (b) a revolving credit
facility to Squire and Miss Erika in an aggregate principal amount not in excess
of $125,000,000 at any time outstanding, a portion of which was utilized for
letters of credit. The proceeds of such term loan and the loans under such
revolving credit facility were used to refinance existing indebtedness of Squire
and Miss Erika, to finance the Miss Erika Acquisition (as hereinafter defined)
and for general working capital purposes of Squire and Miss Erika. The letters
of credit were used to finance the purchase by Squire and Miss Erika of
inventory and for other general working capital purposes.
The Company, Squire and Miss Erika wish to amend and restate the
Existing Financing Agreement to, among other things (i) prepay the term loan in
full, (ii) increase the revolving credit facility to $175,000,000, (iii) extend
the maturity date of the revolving credit facility to June 18, 2001, and (iv)
add Jeri-Jo as a Borrower, on the terms and conditions hereinafter set forth.
Accordingly, the Company, the Borrowers, the Lenders and the Agents hereby agree
that on the Effective Date (as hereinafter defined) the Existing Financing
Agreement shall be amended and restated as follows:
<PAGE>
ARTICLE I
DEFINITIONS; CERTAIN TERMS
SECTION 1.01. Definitions. As used in this Agreement, the following
-----------
terms shall have the respective meanings indicated below, such meanings to be
applicable equally to both the singular and plural forms of such terms:
"Account Debtor" means each debtor, customer or obligor in any way
--------------
obligated on or in connection with any Account Receivable.
"Accounts Receivable" means any and all rights of a Borrower to
-------------------
payment for goods sold, including accounts, contract rights, general intangibles
and any and all such rights evidenced by chattel paper, instruments or
documents, whether due or to become due and whether or not earned by
performance, and whether now or hereafter acquired or arising in the future and
any proceeds arising therefrom or relating thereto.
"Action" has the meaning specified therefor in Section 12.13.
------
"Administrative Agent" has the meaning specified therefor in the
--------------------
preamble hereto.
"Affiliate" means, as to any Person, any other Person that directly or
---------
indirectly through one or more intermediaries, controls, is controlled by, or is
under common control with, such Person. For purposes of this definition,
"control" of a Person means the power, directly or indirectly, either to (i)
vote 5% or more of the Capital Stock having ordinary voting power for the
election of directors of such Person or (ii) direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Agents" has the meaning specified therefor in the preamble hereto.
------
"Agent Advances" has the meaning specified therefor in Section 9.08.
--------------
"A Letter of Credit Obligations" means Letter of Credit Obligations
------------------------------
attributable to Letters of Credit issued for the account of Squire.
"Applicable Base Rate Margin" means, with respect to a Base Rate Loan,
---------------------------
the percentage determined in accordance with the Pricing Grid, provided that, on
and prior to the Pricing Grid Effective Date, the Applicable Base Rate Margin
shall be equal to (-, minus) 75 basis points.
"Applicable Eurodollar Rate Margin" means, with respect to a
---------------------------------
Eurodollar Rate Loan, the percentage determined in accordance with the Pricing
Grid, provided that, on and prior to the Pricing Grid Effective Date, the
Applicable Eurodollar Rate Margin shall be equal to 225 basis points.
2
<PAGE>
"Applicable L/C Percentage" means, with respect to documentary Letters
-------------------------
of Credit, the percentage determined in accordance with the Pricing Grid,
provided that, on and prior to the Pricing Grid Effective Date, the Applicable
L/C Percentage shall be equal to .75%.
"A Revolving Credit Loan" means a Loan made by a Lender or the
-----------------------
Administrative Agent to Squire.
"Assignment and Acceptance" means an assignment and acceptance entered
-------------------------
into by an assigning Lender and an assignee and accepted by the Administrative
Agent, in accordance with Section 12.08 hereof and substantially in the form of
Exhibit H hereto.
"Assignment Agreement" means the Amended and Restated Intercreditor
--------------------
Agreement and Assignment of Factoring Proceeds dated as of the date hereof,
among the Factor, the Collateral Agent, the Administrative Agent, Squire, Miss
Erika and Jeri-Jo, as the same may be amended or otherwise modified from time to
time.
"Availability" shall mean, at any time (i) with respect to the
------------
Borrowers on a combined basis, the difference between (A) the lesser of (x) the
aggregate Borrowing Base Before Overadvance Amount of the Borrowers and (y) the
Total Commitment and (B) the sum of (x) the aggregate outstanding principal
amount of all Loans and (y) all Letter of Credit Obligations, and (ii) with
respect to any Borrower on an individual basis, the lesser of (A) the difference
between (x) the Borrowing Base Before Overadvance Amount of such Borrower and
(y) the sum of (1) the aggregate principal amount of all Loans of such Borrower
and (2) the aggregate Letter of Credit Obligations of such Borrower and (B) the
difference between (x) the Total Commitment and (y) the sum of (1) the aggregate
outstanding principal amount of all Loans and (2) the aggregate Letter of Credit
Obligations.
"Base Rate" means, for any day, an interest rate per annum equal to
---------
the greater of (i) the Prime Rate in effect on such day and (ii) the Federal
Funds Rate in effect on such day plus 1/2 of 1%.
"Base Rate Loan" means a Loan bearing interest at a rate calculated
--------------
based upon the Base Rate.
"Board" means the Board of Governors of the Federal Reserve System of
-----
the United States.
"Borrower" and "Borrowers" each has the meaning specified therefor in
-------- ---------
the preamble hereto.
"Borrowing Base" means with respect to a Borrower as of any date the
--------------
sum of (i) the Borrowing Base Before Overadvance Amount of such Borrower and
(ii) the Overadvance Amount allocated to such Borrower.
"Borrowing Base Before Overadvance Amount" means with respect to a
----------------------------------------
Borrower as of any date the difference between (i) the sum of (A) 85% of the Net
Amount of
3
<PAGE>
Eligible Accounts Receivable of such Borrower and (B) 60% of the value,
determined at the lower of cost or market value in accordance with GAAP, of such
Borrower's Eligible Inventory and (ii) such reserves as the Collateral Agent may
deem appropriate in the exercise of its reasonable business judgment based upon
the lending practices of the Collateral Agent, consistent with the practices
customary in the commercial finance industry generally.
"Borrowing Base Certificate" means the certification of the Borrowing
--------------------------
Base in compliance with Section 7.01(a)(v) hereof, substantially in the form of
Exhibit J hereto, as applicable, setting forth the calculation of the Borrowing
Base and Availability for each Borrower on an individual and combined basis.
"B Letter of Credit Obligations" means the Letter of Credit
------------------------------
Obligations attributable to Letters of Credit issued for the account of Miss
Erika.
"B Revolving Credit Loan" means a Loan made by a Lender or the
-----------------------
Administrative Agent to Miss Erika.
"Business Day" means any day other than a Saturday, Sunday or other
------------
day on which commercial banks in New York City and Charlotte, North Carolina are
required or authorized to close, provided, that with respect to the borrowing,
payment, conversion to or continuation of, or determination of interest rate on,
Eurodollar Loans, Business Day shall mean any Business Day on which dealings in
Dollars may be carried on in the interbank eurodollar markets in New York City,
Charlotte and London.
"Capital Guideline" means any law, rule, regulation, policy, guideline
-----------------
or directive (whether or not having the force of law and whether or not the
failure to comply therewith would be unlawful) (i) regarding capital adequacy,
capital ratios, capital requirements, the calculation of a bank's capital or
similar matters, or (ii) affecting the amount of capital required to be obtained
or maintained by the Lenders, any Person controlling any Lender, or the L/C
Issuer or the manner in which the Lenders, any Person controlling any Lender or
the L/C Issuer allocate capital to any of their contingent liabilities
(including letters of credit), advances, acceptances, commitments, assets or
liabilities.
"Capital Stock" means any and all shares, interests, participations,
-------------
warrants, options or other equivalents (however designated) of capital stock of
a corporation or any and all equivalent ownership interests in a Person (other
than a corporation).
"Capitalized Lease" means any lease which is required under GAAP to be
-----------------
capitalized on the balance sheet of the lessee.
"Capitalized Lease Obligations" means obligations for the payment of
-----------------------------
rent for any real or personal property under leases or agreements to lease that,
in accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with such principles.
4
<PAGE>
"Change of Control" means (i) any person or group of persons (within
-----------------
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934, as
amended) shall have acquired beneficial ownership (within the meaning of Rule
13d-3 promulgated by the Securities and Exchange Commission under said Act) of
40% or more of the voting power of the then outstanding common stock of the
Company, (ii) during any period of 12 consecutive calendar months, individuals
who were directors of the Company on the first day of such period shall cease to
constitute a majority of the board of directors of the Company, provided that a
director who has resigned or is replaced during such time shall not be included
in any determination of whether a Change of Control has occurred pursuant to
this clause (ii) to the extent such director is replaced by a successor director
elected by a majority of those directors who were directors at the commencement
of such period, (iii) the Company shall cease to directly own and control, of
record and beneficially, 100% of the then outstanding Capital Stock of each
Borrower free and clear of all Liens other than (A) in the case of the Capital
Stock of Miss Erika, the Lien of Old ME Corp. and (B) in the case of the Capital
Stock of Jeri-Jo, the Lien of the Sellers, (iv) either Sanford Greenberg or
Peter Boneparth shall cease to manage and be involved in the day-to-day
operations of the Company and Squire and a successor, reasonably acceptable to
the Agents, is not appointed within 180 days of the cessation of such management
and involvement, (v) either Howard Zwilling or Stuart Bregman shall cease to
manage and be involved in the day-to-day operations of Miss Erika and a
successor, reasonably acceptable to the Agents, is not appointed within 180 days
of the cessation of such management and involvement (vi) either Susan Schneider
or Leslie Schneider shall cease to be involved in the day-to-day operations of
Jeri-Jo and a successor, reasonably acceptable to the Agents, is not appointed
within 180 days of the cessation of such management and involvement or (vii) a
"Change of Control" (as defined in the Indenture) shall have occurred.
"CIT" means The CIT Group/Commercial Services, Inc., a New York
---
corporation.
"C Letter of Credit Obligations" means the Letter of Credit
------------------------------
Obligations attributable to Letters of Credit issued for the account of Jeri-Jo.
"Collateral" means all of the property (tangible and intangible)
----------
purported to be subject to the Lien purported to be created by any mortgage,
deed of trust, security agreement, pledge agreement, assignment or other
security document heretofore or hereafter executed by any Person as security for
all or any part of the Obligations.
"Collateral Agent" has the meaning specified therefor in the preamble
----------------
hereto.
"Commitment" means, with respect to each Lender, the revolving credit
----------
commitment of such Lender as set forth in Schedule 1.01A hereto, as the same may
be adjusted from time to time pursuant to the terms of this Agreement.
"Company" has the meaning specified therefor in the preamble hereto.
-------
"Company Notes" means the Company's 12 1/2% Senior Notes due 2005,
-------------
which will be issued pursuant to the Indenture.
5
<PAGE>
"Consolidated Current Assets" means, at a particular date, all cash,
---------------------------
cash equivalents, accounts and inventory of a Person and its Consolidated
Subsidiaries and all other items which would, in conformity with GAAP, be
included under current assets on a balance sheet of such Person and its
Consolidated Subsidiaries on a consolidated basis as at such date; provided,
--------
however, for the purposes hereof (i) Accounts Receivable of the Borrowers shall
- -------
not be considered sold pursuant to the Factoring Agreements and will be included
in Consolidated Current Assets, (ii) the Inventory of Miss Erika and Jeri-Jo
shall be determined without giving effect to any purchase accounting reserves,
and (iii) prior to October 31, 1998, all barter credits arising from the going
out of business sales of Norty's Inc. shall be included as a current asset;
provided, further, that such amounts shall not include (A) any amounts for any
- -------- -------
Indebtedness owing by an Affiliate to such Person or any of its Consolidated
Subsidiaries, unless such Indebtedness arose in connection with the sale of
goods or rendition of services in the ordinary course of business and would
otherwise constitute current assets in conformity with GAAP, (B) any shares of
stock issued by an Affiliate of such Person or any of its Consolidated
Subsidiaries or (C) the cash surrender value of any life insurance policy.
"Consolidated Current Liabilities" means, at a particular date, all
--------------------------------
amounts which would, in conformity with GAAP, be included under current
liabilities on a balance sheet of a Person and its Consolidated Subsidiaries on
a consolidated basis, as at such date, but in any event including, without
limitation, the amounts of (i) all Indebtedness of such Person or any of its
Consolidated Subsidiaries payable on demand, or, at the option of the Person to
whom such Indebtedness is owed, not more than twelve (12) months after such
date, (ii) any payments in respect of any Indebtedness of such Person or any of
its Consolidated Subsidiaries (whether installment, serial maturity, sinking
fund payment or otherwise) required to be made not more than twelve (12) months
after such date, (iii) all accruals for federal or other taxes measured by
income payable within a twelve (12) month period, and (iv) the Loans.
"Consolidated EBIT" means, for any Person and its Consolidated
-----------------
Subsidiaries, for any period, the net income (or net loss) of such Person and
its Consolidated Subsidiaries for such period, plus (i) the sum, without
----
duplication, of (A) gross interest expense (including Letter of Credit fees and
charges, any fees paid to the Agents and amortization of deferred financing
costs in connection with the Agreement and the Company Notes) for such period
minus gross interest income for such period, (B) income tax expense, and (C)
extraordinary or unusual non-cash losses (provided such extraordinary or unusual
losses do not at any time result in a cash outlay by such Person), less (ii)
----
extraordinary gains, each determined on a consolidated basis in accordance with
GAAP for such Person and its Consolidated Subsidiaries.
"Consolidated EBITDA" means for any Person and its Consolidated
-------------------
Subsidiaries, for any period, the net income (or net loss) of such Person and
its Consolidated Subsidiaries for such period, plus (i) the sum, without
----
duplication, of (A) gross interest expense (including Letter of Credit fees and
charges, any fees paid to the Agents and amortization of deferred financing
costs in connection with the Agreement and the Company Notes) for such period
minus gross interest income for such period, (B) income tax expense, (C)
depreciation expense, (D) amortization expense (including amortization of
deferred financing costs) net of negative goodwill amortization, and (E)
extraordinary or unusual non-cash losses (provided such
6
<PAGE>
extraordinary or unusual losses do not at any time result in a cash outlay by
such Person), less (ii) extraordinary gains, each determined on a consolidated
----
basis in accordance with GAAP for such Person and its Consolidated Subsidiaries.
"Consolidated Fixed Charges" means, for any Person and its
--------------------------
Consolidated Subsidiaries for any period, the sum of, without duplication (i)
Consolidated Net Interest Expense for such period, (ii) all principal of
Indebtedness for borrowed money of such Person or any of its Consolidated
Subsidiaries having a scheduled due date during such period (not including
mandatory prepayments pursuant to Section 2.07 hereof), (iii) cash dividends or
distributions paid by such Person or any of its Consolidated Subsidiaries (other
than dividends and distributions paid to the Company) during such period, (iv)
the total income tax liability actually payable by such Person or any of its
Consolidated Subsidiaries in respect of such period, (v) cash expenditures for
the repurchase of the Company's Capital Stock made during such period, and (vi)
cash capital expenditures of such Person and its Consolidated Subsidiaries made
during such period.
"Consolidated Funded Debt" means, for any Person and its Consolidated
------------------------
Subsidiaries for any period, the sum of the following for such Person and its
Consolidated Subsidiaries determined in conformity with GAAP (i) indebtedness
for borrowed money, (ii) indebtedness evidenced by bonds, debentures, notes or
other similar instruments, and (iii) Capitalized Lease Obligations.
"Consolidated Net Interest Expense" means, for any Person and its
---------------------------------
Consolidated Subsidiaries for any period, gross cash interest expense of such
Person and its Consolidated Subsidiaries for such period determined in
conformity with GAAP less the following for such Person and its Consolidated
----
Subsidiaries determined in conformity with GAAP (i) the sum of (a) interest
income for such period and (b) gains for such period on Hedging Agreements (to
the extent not included in interest income above and to the extent not deducted
in the calculation of such gross interest expense), plus the following for such
----
Person and its Consolidated Subsidiaries determined in conformity with GAAP (ii)
the sum of (a) losses for such period on Hedging Agreements (to the extent not
included in such gross interest expense) and (b) the expending of upfront costs
or fees for such period associated with Hedging Agreements (to the extent not
included in gross interest expense).
"Consolidated Net Worth" means, with respect to a Person and its
----------------------
Consolidated Subsidiaries, the excess of (i) the aggregate net book value of the
assets of such Person and its Consolidated Subsidiaries on a consolidated basis
after adjustments in accordance with GAAP (including, without limitation,
reserves for doubtful receivables, obsolescence, depreciation and amortization
and any valuation allowance against tax assets and excluding the amount of any
write-up or revaluation of any asset and the effect of any purchase accounting
reserves applicable to the Inventory of Miss Erika and Jeri-Jo) over (ii) the
Consolidated Total Liabilities of such Person and its Consolidated Subsidiaries
on a consolidated basis, in each case computed and consolidated in accordance
with GAAP.
7
<PAGE>
"Consolidated Subsidiary" of a Person at any time shall mean those
-----------------------
Subsidiaries of such Person whose accounts are or should in accordance with GAAP
be consolidated with those of such Person.
"Consolidated Total Liabilities" means, for a Person and its
------------------------------
Consolidated Subsidiaries, at any date, without duplication, all obligations
which in conformity with GAAP would be included in determining total liabilities
as shown on the liabilities side of a balance sheet of such Person and its
Consolidated Subsidiaries.
"C Revolving Credit Loan" means a Loan made by a Lender or the
-----------------------
Administrative Agent to Jeri-Jo.
"Default" means an event which, with the giving of notice or the lapse
-------
of time or both, would constitute an Event of Default.
"Depository Account" means the depository account maintained by the
------------------
Administrative Agent at the Depository Bank for the deposit by Jeri-Jo of all
amounts received from its Account Debtors and all proceeds from the sale of its
Inventory.
"Depository Bank" means Fleet Bank, NA at which the Depository Account
---------------
is maintained.
"Documentation Agent" has the meaning specified therefor in the
-------------------
preamble hereto.
"Documents" means the Miss Erika Acquisition Documents, the Jeri-Jo
---------
Purchase Documents, the Offering Documents and the Loan Documents.
"Dollar", "Dollars" and the symbol "$" means lawful money of the
------ ------- -
United States of America.
"Early Termination Fee" means a fee equal to (i) the sum of (A) the
---------------------
aggregate unpaid principal amount of the Loans and (B) the Letter of Credit
Obligations, in each case outstanding at the time of the termination of the
Total Commitment, multiplied by (ii) (A) 1.5%, if the Total Commitment is
-------------
terminated on or before June 18, 1999 and (B) 1.0%, if the Total Commitment is
terminated after June 18, 1999 and before June 19, 2000.
"Effective Date" has the meaning specified therefor in Article V
--------------
hereof.
"Eligible Accounts Receivable" means, with respect to any Borrower,
----------------------------
the Accounts Receivable of such Borrower which are and at all times continue to
be, reasonably acceptable to the Collateral Agent in all respects. Criteria for
eligibility may be established and revised from time to time solely by the
Collateral Agent in the exercise of its reasonable business judgment based upon
the lending practices of the Collateral Agent consistent with those criteria
customary in the commercial finance industry generally. Notwithstanding the
foregoing, Accounts Receivable of a Borrower shall be deemed to be acceptable
and eligible if such
8
<PAGE>
Accounts Receivable are generated in the ordinary course of business of such
Borrower and are purchased and credit approved and continue to be credit
approved, in each case by Factor, under the relevant Factoring Agreement and are
and continue to be subject to the Assignment Agreement. In addition, Accounts
Receivable that are purchased and not credit approved (including as the result
of a withdrawal of credit approval) by Factor under the relevant Factoring
Agreement may, in the reasonable business judgment of the Collateral Agent, be
deemed to be eligible if: (i) delivery of the merchandise has been completed;
(ii) no return, rejection or repossession has occurred; (iii) the merchandise
has been accepted by the Account Debtor without dispute, setoff, defense or
counterclaim; (iv) such Account Receivable is (A) owned by a Borrower free and
clear of any Lien, other than in favor of the Collateral Agent or the Factor
under the relevant Factoring Agreement or (B) if purchased by the Factor,
subject to the Assignment Agreement, and in each such case otherwise continues
to be in full conformity with any and all representations and warranties made by
such Borrower to the Agents and the Lenders with respect thereto in the Loan
Documents; (v) such Account Receivable is unconditionally payable in Dollars
within 90 days from the invoice date and is not evidenced by a promissory note,
chattel paper or any other instrument or document; (vi) no more than 60 days
have elapsed from the invoice due date and no more than 90 days have elapsed
from the invoice date; (vii) the Account Debtor with respect thereto is not an
Affiliate of any Borrower or any Guarantor; (viii) such Account Receivable does
not constitute an obligation of the United States or any other Governmental
Authority; (ix) the Account Debtor (or the applicable office of the Account
Debtor) with respect thereto is located in the continental United States, unless
the Account Receivable is supported by a letter of credit or other similar
obligation satisfactory to the Collateral Agent; (x) the Account Debtor with
respect thereto is not also a supplier to or creditor of a Borrower or
Guarantor, unless such supplier or creditor has executed a no-offset letter
satisfactory to the Collateral Agent; (xi) not more than 50% of the aggregate
amount of all Accounts Receivable of the Account Debtor with respect to such
Account Receivable have remained unpaid 60 days past the invoice due date or 90
days past the invoice date; (xii) the Account Debtor is not the subject of a
"Bankruptcy Proceeding"; for purposes hereof an Account Debtor is subject to a
"Bankruptcy Proceeding" if such Account Debtor has filed a petition for
bankruptcy or any other relief under the United States Bankruptcy Code or any
other law relating to bankruptcy, insolvency, reorganization or relief of
debtors, made an assignment for the benefit of creditors, had filed against it
any petition or other application for relief under the United States Bankruptcy
Code or any such other law, has failed, suspended business operations, become
insolvent, called a meeting of its creditors for the purpose of obtaining any
financial concession or accommodation, or had or suffered to be appointed a
receiver or a trustee for all or a significant portion of its assets or affairs;
and (xiii) the Collateral Agent is, and continues to be, reasonably satisfied
with the credit standing of the Account Debtor in relation to the amount of
credit extended.
"Eligible Amount of Prior Season Inventory" means, with respect to
-----------------------------------------
each shipping season, the Prior Season Inventory of Miss Erika during such
shipping season or seasons valued at the lower of cost or market value in
accordance with GAAP in an amount equal to the sum of (i) 75% of the Prior
Season Inventory for the corresponding shipping season or seasons of the
immediately preceding year not subject to a confirmed purchased order, (ii) 50%
of the Prior Season Inventory from the immediately preceding year (not covered
by clause (i)
9
<PAGE>
above) not subject to a confirmed purchase order, and (iii) 100% of all other
Prior Season Inventory (not covered by clauses (i) or (ii) above) subject to a
confirmed purchase order. By way of illustration see Schedule 1.01C attached
hereto.
"Eligible Inventory" means, with respect to any Borrower, all finished
------------------
goods and uncut piece goods Inventory of such Borrower which meets all of the
following specifications: (i) the Inventory is owned by such Borrower free and
clear of any existing Lien, other than that of the Collateral Agent and the
Lenders under the Loan Documents, it is not held on consignment and may be
lawfully sold and it continues to be in full conformity with any representations
and warranties made in this Agreement by such Borrower to the Agents and the
Lenders with respect thereto; (ii) such Borrower has the right to assignment
thereof and the power to grant Liens thereon and security interests therein;
(iii) the Inventory arose or was acquired in the ordinary course of the business
of such Borrower and does not represent damaged goods; (iv) no Account
Receivable or, except as permitted by clause (vi)(B) below, document of title
has been created or issued with respect to such Inventory; (v) the Inventory is
readily marketable for sale by such Borrower; (vi) the Inventory is (A) located
in one of the locations in the United States listed on Part B of Schedule
6.01(e) hereto which is designated with an asterisk or such other locations in
the continental United States which is approved in writing by the Collateral
Agent, which approval will not be unreasonably withheld or delayed or (B) "in
transit" Inventory shipped or to be shipped as finished goods or uncut piece
goods Inventory under a Letter of Credit issued by the L/C Issuer pursuant to
this Agreement to a location in the United States described in the clause (vi)
(A) above; (vii) the Inventory does not represent raw materials (other than
uncut piece goods), trim, work in process, supplies or samples; (viii) if the
Inventory is sold under a licensed trademark, the Collateral Agent shall have
entered into a licensor waiver letter, in form and substance satisfactory to the
Collateral Agent, with the licensor with respect to the rights of the Collateral
Agent to use the trademark to sell or otherwise dispose of such Inventory; (ix)
the Inventory is not Prior Season Inventory, other than, in the case of Miss
Erika, Prior Season Inventory in an amount of up to the Eligible Amount of Prior
Season Inventory; and (x) the Inventory is and at all times shall continue to be
reasonably acceptable to the Collateral Agent in all respects in the exercise of
its reasonable business judgment based upon the lending practices of the
Collateral Agent, consistent with the criteria customary in the commercial
finance industry generally.
"Employee Plan" means an employee benefit plan (other than a
-------------
Multiemployer Plan) covered by Title IV of ERISA and maintained (or was
maintained at any time during the six (6) calendar years preceding the date of
any borrowing hereunder) for employees of a Borrower or any of their ERISA
Affiliates.
"Environmental Actions" refers to any complaint, summons, citation,
---------------------
notice, directive, order, claim, litigation, investigation, judicial or
administrative proceeding, judgment, letter or other written communication from
any governmental agency, department, bureau, office or other authority, or any
third party involving violations of Environmental Laws or Releases of Hazardous
Materials (i) from any assets, properties or businesses of any Loan Party or any
predecessor in interest; or (ii) from or onto any adjoining properties or
businesses; or (iii) from or
10
<PAGE>
onto any facilities which received Hazardous Materials generated by any Loan
Party or any predecessor in interest.
"Environmental Law" means the Comprehensive Environmental Response,
-----------------
Compensation, and Liability Act (42 U.S.C. (S) 9601, et seq.), the Hazardous
-- ---
Materials Transportation Act (49 U.S.C. (S) 1801, et seq.), the Resource
-- ---
Conservation and Recovery Act (42 U.S.C. (S) 6901, et seq.), the Federal Water
-- ---
Pollution Control Act (33 U.S.C. (S) 1251 et seq.), the Clean Air Act (42 U.S.C.
-- ---
(S) 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. (S) 2601 et seq.)
-- --- -- ---
and the Occupational Safety and Health Act (29 U.S.C. (S) 651 et seq.), as such
-- ---
laws may be amended or supplemented from time to time, and any other present or
future federal, state, local or foreign statute, ordinance, rule, regulation,
order, judgment, decree, permit, license or other binding determination of any
Governmental Authority imposing liability or establishing standards of conduct
for protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and, unless the context otherwise requires, the rules
and regulations promulgated thereunder from time to time.
"ERISA Affiliate" means, with respect to any Person, any trade or
---------------
business (whether or not incorporated) which is a member of a group of which
such Person is a member and which would be deemed to be a "controlled group"
within the meaning of Sections 414(b), (c), (m) and (o) of the Internal Revenue
Code.
"Eurodollar Base Rate" means, with respect to each day during each
--------------------
Interest Period pertaining to a Eurodollar Loan, the rate of interest published
in The Wall Street Journal, Eastern Edition, two Business Days prior to such
Interest Period as the "London Interbank Offered Rate" applicable to one, three
or six months, as selected by a Borrower. In the event that The Wall Street
Journal, Eastern Edition is not published or such rate does not appear in The
Wall Street Journal, Eastern Edition, the Eurodollar Base Rate shall be the rate
determined by the Administrative Agent to be the rate at which deposits in
Dollars are offered by NationsBank, N.A. to first class banks in the interbank
eurodollar market where the eurodollar and foreign currency and exchange
operations in respect of its eurodollar loans are then being conducted at
approximately 11:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period, in an amount approximately equal to the
principal amount of the Eurodollar Loan to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
"Eurodollar Loan" means a Loan bearing interest based on the
---------------
Eurodollar Rate.
11
<PAGE>
"Eurodollar Rate" means with respect to each day during each Interest
---------------
Period pertaining to a Eurodollar Loan, a rate per annum determined for such day
in accordance with the following formula (rounded upward to the nearest 1/100 of
1%):
Eurodollar Base Rate
---------------------------
1.00 - Reserve Requirements
"Evergreen Letters of Credit" shall have the meaning specified
---------------------------
therefor in Section 3.01(b).
"Event of Default" means any of the events set forth in Section 10.01
----------------
hereof.
"Existing Financing Agreement" has the meaning assigned to such term
----------------------------
in the RECITALS hereto.
"Existing Lenders" has the meaning assigned to such term in the
----------------
RECITALS hereto.
"Existing Letters of Credit" has the meaning assigned to such term in
--------------------------
Section 3.03(c) hereof.
"Factor" means NationsBanc in its capacity as factor under each
------
Factoring Agreement and shall include CIT as a participant in each Factoring
Agreement.
"Factoring Agreements" means (i) the Amended and Restated Factoring
--------------------
Agreement dated as of September 25, 1997 between the Factor and Squire, (ii) the
Factoring Agreement dated as of September 25, 1997 between the Factor and Miss
Erika, and (iii) the Non-Notification Factoring Agreement dated as of June 18,
1998 between the Factor and Jeri-Jo, each as amended or otherwise modified from
time to time.
"Fall Shipping Season" means, with respect to Miss Erika, the shipping
--------------------
season beginning on July 1 and ending on November 30 of each Fiscal Year.
"Federal Funds Rate" means, for any period, a fluctuating interest
------------------
rate per annum equal for each day during such period of 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 on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by the Administrative
Agent from three Federal funds brokers of recognized standing selected by it.
"Fee Letter" means the letter agreement, dated as of the date hereof,
----------
among the Company, the Borrowers and the Agents obligating the Borrowers to
jointly and severally pay certain fees to the Agents for their account in
connection with this Agreement, as such letter agreement may be modified,
supplemented or amended from time to time.
12
<PAGE>
"Final Maturity Date" means the date this Agreement is terminated
-------------------
pursuant to Section 12.01 hereof.
"Financial Statements" means (i) the audited financial statements of
--------------------
the Company and its Consolidated Subsidiaries for its fiscal year ended November
1, 1997, (ii) the unaudited consolidated financial statements for the Company
and its Consolidated Subsidiaries for the Fiscal Quarter ended January 31, 1998,
(iii) the audited financial statements of the Sellers for their fiscal year
ended December 31, 1997 and (iv) the unaudited financial statements of the
Sellers for their fiscal quarter ending March 31, 1998.
"Fiscal Month" means the fiscal months of the Company and its
------------
Consolidated Subsidiaries as set forth on Part B of Schedule 1.01B hereto.
"Fiscal Quarter" means the fiscal quarters of the Company and its
--------------
Consolidated Subsidiaries as set forth on Part C of Schedule 1.01B hereto.
"Fiscal Year" means the fiscal year of the Company and its
-----------
Consolidated Subsidiaries as set forth on Part A of Schedule 1.01B hereto.
"Fleet" means Fleet Bank, NA.
-----
"GAAP" means generally accepted accounting principles in effect from
----
time to time in the United States, applied on a consistent basis, provided that
for the purposes of Section 7.02(p) and the definitions used therein, "GAAP"
shall mean generally accepted accounting principles in effect on the date hereof
and consistent with those used in the preparation of the Financial Statements.
"Governmental Authority" means any nation or government, any state or
----------------------
other political subdivision thereof and any department, commission, board,
bureau, instrumentality, agency or other entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guaranties" means (i) the guaranty made by the Company contained in
----------
Article XI hereof and (ii) each guaranty, substantially in the form of Exhibits
B-1 and B-2 hereto, made by a Guarantor (other than the Company) in favor of the
Collateral Agent for the benefit of the Lenders guaranteeing the Obligations, as
the same may be amended, modified or supplemented from time to time.
"Guarantors" means the Company, Squire, Miss Erika, Jeri-Jo, Norty's,
----------
Inc. and all Persons which hereafter guarantee, pursuant to Section 7.01(b)
hereof or otherwise, all or any part of the Obligations.
"Hazardous Materials" shall include (i) any element, compound, or
-------------------
chemical that is defined, listed or otherwise classified as a contaminant,
pollutant, toxic pollutant, toxic or hazardous substances, extremely hazardous
substance or chemical, hazardous waste, special waste, or solid waste under
Environmental Laws; (ii) petroleum and its refined products;
13
<PAGE>
(iii) polychlorinated biphenyls; (iv) any substance exhibiting a hazardous waste
characteristic including but not limited to corrosivity, ignitability, toxicity
or reactivity as well as any radioactive or explosive materials; and (v) any raw
materials, building components, including but not limited to asbestos-containing
materials and manufactured products containing Hazardous Materials.
"Hedging Agreement" means any interest rate swap, collar, cap, floor
-----------------
or a forward rate agreement or other agreement regarding the hedging of interest
rate risk exposure executed in connection with hedging the interest rate
exposure of the Borrowers, and any confirming letter executed pursuant to such
agreement, all as amended or supplemented from time to time.
"Holiday Shipping Season" means, with respect to Miss Erika, the
-----------------------
shipping season beginning on October 1 and ending December 31 of each Fiscal
Year.
"Indebtedness" means as to any Person, without duplication, (i)
------------
indebtedness for borrowed money; (ii) indebtedness for the deferred purchase
price of property or services (other than current trade payables incurred in the
ordinary course of business and payable in accordance with customary practices);
(iii) indebtedness evidenced by bonds, debentures, notes or other similar
instruments (other than performance, surety and appeal or other similar bonds
arising in the ordinary course of business); (iv) obligations and liabilities
secured by a Lien upon property owned by such Person, whether or not owing by
such Person and even though such Person has not assumed or become liable for the
payment thereof; (v) obligations and liabilities directly or indirectly
guaranteed by such Person; (vi) obligations or liabilities created or arising
under any conditional sales contract or other title retention agreement with
respect to property used and/or acquired by such Person, even though the rights
and remedies of the lessor, seller and/or lender thereunder are limited to
repossession of such property; (vii) Capitalized Lease Obligations; (viii) all
liabilities in respect of letters of credit, acceptances and similar obligations
created for the account of such Person; and (ix) net liabilities of such Person
under: (A) Hedging Agreements and (B) foreign currency exchange agreements,
each calculated on a basis reasonably satisfactory to the Agents and in
accordance with accepted practice.
"Indemnitees" has the meaning specified therefor in Section 12.16.
-----------
"Indemnified Letters of Credit" has the meaning assigned to such term
-----------------------------
in Section 3.03(c) hereof.
"Indenture" means the Indenture, dated as of June 18, 1998 among the
---------
Company, the Borrowers, Norty's Inc. and United States Trust Company of New
York, as trustee.
"Interest Period" means, with respect to a Loan that is a Eurodollar
---------------
Loan, the period commencing on the borrowing date or the date of any
continuation or conversion into such Eurodollar Loan, as the case may be, and
ending one or three months thereafter, in each case as selected by the relevant
Borrower in the applicable notice given to the Administrative Agent pursuant to
Sections 2.03 or 2.11 hereof; provided that (i) each Interest Period shall begin
--------
on the first Business Day of a month and end on the first Business Day of a
month, (ii) no Interest Period for any Eurodollar Loan shall end after the Final
Maturity Date and (iii) no more
14
<PAGE>
than five (5) Interest Periods in the aggregate for the Borrowers may exist at
any one time and only the Loans of a single Borrower may be included in a single
Interest Period.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
---------------------
amended from time to time.
"Inventory" means all goods and merchandise of a Borrower including,
---------
but not limited to, all raw materials, work in process, piece goods, trim,
finished goods, materials and supplies of every nature used or usable in
connection with the manufacture, shipping, storing, advertising or sale of such
goods and merchandise, whether now owned or hereafter acquired and all such
property the sale or other disposition of which would give rise to Accounts
Receivable.
"Jeri-Jo" has the meaning specified therefor in the preamble hereto.
-------
"Jeri-Jo Assets" has the meaning specified for the term "Assets" in
--------------
the Jeri-Jo Purchase Agreement.
"Jeri-Jo Earn Out Payment" has the meaning specified for the term
------------------------
"Earn Out Payment" in the Jeri-Jo Purchase Agreement.
"Jeri-Jo Purchase" means the purchase by Jeri-Jo of the Jeri-Jo Assets
----------------
from the Sellers pursuant to the Jeri-Jo Purchase Documents.
" Jeri-Jo Purchase Agreement" means the Agreement of Purchase and Sale
---------------------------
dated as of the 15th day of April, 1998, as amended through the date hereof, by
and among the Sellers, Susan Schneider, Leslie Schneider, Scott Schneider, Jeri-
Jo and the Company.
" Jeri-Jo Purchase Documents" means the Jeri-Jo Purchase Agreement and
---------------------------
all other documents entered into or delivered in connection with the Jeri-Jo
Purchase Agreement or the Jeri-Jo Purchase.
"Jeri-Jo Subordinate Pledge and Security Agreement" means the
-------------------------------------------------
subordinate pledge and security agreement dated as of the date hereof among the
Company and each of the Sellers, as the same may be amended or otherwise
modified from time to time.
"Jeri-Jo Subordination Agreement" means the subordination agreement
-------------------------------
dated as of the date hereof between the Collateral Agent and the Sellers, as the
same may be amended or otherwise modified from time to time.
"Jeri-Jo Termination Agreements" means each payoff and release letter,
------------------------------
in form and substance satisfactory to the Agents, dated as of the effective date
of the Jeri-Jo Purchase, executed by The Chase Manhattan Bank and Marine Midland
Bank, N.A., as appropriate, confirming the payment in full of all of the
obligations of the Sellers owing to The Chase Manhattan Bank and Marine Midland
Bank, N.A. and the termination or release of all Liens existing in favor of The
Chase Manhattan Bank and Marine Midland Bank, N.A. in and to the Jeri-Jo Assets.
15
<PAGE>
"L/C Issuer" means NationsBank, N.A. and, in the case of certain
----------
Existing Letters of Credit and Indemnified Letters of Credit, The Chase
Manhattan Bank or Marine Midland Bank, N.A., or such other bank as the Agents
may select in their sole and absolute discretion.
"L/C Subfacility" means that portion of the Total Commitment equal to
---------------
$160,000,000, or such other amount as shall be agreed to in writing by the
Agents, the Lenders and the Borrowers.
"Ledger Debt" means indebtedness owing by a Borrower to the Factor by
-----------
reason of such Borrower's purchases from other entities factored by the Factor,
provided that the Factor shall include CIT, as a participant of the Factor in
each Factoring Agreement .
"Lender" has the meaning specified therefor in the preamble hereto.
------
"Letter of Credit" has the meaning specified therefor in Section
----------------
3.01(a) hereof.
"Letter of Credit Application" has the meaning specified therefor in
----------------------------
Section 3.01(a) hereof.
"Letter of Credit Guaranty" means one or more guaranties by
-------------------------
NationsBanc or, in the case of certain Existing Letters of Credit and certain
Indemnified Letters of Credit, CIT in favor of the L/C Issuer guaranteeing the
Borrowers' obligations to the L/C Issuer under a reimbursement agreement, Letter
of Credit Application or other like document in respect of any Letters of
Credit.
"Letter of Credit Indemnity Letters" means (i) the letter agreement
----------------------------------
dated June 18, 1998 between the Administrative Agent and The Chase Manhattan
Bank and (ii) the letter agreement dated June 18, 1998 between the
Administrative Agent and Marine Midland Bank, N.A., in each case pursuant to
which the Administrative Agent, on behalf of the Lenders, has agreed to
indemnify The Chase Manhattan Bank and Marine Midland Bank, N.A. for certain
amounts paid pursuant to the letters of credit identified on Schedule A to each
such letter agreement.
"Letter of Credit Obligations" means, at any time and without
----------------------------
duplication, the sum of (i) the outstanding Reimbursement Obligations at such
time, plus (ii) the aggregate maximum amount available for drawing under the
----
Letters of Credit outstanding at such time, plus (iii) all amounts for which
----
NationsBanc or CIT may be liable to the L/C Issuer pursuant to the Letter of
Credit Guaranty in connection with any steamship guaranty, airway release,
indemnity or delivery order issued by the L/C Issuer at the request of or for
the benefit of a Borrower, in each case as calculated by the L/C Issuer.
"Lien" shall mean any mortgage, deed of trust, pledge, lien, security
----
interest, charge or other encumbrance or security arrangement of any nature
whatsoever, including but not limited to any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.
16
<PAGE>
"Loan" or "Revolving Credit Loan" means any Loan made by a Lender or
---- ---------------------
the Administrative Agent to a Borrower pursuant to Section 2.01 (a) hereof.
"Loan Account" means a separate account for each Borrower maintained
------------
at the Payment Office of the Administrative Agent in the name of a Borrower in
which such Borrower will be charged with all Loans made to, and all other
Obligations incurred by, such Borrower or such other accounts as the
Administrative Agent shall designate from time to time.
"Loan Documents" means this Agreement, the Notes, the Guaranties, the
--------------
Security Agreements, the Pledge Agreements, the Assignment Agreement, the Fee
Letter, the Subordination Agreements, the Letter of Credit Applications and all
other instruments, agreements and other documents executed and delivered
pursuant hereto or thereto, including, without limitation, any intercompany
notes pledged to the Collateral Agent.
"Loan Parties" means each of the Company, the Borrowers and the other
------------
Guarantors.
"Material Adverse Effect" means a material adverse effect upon (i) the
-----------------------
business, properties, operations, or condition (financial or otherwise) of any
Borrower or of the Loan Parties taken as a whole but excluding an event or
condition that has a material adverse effect solely upon general economic
conditions or the apparel industry generally and not upon the business,
operation or condition (financial or otherwise) of any Borrower or of the Loan
Parties taken as a whole, (ii) the ability of any Borrower or of the Loan
Parties taken as a whole to perform its or their obligations hereunder or under
any other Loan Document to which any of such Persons is a party, (iii) the Lien
arising under the Loan Documents on any Collateral or (iv) the rights, powers
and remedies of the Agents and the Lenders under this Agreement or any other
Loan Document or the legality, validity or enforceability of this Agreement or
any other Loan Document.
"Material Contract" means, with respect to any Person, each contract
-----------------
to which such Person is a party involving aggregate consideration payable to or
by such Person of $500,000 or more (other than contracts that by their terms may
be terminated by any party thereto in the ordinary course of its business upon
less than 60 days' notice) or otherwise material to the business, condition
(financial or otherwise), operations, performance, properties or prospects of
such Person.
"Miss Erika" has the meaning specified therefor in the preamble
----------
hereto.
"Miss Erika Acquisition" means the purchase by Miss Erika of the Miss
----------------------
Erika Assets from Old ME Corp. pursuant to the Miss Erika Acquisition Documents.
"Miss Erika Acquisition Agreement" means the Agreement of Purchase and
--------------------------------
Sale dated as of the 29th day of August, 1997, as amended through September 25,
1997, by and among Old ME Corp., Terbem Limited, a British Virgin Islands
corporation, Bobst Investment Corp., a British Virgin Islands corporation, TCRI
Offshore Partners C.V., a Netherlands Antilles corporation, TCR International
Partners L.P., a Delaware limited partnership, Triumph Capital,
17
<PAGE>
L.P. II, a Delaware limited partnership, Stuart Bregman, Howard Zwilling, Sidney
Goldstein, Christian Baillet, Miss Erika and the Company.
"Miss Erika Acquisition Documents" means the Miss Erika Acquisition
--------------------------------
Agreement and all other documents entered into or delivered in connection with
the Miss Erika Acquisition Agreement or the Miss Erika Acquisition.
"Miss Erika Assets" has the meaning specified therefor in the Miss
-----------------
Erika Acquisition Agreement.
"Miss Erika Earn Out Payment" has the meaning specified for the term
---------------------------
"Earn Out Payment" in the Miss Erika Acquisition Agreement.
"Miss Erika Subordinate Pledge and Security Agreement" means the
----------------------------------------------------
subordinate pledge and security agreement dated as of September 25, 1997 between
the Company and Old ME Corp., as the same may be amended or otherwise modified
from time to time.
"Miss Erika Subordination Agreement" means the subordination agreement
----------------------------------
dated as of September 25, 1997 between the Collateral Agent and Old ME Corp., as
the same may be amended or otherwise modified from time to time.
"Multiemployer Plan" means a "multiemployer plan" as defined in
------------------
Section 4001(a)(3) of ERISA for which a Borrower or any ERISA Affiliate has
contributed to, or has been obligated to contribute to, at any time during the
six (6) years preceding the date hereof.
"NationsBanc" means NationsBanc Commercial Corporation, a Georgia
-----------
corporation.
"Net Amount of Eligible Accounts Receivable" means the aggregate
------------------------------------------
unpaid invoice amount of Eligible Accounts Receivable less, without duplication
(i) in the case of Accounts Receivable not purchased by the Factor under a
Factoring Agreement, sales, excise or similar taxes, returns, discounts,
chargebacks, claims, advance payments, credits and allowances of any nature at
any time issued, owing, granted, outstanding, available or claimed, and (ii) in
the case of Accounts Receivable purchased by a Factor under a Factoring
Agreement and sums due under a Factoring Agreement, deductions for factoring
charges, discounts, estimated anticipation, chargebacks based upon disputes and
returns, chargebacks of department risk accounts purchased with recourse, and
all other charges, offsets and reserves under a Factoring Agreement.
"Net Proceeds" means (a) with respect to the sale or other disposition
------------
of any asset by the Company or any of its Subsidiaries (including in connection
with any sale-leaseback), the excess, if any, of (i) the aggregate amount
received in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such sale or other
disposition, over (ii) the sum of (A) the principal amount of any Indebtedness
which is secured by any such asset (other than Indebtedness assumed by the
purchaser of such asset) or which is required to be, and is, repaid in
connection with the sale or other disposition thereof (other than Indebtedness
18
<PAGE>
hereunder), (B) the reasonable out-of-pocket expenses and fees incurred by the
Company or its Subsidiaries in connection with such sale or other disposition
(but only to the extent that such out-of-pocket expenses and fees, if paid to an
Affiliate of the Company (other than legal fees and expenses), are approved by
the Agents in their sole discretion exercised reasonably), and provided that all
such expenses and fees are set forth on a certificate provided to the Agents,
and (C) federal and state taxes incurred in connection with such sale or other
disposition, whether payable at such time or thereafter and (b) with respect to
the sale or other disposition of any Capital Stock or debt security by the
Company or any of its Subsidiaries, the excess of (i) the aggregate amount
received in cash (including any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, but
only as and when such cash is so received) in connection with such sale or other
disposition, over (ii) the sum of (A) the reasonable fees, commissions,
discounts and other out-of-pocket expenses incurred by the Company or its
Subsidiaries in connection with such sale or other disposition (but only to the
extent such fees, commissions and expenses, if paid to an Affiliate of the
Company (other than legal fees and expenses), are approved by the Agents in
their sole discretion exercised reasonably and provided that all such fees,
commissions and expenses are set forth on a certificate provided to the Agents)
and (B) federal and state taxes incurred in connection with such sale or other
disposition, whether payable at such time or thereafter.
"Note Purchase Agreement" means the Purchase Agreement, dated June 15,
-----------------------
1998, among the Company and the initial purchasers of the Company Notes.
"Notice of Borrowing" has the meaning specified therefor in Section
-------------------
2.03 hereof.
"Obligations" means (i) the obligations of each Borrower to pay, as
-----------
and when due and payable (by scheduled maturity or otherwise), all amounts from
time to time owing by it in respect of any Loan Document to which it is a party,
whether for principal, interest (including, without limitation, all interest
that accrues after the commencement of any case, proceeding or other action
relating to bankruptcy, insolvency or reorganization of any Borrower, whether or
not a claim for post-filing interest is allowed in such proceeding), Letter of
Credit Obligations, fees, commissions, expense reimbursements, indemnifications
or otherwise and all Ledger Debt, and (ii) the obligations of each Borrower to
perform or observe all of its other obligations from time to time existing under
any Loan Document to which it is a party.
"Offering" means the issuance by the Company of the Company Notes on
--------
the Effective Date in the aggregate principal amount of $125,000,000 and the
agreement of the Borrowers to guaranty the Company's obligations under the
Company Notes, in each case pursuant to the terms and conditions as described in
the Offering Memorandum dated June 15, 1998.
"Offering Documents" means the Offering Memorandum dated June 15,
------------------
1998, the Company Notes, the Indenture, the Note Purchase Agreement and all
other agreements, documents and instruments effectuating the foregoing and all
exhibits to any of the foregoing.
"Old ME Corp." means Old ME Corp. a Delaware corporation and the
------------
seller of the Miss Erika Assets to Miss Erika pursuant to the Miss Erika
Acquisition Documents.
19
<PAGE>
"Operating Lease Obligations" means all obligations for the payment of
---------------------------
rent for any real or personal property under leases or agreements to lease,
other than Capitalized Lease Obligations.
"Other Taxes" shall have the meaning specified therefor in Section
-----------
2.12 hereto.
"Overadvance Amount" means (i) for the Borrowers on a combined basis,
------------------
an amount (A) up to $10,000,000 at anytime during the June and July Fiscal
Months (other than the last day of such Fiscal Months) and (B) up to $5,000,000
(x) at any time during any other Fiscal Month (other than the last day of such
Fiscal Month) and (y) on the last day of the May, June, July August, September
and October Fiscal Months, which amount shall be allocated among the Borrowers
by the Administrative Agent pursuant to the terms of Section 2.01(b) hereof and
(ii) for each Borrower on an individual basis, the portion of the relevant
amount set forth in clause (i) above allocated by the Administrative Agent to
such Borrower pursuant to Section 2.01(b) hereof as such amounts may be reduced
as provided in Section 2.07(g) hereof.
"Payment Office" means the Administrative Agent's offices located at
--------------
1211 Avenue of the Americas, New York, NY 10036, or such other offices as the
Administrative Agent may designate and, when used in connection with any
payments made to the Administrative Agent, shall mean an account in the name of
the Administrative Agent designated to the Borrowers and the Lenders from time
to time into which the Borrowers and the Lenders shall make all payments to the
Administrative Agent under this Agreement.
"Permitted Disposition" has the meaning specified therefor in Section
---------------------
12.18.
"Permitted Investments" means (i) 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 or
marketable direct obligations issued or unconditionally guaranteed by any State
or agency thereof and backed by the full faith and credit of such State, in each
case maturing within one year from the date of acquisition thereof, (ii)
commercial paper, maturing not more than 270 days after the date of issue rated
P-1 by Moody's Investors Service, Inc. or A-1 by Standard & Poor's Ratings
Group, (iii) overnight bank deposits, certificates of deposit and bankers'
acceptances in each case maturing not more than 270 days after the date of
issue, issued by any Lender or issued by commercial banking institutions, and
money market or time or demand deposit accounts maintained at any Lender or
commercial banking institutions each commercial banking institutions (other than
any Lender) of which is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000, and (iv) repurchase agreements having maturities of not more than
90 days from the date of acquisition which are entered into with the commercial
banking institutions described in clause (iii) above and which are secured by
readily marketable direct obligations of the Government of the United States of
America or any agency thereof.
"Permitted Liens" shall have the meaning specified therefor in Section
---------------
7.02(a) hereto.
20
<PAGE>
"Person" means an individual, corporation, limited liability company,
------
partnership, association, joint-stock company, trust, unincorporated
organization, joint venture or Governmental Authority.
"Pledge Agreements" means (i) the Pledge and Security Agreements,
-----------------
dated as of September 25, 1997, made by each of the Company, Squire and Miss
Erika in favor of the Collateral Agent and (ii) the Pledge and Security
Agreement dated as of June 18, 1998 made by Jeri-Jo in favor of the Collateral
Agent, in the form of Exhibit D-1 hereto, as the same may be amended or
otherwise modified from time to time.
"Post-Default Rate" means a rate of interest per annum equal to the
-----------------
rate of interest otherwise in effect plus 2% or, if no other rate of interest is
in effect, the Base Rate plus 2.5%.
"Post Office Box" means the post office box established and maintained
---------------
by Jeri-Jo at the United States Post Office with such post office box number and
at such location as is identified in writing by Jeri-Jo to the Administrative
Agent.
"Pricing Grid" means the pricing grid attached hereto as Schedule
------------
1.01D.
"Pricing Grid Effective Date" means (i) if the Effective Date is on or
---------------------------
before August 1, 1998, on the first day of the month following the date of
delivery to the Agents of the Financial Statements pursuant to Section
7.01(a)(i) for the first Fiscal Quarter of 1999 and (ii) if the Effective Date
is after August 1, 1998, on the first day of the month following the date of
delivery to the Agents of the Financial Statements pursuant to Section
7.01(a)(i) for the second Fiscal Quarter of 1999.
"Prime Rate" means the rate of interest publicly announced by
----------
NationsBank, N.A. in Charlotte, North Carolina from time to time as its prime
rate. The prime rate is determined from time to time by NationsBank, N.A. as a
means of pricing some loans to its borrowers and neither is tied to any external
rate of interest or index, nor necessarily reflects the lowest rate of interest
actually charged by NationsBank, N.A. to any particular class or category of
customers. Each change in the Prime Rate shall be effective on the first day of
the month following the date such change is announced.
"Prior Season Inventory" means, during any shipping season of Miss
----------------------
Erika, finished goods Inventory that is manufactured to be shipped in the
shipping seasons of Miss Erika prior to the current shipping season of Miss
Erika.
"Pro Rata Share" means, with respect to any Lender, a fraction
--------------
(expressed as a percentage), the numerator of which shall be the amount of such
Lender's Commitment and the denominator of which shall be the Total Commitment,
provided that, if the Commitments have been reduced to zero, the numerator shall
be the aggregate unpaid principal amount of such Lender's Loans and interest in
Letter of Credit Obligations and the denominator shall be the aggregate unpaid
principal amount of all of the Loans and Letter of Credit Obligations.
21
<PAGE>
"Reimbursement Obligations" means the aggregate joint and several
-------------------------
obligations of the Borrowers to reimburse NationsBanc, CIT and the Lenders for
amounts payable by NationsBanc, CIT or the Lenders under a Letter of Credit
Guaranty in respect of any drawing made under any Letter of Credit, together
with interest thereon as provided in Section 2.06.
"Release" means any spilling, leaking, pumping, pouring, emitting,
-------
emptying, discharging, injecting, escaping, leaching, seeping, migrating,
dumping, or disposing of any Hazardous Material (including the abandonment or
discarding of barrels, containers, and other closed receptacles containing any
Hazardous Material) into the indoor or outdoor environment, including ambient
air, soil, surface or ground water.
"Release Certificate" has the meaning specified therefor in Section
-------------------
12.18.
"Remedial Action" shall mean all actions taken to (i) monitor, assess,
---------------
evaluate, investigate, clean up, remove, treat, remediate or contain or in any
way address Hazardous Materials in the indoor or outdoor environment, (ii)
prevent, mitigate or minimize any Release or threatened Release so that the
Release or threatened Release does not migrate or endanger or threaten to
endanger public health or welfare or the environment or (iii) perform pre-
remedial investigations and studies, and post remedial operation and maintenance
activities or any other actions authorized by 42 USC (S) 9601.
"Reportable Event" means an event described in Section 4043 of ERISA
----------------
(other than an event not subject to the provision for 30-day notice to the
Pension Benefit Guaranty Corporation under the regulations promulgated under
such Section).
"Required Lenders" means, at any time, Lenders whose Pro Rata Shares
----------------
aggregate at least 60%.
"Reserve Requirements" means, for any day as applied to a Eurodollar
--------------------
Loan, the aggregate (without duplication) of the rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board or other Governmental Authority having jurisdiction
with respect thereto) dealing with reserve requirements prescribed for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board) maintained by a member bank of the Federal Reserve
System. Eurodollar Loans shall be deemed to constitute Eurocurrency Liabilities
and to be subject to such reserve requirements without benefit of or credit for
proration, exceptions or offsets which may be available from time to time to any
Lender or the Affiliate of any Lender under Regulation D.
"Revolving Credit Loan" or "Loan" means a Loan made by a Lender or the
--------------------- ----
Administrative Agent to a Borrower pursuant to Section 2.01(a)(i) hereof.
"Revolving Credit Note" or "Note" means a joint and several promissory
--------------------- ----
note of the Borrowers, substantially in the form of Exhibit A hereto, made
payable to the order of a Lender and evidencing the Indebtedness resulting from
the making by such Lender of Loans and delivered to the Administrative Agent
pursuant to Article V hereof, as such promissory note may
22
<PAGE>
be modified or extended from time to time, and any promissory note or notes
issued in exchange or replacement therefor.
"Security Agreements" means the (i) Security Agreements dated as of
-------------------
September 25, 1997 made by each of the Loan Parties (other than Jeri-Jo) in
favor of the Collateral Agent, and (ii) the Security Agreement made by Jeri-Jo
in favor of the Collateral Agent in the form of Exhibit C-1 hereto, as the same
may be amended or otherwise modified from time to time.
"Security Documents" means collectively, each Security Agreement and
------------------
each Pledge Agreement executed and delivered by a Loan Party, and all Uniform
Commercial Code financing statements required by this Agreement and the Security
Agreements to be filed with respect to the security interests in personal
property and fixtures created pursuant to such agreements, and all other
documents and agreements executed and delivered by the Loan Parties in
connection with any of the foregoing documents.
"Sellers" means Jeri-Jo Knitwear Inc., a New York corporation, and
-------
Jamie Scott, Inc. a New York corporation.
"Settlement Period" has the meaning specified therefor in Section
-----------------
2.05(b)(i).
"Solvent" means, with respect to any Person on a particular date, that
-------
on such date (a) the fair value of the property of such Person is not less than
the total amount of its liabilities (including, without limitation, liabilities
on all claims, whether or not reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable,
secured or unsecured) of such Person, (b) the present fair salable value of the
assets of such Person is not less than the amount that will be required to pay
the probable liability of such Person on its existing debts as they become
absolute and matured, (c) such Person is able to realize upon its assets and pay
its debts and other liabilities, contingent obligations and other commitments as
they mature in the normal course of business, (d) such Person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such
Person's ability to pay as such debts and liabilities mature, and (e) such
Person is not engaged in business or a transaction, and is not about to engage
in business or a transaction, for which such Person's property would constitute
unreasonably small capital.
"Spring Shipping Season" means, with respect to Miss Erika, the
----------------------
shipping season beginning on January 1 and ending on May 31 of each Fiscal Year.
"Squire" has the meaning specified therefor in the preamble hereto.
------
"Subordinate Pledge and Security Agreements" means the Miss Erika
------------------------------------------
Subordinate Pledge and Security Agreement and the Jeri-Jo Subordinate Pledge and
Security Agreement.
"Subordination Agreements" means the Miss Erika Subordination
------------------------
Agreement and the Jeri-Jo Subordination Agreement.
23
<PAGE>
"Subsidiary" means, as to any Person, any corporation of which more
----------
than 50% of the outstanding Capital Stock having (in the absence of
contingencies) ordinary voting power to elect directors (or Persons performing
similar functions) of such corporation is, at the time of determination, owned
directly, or indirectly through one or more intermediaries, by such Person.
"Syndication Date" shall mean the earlier of (i) the date which is 60
----------------
days after the date of the initial Loan and (ii) the date on which the
Administrative Agent determines in its sole discretion (and notifies the
Borrowers and the Lenders) that the primary syndication (and the resulting
addition of institutions as Lenders pursuant to Section 12.08) has been
completed.
"Taxes" shall have the meaning given to that term in Section 2.12.
-----
"Termination Anniversary Date" means June 18, 2001 and thereafter June
----------------------------
18 of each succeeding calendar year.
"Termination Event" means (i) a Reportable Event with respect to any
-----------------
Employee Plan, (ii) any event that causes a Borrower or any of its ERISA
Affiliates to incur liability under Section 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971 or 4975 of the
Internal Revenue Code, (iii) the filing of a notice of intent to terminate an
Employee Plan under Section 4041(c) of ERISA, (iv) the institution of
proceedings by the Pension Benefit Guaranty Corporation to terminate an Employee
Plan, or (v) any other event or condition that would constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Employee Plan.
"Title Company" shall have the meaning specified therefor in Section
-------------
7.01(m).
"Total Commitment" means the sum of the amounts of the Lenders'
----------------
Commitments.
"Transition Shipping Season" means, with respect to Miss Erika, the
--------------------------
shipping season beginning on April 1 and ending on June 30 of each Fiscal Year.
"WARN" has the meaning specified therefor in Section 6.01(j).
----
"Working Capital" means as to any Person at a particular date, the
---------------
excess, if any, of Consolidated Current Assets of such Person and its
Consolidated Subsidiaries over Consolidated Current Liabilities of such Person
and its Consolidated Subsidiaries at such date.
SECTION 1.02. Accounting and Other Terms. Unless otherwise expressly
--------------------------
provided herein, each accounting term used herein shall have the meaning given
it under GAAP applied on a basis consistent with those used in preparing the
Financial Statements. All terms used in this Agreement which are defined in
Article 9 of the Uniform Commercial Code in effect in the State of New York on
the date hereof and which are not otherwise defined herein shall have the same
meanings herein as set forth therein.
24
<PAGE>
SECTION 1.03. Time References. Unless otherwise indicated herein,
---------------
all references to time of day refer to Eastern standard time or Eastern daylight
saving time, as in effect in New York City on such day. For purposes of the
computation of a period of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding", provided, however, that with respect to a computation
-------- -------
of fees or interest payable to the Agents, the Lenders or the L/C Issuer, such
period shall in any event consist of at least one full day.
ARTICLE II
THE LOANS
SECTION 2.01. Commitments. (a) Subject to the terms and conditions
-----------
and relying upon the representations and warranties set forth herein, each
Lender severally agrees to make Loans to the Borrowers, which may be either A
Revolving Credit Loans to Squire, B Revolving Credit Loans to Miss Erika or C
Revolving Credit Loans to Jeri-Jo, at any time and from time to time from the
Effective Date to the Final Maturity Date, or until the earlier reduction of its
Commitment to zero in accordance with the terms hereof, in an aggregate
principal amount of Loans at any time outstanding not to exceed the amount of
such Lender's Commitment.
(b) Notwithstanding the foregoing, (i) the aggregate principal
amount of Loans outstanding at any time to the Borrowers on a combined basis
shall not exceed the lowest of (A) the difference between (1) the Total
------ --
Commitment and (2) the aggregate Letter of Credit Obligations, (B) the
difference between (1) the then current Borrowing Base of the Borrowers on a
combined basis and (2) the aggregate Letter of Credit Obligations, and (C)
$60,000,000, (ii) the aggregate principal amount of A Revolving Credit Loans
outstanding at any time to Squire shall not exceed the difference between (A)
the then current Borrowing Base of Squire on an individual basis and (B) the
aggregate A Letter of Credit Obligations, (iii) the aggregate principal amount
of B Revolving Credit Loans outstanding at any time to Miss Erika shall not
exceed the difference between (A) the then current Borrowing Base of Miss Erika
on an individual basis and (B) the aggregate B Letter of Credit Obligations, and
(iv) the aggregate principal amount of C Revolving Credit Loans outstanding at
any time to Jeri-Jo shall not exceed the difference between (A) the then current
Borrowing Base of Jeri-Jo on an individual basis and (B) the aggregate C Letter
of Credit Obligations, provided that (x) the Lenders agree to include the
Overadvance Amount as part of the Borrowing Base, (y) no Borrower shall be
permitted to obtain a Loan that results in such Borrower having an Overadvance
Amount if and to the extent that, at such time, any other Borrower has positive
Availability, and (z) except as provided in clause (y) above, the Overadvance
Amount shall be allocated among the Borrowers by the Administrative Agent in the
exercise of its reasonable business judgment based upon such factors as the
Administrative Agent may deem appropriate.
(c) Within the foregoing limits, the Borrowers may borrow, repay
and reborrow Loans, on or after the Effective Date and prior to the Final
Maturity Date, subject to the terms, provisions and limitations set forth
herein.
25
<PAGE>
SECTION 2.02. Loans. Except as otherwise provided in Section 2.05,
-----
Loans shall be made ratably by the Lenders in accordance with their respective
Commitments. The initial Loans shall be made on or after the Effective Date
against delivery hereunder of the Notes.
SECTION 2.03. Making the Loans. A Borrower shall give the
----------------
Administrative Agent prior telephone notice (which notice, if requested by the
Administrative Agent, must be promptly confirmed in writing in substantially the
form of Exhibit I hereto (a "Notice of Borrowing")) (i) not later than 11:00
a.m. (New York City time) on the date of the proposed borrowing, in the case of
a borrowing consisting of Base Rate Loans, or (ii) not later than 12:00 noon
(New York City time) three Business Days prior to such proposed borrowing in the
case of a borrowing consisting of Eurodollar Loans, provided that Eurodollar
Loans will only be made on the first Business Day of a month. Such Notice of
Borrowing shall be irrevocable and shall specify the Borrower that is requesting
such Loan, the principal amount of the proposed borrowing (which, in the case of
a Eurodollar Loan, must be in a minimum amount of $5,000,000 and in multiples of
$1,000,000 in excess thereof), whether such Loan is requested to be a Base Rate
Loan or a Eurodollar Loan and, in the case of a Eurodollar Loan, the Initial
Interest Period for such Eurodollar Loan, if requested by the Administrative
Agent, the use of the proceeds of such proposed Loan, and the proposed borrowing
date, which must be a Business Day and, in the case of a Eurodollar Loan, the
first Business Day of a month, and such Borrower shall be bound to make a
borrowing in accordance therewith. At no time shall the principal amount of
Loans that are Eurodollar Loans exceed $40,000,000 in the aggregate for the
Borrowers. Notwithstanding anything to the contrary contained herein, prior to
the Syndication Date, all Loans shall be incurred and maintained as Base Rate
Loans. The Administrative Agent may act without liability upon the basis of
written, telecopy or telephone notice believed by the Administrative Agent in
good faith to be from a Borrower (or from any officer thereof designated in
writing to the Administrative Agent), and each Borrower hereby waives the right
to dispute the Administrative Agent's record of the terms of any such telephonic
Notice of Borrowing.
SECTION 2.04. Notes; Repayment of Loans. (a) All Loans made by a
-------------------------
Lender shall be evidenced by a single Note, duly executed by the Borrowers,
dated the Effective Date, and delivered to and made jointly and severally
payable to the order of such Lender in a principal amount equal to its
Commitment on such date.
(b) The outstanding principal balance of each Loan shall be due
and payable on the Final Maturity Date.
SECTION 2.05. Funding and Settlement Procedures.
---------------------------------
(a) (i) Except as otherwise provided in this subsection
2.05(a), all Loans under this Agreement shall be made by the Lenders
simultaneously and proportionately according to their Pro Rata Shares of the
Total Commitment, it being understood that no Lender shall be responsible for
any default by any other Lender in such other Lender's obligation to make a Loan
requested hereunder nor shall the relevant Commitment of any Lender to make the
26
<PAGE>
Loan requested be increased or decreased as a result of the default by any other
Lender in such other Lender's obligation to make a Loan requested hereunder.
(ii) Notwithstanding any other provision of this Agreement,
in order to reduce the number of fund transfers among the Borrowers, the Lenders
and the Agents, the Borrowers, the Lenders and the Agents agree that the
Administrative Agent may, but shall not be obligated to, and the Borrowers and
the Lenders hereby irrevocably authorize the Administrative Agent to, fund, on
behalf of the Lenders, Loans pursuant to Sections 2.02 and 2.03, subject to the
procedures for settlement set forth in subsection 2.05(b); provided, however,
-------- -------
that (A) the Administrative Agent shall in no event fund such Loan if the
Administrative Agent shall have received written notice from the Required
Lenders on the Business Day prior to the date of the proposed Loan that one or
more of the conditions precedent contained in Section 5.02 hereof will not be
satisfied on the date of the proposed Loan and (B) the Administrative Agent
shall not otherwise be required to determine that, or take notice whether, the
conditions precedent in Section 5.02 have been satisfied. If the Administrative
Agent elects not to fund a requested Loan on behalf of the Lenders, promptly
after receipt of a Notice of Borrowing, the Administrative Agent shall so notify
each Lender. If the Administrative Agent notifies the Lenders that it will not
fund a requested Loan on behalf of the Lenders, each Lender shall make its Pro
Rata Share of the Loan available to the Administrative Agent, in immediately
available funds, at the Payment Office no later than 2:00 p.m. (New York City
time) on the date of the proposed Loan. The Administrative Agent will make the
proceeds of such Loans available to the appropriate Borrower on the day of the
proposed Loan by causing an amount, in immediately available funds, equal to the
proceeds of all such Loans received by the Administrative Agent at the Payment
Office or the amount funded by the Administrative Agent on behalf of the Lenders
to be deposited in an account designated by the appropriate Borrower.
(iii) If the Administrative Agent has notified the Lenders
that the Administrative Agent will not fund a particular Loan pursuant to
subsection 2.05(a)(ii) on behalf of the Lenders, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent on such day and the Administrative Agent, in its sole and absolute
discretion, may, but shall not be obligated to, cause a corresponding amount to
be made available to the appropriate Borrower on such day. If, in such case,
the Administrative Agent makes such corresponding amount available to the
appropriate Borrower and such corresponding amount is not in fact made available
to the Administrative Agent by such Lender, such Lender and each of the
Borrowers, severally agree to repay to the Administrative Agent forthwith on
demand such corresponding amount together with interest thereon for each day
from the date such amount is made available to such Borrower until the date such
amount is repaid to the Administrative Agent, at (A) in the case of such
Borrower, a rate per annum equal to the higher of the Federal Funds Rate and the
interest rate applicable thereto pursuant to Section 2.06 and (B) in the case of
such Lender, at the Federal Funds Rate for three Business Days and thereafter at
the Prime Rate. If such Lender shall repay to the Administrative Agent such
corresponding amount, such amount so repaid shall constitute such Lender's Pro
Rata Share of such Loan.
27
<PAGE>
(iv) Nothing in this Section 2.05(a) shall be deemed to
relieve any Lender from its obligation to fulfill its Commitment hereunder or to
prejudice any rights that the Administrative Agent or a Borrower may have
against any Lender as a result of any default by such Lender hereunder.
(b) (i) With respect to all periods for which the
Administrative Agent, on behalf of the Lenders, has funded Loans pursuant to
subsection 2.05(a), on the first Business Day after the last day of each week,
or such shorter period as the Administrative Agent may from time to time select
(any such week or shorter period being herein called a "Settlement Period"), the
Administrative Agent shall notify each Lender of the average daily unpaid
principal amount of the Loans outstanding during such Settlement Period. In the
event that such amount is greater than the average daily unpaid principal amount
of the Loans outstanding during the Settlement Period immediately preceding such
Settlement Period (or, if there has been no preceding Settlement Period, the
amount of the Loans made on the date of such Lender's initial funding), each
Lender shall promptly make available to the Administrative Agent such Lender's
Pro Rata Share of the difference in immediately available funds. In the event
that such amount is less than such average daily unpaid principal amount, the
Administrative Agent shall promptly pay over to each other Lender such Lender's
Pro Rata Share of the difference in immediately available funds. In addition, if
the Administrative Agent shall so request at any time when a Default or an Event
of Default shall have occurred and be continuing, or any other event shall have
occurred as a result of which the Administrative Agent shall determine that it
is desirable to present claims against the Borrowers for repayment, each Lender
shall promptly remit to the Administrative Agent or, as the case may be, the
Administrative Agent shall promptly remit to each Lender, sufficient funds to
adjust the interests of the Lenders in the then outstanding Loans to such an
extent that, after giving effect to such adjustment, each Lender's interest in
the then outstanding Loans will be equal to its Pro Rata Share thereof. The
obligations of the Administrative Agent and each Lender under this subsection
2.05(b) shall be absolute and unconditional. Each Lender shall only be entitled
to receive interest on its Pro Rata Share of the Loans which have been funded by
such Lender.
(ii) In the event that any Lender fails to make any payment
required to be made by it pursuant to subsection 2.05(b)(i), the Administrative
Agent shall be entitled to recover such corresponding amount on demand from such
Lender together with interest thereon, for each day from the date such payment
was due until the date such amount is paid to the Administrative Agent, at the
Federal Funds Rate for three Business Days and thereafter at the Prime Rate.
During the period in which such Lender has not paid such corresponding amount to
the Administrative Agent, notwithstanding anything to the contrary contained in
this Agreement or any other Loan Document, the amount so advanced by the
Administrative Agent to any Borrower shall, for all purposes hereof, be a Loan
made by the Administrative Agent for its own account. Upon any such failure by a
Lender to pay the Administrative Agent, the Administrative Agent shall promptly
thereafter notify the Borrowers of such failure and the Borrowers shall
immediately pay such corresponding amount to the Administrative Agent for its
own account.
28
<PAGE>
SECTION 2.06. Interest.
--------
(a) Loans. Each Loan which is a Eurodollar Loan shall bear
-----
interest on the principal amount thereof from time to time outstanding from the
date of such Loan until such principal amount becomes due, at a rate per annum
equal to the Eurodollar Rate for the Interest Period in effect for such Loan
plus the Applicable Eurodollar Rate Margin. Interest shall accrue from and
include the first date of an Interest Period, but exclude the last day of such
Interest Period. Each Loan which is a Base Rate Loan shall bear interest on the
principal amount thereof from time to time outstanding from the date of such
Loan, until such principal amount becomes due, at a rate per annum equal to the
Base Rate plus the Applicable Base Rate Margin.
(b) [Intentionally Omitted]
(c) Default Interest. Upon the occurrence and during the
----------------
continuance of an Event of Default, all outstanding principal of the Loans and
all outstanding Reimbursement Obligations and (to the extent permitted by law)
interest which is not paid when due, may, at the option of the Administrative
Agent or the Required Lenders, bear interest until such amount is paid in full
at a fluctuating interest rate per annum equal at all times to the Post-Default
Rate.
(d) Interest Payment. Interest on each Eurodollar Loan shall be
----------------
payable, in arrears, on the last day of each Interest Period of such Eurodollar
Loan and, in the case of any Eurodollar Loan of six month duration, the day that
interest would have been payable if such Eurodollar Loan had an Interest Period
of three months. Interest on each Base Rate Loan shall be payable monthly, in
arrears, on the first day of each month, commencing on the first day of the
month following the month in which such Loan is made, and at maturity (whether
upon demand, by acceleration or otherwise). Interest at the Post-Default Rate
shall be payable on demand. The Borrowers hereby authorize the Administrative
Agent to, and the Administrative Agent may, from time to time, charge the Loan
Account pursuant to Section 4.02 hereof with the amount of any interest payment
due hereunder.
(e) General. All interest shall be computed on the basis of a
-------
year of 360 days for the actual number of days, including the first day but
excluding the last day, elapsed.
SECTION 2.07. Reduction of Commitment; Prepayment of Loans.
--------------------------------------------
(a) The Borrowers may at any time or from time to time and
without penalty or premium reduce the Total Commitment to an amount (which may
be zero) not less than the sum of the unpaid principal amount of all Loans then
outstanding plus the principal amount of all Loans not yet made as to which
----
notice has been given by a Borrower under Section 2.03 hereof plus the Letter of
----
Credit Obligations at such time plus the stated amount of all Letters of Credit
----
not yet issued as to which a request has been made and not withdrawn. Any
reduction shall be in an amount which is an integral multiple of $5,000,000.
Reduction of the Total Commitment shall be made by providing not less than two
Business Days' written notice (which notice shall be irrevocable) to such effect
to the Administrative Agent (which notice the Administrative Agent shall
promptly transmit to each Lender). Reductions of the Total
29
<PAGE>
Commitment are irrevocable and may not be reinstated. Each such reduction shall
reduce the Commitment of each Lender proportionately in accordance with its Pro
Rata Share.
(b) Subject to the terms and conditions contained in this Section
2.07, Section 2.10 hereof and elsewhere in this Agreement, the Borrowers shall
have the right to prepay the Loans, in whole or in part, provided that, subject
to the terms of Section 2.08(a) hereof, the Borrowers shall be obligated to pay
the Early Termination Fee with respect to any Loans prepaid in connection with a
termination of the Total Commitment prior to June 19, 2000.
(c) If at any time (i) the Borrowing Base of the Borrowers calculated
on a combined basis is less than the sum of the outstanding principal on all
Loans outstanding plus the outstanding amount of all Letter of Credit
Obligations, (ii) the Borrowing Base of Squire on an individual basis is less
than the sum of the outstanding principal on all A Revolving Credit Loans plus
the outstanding amount of all A Letter of Credit Obligations, (iii) the
Borrowing Base of Miss Erika on an individual basis is less than the sum of the
outstanding principal on all B Revolving Credit Loans plus the outstanding
amount of all B Letter of Credit Obligations, or (iv) the Borrowing Base of
Jeri-Jo on an individual basis is less than the sum of the outstanding principal
on all C Revolving Credit Loans plus the outstanding amount of all C Letter of
Credit Obligations, Squire, Miss Erika or Jeri-Jo, as appropriate, will (A)
immediately give notice of such occurrence to the Administrative Agent and (B)
prepay the appropriate Loans in an amount which will reduce the sum of the
outstanding principal on all such Loans, the A Revolving Credit Loans, the B
Revolving Credit Loans, or the C Revolving Credit Loans as the case may be, to
an amount less than or equal to the then current Borrowing Base of the Borrowers
on a combined basis or the Borrowing Base of Squire, Miss Erika or Jeri-Jo, on
an individual basis, as the case may be. If at any time after the applicable
Borrowers have complied with the first sentence of this Section 2.07(c), the
aggregate Letter of Credit Obligations is greater than the then current
Borrowing Base of the Borrowers on a combined basis, the A Letter of Credit
Obligations is greater than the then current Borrowing Base of Squire on an
individual basis, the B Letter of Credit Obligations is greater than the then
current Borrowing Base of Miss Erika on an individual basis, or the C Letter of
Credit Obligations is greater than the then current Borrowing Base of Jeri-Jo on
an individual basis, Squire, Miss Erika or Jeri-Jo, as appropriate, shall
provide cash collateral to the Collateral Agent in the amount of such excess,
which cash collateral shall be deposited in an interest bearing account
maintained by the Collateral Agent and, provided that no Event of Default shall
have occurred and be continuing, returned to Squire, Miss Erika or Jeri-Jo, as
appropriate, at such time as (w) the aggregate Letter of Credit Obligations plus
the aggregate principal amount of all outstanding Loans no longer exceeds the
then current Borrowing Base of the Borrowers on a combined basis, (x) the
aggregate A Letter of Credit Obligations plus the aggregate principal amount of
all outstanding A Revolving Credit Loans no longer exceeds the then current
Borrowing Base of Squire on an individual basis, (y) the aggregate B Letter of
Credit Obligations plus the aggregate principal amount of all outstanding B
Revolving Credit Loans no longer exceeds the then current Borrowing Base of Miss
Erika on an individual basis, or (z) the aggregate C Letter of Credit
Obligations plus the aggregate principal amount of all outstanding C Revolving
Credit Loans no longer exceeds the then current Borrowing Base of Jeri-Jo on an
individual basis, as the case may be.
30
<PAGE>
(d) [Intentionally Omitted]
(e) [Intentionally Omitted]
(f) The Borrowers shall immediately prepay the Loans and
provide cash collateral to the Collateral Agent in the amount of all Letter of
Credit Obligations (which cash collateral shall be deposited in an interest
bearing account maintained by the Collateral Agent) if, without its consent,
NationsBanc has been replaced as the Factor by a Borrower.
(g) Upon the request of the Required Lenders, promptly
following, and in any event within two Business Days after, the receipt by the
Company or any of its Subsidiaries of any Net Proceeds from the issuance, sale,
assignment, transfer or other disposition by the Company or any of its
Subsidiaries of any Capital Stock, debt securities or assets of the Company or
any of its Subsidiaries, the Borrowers shall make a prepayment of the Loans in
an amount equal to the excess, if any, of the sum of the Loans and Letter of
Credit Obligations over the Borrowing Base Before Overadvance Amount, provided
that the Borrowers shall not be required to prepay such Loans in the case of (i)
the issuance of Capital Stock of the Company pursuant to the Company's 1994
Stock Option Plan, the Company's 1998 Long Term Incentive Plan, the Company's
Non-Employee Directors' Stock Option Plan or pursuant to other plans or
arrangements with respect to options or warrants issued to the employees,
consultants and directors of the Company or any Borrower to the extent such
issuance results in cash Net Proceeds of less than $100,000 to the Company and
the Borrowers in the aggregate in any Fiscal Year, (ii) the issuance of Capital
Stock of the Company consisting of common equity or preferred equity with a
dividend not higher than the interest on the Company Notes and having other
terms no more restrictive for the Company and its Subsidiaries than the terms of
the Indenture, in any case to make the Miss Erika Earn Out Payment, the Jeri-Jo
Earn Out Payment and any other earnout payments payable in connection with an
acquisition otherwise permitted by Section 7.02f (ix) hereof, or the proceeds of
which will be used to prepay, purchase, redeem, retire, defease or otherwise
acquire Company Notes in accordance with Section 7.02(r)(ii) hereof, (iii)
intercompany indebtedness between the Loan Parties permitted by Sections 7.02(b)
and 7.02(f) hereof, (iv) sales of Inventory (A) by the Borrowers and their
Subsidiaries in the ordinary course of business and (B) by Norty's in going out
of business sales, (v) sales of Accounts Receivable by the Borrowers pursuant to
the Factoring Agreements, (vi) the disposition of obsolete or worn out property
in the ordinary course of business, (vii) sales of the Capital Stock or assets
of Norty's, and (viii) the issuance of the Company Notes. In addition, upon
receipt of aggregate Net Proceeds from any such issuance, sale, assignment,
transfer or other disposition by the Company or any of its Subsidiaries of any
Capital Stock, debt securities or assets of the Company or any of its
Subsidiaries in excess of $500,000, other than any Net Proceeds from the events
described in clauses (i) through (viii) above, the current Overadvance Amount
limits (as such amounts are initially set forth in clause (i) of the definition
of "Overadvance Amount" in Section 1.01 hereof) shall each be reduced on a
dollar for dollar basis by the aggregate amount of Net Proceeds in excess of
$500,000 received from any such issuance, sale, assignment, transfer or other
disposition, with such reduction to be effective upon receipt of such Net
Proceeds, provided that no such reduction shall be required if the Net Proceeds
from the issuance of Capital Stock of the Company consisting of common equity or
preferred equity with a dividend not
31
<PAGE>
higher than the interest on the Company Notes and having other terms no more
restrictive for the Company and its Subsidiaries than the terms of the Indenture
are used to prepay, purchase, redeem, retire, defease or otherwise acquire
Company Notes in accordance with Section 7.02(r)(ii) hereof.
(h) Subject to paragraph (b) of Section 2.10 of this Agreement, the
Administrative Agent shall on each Business Day apply all funds received from
the Factor pursuant to the Assignment Agreement or representing other proceeds
of Accounts Receivable or Inventory, to the payment, in whole or in part, of the
outstanding Loans.
(i) Immediately upon the receipt by any Loan Party of any insurance
proceeds, the Borrowers shall prepay the Loans in an amount equal to the
insurance proceeds received by such Loan Party, provided that (i) except with
--------
respect to the proceeds from key-man life insurance and except during the
continuance of an Event of Default, proceeds from insurance covering damage to
property not in excess of $500,000 for any one occurrence shall not be required
to be so prepaid on such date to the extent such insurance proceeds are used to
replace or restore the properties or assets in respect of which such proceeds
were paid if the Borrowers deliver a certificate to the Administrative Agent on
or prior to such date stating that such proceeds shall be used to replace or
restore any such properties or assets within a period specified in such
certificate not to exceed 60 days after the date of receipt of such proceeds
(which certificate shall set forth estimates of the proceeds to be so expended)
and (ii) if all or any portion of such proceeds not so applied to the repayment
of the Loans are not so used within the period specified in the relevant
certificate furnished pursuant to clause (i) above, such remaining portion shall
be prepaid on the last day of such specified period.
(j) The Borrowers shall repay the Loans in the amount of any payments
received as (i) principal of the non-negotiable limited recourse promissory
notes listed on Schedule 7.02(k)(ii) hereof and (ii) principal of or interest on
loans or advances made pursuant to Section 7.02(f)(xii) hereof and dividends or
distributions made by Norty's to Squire pursuant to Section 7.02(i)(iv) hereof,
in each case on the Business Day following the receipt of such payments.
(k) Any prepayment made pursuant to this Section 2.07 shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of prepayment.
(l) Except as otherwise expressly provided in this Section 2.07,
payments with respect to any paragraph of this Section 2.07 are in addition to
payments made or required to be made under any other paragraph of this Section
2.07. Prepayments of the Loans pursuant to this Section 2.07 shall be applied
to the A Revolving Credit Loans, the B Revolving Credit Loans or the C Revolving
Credit Loans by the Administrative Agent, first, based upon the Borrower making
such prepayment and, second, based upon such factors as the Administrative Agent
deem appropriate in the exercise of its reasonable business judgment (which
factors may include the minimization or reduction of the payments required by
Section 2.10(a) hereof).
32
<PAGE>
SECTION 2.08. Fees.
----
(a) Early Termination Fee. If the Total Commitment is terminated
---------------------
prior to June 19, 2000 the Borrowers shall pay to the Administrative Agent for
the Pro Rata Share of the Lenders, on the date of such termination, the Early
Termination Fee, provided, that the Early Termination Fee shall not be payable
if (i) the Loans are prepaid from the proceeds generated by the public sale or
the private sale, pursuant to Rule 144A of the Securities Act of 1933 of Capital
Stock, of debt securities or convertible debt securities of the Company or any
of its Subsidiaries or (ii) the Total Commitment is terminated as a result of an
Event of Default and the Loans are not repaid from the proceeds generated from a
third party refinancing, other than a refinancing described in clause (i) above.
(b) Other Fees. The Borrowers shall jointly and severally pay to the
----------
Agents the fees set forth in the Fee Letter at the times set forth in the Fee
Letter. All fees required to be paid to the Agents pursuant to the Fee Letter
shall be paid to the Administrative Agent, for the account of the Agents. All
fees required to be paid to the Lenders pursuant to this Agreement shall be paid
to the Administrative Agent for the Pro Rata Share of the Lenders. All fees
under this Agreement and the Fee Letter are non-refundable under all
circumstances.
SECTION 2.09. Eurodollar Rate Not Determinable; Illegality or
-----------------------------------------------
Impropriety.
- -----------
(a) In the event, and on each occasion, that on or before the day on
which the Eurodollar Rate is to be determined for a borrowing that is to include
Eurodollar Loans, the Administrative Agent has determined in good faith that, or
has been advised by the Required Lenders that, (i) the Eurodollar Rate cannot be
determined for any reason, (ii) the Eurodollar Rate will not adequately and
fairly reflect the cost of maintaining Eurodollar Loans or (iii) Dollar deposits
in the principal amount of the applicable Eurodollar Loans are not available in
the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of the Lenders' Eurodollar Loans are then being
conducted, the Administrative Agent shall, as soon as practicable thereafter,
give written notice of such determination to the Borrowers and the other
Lenders. In the event of any such determination, any request by the Borrowers
for a Eurodollar Loan pursuant to Section 2.03 shall, until, in the case of such
a determination by the Required Lenders, the Administrative Agent has been
advised by the Required Lenders and the Administrative Agent has so advised such
Borrower that, or in the case of a determination by the Administrative Agent,
the Administrative Agent has advised such Borrower and the other Lenders that,
the circumstances giving rise to such notice no longer exist, be deemed to be a
request for a Base Rate Loan. Each determination by the Administrative Agent
and/or the Required Lenders hereunder shall be conclusive and binding absent
manifest error.
(b) In the event that it shall be unlawful for any Lender to make,
maintain or fund any Eurodollar Loan as contemplated by this Agreement, then
such Lender shall forthwith give notice thereof to the Administrative Agent and
the Borrowers describing such illegality in reasonable detail. Effective
immediately upon the giving of such notice, the
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obligation of such Lender to make Eurodollar Loans shall be suspended for the
duration of such illegality and, if and when such illegality ceases to exist,
such suspension shall cease, and such Lender shall notify the Administrative
Agent and the Borrowers. If any such change shall make it unlawful for any
Lender to maintain any outstanding Eurodollar Loan as a Eurodollar Loan, such
Lender shall, upon the happening of such event, notify the Administrative Agent
and the Borrowers, and the Borrowers shall immediately, or if permitted by
applicable law, rule, regulation, order, decree, interpretation, request or
directive, at the end of the then current Interest Period for such Eurodollar
Loan, convert each such Eurodollar Loan into a Base Rate Loan.
SECTION 2.10. Indemnity.
---------
(a) The Borrowers hereby jointly and severally indemnify each Lender
against any loss or expense that such Lender actually sustains or incurs
(including, without limitation, any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund or maintain any Eurodollar Loan and including loss of anticipated
profits) as a consequence of (i) any failure by the Borrowers to fulfill on the
date of any borrowing hereunder the applicable conditions set forth in Article
V, (ii) any failure by the Borrowers to borrow any Eurodollar Loan hereunder, to
convert any Base Rate Loan into a Eurodollar Loan or to continue a Eurodollar
Loan as such after notice of such borrowing, conversion or continuation has been
given pursuant to Section 2.03 or Section 2.11 hereof, (iii) any payment,
prepayment (mandatory or optional) or conversion of a Eurodollar Loan required
by any provision of this Agreement or otherwise made on a date other than the
last day of the Interest Period applicable thereto, (iv) any default in payment
or prepayment of the principal amount of any Eurodollar Loan or any part thereof
or interest accrued thereon, as and when due and payable (at the due date
thereof, by notice of prepayment or otherwise), or (v) the occurrence of any
Event of Default, including, in each such case, any loss (including, without
limitation, loss of anticipated profits) or reasonable expense sustained or
incurred in liquidating or employing deposits from third parties acquired to
effect or maintain such Loan or any part thereof as a Eurodollar Loan. Such
loss or reasonable expense shall include but not be limited to an amount equal
to the excess, if any, as reasonably determined by such Lender, of (i) its cost
of obtaining the funds for the Loan being paid or prepaid or converted or
continued or not borrowed or converted or continued (based on the Eurodollar
Rate applicable thereto) for the period from the date of such payment,
prepayment, conversion, continuation or failure to borrow, convert or continue
on the last day of the Interest Period for such Loan (or, in the case of a
failure to borrow, convert or continue, the last day of the Interest Period for
such Loan that would have commenced on the date of such failure to borrow,
convert or continue) over (ii) the amount of interest (as reasonably determined
by such Lender) that would be realized by such Lender in re-employing the funds
so paid, prepaid, converted or continued or not borrowed, converted or continued
for such Interest Period. A certificate of any Lender setting forth in
reasonable detail any amount or amounts that such Lender is entitled to receive
pursuant to this Section 2.10 and the basis for the determination of such amount
or amounts shall be delivered to the Borrowers and shall be conclusive and
binding absent manifest error.
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(b) Notwithstanding paragraph (a) of this Section 2.10, the
Administrative Agent will use reasonable efforts to minimize or reduce any such
loss or expense resulting from the mandatory prepayments required by Section
2.07 (other than paragraph (f) thereof) of this Agreement by (i) applying all
payments and prepayments to Base Rate Loans prior to any application of payments
to Eurodollar Loans and (ii) after all Base Rate Loans have been paid in full,
calculating any such loss or expense based upon the net decrease in Eurodollar
Loans on a day after giving effect to all prepayments and all Loans made on such
day.
SECTION 2.11. Continuation and Conversion of Loans.
------------------------------------
(a) Subject to Section 2.09 hereof, the Borrowers shall have the
right, at any time, on three (3) Business Days' prior irrevocable written or
telecopy notice to the Administrative Agent, to continue any Eurodollar Loan, or
any portion thereof, into a subsequent Interest Period or, after the Syndication
Date, to convert any Base Rate Loan or portion thereof into a Eurodollar Loan,
or on one (1) Business Day's prior irrevocable written or telecopy notice to the
Administrative Agent, to convert any Eurodollar Loan or portion thereof into a
Base Rate Loan, subject to the following:
(i) no Eurodollar Loan may be continued as such and no Base
Rate Loan may be converted into a Eurodollar Loan, when any Event of
Default or Default shall have occurred and be continuing at such time;
(ii) in the case of a continuation of a Eurodollar Loan as such
or a conversion of a Base Rate Loan into a Eurodollar Loan, the aggregate
principal amount of such Eurodollar Loan shall not be less than $5,000,000
and in multiples of $1,000,000 if in excess thereof;
(iii) in the case of a conversion from a Eurodollar Loan to a
Base Rate Loan, accrued interest on the Loan (or portion thereof) being
converted shall be paid by the applicable Borrower at the time of
conversion;
(iv) a Base Rate Loan may be converted into a Eurodollar Loan
only on the first Business Day of a month;
(v) any portion of a Loan maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Loan; and
(vi) if any conversion of a Eurodollar Loan shall be effected
on a day other than the last day of an Interest Period, the Borrowers shall
jointly and severally reimburse each Lender on demand for any loss incurred
or to be incurred by it in the reemployment of the funds released by such
conversion as provided in Section 2.10 hereof.
In the event that a Borrower shall not give notice to continue any Eurodollar
Loan into a subsequent Interest Period, such Loan shall automatically become a
Base Rate Loan at the expiration of the then current Interest Period.
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SECTION 2.12. Taxes. (a) All payments made by the Borrowers hereunder,
-----
under the Notes or under any other Loan Document shall be made without set-off,
counterclaim, deduction or other defense. All such payments shall be made free
and clear of and without deduction for any present or future income, franchise,
sales, use, excise, stamp or other taxes, levies, imposts, deductions, charges,
fees, withholdings, restrictions or conditions of any nature now or hereafter
imposed, levied, collected, withheld or assessed by any jurisdiction (whether
pursuant to United States Federal, state, local or foreign law) or by any
political subdivision or taxing authority thereof or therein, and all interest,
penalties or similar liabilities, excluding taxes on the net income of, and
branch profit taxes of, any Lender, the Agents or the L/C Issuer imposed by the
jurisdiction in which such Lender, the Agents or the L/C Issuer is organized or
any political subdivision thereof or taxing authority thereof or any
jurisdiction in which such Person's principal office or relevant lending office
is located or any political subdivision thereof or taxing authority thereof
(such nonexcluded taxes being hereinafter collectively referred to as
"Taxes"). If the Borrowers shall be required by law to deduct or to withhold any
-----
Taxes from or in respect of any amount payable hereunder, (i) the amount so
payable shall be increased to the extent necessary so that after making all
required deductions and withholdings (including Taxes on amounts payable to the
Lenders or the L/C Issuer pursuant to this sentence) the Lenders or the L/C
Issuer receive an amount equal to the sum they would have received had no such
deductions or withholdings been made, (ii) the Borrowers shall make such
deductions or withholdings, and (iii) the Borrowers shall pay the full amount
deducted or withheld to the relevant taxation authority in accordance with
applicable law. Whenever any Taxes are payable by the Borrowers, as promptly as
possible thereafter, the Borrowers shall send the Lenders, the L/C Issuer and
the Agents an official receipt (or, if an official receipt is not available,
such other documentation as shall be satisfactory to the Lenders, L/C Issuer or
the Agents, as the case may be) showing payment. In addition, the Borrowers
agree to pay any present or future taxes, charges or similar levies which arise
from any payment made hereunder or from the execution, delivery, performance,
recordation or filing of, or otherwise with respect to, this Agreement, the
Notes, the Letters of Credit or any other Loan Document other than the foregoing
excluded taxes (hereinafter referred to as "Other Taxes").
-----------
(b) The Borrowers will jointly and severally indemnify the Lenders and
the L/C Issuer for the amount of Taxes or Other Taxes (including, without
limitation, any Taxes or Other Taxes imposed by any jurisdiction on amounts
payable under this Section 2.12) paid by any Lender or the L/C Issuer and any
liability (including penalties, interest and expenses for nonpayment, late
payment or otherwise) arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted. This
indemnification shall be paid within 30 days from the date on which such Lender
or such L/C Issuer makes written demand which demand shall identify the nature
and amount of Taxes or Other Taxes for which indemnification is being sought and
the basis of the claim.
(c) Each Lender that is organized in a jurisdiction other than the
United States, a State thereof or the District of Columbia hereby agrees that:
(i) it shall, no later than the Effective Date (or, in the
case of a Lender which becomes a party hereto pursuant to Section 12.08
hereof after the Effective
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Date, the date upon which such Lender becomes a party hereto) deliver to
the Borrowers and the Administrative Agent:
(A) two accurate, complete and signed originals of U.S.
Internal Revenue Service Form 4224 or successor form, or
(B) two accurate, complete and signed originals of U.S.
Internal Revenue Service Form 1001 or successor form,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of its lending office under this Agreement free from withholding of
United States Federal income tax;
(ii) if at any time such Lender changes its lending office or
offices or selects an additional lending office it shall, at the same time
or reasonably promptly thereafter, deliver to the Borrowers through the
Administrative Agent in replacement for, or in addition to, the forms
previously delivered by it hereunder:
(A) if such changed or additional lending office is
located in the United States, two accurate, complete and signed
originals of such Form 4224 or successor form, or
(B) two accurate, complete and signed originals of such
Form 1001 or successor form,
in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such changed or additional lending office under this Agreement
free from withholding of United States Federal income tax; and
(iii) it shall, promptly upon the Borrowers' reasonable request
to that effect, deliver to the Borrowers such other forms or similar
documentation as may be required from time to time by any applicable law,
treaty, rule or regulation in order to establish such Lender's tax status
for withholding purposes.
(d) If either of the Borrowers fails to perform its obligations under
this Section 2.12, the Borrowers shall jointly and severally indemnify the
Lenders and the L/C Issuer for any taxes, interest or penalties that may become
payable as a result of any such failure.
SECTION 2.13. Joint and Several Liability of the Borrowers.
--------------------------------------------
(a) Notwithstanding anything in this Agreement or any other Loan
Document to the contrary (including, without limitation, the designation of the
Loans as A Revolving Credit Loans, B Revolving Credit Loans or C Revolving
Credit Loans and the designation of Letter of Credit Obligations as A Letter of
Credit Obligations, B Letter of Credit Obligations or C Letter of Credit
Obligations), each of the Borrowers hereby accepts joint and
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several liability hereunder and under the other Loan Documents in consideration
of the financial accommodations to be provided by the Agents and the Lenders
under this Agreement and the other Loan Documents, for the mutual benefit,
directly and indirectly, of each of the Borrowers and in consideration of the
undertakings of the other Borrower to accept joint and several liability for the
Obligations. Each of the Borrowers, jointly and severally, hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Borrower, with respect to the payment
and performance of all of the Obligations (including, without limitation, any
Obligations arising under this Section 2.13), it being the intention of the
parties hereto that all the Obligations shall be the joint and several
obligations of each of the Borrowers without preferences or distinction among
them. If and to the extent that any of the Borrowers shall fail to make any
payment with respect to any of the Obligations as and when due or to perform any
of the Obligations in accordance with the terms thereof, then in each such event
the other Borrower will make such payment with respect to, or perform, such
Obligation. Subject to the terms and conditions hereof, the Obligations of each
of the Borrowers under the provisions of this Section 2.13 constitute the
absolute and unconditional, full recourse Obligations of each of the Borrowers
enforceable against each such Person to the full extent of its properties and
assets, irrespective of the validity, regularity or enforceability of this
Agreement, the other Loan Documents or any other circumstances whatsoever.
(b) The provisions of this Section 2.13 are made for the benefit of
the Agents, the Lenders and their successors and assigns, and may be enforced by
them from time to time against any or all of the Borrowers as often as occasion
therefor may arise and without requirement on the part of the Agents, the
Lenders or such successors or assigns first to marshall any of its or their
claims or to exercise any of its or their rights against any of the other
Borrowers or to exhaust any remedies available to it or them against any of the
other Borrowers or to resort to any other source or means of obtaining payment
of any of the Obligations hereunder or to elect any other remedy. The
provisions of this Section 2.13 shall remain in effect until all of the
Obligations shall have been paid in full or otherwise fully satisfied.
(c) Each of the Borrowers hereby agrees that it will not enforce any
of its rights of contribution or subrogation against the other Borrowers with
respect to any liability incurred by it hereunder or under any of the other Loan
Documents, any payments made by it to the Agents or the Lenders with respect to
any of the Obligations or any Collateral until such time as all of the
Obligations have been paid in full in cash. Any claim which any Borrower may
have against any other Borrower with respect to any payments to the Agents or
the Lenders hereunder or under any other Loan Documents are hereby expressly
made subordinate and junior in right of payment, without limitation as to any
increases in the Obligations arising hereunder or thereunder, to the prior
payment in full in cash of the Obligations and, in the event of any insolvency,
bankruptcy, receivership, liquidation, reorganization or other similar
proceeding under the laws of any jurisdiction relating to any Borrower, its
debts or its assets, whether voluntary or involuntary, all such Obligations
shall be paid in full in cash before any payment or distribution of any
character, whether in cash, securities or other property, shall be made to any
other Borrower therefor.
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ARTICLE III
LETTERS OF CREDIT
SECTION 3.01. Letter of Credit Guaranty.
-------------------------
(a) In order to assist the Borrowers in establishing or opening
documentary and standby letters of credit, which shall not have expiration dates
that exceed 270 days in the case of documentary letters of credit and 365 days
in the case of standby letters of credit (or such longer periods as may be
approved by the Agents from the date of issuance (the "Letters of Credit"), with
-----------------
the L/C Issuer, the Borrowers have requested NationsBanc to join in the
applications for such Letters of Credit, and/or guarantee payment or performance
of such Letters of Credit and any drafts thereunder through the issuance of a
Letter of Credit Guaranty, thereby lending NationsBanc's credit to that of the
Borrowers, and NationsBanc hereby agrees to do so. These arrangements shall be
coordinated by NationsBanc subject to the terms and conditions set forth below.
NationsBanc shall not be required to be the issuer of any Letter of Credit. A
Borrower will be the account party for each application for a Letter of Credit,
which shall be substantially in the form of Exhibit E hereto or on a computer
transmission system approved by NationsBanc and the L/C Issuer or such other
written form or written transmission system as may from time to time be approved
by the L/C Issuer and NationsBanc, and shall be duly completed in a manner
reasonably acceptable to NationsBanc, together with such other certificates,
agreements, documents and other papers and information as the L/C Issuer or
NationsBanc may reasonably request (the "Letter of Credit Application"). In the
----------------------------
event of any conflict between the terms of the Letter of Credit Application and
this Agreement, for purposes of this Agreement, the terms of this Agreement
shall control.
(b) The aggregate Letter of Credit Obligations shall not exceed the
lowest of (i) the difference between (A) the Total Commitment and (B) the
- ---------
aggregate principal amount of Loans then outstanding, (ii) the difference
between (A) the aggregate Borrowing Base for the Borrowers on a combined basis
and (B) the aggregate principal amount of the Loans then outstanding and (iii)
the L/C Subfacility. In addition (x) the A Letter of Credit Obligations shall
not exceed the difference between (1) the then current Borrowing Base of Squire
on an individual basis and (2) the aggregate principal amount of A Revolving
Credit Loans, (y) the B Letter of Credit Obligations shall not exceed the
difference between (1) the then current Borrowing Base of Miss Erika on an
individual basis and (2) the aggregate principal amount of B Revolving Credit
Loans and (z) the C Letter of Credit Obligations shall not exceed the difference
between (1) the then current Borrowing Base of Jeri-Jo on an individual basis
and (2) the aggregate principal amount of C Revolving Credit Loans, provided
that (AA) no Borrower shall be permitted to obtain a Letter of Credit that
results in such Borrower having an Overadvance Amount if and to the extent that,
at such time, any other Borrower has positive availability, (BB) except as
provided in clause (AA) above, the Overadvance Amount shall be allocated among
the Borrowers by the Administrative Agent, as described in Section 2.01(b)
hereof, and (CC) nothing contained herein shall prohibit a Borrower with
positive Availability at any time from opening a Letter of Credit for the
account of another Borrower that does not have positive Availability at such
time. Not more than $45 million of such Letter of Credit Obligations shall
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be Letter of Credit Obligations with respect to standby Letters of Credit and
not more than $130 million of such Letter of Credit Obligations shall be Letter
of Credit Obligations with respect to documentary Letters of Credit (including
$45 million of such Letters of Credit available to Jeri-Jo under its Borrowing
Base, subject to all of the terms of this Agreement). In addition, the terms and
conditions of all Letters of Credit and all changes or modifications thereof by
the Borrowers and/or the L/C Issuer shall in all respects be subject to the
prior approval of NationsBanc (or, in the case of Existing Letters of Credit and
Indemnified Letters of Credit issued by The Chase Manhattan Bank or Marine
Midland Bank, N.A., CIT) in the reasonable exercise of its sole and absolute
discretion; provided, however, that (i) the expiry date of all Letters of Credit
-------- -------
shall be no later than forty-five days prior to the Final Maturity Date unless,
on or prior to forty-five days prior to the Final Maturity Date, either such
Letters of Credit shall be cash collateralized in an amount equal to 105% of the
face amount of such Letters of Credit or the Borrowers shall provide the Agents
and the Lenders with an indemnification, in form and substance reasonably
satisfactory to the Collateral Agent, from a commercial bank or other financial
institution acceptable to the Collateral Agent for any Letter of Credit
Obligations with respect to such Letters of Credit and (ii) the Letters of
Credit and all documentation in connection therewith shall be in form and
substance reasonably satisfactory to NationsBanc and the L/C Issuer. At the
request of a Borrower, NationsBanc may, in its sole discretion, assist such
Borrower in establishing or opening standby Letters of Credit that have expiry
dates that will automatically be extended for an additional period or periods
unless the L/C Issuer notifies the beneficiary that the then existing expiry
date will not be extended ("Evergreen Letters of Credit"), provided that (x)
---------------------------
NationsBanc shall have no obligation to assist any Borrower in establishing or
opening any Evergreen Letter of Credit, (y) NationsBanc may at any time, in its
sole discretion, instruct the L/C Issuer to notify the beneficiary of an
Evergreen Letter of Credit that the expiry date of such Letter of Credit will
not be automatically extended, if an Event of Default or Default has occurred
and is continuing, and (z) all Evergreen Letters of Credit shall be subject to
all of the terms and conditions contained in this Agreement applicable to
Letters of Credit.
(c) The Administrative Agent shall have the right, without notice to
the Borrowers, to charge the relevant Loan Account with the amount of any and
all indebtedness, liabilities and obligations of any kind (including
indemnification for breakage costs, capital adequacy and reserve requirement
charges) incurred by the Agents, NationsBanc, CIT or the Lenders under the
Letter of Credit Guaranty or incurred by an L/C Issuer with respect to a Letter
of Credit at the earlier of (i) payment by NationsBanc, CIT or the Lenders under
the Letter of Credit Guaranty or (ii) the occurrence of an Event of Default.
Any amount charged to a Loan Account shall be deemed a Loan hereunder made by
the Lenders to the relevant Borrower, funded by the Administrative Agent on
behalf of the Lenders and subject to Section 2.05 of this Agreement. Any
charges, fees, commissions, costs and expenses charged to NationsBanc or CIT for
a Borrower's account by the L/C Issuer in connection with or arising out of
Letters of Credit or transactions relating thereto will be charged to the
relevant Loan Account in full when charged to or paid by NationsBanc or CIT and,
when charged, shall be conclusive on such Borrower absent manifest error. Each
of the Lenders and the Borrowers agrees that the Administrative Agent shall have
the right to make such charges regardless of whether any Event of Default or
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Default shall have occurred and be continuing or whether any of the conditions
precedent in Section 5.02 have been satisfied.
(d) The Borrowers unconditionally and jointly and severally indemnify
each Agent, NationsBanc, CIT and each Lender and hold each Agent, NationsBanc,
CIT and each Lender harmless from any and all loss, claim or liability incurred
by any Agent, NationsBanc, CIT or any Lender arising from any transactions or
occurrences relating to Letters of Credit, any drafts or acceptances thereunder,
the Collateral relating thereto, and all Obligations in respect thereof,
including any such loss or claim due to any action taken by the L/C Issuer,
other than for any such loss, claim or liability arising out of the gross
negligence or willful misconduct of the Agents, NationsBanc, CIT or any Lender
as determined by a final judgment of a court of competent jurisdiction. The
Borrowers further agree to jointly and severally hold the Agents, NationsBanc,
CIT and each Lender harmless from any errors or omission, negligence or
misconduct by the L/C Issuer. The Borrowers' unconditional, joint and several
obligations to the Agents, NationsBanc, CIT and each Lender with respect to the
Letters of Credit hereunder shall not be modified or diminished for any reason
or in any manner whatsoever, other than as a result of the Agents',
NationsBanc's, CIT's or such Lender's gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction. The
Borrowers agree that any charges incurred by NationsBanc, CIT or the L/C Issuer
for a Borrower's account hereunder may be charged to the relevant Loan Account.
(e) None of the Agents, NationsBanc, CIT, the Lenders and the L/C
Issuer shall be responsible for the existence, character, quality, quantity,
condition, packing, value or delivery of the goods purporting to be represented
by any documents; any difference or variation in the character, quality,
quantity, condition, packing, value or delivery of the goods from that expressed
in the documents; the validity, sufficiency or genuineness of any documents or
of any endorsements thereof even if such documents should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; the time,
place, manner or order in which shipment is made; partial or incomplete
shipments, or failure or omission to ship any or all of the goods referred to in
the Letters of Credit or documents; any deviation from instructions, delay,
default, or fraud by the shipper and/or anyone else in connection with the
Collateral or the shipping thereof; or any breach of contract between the
shipper or vendors and the Borrowers. Furthermore, without limiting any of the
foregoing, none of the Agents, NationsBanc, CIT and the Lenders shall be
responsible for any act or omission with respect to or in connection with any
goods covered by any Letter of Credit except in the case of the Agents',
NationsBanc's, CIT's or the Lenders' gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction.
(f) The Borrowers jointly and severally agree that any action taken by
any Agent, NationsBanc, CIT or any Lender, if taken in good faith, or any action
taken by the L/C Issuer, under or in connection with the Letters of Credit, the
drafts or acceptances, the guarantees or the Collateral, shall be binding on the
Borrowers and shall not put the Agents, NationsBanc, CIT or the Lenders in any
resulting liability to the Borrowers except in the case of the Agents',
NationsBanc's, CIT's or the Lenders' gross negligence or willful misconduct as
determined by a final judgment of a court of competent jurisdiction. In
furtherance of the
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foregoing, NationsBanc and CIT shall have the full right and authority to clear
and resolve any questions of non-compliance of documents; to give any
instructions as to acceptance or rejection of any documents or goods; to execute
any and all steamship or airways guaranties (and applications therefore),
indemnities or delivery orders; to grant any extensions of the maturity of, time
of payment for, or time of presentation of, any drafts, acceptances or
documents; and to agree to any amendments, renewals, extensions, modifications,
changes or cancellations of any of the terms or conditions of any of the
applications, Letters of Credit, drafts or acceptances, all in NationsBanc's or
CIT's sole name, and the L/C Issuer shall be entitled to comply with and honor
any and all such documents or instruments executed by or received solely from
NationsBanc or CIT, all without any notice to or any consent from the Borrowers.
NationsBanc and CIT, as applicable, shall use reasonable efforts to consult with
the Borrowers before taking any action pursuant to this Section 3.01(f).
(g) Without NationsBanc's or CIT's, as applicable, express consent,
the Borrowers jointly and severally agree: (i) not to execute any and all
applications for steamship or airway guaranties, indemnities or delivery orders;
to grant any extensions of the maturity of, time of payment for, or time of
presentation of, any drafts, acceptances or documents; or to agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the Letter of Credit Applications, Letters
of Credit, drafts or acceptances; and (ii) after the occurrence of an Event of
Default which is not cured within any applicable grace period, if any, or
waived, not to (A) clear and resolve any questions of non-compliance of
documents, or (B) give any instructions as to acceptances or rejection of any
documents or goods.
(h) The Borrowers jointly and severally agree that any necessary and
material import, export or other license or certificate for the import or
handling of Inventory will have been promptly procured; all foreign and domestic
material governmental laws and regulations in regard to the shipment and
importation of Inventory or the financing thereof will have been promptly and
fully complied with, in each case, where the failure to obtain such certificate
or license or the failure to comply with such laws would have a Material Adverse
Effect; and any certificates in that regard that NationsBanc or CIT, as
applicable, may at any time reasonably request will be promptly furnished. In
this connection, the Borrowers warrant and represent that all shipments made
under any Letters of Credit are in accordance with the laws and regulations of
the countries in which the shipments originate and terminate, and are not
prohibited by any such laws and regulations except where the failure to be in
compliance with such laws and regulations would not have a Material Adverse
Effect. As between the Borrowers, on the one hand, and the Agents, NationsBanc,
CIT, the Lenders and the L/C Issuer, on the other hand, the Borrowers jointly
and severally assume all risk, liability and responsibility for, and agree to
pay and discharge, all present and future local, state, federal or foreign
taxes, duties, or levies in respect of the shipment and importation of
Inventory. As between the Borrowers, on the one hand, and the Agents,
NationsBanc, CIT, the Lenders and the L/C Issuer, on the other hand, any
embargo, restriction, laws, customs or regulations of any country, state, city,
or other political subdivision, where such Inventory is or may be located, or
wherein payments are to be made, or wherein drafts may be drawn, negotiated,
accepted, or paid, shall be solely the Borrowers' joint and several risk,
liability and responsibility.
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(i) Upon any payments made to the L/C Issuer under the Letter of
Credit Guaranty, NationsBanc, CIT, the Agents or the Lenders, as the case may
be, shall, without prejudice to its rights under this Agreement (including that
such unreimbursed amounts shall constitute Loans hereunder), acquire by
subrogation, any rights, remedies, duties or obligations granted or undertaken
by the Borrowers in favor of the L/C Issuer in any application for Letters of
Credit, any standing agreement relating to Letters of Credit or otherwise, all
of which shall be deemed to have been granted to NationsBanc, CIT, the Agents
and the Lenders and apply in all respects to NationsBanc, CIT, the Agents and
the Lenders and shall be in addition to any rights, remedies, duties or
obligations contained herein.
SECTION 3.02. Participations.
--------------
(a) Purchase of Participations. Immediately upon issuance by the L/C
--------------------------
Issuer of any Letter of Credit pursuant to this Agreement , each Lender (other
than, in the case of Letters of Credit issued after the Effective Date,
NationsBanc and, in the case of the Existing Letters of Credit and Indemnified
Letters of Credit, NationsBanc or CIT, as appropriate) shall be deemed to have
irrevocably and unconditionally purchased and received from NationsBanc (or, in
the case of Existing Letters of Credit and Indemnified Letters of Credit issued
by The Chase Manhattan Bank or Marine Midland Bank, N.A., CIT), without recourse
or warranty, an undivided interest and participation, to the extent of such
Lender's Pro Rata Share, in all obligations of NationsBanc (and, in the case of
the Existing Letters of Credit and Indemnified Letters of Credit issued by The
Chase Manhattan Bank or Marine Midland Bank, N.A., CIT) in such Letter of Credit
(including, without limitation, all Reimbursement Obligations of the Borrowers
with respect thereto pursuant to the Letter of Credit Guaranty or otherwise).
(b) Sharing of Payments. In the event that NationsBanc (or, in the
-------------------
case of Existing Letters of Credit and Indemnified Letters of Credit issued by
The Chase Manhattan Bank or Marine Midland Bank, N.A., CIT) makes any payment in
respect of the Letter of Credit Guaranty and the Borrowers shall not have repaid
such amount to the Administrative Agent for the account of NationsBanc (or, in
the case of Existing Letters of Credit and Indemnified Letters of Credit issued
by The Chase Manhattan Bank or Marine Midland Bank, N.A., CIT), the
Administrative Agent shall charge the relevant Loan Account in the amount of the
Reimbursement Obligation, in accordance with Sections 3.01(c) and 4.02.
(c) Obligations Irrevocable. The obligations of a Lender to make
-----------------------
payments to the Administrative Agent for the account of the Agents, NationsBanc,
CIT or the L/C Issuer with respect to a Letter of Credit shall be irrevocable,
without any qualification or exception whatsoever and shall be made in
accordance with the terms and conditions of this Agreement under all
circumstances, 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, setoff, defense or other right
which a Borrower may have at any time against a beneficiary named in such
Letter of
43
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Credit or any transferee of such Letter of Credit (or any Person for whom
any such transferee may be acting), the Agents, L/C Issuer, any Lender, or
any other Person, whether in connection with this Agreement, such Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transactions between any Borrower or any other
party and the beneficiary named in such Letter of Credit);
(iii) any draft, certificate or any other document presented
under such Letter of Credit 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 security for the
performance or observance of any of the terms of any of the Loan Documents;
(v) any failure by NationsBanc, CIT or the Administrative
Agent to provide any notices required pursuant to this Agreement relating
to such Letter of Credit ;
(vi) any payment by the L/C Issuer under any of the Letters of
Credit against presentation of a draft or certificate which does not comply
with the terms of such Letter of Credit; or
(vii) the occurrence of any Default or Event of Default.
SECTION 3.03. Letters of Credit.
-----------------
(a) Request for Issuance. A Borrower may from time to time, upon
--------------------
notice not later than 12:00 noon, New York City time, at least three Business
Days in advance, request NationsBanc to assist such Borrower in establishing or
opening a Letter of Credit by delivering to NationsBanc, with a copy to the
Administrative Agent and the L/C Issuer, a Letter of Credit Application,
together with any necessary related documents. NationsBanc shall not provide
support, pursuant to the Letter of Credit Guaranty, if NationsBanc and the
Administrative Agent shall have received written notice from the Required
Lenders on the Business Day immediately preceding the proposed issuance date for
such Letter of Credit that one or more of the conditions precedent in Section
5.02 will not have been satisfied on such date, and neither NationsBanc nor the
Administrative Agent shall otherwise be required to determine that, or take
notice whether, the conditions precedent set forth in Section 5.02 have been
satisfied.
(b) Letters of Credit Fees. (i) The Borrowers shall jointly and
----------------------
severally pay to the Administrative Agent for the account of the Lenders in
accordance with such Lender's Pro Rata Share a nonrefundable fee for each
documentary Letter of Credit issued hereunder, which fee shall be payable
monthly in arrears on the first day of each month and shall be equal to the
product of (A) the Applicable L/C Percentage and (B) the average daily
outstanding stated amount of such documentary Letter of Credit during the prior
month. In addition, the Borrowers shall jointly and severally pay to the
Administrative Agent for the
44
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account of the Lenders, in accordance with the Lenders' Pro Rata Shares
(x) for each standby Letter of Credit issued hereunder, a nonrefundable fee
equal to 1.0% per annum of the outstanding stated amount of such standby Letter
of Credit, payable quarterly in advance commencing on the date such standby
Letter of Credit is issued and on the first day of each calendar quarter
thereafter and (y) for any amendment to an existing standby Letter of Credit
that increases the stated amount of such standby Letter of Credit, a
nonrefundable fee equal to 1.0% per annum of the increase in the outstanding
stated amount of such standby Letter of Credit for the period from the date of
such increase to the last day of such calendar quarter, payable on the date of
such increase.
(ii) L/C Issuer Charges. The Borrowers shall pay to
------------------
NationsBanc (or, in the case of Existing Letters of Credit and Indemnified
Letters of Credit issued by The Chase Manhattan Bank or Marine Midland Bank,
N.A., CIT) the standard charges assessed by the L/C Issuer in connection with
the issuance, administration, amendment, payment or cancellation of Letters of
Credit and the Letter of Credit Guaranty.
(iii) Charges to Loan Account. The Borrowers hereby authorize
-----------------------
the Administrative Agent to, and the Administrative Agent may, from time to
time, charge the relevant Loan Account pursuant to Sections 3.01(c) and 4.02 of
this Agreement with the amount of any Letter of Credit fees or charges due under
this Section 3.03.
(c) Existing Letters of Credit; Letter of Credit Indemnity. Schedule
------------------------------------------------------
3.03(c) hereto contains a description of all letters of credit outstanding on
the Effective Date pursuant to the Existing Financing Agreement. Each such
letter of credit, including any extension or renewal thereof (each, as amended
from time to time in accordance with the terms thereof and hereof, an "Existing
--------
Letter of Credit") shall constitute a "Letter of Credit" issued for the account
- ----------------
of Squire or Miss Erika, as the case may be, for all purposes of this Agreement,
including, without limitation, calculations of Availability, the Overadvance
Amount, the Borrowing Base, Letter of Credit fees, Letter of Credit Obligations
and Reimbursement Obligations, outstanding on the Effective Date. Schedule A to
each of the Letter of Credit Indemnity Letters contains a description of all
letters of credit issued by The Chase Manhattan Bank or Marine Midland Bank,
N.A., as the case may be, for the account of a Seller which are outstanding as
of the Effective Date, for which the Administrative Agent has agreed to
indemnify The Chase Manhattan Bank or Marine Midland Bank, N.A., as appropriate.
Each such letter of credit, including any extension or renewal thereof (each, as
amended from time to time in accordance with the terms of the Letter of Credit
Indemnity Letters, the "Indemnified Letters of Credit"), shall constitute a
-----------------------------
"documentary Letter of Credit" issued for the account of Jeri-Jo for all
purposes of this Agreement, including without limitation, calculations of
Availability, the Overadvance Amount, the Borrowing Base, Letter of Credit fees,
Letter of Credit Obligations and Reimbursement Obligations, outstanding on the
Effective Date.
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ARTICLE IV
FEES, PAYMENTS AND OTHER COMPENSATION
-------------------------------------
SECTION 4.01. Audit and Collateral Monitoring Fees. The Borrowers
------------------------------------
acknowledge that the Agents may upon reasonable notice to the Company conduct
audits and/or field examinations of the Borrowers and the Guarantors at any time
and from time to time during normal business hours in a manner so as to not
unduly disrupt the business of the Borrowers and the Guarantors, provided that
(i) such notice shall not be required if an Event of Default has occurred and is
continuing and (ii) in the absence of a continuing Event of Default, the Agents
may conduct no more than two audits and/or field examinations of the Borrowers
and Guarantors in any year, provided further that the Agents may conduct an
additional audit and/or field examination in the event that the average
outstanding Loans for any calendar month are greater than $40 million. The
Borrowers jointly and severally agree to pay $600 per day per examiner plus the
examiner's out-of-pocket costs and reasonable expenses incurred in connection
with all such visits, inspections, audits and examinations.
SECTION 4.02. Payments; Computations and Statements. (a) The Borrowers
-------------------------------------
will make each payment under the Notes not later than 12:00 noon (New York City
time) on the day when due, in lawful money of the United States of America and
in immediately available funds, to the Administrative Agent at the Payment
Office. All payments received by the Administrative Agent after 12:00 noon (New
York City time) on any Business Day will be credited to the relevant Loan
Account on the next succeeding Business Day. All payments shall be made by the
Borrowers without defense, set-off or counterclaim to the Administrative Agent
and the Lenders. Except as provided in Section 2.05, after receipt, the
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal ratably to the Lenders and like funds
relating to the payment of any other amount payable to any Lender to such Lender
in each case to be applied in accordance with the terms of this Agreement,
provided that the Administrative Agent will cause to be distributed all interest
and fees received from or for the account of each Borrower not less than once
each month and in any event promptly after receipt thereof. The Lenders and the
Borrowers hereby authorize the Administrative Agent to, and the Administrative
Agent may, from time to time, charge the Loan Account of a Borrower with any
amount due and payable by such Borrower under any Loan Document to which such
Borrower is a party. Each of the Lenders and the Borrowers agree that the
Administrative Agent shall have the right to make such charges whether or not
any Event of Default or Default shall have occurred and be continuing or whether
any of the conditions precedent in Section 5.02 have been satisfied. Any amount
charged to the Loan Account of a Borrower shall be deemed a Loan hereunder made
by the Lenders to such Borrower, funded by the Administrative Agent on behalf of
the Lenders and subject to Section 2.05 of this Agreement. The Lenders and the
Borrowers confirm that any charges which the Administrative Agent may so make to
the Loan Account of a Borrower as herein provided will be made as an
accommodation to such Borrower and solely at the Administrative Agent's
discretion. It is expressly understood and agreed by the Borrowers that the
Administrative Agent and the Lenders shall have no responsibility to inquire
into the correctness of the apportionment, allocation or disposition of Loans or
Letters of Credit made to the Borrowers or any fees, costs or expenses for which
the
46
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Borrowers are jointly and severally obligated under this Agreement. Whenever
any payment to be made under any such Loan Document shall be stated to be due on
a day other than a Business Day, such payment shall be made on the next
succeeding Business Day and such extension of time shall in such case be
included in the computation of interest or fees, as the case may be. All
computations of fees shall be made by the Administrative Agent on the basis of a
year of 360 days for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such fees are payable.
Each determination by the Administrative Agent of an interest rate or fees
hereunder shall be conclusive and binding for all purposes in the absence of
manifest error.
(b) The Administrative Agent shall provide each Borrower, promptly
after the end of each calendar month, a summary statement (in the form from time
to time used by the Administrative Agent) of the opening and closing daily
balances in the Loan Account of such Borrower during such month, the amounts and
dates on all Loans made to such Borrower during such month, the amounts and
dates of all payments on account of the Loans to such Borrower during such month
and the Loans to which such payments were applied, the amount of interest
accrued on the Loans to such Borrower during such month, any Letters of Credit
issued by the L/C Issuer for the account of such Borrower during such month,
specifying the face amount thereof, the amount of charges to such Loan Account
and/or Loans made to such Borrower during such month to reimburse the Lenders
for drawings made under Letters of Credit, and the amount and nature of any
charges to such Loan Account made during such month on account of fees,
commissions, expenses and other Obligations. All entries on any such statement
shall, 30 days after the same is sent, be presumed to be correct and shall
constitute presumptive evidence of the information contained in such statement
and shall be final and conclusive absent manifest error.
SECTION 4.03. Sharing of Payments, Etc. Except as provided in Section
------------------------
2.05 hereof, if any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of set-off, or otherwise) on
account of any Obligation in excess of its ratable share of payments on account
of similar obligations obtained by all the Lenders, such Lender shall forthwith
purchase from the other Lenders such participations in such similar obligations
held by them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that if all or any
-------- -------
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender of any interest or other
amount paid by the purchasing Lender in respect of the total amount so
recovered). The Borrowers agree that any Lender so purchasing a participation
from another Lender pursuant to this Section 4.03 may, to the fullest extent
permitted by law, exercise all its rights (including the Lender's right of set-
off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrowers in the amount of such participation.
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<PAGE>
SECTION 4.04. Apportionment of Payments. (a) Subject to Sections
-------------------------
2.05 and 12.01 hereof, all payments of principal and interest in respect of
outstanding Loans, all payments in respect of the Reimbursement Obligations, all
payments of fees (other than the fees set forth in the Fee Letter, fees with
respect to Letters of Credit provided for in Section 3.03(b)(ii) and the audit
and collateral monitoring fee provided for in Section 4.01) and all other
payments in respect of any other Obligations, shall be allocated by the
Administrative Agent among such of the Lenders as are entitled thereto, in
proportion to their respective Pro Rata Shares or otherwise as provided herein
or, in respect of payments not made on account of Loans or Letter of Credit
Obligations, as designated by the Person making payment when the payment is
made.
(b) After the occurrence and during the continuance of an Event of
Default, the Administrative Agent may, and upon the direction of the Required
Lenders shall, apply all payments in respect of any Obligations and all proceeds
of the Collateral, subject to the provisions of this Agreement (i) first, to pay
-----
the Obligations in respect of any fees, expense reimbursements or indemnities
then due to any Agent or the L/C Issuer; (ii) second, to pay the Obligations in
------
respect of any fees and indemnities then due to the Lenders; (iii) third,
-----
ratably to pay interest due in respect of the Loans and Reimbursement
Obligations; (iv) fourth, ratably to pay or prepay principal of the Loans and
------
Letter of Credit Obligations (or, to the extent such Obligations are contingent,
to prepay or provide cash collateral in respect of such Obligations); and (v)
fifth, to the ratable payment of all other Obligations then due and payable.
- -----
SECTION 4.05. Increased Costs and Reduced Return.
----------------------------------
(a) If any Lender or the L/C Issuer shall have determined that the
adoption or implementation of, or any change in, any law, rule, treaty or
regulation, or any policy, guideline or directive of, or any change in the
interpretation or administration thereof by, any court, central bank or other
administrative or Governmental Authority, or compliance by the L/C Issuer or any
Lender or any Person controlling any such Lender or the L/C Issuer with any
directive of or guideline from any central bank or other Governmental Authority
or the introduction of or change in any accounting principles applicable to the
L/C Issuer or any Lender or any Person controlling any such Lender or the L/C
Issuer (in each case, whether or not having the force of law), shall (i) change
the basis of taxation of payments to the L/C Issuer or any Lender or any Person
controlling any such Lender or the L/C Issuer of any amounts payable hereunder
(except for taxes on the overall net income of the L/C Issuer or any Lender or
any Person controlling any such Lender or the L/C Issuer), (ii) impose, modify
or deem applicable any reserve, special deposit or similar requirement against
any Loan, Letter of Credit or against assets of or held by, or deposits with or
for the account of, or credit extended by, the L/C Issuer or any Lender, or any
Person controlling any such Lender or the L/C Issuer or (iii) impose on the L/C
Issuer or any Lender or any Person controlling any such Lender or the L/C Issuer
any other condition regarding this Agreement or any Loan or Letter of Credit,
and the result of any event referred to in clauses (i), (ii) or (iii) above
shall be to increase the cost to the L/C Issuer or any Lender of making any
Loan, issuing, guaranteeing or participating in any Letter of Credit, or
agreeing to make any Loan or issue, guaranty or participate in any Letter of
Credit, or to reduce any amount received or receivable by the L/C Issuer or any
Lender hereunder, then, upon
48
<PAGE>
demand by the L/C Issuer or such Lender, the Borrowers shall pay to the L/C
Issuer or such Lender such additional amounts as will compensate the L/C Issuer
or such Lender for such increased costs or reductions in amount.
(b) If any Lender or the L/C Issuer shall have determined that any
Capital Guideline or adoption or implementation of, or any change in, any
Capital Guideline by the Governmental Authority charged with the interpretation
or administration thereof, or compliance by the L/C Issuer, any Lender or any
Person controlling such L/C Issuer or any Lender with any Capital Guideline or
with any request or directive of any such Governmental Authority with respect to
any Capital Guideline, or the implementation of, or any change in, any
applicable accounting principles (in each case, whether or not having the force
of law), either (i) affects or would affect the amount of capital required or
expected to be maintained by the L/C Issuer, any Lender or any Person
controlling such L/C Issuer or any Lender, and the L/C Issuer or any Lender
determines that the amount of such capital is increased as a direct or indirect
consequence of any Loans made or maintained, Letters of Credit issued or any
guaranty or participation with respect thereto, or the L/C Issuer's, any
Lender's or any such other controlling Person's other obligations hereunder, or
(ii) has or would have the effect of reducing the rate of return on the L/C
Issuer's, any Lender's, any such other controlling Person's capital to a level
below that which such L/C Issuer, such Lender or such controlling Person could
have achieved but for such circumstances as a consequence of any Loans made or
maintained, Letters of Credit issued, or any guaranty or participation with
respect thereto or any agreement to make Loans, to issue Letters of Credit or
such L/C Issuer's, such Lender's, such other controlling Person's other
obligations hereunder (in each case, taking into consideration such L/C
Issuer's, such Lender's or such other controlling Person's policies with respect
to capital adequacy), then, upon demand by the L/C Issuer or any Lender, the
Borrowers shall pay to the L/C Issuer or such Lender from time to time such
additional amounts as will compensate the L/C Issuer or such Lender for such
cost of maintaining such increased capital or such reduction in the rate of
return on such L/C Issuer's, such Lender's or such other controlling Person's
capital.
(c) All amounts payable under this Section 4.05 shall bear interest
from the date that is ten days after the date of demand by the L/C Issuer or a
Lender until payment in full to the L/C Issuer or such Lender at the Base Rate.
A certificate of the L/C Issuer or any Lender claiming compensation under this
Section 4.05 specifying the event herein above described and the nature of such
event shall be submitted by the L/C Issuer or such Lender to a Borrower, setting
forth the additional amount due and an explanation of the calculation thereof,
the L/C Issuer's or such Lender's reasons for invoking the provisions of this
Section 4.05, and shall be final and conclusive absent manifest error.
49
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ARTICLE V
CONDITIONS OF EFFECTIVENESS, LETTER OF CREDIT
ISSUANCE AND LENDING
SECTION 5.01. Conditions Precedent to Effectiveness. This Agreement
-------------------------------------
shall become effective as of the Business Day (the "Effective Date") when each
--------------
of the following conditions precedent shall have been satisfied:
(a) Payment of Fees, Etc. The Borrowers shall have paid on or
---------------------
before the date of this Agreement, all fees, costs, expenses and taxes then
payable by the Borrowers pursuant to Sections 2.08(b) and 12.05 hereof.
(b) Representations and Warranties; No Event of Default. The
---------------------------------------------------
representations and warranties contained in Section 6.01 of this Agreement and
in each other Loan Document and certificate or other writing delivered to the
Agents, the Lenders or the L/C Issuer pursuant hereto on or prior to the
Effective Date shall be correct on and as of the Effective Date as though made
on and as of such date (other than those which expressly speak only as of a
different date); and no Default or Event of Default shall have occurred and be
continuing on the Effective Date or would result from this Agreement becoming
effective in accordance with its terms.
(c) Legality. The making of the initial Loans or the issuance
--------
of the initial Letter of Credit shall not contravene any law, rule or regulation
applicable to the Lenders or the L/C Issuer.
(d) Delivery of Documents. The Agents shall have received on or
---------------------
before the Effective Date the following, each in form and substance reasonably
satisfactory to the Agents and, unless indicated otherwise, dated the Effective
Date:
(i) a Note payable to the order of each Lender, duly
executed by each Borrower;
(ii) a Guaranty, duly executed by each Borrower and
Norty's Inc.;
(iii) a Security Agreement, duly executed by Jeri-Jo;
(iv) a Pledge Agreement, duly executed by Jeri-Jo,
together with all inter-company promissory notes of Jeri-Jo, and original
stock certificates representing certain shares of common stock of the
companies listed in Schedule 5.01(d)(iv) hereto, in each case accompanied
by undated stock powers executed in blank or other instruments of transfer;
(v) appropriate financing statements on Form UCC-1, duly
executed by Jeri-Jo for filing in such office or offices as may be
necessary or, in the
50
<PAGE>
reasonable opinion of the Agents, desirable to perfect the security
interests purported to be created by the Security Agreements;
(vi) certified copies of requests for copies of
information on Form UCC-11, listing all effective financing statements
which name as debtor any Borrower or Guarantor or the Sellers and which are
filed in the offices referred to in paragraph (v) above, together with
copies of such financing statements, none of which, except as otherwise
agreed to in writing by the Agents, shall cover any of the Collateral;
(vii) a copy of the resolutions adopted by the Board of
Directors of each Borrower and Guarantor, certified as of the Effective
Date by authorized officers thereof, authorizing (A) the borrowings
hereunder and the transactions contemplated by the Loan Documents and the
Factoring Agreements to which such Borrower or Guarantor is or will be a
party, and (B) the execution, delivery and performance by each Borrower and
Guarantor of each Loan Document and Factoring Agreement and the execution
and delivery of the other documents to be delivered by each Borrower and
Guarantor in connection herewith;
(viii) a certificate of an authorized officer of each
Borrower and Guarantor, certifying the names and true signatures of the
officers of such Borrower or Guarantor authorized to sign each Loan
Document and Factoring Agreement to which such Borrower or Guarantor is or
will be a party and the other documents to be executed and delivered by
such Borrower or Guarantor in connection herewith, together with evidence
of the incumbency of such authorized officers;
(ix) a certificate dated as of a recent date of the
appropriate official(s) of the states of incorporation and each state of
foreign qualification of each Borrower and Guarantor, certifying as to the
subsistence in good standing of, and the payment of taxes by, such Borrower
or Guarantor in such states and listing all charter documents of such
Borrower and Guarantor on file with such official(s);
(x) a copy of the charter of each Borrower and Guarantor
certified by the appropriate official(s) of the state of organization of
such Borrower or Guarantor and as of the Effective Date by an authorized
officer of the Borrower or Guarantor;
(xi) a copy of the by-laws of each Borrower and Guarantor,
certified as of the Effective Date by an authorized officer of such
Borrower or Guarantor;
(xii) an opinion of Haythe & Curley, New York counsel to
the Borrowers and Guarantors, substantially in the form of Exhibit F
hereto, and as to such other matters as the Agents may reasonably request;
(xiii) an opinion of Jamieson, Moore, Peskin & Spicer, New
Jersey counsel to the Borrowers and the Guarantors, substantially in the
form of Exhibit G hereto, and as to such other matters as the Agents may
reasonably request;
51
<PAGE>
(xiv) a certificate of the chief executive officer or the
chief financial officer of the Company and each Borrower, certifying as to
the matters set forth in subsection (b) of this Section 5.01;
(xv) a copy of the Financial Statements and the pro forma
and projected financial statements described in Section 6.01(h) hereof
together with a certificate of the chief executive officer or chief
financial officer of the Company and each Borrower setting forth (i) all
existing Indebtedness of the Company and each Borrower not reflected on the
Financial Statements, including guarantees, pending or, to the best of the
Company's and each Borrower's knowledge, threatened litigation and other
contingent liabilities of the Borrowers and Guarantors (in the case of such
contingent liabilities, only if required to be reported in a Financial
Statement by GAAP), and (ii) all dividends declared or paid since the date
of such financial statements and all inter-company payments made or
obligations incurred to Affiliates outside the ordinary course of the
Borrowers' businesses since the date of such Financial Statements, in any
case by or of the Company or any Borrower;
(xvi) a breakdown of Inventory by Borrower and by
location in the form specified in Section 7.01(a)(v)(A) hereof certified by
the chief financial officer of each Borrower;
(xvii) the Assignment Agreement duly executed by the
Borrowers and the Factor, in form and substance satisfactory to the Agents;
(xviii) copy, certified by the chief executive officer or
the chief financial officer of each Borrower of the executed Factoring
Agreement to which it is a party and all related documents;
(xix) copies of the insurance policies and certificates
of insurance evidencing such insurance on the property of the Jeri-Jo as is
required by Section 7.01(h) hereof naming the Collateral Agent as
additional insured and loss payee, using a long form loss payee
endorsement, for all insurance maintained by the Borrowers and the
Guarantors;
(xx) a certificate of an authorized officer of each
Borrower and Guarantor certifying the names and true signatures of those
officers of each Borrower and Guarantor that are authorized to provide
Notices of Borrowings, Letter of Credit Applications and all other notices
under this Agreement and the Loan Documents;
(xxi) (A) a landlord waiver For the premises of Jeri-Jo
located at 80 Carter Drive, Edison, New Jersey, in form and substance
reasonably satisfactory to the Agents;
(xxii) a Borrowing Base Certificate calculated on a
consolidated basis and on an individual basis for each Borrower current as
of June 16, 1998 and
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calculated on a pro forma basis giving effect to the Jeri-Jo Purchase, the
issuance of the Company Notes and the transactions contemplated by this
Agreement;
(xxiii) a copy of (A) each Jeri-Jo Purchase Document,
including any Update Notice (as defined in the Jeri-Jo Purchase Agreement)
certified as a true and correct copy thereof by the chief executive officer
of the Company, and if there is no Update Notice, a certificate of the
chief executive officer of the Company to that effect, (B) each financial
statement delivered to Jeri-Jo pursuant to the Jeri-Jo Purchase Agreement
and (C) the lease regarding the property located at 80 Carter Drive,
Edison, New Jersey;
(xxiv) a copy of each Offering Document certified as a
true and correct copy thereof by the chief executive officer, president or
chief financial officer of the Company;
(xxv) a copy of the most recent annual report (Form 5500
Series) for each Employee Plan, including Schedule B attached thereto;
(xxvi) the Jeri-Jo Termination Agreements and the Letter
of Credit Indemnity Letters duly executed by The Chase Manhattan Bank and
Marine Midland Bank, N.A., as appropriate, together with UCC termination
statements and other documentation evidencing the termination by The Chase
Manhattan Bank and Marine Midland Bank, N.A. of their Liens in and to the
properties and assets of the Sellers;
(xxvii) the Jeri-Jo Subordination Agreement, duly executed
by the Collateral Agent and the Sellers;
(xxviii) the Jeri-Jo Subordinate Pledge Agreement, duly
executed by the Company and the Sellers;
(xxix) a strategic business plan for the Borrowers in the
form and substance reasonably satisfactory to the Agents, which may consist
of the Company's Offering Memorandum in respect of the Offering together
with the financial statements described in Section 6.01(h) (iii) hereof;
(xxx) evidence satisfactory to the Agents that Jeri-Jo
has established the Post Office Box; and
(xxxi) such other agreements, instruments, approvals,
opinions and other documents as the Agents may reasonably request.
(e) Proceedings; Receipt of Documents. All proceedings in
---------------------------------
connection with the transactions contemplated by this Agreement, and all
documents incidental thereto, shall be satisfactory to the Agents and their
special counsel, and the Agents and such special counsel shall have received all
such information and such counterpart originals or
53
<PAGE>
certified or other copies of such documents as the Agents or such special
counsel may reasonably request.
(f) Material Adverse Effect. The Lenders shall have determined,
-----------------------
in their sole judgment, that (i) no Material Adverse Effect shall have occurred
after January 31, 1998 with respect to (i) any Borrower on an individual basis
or the Company and its Consolidated Subsidiaries (including Jeri-Jo) taken as a
whole, and (ii) no Material Adverse Effect shall have occurred after January 31,
1998 with respect to the business, properties, operations or condition
(financial or otherwise) of the Sellers and their Subsidiaries taken as a whole,
or with respect to the Jeri-Jo Assets;
(g) Consummation of the Jeri-Jo Purchase. All terms and
------------------------------------
provisions of the Jeri-Jo Purchase Documents shall be in form and substance
reasonably satisfactory to the Agents and shall not be amended without the
consent of the Agents. The Agents shall be reasonably satisfied with the nature
of and the amount and type of assets and liabilities being acquired and/or
assumed in the Jeri-Jo Purchase. The Jeri-Jo Purchase, including all of the
terms and conditions thereof, shall have been duly authorized by the board of
directors and (if required by applicable law) the shareholders of the parties to
the Jeri-Jo Agreement and all Jeri-Jo Purchase Documents shall have been duly
executed and delivered by the parties thereto and shall be in full force and
effect in all respects as if made on and as of the Effective Date. The
representations and warranties set forth in the Jeri-Jo Purchase Documents shall
be true and correct in all material respects as if made on and as of the
Effective Date. Each of the conditions precedent to the obligations of each of
the parties to the Jeri-Jo Purchase Documents to consummate the Jeri-Jo Purchase
as set forth in the Jeri-Jo Purchase Documents shall have been satisfied or
waived with the consent of the Agents and the Jeri-Jo Purchase shall have been
consummated in accordance with all applicable law and the Jeri-Jo Purchase
Documents. The consideration paid in the Jeri-Jo Purchase, excluding the Jeri-Jo
Earn-Out Payment, shall not exceed $55,000,000 and the assumption of liabilities
set forth in the Jeri-Jo Purchase Documents.
(h) Name Change. The Agents shall have received evidence
-----------
to them that JJ Acquisition Corp. has changed its name to Jeri-Jo Knitwear, Inc.
and that Sellers have changed their names to other than Jeri-Jo Knitwear Inc.
and Jamie Scott, Inc. respectively.
(i) Availability. After giving effect to all Loans outstanding
------------
on the Effective Date (including all Loans made on the Effective Date) and all
Letters of Credit outstanding on the Effective Date (including all Letters of
Credit issued on the Effective Date), the Availability, calculated on a combined
basis for the Borrowers, shall not be less than $18,000,000 and all other
liabilities of the Borrowers shall be current and the Borrowers shall deliver to
the Administrative Agent a certificate of the chief financial officer of the
Company certifying that (i) the Availability, calculated on a combined basis for
the Borrowers is not less than $18,000,000 and containing the calculation
thereof and (ii) all other liabilities of the Borrowers are current, together
with such evidence that the Agents may reasonably require.
54
<PAGE>
(j) Consummation of the Offering. On or prior to the Effective
----------------------------
Date, the Company shall have received gross cash proceeds of at least
$125,000,000 from the issuance of the Company Notes pursuant to the Offering and
shall use a portion of such proceeds to repay in full the term loan outstanding
pursuant to the Existing Financing Agreement. The terms and conditions of the
Offering Documents shall be in form and substance reasonably satisfactory to the
Agents. The Offering, including all of the terms and conditions thereof, shall
have been duly authorized by the boards of directors of the Company and the
Borrowers and all Offering Documents shall have been duly executed and delivered
by the parties thereto and shall be in full force and effect in all respects on
the Effective Date. All conditions precedent to the consummation of the Offering
and the issuance of the Company Notes as set forth in the Offering Documents
shall have been satisfied, and not waived unless consented to by the Agents, to
the reasonable satisfaction of the Agents. The Offering and the issuance of the
Company Notes shall have been consummated, in accordance with all applicable law
and the terms and conditions of the Offering Documents.
SECTION 5.02. Conditions Precedent to Loans and Letters of Credit.
---------------------------------------------------
As a condition precedent to the Administrative Agent or any Lender making any
Loan (including the initial Loans on the Effective Date), or the Agents
assisting the Borrowers in establishing, or opening any Letter of Credit
(including the initial Letters of Credit on the Effective Date), each of the
following conditions precedent shall be fulfilled in a manner satisfactory to
the Administrative Agent;
(a) Payment of Fees, Etc. The Borrowers shall have paid all
---------------------
fees, costs, expenses and taxes then payable by the Borrowers pursuant to
Sections 2.08 and 12.05 hereof.
(b) Representations and Warranties; No Event of Default. The
---------------------------------------------------
following statements shall be true, and the submission by a Borrower to the
Administrative Agent of a Notice of Borrowing with respect to a Loan and a
Borrower's acceptance of the proceeds of such Loan, or the submission by a
Borrower of a Letter of Credit Application with respect to a Letter of Credit
and the issuance of such Letter of Credit shall be deemed to be a representation
and warranty by such Borrower on the date of such Loan and the date of the
issuance of such Letter of Credit that (i) the representations and warranties
contained in Section 6.01 of this Agreement and in each other Loan Document and
certificate or other writing delivered to the Lenders pursuant hereto on or
prior to the date of such Loan or Letter of Credit are correct on and as of such
date as though made on and as of such date (other than those representations and
warranties which expressly speak only as of a different date); and (ii) no Event
of Default or Default has occurred and is continuing or would result from the
making of the Loan to be made on such date or the issuance of the Letter of
Credit to be issued on such date.
(c) Legality. The making of such Loan or the issuance of such
--------
Letter of Credit shall not contravene any law, rule or regulation applicable to
the Agents, the Lenders or the L/C Issuer, as the case may be.
55
<PAGE>
(d) Notices. Except in the case of a borrowing of a Loan
-------
pursuant to Sections 3.01(c), the Administrative Agent shall have received (i) a
Notice of Borrowing pursuant to Section 2.03 hereof no later than 12:00 noon
(New York City time) (A) on the date of the proposed borrowing with respect to a
Base Rate Loan and (B) three Business Days prior to the date of the proposed
borrowing in the case of a Eurodollar Loan and (ii) a Letter of Credit
Application pursuant to Section 3.03 hereof not later than 12:00 noon (New York
City time) three Business Days prior to the proposed date of issuance of a
Letter of Credit.
(e) Delivery of Documents. The Administrative Agent shall have
---------------------
received such other reasonably available information, approvals and documents,
each in form and substance reasonably satisfactory to the Administrative Agent,
as the Administrative Agent may reasonably request.
(f) Proceedings. All proceedings in connection with the making
-----------
of such Loan or the issuance of such Letter of Credit and the other transactions
contemplated by this Agreement, and all documents incidental thereto, shall be
reasonably satisfactory to the Administrative Agent and its special counsel.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES
SECTION 6.01. Representations and Warranties. The Company and each
------------------------------
Borrower represents and warrants as follows:
(a) Organization, Good Standing, Etc. Each Loan Party (i) is a
---------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the state of its organization, (ii) has all requisite corporate power and
authority to conduct its business as now conducted and as presently contemplated
and to make the borrowings hereunder (in the case of the Borrowers) and to
consummate the transactions contemplated by the Documents to which it is a
party, and (iii) is duly qualified to do business and is in good standing in
each jurisdiction in which the character of the properties owned or leased by it
or in which the transaction of its business makes such qualification necessary
(except, prior to July 31, 1998, in the case of Jeri-Jo with respect to New
Jersey and New York), except in the case of clause (iii) where the failure to
qualify and be in good standing would not have a Material Adverse Effect.
(b) Authorization, Etc. The execution, delivery and
-------------------
performance by each Loan Party of each Document to which it is a party, (i) have
been duly authorized by all necessary corporate action, (ii) do not contravene
the charter, by-laws or any applicable law or any contractual restriction
binding on or otherwise affecting it or any of its properties, (iii) do not
result in or require the creation of any Lien, (other than pursuant to any such
Loan Document) upon or with respect to any of its properties, and (iv) do not
result in any suspension, revocation, impairment, forfeiture or nonrenewal of
any permit, license, authorization or approval applicable to its operations or
any of its properties.
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<PAGE>
(c) Governmental Approvals. No authorization or approval or
----------------------
other action by, and no notice to or filing with, any Governmental Authority or
other regulatory body is required in connection with the due execution, delivery
and performance by each Loan Party of any Document to which it is or will be a
party.
(d) Enforceability of Loan Documents. This Agreement is, and
--------------------------------
each other Document to which each Loan Party is or will be a party, when
delivered hereunder, will be, a legal, valid and binding obligation of such Loan
Party, enforceable against such Loan Party in accordance with its terms except
to the extent the enforceability thereof may be limited by any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting generally, the enforcement of creditors' rights and
remedies and by general principles of equity.
(e) Inventory Locations; Places of Business; Chief Executive
--------------------------------------------------------
Office. There is no location at which any Borrower has any Inventory (except for
Inventory in transit) other than (i) those locations listed on Part A of
Schedule 6.01(e) hereto and (ii) any other locations in the continental United
States permitted pursuant to the terms of Section 7.01(n) hereof. Part B of
Schedule 6.01(e) hereto contains a true, correct and complete list, as of the
Effective Date, of the legal names and addresses of each warehouse at which
Inventory of any Borrower is stored. None of the receipts received by a
Borrower from any warehouse states that the goods covered thereby are to be
delivered to bearer or to the order of a named Person or to a named Person and
such named Person's assigns. Part C of Schedule 6.01(e) sets forth a complete
and accurate list as of the date hereof of (A) each place of business of each
Loan Party and (B) the chief executive office of each Loan Party. Part D of
Schedule 6.01(e) sets forth a complete and accurate description and list as of
the date hereof of the location, by state and street address, of all real
property owned and leased by the Company and its Subsidiaries.
(f) Subsidiaries. Schedule 6.01(f) hereto is a complete and
------------
correct description of the name, jurisdiction of incorporation and ownership of
the outstanding Capital Stock of each Subsidiary of the Company in existence on
the date hereof. All shares of such stock owned by the Company or one or more of
its Subsidiaries, as indicated in such Schedule, are owned free and clear of all
Liens other than (i) Liens created by the Loan Documents and (ii) in the case of
the Capital Stock of Miss Erika and Jeri-Jo, Permitted Liens.
(g) Litigation. Except (i) as set forth on Schedule 6.01(g)
----------
hereto and (ii) for all pending or, to the best of the Loan Parties' knowledge,
threatened actions, suits or proceedings affecting the Company or any of its
Subsidiaries before any court or other Governmental Authority or any arbitrator
seeking money damages in an aggregate amount for all such actions, suits or
proceedings of not more than $500,000 in excess of any applicable insurance or
bond coverage and, in the case of clause (ii), which actions, suits or
proceedings were not pending or, to the best of the Loan Parties' knowledge
threatened on the Effective Date, there is no pending or, to the best of the
Loan Parties' knowledge, threatened action, suit or proceeding affecting the
Company or any of its Subsidiaries before any court or other Governmental
Authority or any arbitrator. There is no pending or, to the best of the Loan
Parties' knowledge, threatened action, suit or proceeding affecting the Company
or any of its
57
<PAGE>
Subsidiaries before any court or other Governmental Authority or any arbitrator
which may have a Material Adverse Effect.
(h) Financial Condition. (i) The Financial Statements, copies of
-------------------
which have been delivered to the Lenders, fairly present in all material
respects the financial condition of the Company and its Subsidiaries and the
Seller, as the case may be, as at the respective dates thereof and the results
of operations of the Company and its Subsidiaries and the Seller, as the case
may be, for the fiscal periods ended on such respective dates, all in accordance
with GAAP, and since January 31, 1998 there has been no Material Adverse Effect.
(ii) The pro forma consolidated and consolidating balance sheets
of the Company as at January 31, 1998 after giving effect to the Jeri-Jo
Purchase and related financings, certified by the chief financial officer of the
Company, copies of which have been furnished to the Lenders, were believed at
the time furnished to be reasonable, have been prepared on a reasonable basis
and in good faith by the Company, and have been based on assumptions believed by
the Company to be reasonable at the time made and upon the best information then
reasonably available to the Company.
(iii) The Company has heretofore furnished to the Agents and
the Lenders projected balance sheets, income statements and statements of cash
flow prepared on a monthly basis for the period from June 1998 to October 1998
and prepared on an annual basis for the Fiscal Years ending in 1999, 2000, 2001,
2002, and 2003 and such projections were believed at the time furnished to be
reasonable, have been prepared on a reasonable basis and in good faith by the
Company, and have been based on assumptions believed by the Company to be
reasonable at the time made and upon the best information then reasonably
available to the Company.
(i) Compliance with Law, Etc. Neither the Company nor any other Loan
-------------------------
Party is in violation of its charter or by-laws, any material law or any term of
any agreement or instrument binding on or otherwise affecting it or any of its
properties, except, in the case of any violation of any agreement or instrument,
where such violation would not have a Material Adverse Effect.
(j) ERISA. Schedule 6.01(j) hereto sets forth each Employee Plan and
-----
Multiemployer Plan. Except as set forth on Schedule 6.01(j) hereto, (i) each
Employee Plan is in substantial compliance with the applicable provisions of
ERISA and the Internal Revenue Code, (ii) no Termination Event has occurred nor
is reasonably expected to occur with respect to any Employee Plan, (iii) the
most recent annual report (Form 5500 Series) with respect to each Employee Plan,
including Schedule B (Actuarial Information) thereto, copies of which have been
filed with the Internal Revenue Service and delivered to the Agents, is complete
and correct in all material respects and fairly presents the funding status of
such Employee Plan, and since the date of such report there has been no material
adverse change in such funding status, (iv) no Employee Plan had an accumulated
or waived funding deficiency or permitted decreases or has applied for an
extension of any amortization period within the meaning of Section 412 of the
Internal Revenue Code at any time during the previous 60 months, and (v) no Lien
imposed
58
<PAGE>
under the Internal Revenue Code or ERISA exists or is likely to arise on account
of any Employee Plan within the meaning of Section 412 of the Internal Revenue
Code at any time during the previous 60 months, except as described in clauses
(ii) and (iii) of paragraph 6.01(k) hereof. Except as set forth on Schedule
6.01(j) hereto, neither the Company nor any other Loan Party nor any of their
respective ERISA Affiliates have incurred any withdrawal liability under ERISA
with respect to any Multiemployer Plan, and neither the Company nor any other
Loan Party is aware of any facts indicating that the Company or any other Loan
Party or any of their respective ERISA Affiliates may in the future incur any
such withdrawal liability. Except as required by Section 4980B of the Internal
Revenue Code, and except as set forth on Schedule 6.01(j) hereto, neither the
Company nor any other Loan Party nor any of their respective ERISA Affiliates
maintains an employee welfare benefit plan (as defined in Section 3(1) of ERISA)
which provides health or welfare benefits (through the purchase of insurance or
otherwise) for any retired or former employee of the Company or any other Loan
Party or any of their respective ERISA Affiliates or coverage after a
participant's termination of employment. Neither the Company nor any other Loan
Party nor any of their respective ERISA Affiliates has incurred any liability or
obligation under the Worker Adjustment and Retraining Notification Act ("WARN")
----
or similar state law, which remains unpaid or unsatisfied.
(k) Taxes, Etc. All Federal, state and local tax returns and other
-----------
reports required by applicable law to be filed by the Company and each Loan
Party have been filed, and, except as set forth on Schedule 6.01(k) hereto, all
taxes, assessments and other governmental charges imposed upon the Company or
any other Loan Party or any property of the Company or such other Loan Party and
which have become due and payable on or prior to the date hereof have been paid,
except (i) to the extent contested in good faith by proper proceedings which
stay the imposition of any penalty, fine or Lien resulting from the non-payment
thereof and with respect to which adequate reserves have been set aside for the
payment thereof, and (ii) for taxes, assessments or other charges in an amount
of not more than $200,000 in the aggregate and the Liens, if any, securing such
amounts.
(l) Regulation U. Neither the Company nor any other Loan Party is or
------------
will be engaged in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulation U issued
by the Board of Governors of the Federal Reserve System), and no proceeds of any
Loan will be used to purchase or carry any margin stock or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
(m) Nature of Business. Neither the Company nor any other Loan Party
------------------
is engaged in any business other than the apparel business, excluding
manufacturing but not excluding contracting for manufacture or the manufacture
of samples.
(n) Adverse Agreements, Etc. Neither the Company nor any other Loan
------------------------
Party nor any of their respective Subsidiaries is a party to any agreement or
instrument, or subject to any charter or other corporate restriction or any
judgment, order, regulation, ruling or other requirement of a court or other
Governmental Authority or regulatory body, which has or,
59
<PAGE>
to the best knowledge of the Company and the other Loan Parties, in the future
is reasonably likely to result in, a Material Adverse Effect.
(o) Holding Company and Investment Company Acts. Neither the Company
-------------------------------------------
nor any other Loan Party is (i)a "holding company" or a "subsidiary company" of
a "holding company" or an "affiliate" of a "holding company", as such terms are
defined in the Public Utility Holding Company Act of 1935, as amended, or (ii)
an "investment company" or an "affiliated person" or "promoter" of, or
"principal underwriter" of or for, an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended.
(p) Permits, Etc. Each Loan Party has all permits, licenses,
-------------
authorizations and approvals required for them lawfully to own and operate their
business except where the failure to have such would not have a Material Adverse
Effect.
(q) Title to Properties. Each Loan Party has good and marketable
-------------------
title to all of their properties and assets, free and clear of all Liens, and
other types of preferential arrangements except for Permitted Liens.
(r) Full Disclosure. No Loan Document or schedule or exhibit thereto
---------------
and no certificate, report, statement or other document or information furnished
in writing by or on behalf of the Loan Parties to the Lenders in connection
herewith or with the consummation of the transactions contemplated hereby,
contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the statements contained herein or therein not
misleading in any material respect. There is no fact reasonably likely to
result in a Material Adverse Effect which has not been set forth in a footnote
included in the Financial Statements or a Schedule hereto.
(s) Operating Lease Obligations. As of the date hereof, the Company
---------------------------
and the other Loan Parties do not have any obligations as lessee for the payment
of rent for any real or personal property other than the Operating Lease
Obligations set forth in Schedule 6.01(s) hereto.
(t) Environmental Matters. (i) The operations of the Loan Parties
---------------------
are in compliance with all Environmental Laws except where the failure to be in
compliance would not have a Material Adverse Effect; (ii) there has been no
Release at any of the properties owned or operated by any Loan Party or a
predecessor in interest, or at any disposal or treatment facility which received
Hazardous Materials generated by any Loan Party or any predecessor in interest
except, in each case, where the Release would not have a Material Adverse
Effect; (iii) no Environmental Actions have been asserted against any Loan Party
or any predecessor in interest nor does any Loan Party have knowledge or notice
of any threatened or pending Environmental Action against any Loan Party or any
predecessor in interest which will have a Material Adverse Effect; and (iv) no
Environmental Actions have been asserted against any facilities that may have
received Hazardous Materials generated by any Loan Party or any predecessor in
interest which will result in a Material Adverse Effect.
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(u) Schedules. All of the information which is required to be
---------
scheduled to this Agreement on the date hereof is set forth on the Schedules
attached hereto, is correct and accurate in all material respects and does not
omit to state any information material thereto.
(v) Insurance. The Loan Parties keep their properties adequately
---------
insured and maintain (i) insurance to such extent and against such risks,
including fire, as is customary with companies in the same or similar
businesses, (ii) workmen's compensation insurance in the amount required by
applicable law, (iii) public liability insurance, which shall include product
liability insurance, in the amount customary with companies in the same or
similar business against claims for personal injury or death on properties
owned, occupied or controlled by them, and (iv) such other insurance as may be
required by law.
(w) Use of Proceeds. The proceeds of the Loans shall be used to
---------------
refinance existing Indebtedness of the Company and its Subsidiaries, to finance
the Jeri-Jo Purchase, for general working capital purposes and to make
intercompany loans and advances permitted by Sections 7.02(b) and 7.02(f)
hereof. The Letters of Credit will be used to finance the purchase by the
Borrowers of Inventory and for other general working capital purposes.
(x) Security Interests. The Security Documents create in favor of
------------------
the Collateral Agent, for the benefit of the Lenders, a legal, valid and (upon
the filing of UCC-1 financing statements described in Section 5.01(d)(v), the
recording of the Assignment For Security (Trademarks) referred to in the Jeri-Jo
Security Agreement in the United States Patent and Trademark Office, the
recording of the Assignment For Security (Copyrights) referred to the Jeri-Jo
Security Agreement in the United States Registrar of Copyrights, and the
delivery to the Collateral Agent of the Pledged Collateral (as defined in the
Jeri-Jo Pledge Agreement)) perfected first priority (except as permitted by
Section 7.02(a) hereof) security interest in the Collateral.
(y) Tradenames. Schedule 6.01(y) hereto sets forth a complete and
----------
accurate list as of the Effective Date of all tradenames used by the Company and
its Subsidiaries.
(z) Solvency. After giving effect to the transactions contemplated
--------
or required to occur by the terms of this Agreement, the Jeri-Jo Purchase
Documents and the Offering Documents, each Loan Party is, individually and
together with its Subsidiaries, Solvent.
(aa) Material Contracts. Set forth on Schedule 6.01(aa) hereto is a
------------------
complete and accurate list as of the Effective Date of all Material Contracts of
the Company and its Subsidiaries, showing the parties thereto and amendments and
modifications thereto. As of the date hereof, each such Material Contract (i)
is in full force and effect and is binding upon and enforceable against each
Loan Party that is a party thereto and, to the best of such Loan Party's
knowledge, all other parties thereto in accordance with its terms, (ii) has not
been otherwise amended or modified, and (iii) there exists no default under any
Material Contract by any Loan Party thereto or, to the Loan Parties' knowledge,
any other party thereto which default gives the non-defaulting party the right
to terminate such Material Contract.
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(bb) Representations and Warranties in Documents. All representations
-------------------------------------------
and warranties set forth in the Documents are true and correct in all material
respects at the time as of which such representations were made and on the
Effective Date.
(cc) The Offering. The Offering, including the issuance of the
------------
Company Notes by the Company, has been effected in accordance with the terms of
the Offering Documents and applicable law. At the time of consummation thereof,
all consents and approvals of, and filings and registrations with, and all other
actions in respect of, all Governmental Authorities required in order to
consummate the Offering shall have been obtained, given, filed or taken and
shall be in full force and effect. At the time of consummation of the Offering,
there does not exist any judgment, order or injunction prohibiting or imposing
any material adverse condition upon the consummation of the Offering. All
actions taken by the Company or any of its Subsidiaries pursuant to or in
furtherance of the Offering have been taken in compliance in all material
respects with the respective Offering Documents and all applicable law.
(dd) Offering Documents. (i) The Loan Parties are not in default on
------------------
any of their obligations under any Offering Document, (ii) all representations
and warranties made by the Loan Parties in the Offering Documents and in the
certificates delivered in connection therewith are true and correct in all
material respects as of the date hereof, (iii) all written information (other
than pro forma information and projections as to which Section 6.01(h)(ii) and
(iii) above shall be applicable), with respect to the Loan Parties and the
Offering, furnished to the Agents by the Loan Parties or on behalf of the Loan
Parties, were, at the time the same were so furnished, complete and correct in
all material respects, or have been subsequently supplemented by other written
information, to the extent necessary to give the Agents and the Lenders a true
and accurate knowledge of the subject matter of each of them in relation to the
Loan Parties and the Offering, in all material respects, and (iv) no
representation, warranty or statement made by the Loan Parties at the time they
were made in any Offering Document, or any agreement, certificate, statement or
document required to be delivered pursuant to any Offering Document contains any
untrue statement of material fact or omits to state a material fact necessary in
order to make the statements contained in such Offering Document not misleading
in light of the circumstances in which they were made. The obligations of the
Loan Parties pursuant to the Offering Documents are unsecured obligations.
(ee) The Jeri-Jo Purchase. The Jeri-Jo Purchase has been effected in
--------------------
accordance with the terms of the Jeri-Jo Purchase Documents and all applicable
law. At the time of consummation thereof, all consents and approvals of, and
filings and registrations with, and all other actions in respect of, all
Governmental Authorities required in order to consummate the Jeri-Jo Purchase
shall have been obtained, given, filed or taken and shall be in full force and
effect. At the time of consummation of the Jeri-Jo Purchase, there does not
exist any judgment, order or injunction prohibiting or imposing any material
adverse condition upon the consummation of the Jeri-Jo Purchase.
(ff) Miss Erika Acquisition Documents and Jeri-Jo Purchase Documents.
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(i) The Loan Parties are not in default on any of their obligations under any
Miss Erika Acquisition Document or any Jeri-Jo Purchase Document, and, to the
best knowledge of the Loan
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Parties, neither Old ME Corp., any Seller nor any other party to any Miss Erika
Acquisition Document or any Jeri-Jo Purchase Document, as the case may be, is in
default thereunder, (ii) all representations and warranties made by the Loan
Parties in the Jeri-Jo Purchase Documents and in the certificates delivered in
connection therewith are true and correct in all material respects as of the
date hereof and, to the best knowledge of the Loan Parties, all material
representations and warranties made in the Jeri-Jo Purchase Documents by or on
behalf of the Sellers, or any other party thereto other than the Loan Parties,
is true and correct in all material respects as of the date hereof, (iii) all
written information (other than pro forma information and projections as to
which Section 6.01(h)(ii) and (iii) above shall be applicable), with respect to
the Loan Parties and the Jeri-Jo Purchase, and, to the best knowledge of the
Loan Parties, the business and Jeri-Jo Assets acquired in connection with the
Jeri-Jo Purchase, furnished to the Agents by the Loan Parties or on behalf of
the Loan Parties, were, at the time the same were so furnished, complete and
correct in all material respects, or have been subsequently supplemented by
other written information, to the extent necessary to give the Agents and the
Lenders a true and accurate knowledge of the subject matter of each of them in
relation to the Loan Parties, the Jeri-Jo Purchase, and the business and Jeri-Jo
Assets acquired in connection with the Jeri-Jo Purchase, in all material
respects, (iv) no representation, warranty or statement made by the Loan Parties
or, to their best knowledge, the Sellers or any other party thereto other than
the Loan Parties, at the time they were made in any Jeri-Jo Purchase Document,
or any agreement, certificate, statement or document required to be delivered
pursuant to any Jeri-Jo Purchase Document contains any untrue statement of
material fact or omits to state a material fact necessary in order to make the
statements contained in such Jeri-Jo Purchase Documents not misleading in light
of the circumstances in which they were made, and (v) in connection with the
Jeri-Jo Purchase, Jeri-Jo is acquiring the Jeri-Jo Assets, including, without
limitation, the accounts receivable and inventory of each of the Sellers and, on
the date hereof, after giving effect to the transactions contemplated by this
Agreement, by the Jeri-Jo Purchase Agreement and by the other Jeri-Jo Purchase
Documents and Loan Documents, Jeri-Jo will have good title to such Jeri-Jo
Assets, including without limitation, the account receivables and inventory of
the Sellers free and clear of all Liens other than the Liens created by the Loan
Documents and other than Permitted Liens.
(gg) Year 2000. Any reprogramming required to permit the proper
---------
functioning, in and following the year 2000, of (A) the Borrowers' and the
Guarantors' computer systems and (B) equipment containing embedded microchips
(including systems and equipment supplied by others or with which Borrowers' and
the Guarantors' systems interface) and the testing of all such systems and
equipment, as so reprogrammed, will be completed by July 1, 1999. The cost to
the Borrowers and the Guarantors of such reprogramming and testing and of the
reasonably foreseeable consequences of year 2000 to the Borrowers and the
Guarantors (including, without limitation, reprogramming errors and the failure
of others' systems or equipment) will not result in an Event of Default or have
a Material Adverse Effect. Except for such of the reprogramming referred to in
the preceding sentences of this Section 6.01(gg) as may be necessary, the
computer and management information systems of the Borrowers and the Guarantors
are and, with ordinary course upgrading and maintenance, will continue to be,
sufficient to permit the Borrowers and the Guarantors to conduct their business
without a Material Adverse Effect."
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ARTICLE VII
COVENANTS OF THE BORROWER
SECTION 7.01. Affirmative Covenants. So long as any principal of or
---------------------
interest on the Loans or the Reimbursement Obligations or any other Letter of
Credit Obligations (whether or not due) shall remain unpaid or any Lender shall
have any Commitment hereunder, the Company and the Borrowers will unless the
Required Lenders shall otherwise consent in writing:
(a) Reporting Requirements. Furnish to the Lenders (except in the
----------------------
case of clause (v)(C) below, which shall be furnished to the Agents):
(i) as soon as available and in any event within 50 days after
the end of each Fiscal Quarter of the Company, consolidated and
consolidating balance sheets and consolidated and consolidating statements
of income and consolidated statements of retained earnings and cash flow of
the Company and its Consolidated Subsidiaries, in each case as at the end
of such Fiscal Quarter; and for the period commencing at the end of the
immediately preceding Fiscal Year and ending with the end of such Fiscal
Quarter, setting forth in each case in comparative form the figures for the
corresponding date or period of the immediately preceding Fiscal Year
(except in the case of Miss Erika until the 1999 Fiscal Year and except in
the case of Jeri-Jo until the 2000 Fiscal Year), all in reasonable detail
and certified by the chief financial officer of the Company as fairly
presenting, in all material respects, the financial position of the Company
and its Consolidated Subsidiaries as of the end of such Fiscal Quarter and
the results of operations and changes in financial position of the Company
and its Consolidated Subsidiaries for such Fiscal Quarter, in accordance
with GAAP applied in a manner consistent with that of the most recent
audited financial statements furnished to the Lender, subject to year end
adjustments and the absence of footnotes;
(ii) as soon as available, and in any event within 105 days after
the end of each Fiscal Year of the Company, consolidated and consolidating
balance sheets and consolidated and consolidating statements of income and
consolidated statements of retained earnings and cash flow of the Company
and its Consolidated Subsidiaries, in each case as at the end of such
Fiscal Year, setting forth in comparative form the corresponding figures
for the immediately preceding Fiscal Year, all in reasonable detail and
prepared in accordance with GAAP, and with respect to the consolidated
financial statements accompanied by a report and an unqualified opinion,
prepared in accordance with generally accepted auditing standards, of Ernst
& Young LLP or other independent certified public accountants of recognized
standing selected by the Company and reasonably satisfactory to the Agents,
together with a written statement of such accountants (1) to the effect
that, in making the examination necessary for their certification of such
financial statements, they have not obtained any knowledge of the existence
of an Event of Default or a Default under Sections 7.02(f)(vi), 7.02(h),
7.02(i)(iii) or 7.02(p) hereof and (2) if such accountants shall have
obtained any
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knowledge of the existence of an Event of Default or such Default,
describing the nature thereof;
(iii) as soon as available and in any event within 30 days of
the end of each Fiscal Month (for the June 1998 Fiscal Month for Jeri-Jo,
only the period from the Effective Date to the end of such month),
internally prepared consolidated balance sheets and consolidated statements
of income for such Fiscal Month of the Company and its Consolidated
Subsidiaries and balance sheets and statements of income prepared on a
stand alone basis for the Company and its Subsidiaries for such Fiscal
Month, in each case for the period from the beginning of such Fiscal Year
to the end of such Fiscal Month all in reasonable detail and certified by
the chief financial officer of the Company as fairly presenting, in all
material respects, the financial position of the Company and its
Consolidated Subsidiaries as of the end of such Fiscal Month and the
results of operations of the Company and its Consolidated Subsidiaries for
such Fiscal Month, in accordance with GAAP applied in a manner consistent
with that of the most recent audited financial statements furnished to the
Lenders, subject to quarterly and year end adjustments and the absence of
footnotes;
(iv) simultaneously with the delivery of the financial
statements required by clauses (i), (ii) and (iii) of this Section 7.01(a),
a certificate of the chief financial officer of the Company, stating (a)
that such officer has reviewed the provisions of this Agreement and the
other Loan Documents and has made or caused to be made under such officer's
supervision a review of the condition and operations of the Company and its
Subsidiaries during the period covered by such financial statements with a
view to determining whether the Company and its Subsidiaries were in
compliance with all of the provisions of such Loan Documents at the times
such compliance is required by the Loan Documents, and that such review has
not disclosed, and such officer has no knowledge of, the existence during
such period of an Event of Default or Default or, if an Event of Default or
such Default existed, describing the nature and period of existence thereof
and the action which the Company and its Subsidiaries propose to take or
took with respect thereto and (b) a schedule showing the calculations
specified in Section 7.02(p) of this Agreement if such financial covenants
are applicable for such period;
(v) (A) within 30 days after the end of each Fiscal Month, a
schedule, in form and substance reasonably satisfactory to the Collateral
Agent, current as of the close of business on the last day of such Fiscal
Month, certified by the chief financial officer of each Borrower,
containing a breakdown of each Borrower's Inventory by amount and valued at
cost (which shall include dollar valuation by location) and warehouse and
production facility location and shall include a breakdown of all Prior
Season Inventory, appropriately completed with information reasonably
satisfactory to the Collateral Agent, incorporating all appropriate month-
end adjustments and current as of the close of business on the last day of
such Fiscal Month immediately prior to such date, and (B) within 30 days
after the end of each Fiscal Month, a Borrowing Base Certificate, in the
form of Exhibit J hereto, current as of the close of business on the last
day of such Fiscal Month setting forth the calculation of the Borrowing
Base (utilizing
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the Accounts Receivable at the end of such Fiscal Month and the Inventory
set forth in the report delivered pursuant to clause (A) above at such time
including in-transit Inventory) and Availability for each Borrower on an
individual and combined basis, and supported by schedules showing the
derivation thereof and containing such detail and such other information as
the Collateral Agent may reasonably request from time to time provided that
(1) the Borrowing Base and the Availability set forth in the Borrowing Base
Certificate shall be effective from and including the date such Borrowing
Base Certificate is duly received by the Collateral Agent to but not
including the date on which a subsequent Borrowing Base Certificate is duly
received by the Collateral Agent, unless the Collateral Agent disputes the
eligibility of any asset for inclusion in the calculation of the Borrowing
Base or the valuation thereof by notice of such dispute to the appropriate
Borrower and (2) in the event of any dispute about the eligibility of any
asset for inclusion in the calculation of the Borrowing Base or the
valuation thereof, the Collateral Agent's good faith judgment shall
control;
(vi) not later than fifteen days after the Effective Date and
prior to the end of each Fiscal Year, financial projections (including
projected income statements, balance sheets and schedules of cash receipts
and cash disbursements, all projected on a monthly basis for the succeeding
Fiscal Year and on an annual basis for each Fiscal Year thereafter until
the Termination Anniversary Date and in each case prepared on a
consolidated and stand alone basis), in form and substance reasonably
satisfactory to the Agents; all such financial projections shall be
reasonable, shall be prepared on a reasonable basis and in good faith, and
shall be based on assumptions believed by the Company to be reasonable at
the time made and from the best information then available to the Company;
(vii) promptly upon their becoming available, a copy of (A) all
consultants' reports, investment bankers' reports, accountants' management
letters, business plans and similar documents, (B) all reports, financial
statements or other information delivered by the Company or any other Loan
Party to its shareholders generally, (C) all reports, proxy statements,
financial statements and other information filed with the Securities and
Exchange Commission or generally distributed by the Company or any other
Loan Party to its creditors or the financial community in general, and (D)
any audit or other reports submitted to the Company or any other Loan Party
by independent accountants in connection with any annual, interim or
special audit;
(viii) promptly after submission to any Government Authority all
documents and information furnished to such Government Authority in
connection with any investigation of any Loan Party other than routine
inquiries by such Governmental Authority and, except as requested by the
Agents, other than in connection with tax audits by Governmental
Authorities;
(ix) as soon as possible, and in any event within five days
after the occurrence of an Event of Default, Default or a Material Adverse
Effect, the written statement of the chief executive officer or the chief
financial officer of each Borrower,
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setting forth the details of such Event of Default, Default or Material
Adverse Effect and the action which the Company and its Subsidiaries
propose to take with respect thereto;
(x) (A) as soon as possible and in any event (1) within 30 days
after the Borrowers, the Guarantors or any of their respective ERISA
Affiliates knows or has reason to know that any Termination Event described
in clause (i) of the definition of Termination Event with respect to any
Employee Plan has occurred, (2) within 10 Business Days after the
Borrowers, the Guarantors or any of their respective ERISA Affiliates knows
or has reason to know that any other Termination Event with respect to any
Employee Plan has occurred, or (3) within 10 Business Days after any of the
Borrowers, any of the Guarantors or any of their respective ERISA
Affiliates knows or has reason to know that an accumulated funding
deficiency has been incurred or an application has been made to the
Secretary of the Treasury for a waiver or modification of the minimum
funding standard (including installment payments) or an extension of any
amortization period under Section 412 of the Internal Revenue Code with
respect to an Employee Plan, a statement of the chief financial officer of
the Company setting forth the details of such occurrence and the action, if
any, which the Borrowers, the Guarantors or any of their respective ERISA
Affiliates proposes to take with respect thereto, (B) promptly and in any
event within two Business Days after receipt thereof by the Borrowers, the
Guarantors or any of their respective ERISA Affiliates from the Pension
Benefit Guaranty Corporation, copies of the notice received by the
Borrowers, the Guarantors or any of their respective ERISA Affiliates of
the Pension Benefit Guaranty Corporation's intention to terminate any Plan
or to have a trustee appointed to administer any Plan, (C) promptly and in
any event within 30 days after the filing thereof with the Internal Revenue
Service, copies of each Schedule B (Actuarial Information) to the annual
report (Form 5500 Series) with respect to each Employee Plan and
Multiemployer Plan, (D) promptly and in any event within 10 Business Days
after receipt thereof by the Borrowers, the Guarantors or any of their
respective ERISA Affiliates from a sponsor of a Multiemployer Plan or from
the Pension Benefit Guaranty Corporation, a copy of the notice received by
the Borrowers, the Guarantors or any of their respective ERISA Affiliates
concerning the imposition or amount of withdrawal liability under Section
4202 of ERISA or indicating that such Multiemployer Plan may enter
reorganization status under Section 4241 of ERISA, and (E) promptly and in
any event within 10 Business Days after any of the Borrowers, any of the
Guarantors or any of their respective ERISA Affiliates sends notice of a
plant closing or mass layoff (as defined in WARN) to employees, copies of
each such notice sent by the Borrowers, the Guarantors or any of their
respective ERISA Affiliates;
(xi) as soon as available and in any event within 5 days after
receipt or delivery thereof, copies of any material notices or statements
that any Loan Party receives or sends in connection with the Miss Erika
Acquisition Documents, the Jeri-Jo Purchase Documents or the Indenture
including, without limitation, each EBITDA Notice, EBITDA Statement,
Dispute Notice, Accountants' Statement, Audited Statement, Determination
and Final Earn-Out Notice (each as defined in the Miss Erika Acquisition
Agreement and the Jeri-Jo Purchase Documents, as the case may be);
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(xii) promptly after the commencement thereof but in any event
not later than five days after service of process with respect thereto on,
or the obtaining of knowledge thereof by, the Company or any other Loan
Party, notice of each action, suit or proceeding before any court or other
Governmental Authority or other regulatory body or any arbitrator which
would have a Material Adverse Effect;
(xiii) as soon as available, and in any event within 60 days of
the Effective Date, a balance sheet of Jeri-Jo as of the Effective Date of
the Jeri-Jo Purchase and the Offering, all in reasonable detail and
certified by the chief financial officer of the Company as fairly
presenting, in all material respects, the financial position of Jeri-Jo as
of such date and prepared in accordance with GAAP (other than the absence
of footnotes and adjustments but including a narrative description of any
adjustments); and
(xiv) promptly upon request, such other information concerning
the condition or operations, financial or otherwise, of the Company or any
other Loan Party that the Agents from time to time may reasonably request.
(b) Guaranties, Etc. Cause each of their respective Subsidiaries not
----------------
existing on the Effective Date to execute and deliver to the Collateral Agent
promptly, and in any event within 15 days after the formation or acquisition
thereof (i) a guaranty, substantially in the form of Exhibit B-1 hereto,
guaranteeing the Obligations, and (ii) a security agreement, substantially in
the form of Exhibit C-2 hereto, securing such guaranty, and, in connection with
each such delivery, cause to be delivered to the Collateral Agent, in form and
substance reasonably satisfactory to the Collateral Agent, a written opinion of
counsel as to such matters relating thereto as the Collateral Agent may
reasonably request, together with such other agreements, instruments, approvals
or other documents as the Collateral Agent may reasonably request. In addition,
within 15 days after the formation or acquisition of any Subsidiary not existing
on the Effective Date, the parent of such Subsidiary shall pledge all of the
Capital Stock of such Subsidiary to the Collateral Agent pursuant to the terms
of the Pledge Agreement to which such parent is a party.
(c) Compliance with Laws, Etc. Comply, and cause each of their
--------------------------
respective Subsidiaries to comply, with all applicable material laws, rules,
regulations and orders (including, without limitation, ERISA and Environmental
Laws), such compliance to include, without limitation, (i) paying before the
same become delinquent all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any of its properties, and
(ii) paying all lawful claims arising under such laws which if unpaid might
become a Lien upon any of its properties, except (A) to the extent contested in
good faith by proper proceedings which stay the imposition of any penalty, fine
or Lien resulting from the non-payment thereof and with respect to which
adequate reserves have been set aside for the payment thereof and (B) taxes,
assessments or other claims in an amount of not more than $200,000 in the
aggregate and the Liens, if any, securing such amounts.
(d) Preservation of Existence, Etc. Except for Norty's, Inc.,
-------------------------------
maintain and preserve, and cause each of their Subsidiaries to maintain and
preserve, its existence, rights
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and privileges, and become or remain duly qualified and in good standing in each
jurisdiction in which the character of the properties owned or leased by them or
in which the transaction of their business makes such qualification necessary,
except where the failure to preserve its rights and privileges and to qualify
and be in good standing would not have a Material Adverse Effect. In the case of
Jeri-Jo, become duly qualified and in good standing in New York and New Jersey
on or prior to July 31, 1998.
(e) Keeping of Records and Books of Account. Keep, and cause each of
---------------------------------------
their Subsidiaries to keep, adequate records and books of account, with complete
entries made in accordance with GAAP.
(f) Inspection Rights. Permit, and cause each of their Subsidiaries
-----------------
to permit, the Agents, or any agents or representatives thereof at any time and
from time to time upon reasonable notice to the Company, during normal business
hours to examine and make copies of and abstracts from their records and books
of account, to visit and inspect their properties, to conduct audits, physical
counts, valuations or examinations and to discuss their affairs, finances and
accounts with any of the directors, officers, managerial employees, independent
accountants or other representatives thereof, provided that (i) the foregoing
shall be in a manner so as to not unduly disrupt the business of the Borrowers
and (ii) such notice shall not be required if an Event of Default has occurred
and is continuing.
(g) Maintenance of Properties, Etc. Except in respect of Norty's
-------------------------------
Inc., maintain and preserve, and cause each of their Subsidiaries to maintain
and preserve, all of their properties which are necessary or useful in the
proper conduct of their business in good working order and condition, ordinary
wear and tear and damage due to casualty excepted. Except where the failure to
comply would not have a Material Adverse Effect, comply, and cause each of their
Subsidiaries to comply, at all times with the provisions of all leases to which
each of them is a party as lessee or under which each of them occupies property,
so as to prevent any loss or forfeiture thereof or thereunder.
(h) Maintenance of Insurance. Maintain for the Company and its
------------------------
Subsidiaries, with responsible and reputable insurance companies or associations
insurance (including, without limitation, comprehensive general liability and
property and casualty insurance) with respect to their properties and business,
in such amounts and covering such risks, as is required by any Governmental
Authority or other regulatory body having jurisdiction with respect thereto and
as is carried generally in accordance with sound business practice by companies
in similar businesses similarly situated.
(i) Environmental. Cause each Loan Party to (i) keep any property
-------------
either owned or operated by it free of any Liens arising under any Environmental
Laws; (ii) comply with Environmental Laws except where the failure to comply
would not have a Material Adverse Effect and provide to the Agents documentation
of such compliance which the Agents reasonably request; (iii) promptly notify
the Agents of any Release of a Hazardous Material in excess of any reportable
quantity and take any Remedial Actions required by Governmental Authorities to
abate said Release; and (iv) promptly provide the Agents with
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written notice within ten (10) days of the receipt of any Environmental Action
or notice that an Environmental Action will be filed against either of the
Borrowers.
(j) Further Assurances. Shall, and shall cause each Subsidiary to,
------------------
do, execute, acknowledge and deliver, at the sole cost and expense of the
Borrowers all such further acts, deeds, conveyances, mortgages, assignments,
estoppel certificates, financing statements, notices of assignment, transfers
and assurances as the Agents may reasonably require from time to time in order
to (i) carry out more effectively the purposes of this Agreement and the other
Loan Documents, (ii) subject to valid and perfected first priority Liens, all
the Collateral, (iii) perfect and maintain the validity, effectiveness and
priority of any of the Loan Documents and the Liens intended to be created
thereby, and (iv) better assure, convey, grant, assign, transfer and confirm
unto the Agents, the Lenders and the L/C Issuer the rights now or hereafter
intended to be granted to the Agents, the Lenders and the L/C Issuer under this
Agreement, any Loan Document or any other instrument under which the Borrowers,
the Guarantors or any of their respective Subsidiaries may be or may hereafter
become bound for carrying out the intention or facilitating the performance of
the terms of the Agreement.
(k) Key Man Life Insurance. Furnish to the Agents within sixty (60)
----------------------
days of the Effective Date a copy of key man life insurance policies on the life
of Susan Schneider in the amount of $1,500,000, from a responsible and reputable
life insurance company, together with a collateral assignment of such life
insurance policy to the Collateral Agent for the benefit of the Lenders, duly
executed by Jeri-Jo, and acknowledged by the home office of the insurance
company. Maintain at all times such key man or other life insurance policies on
the lives of Sanford Greenberg, Peter Boneparth Howard Zwilling and Susan
Schneider or their successors for so long as such individuals or their
successors are employed by the Company or any Borrower from a responsible and
reputable life insurance company each in an amount of not less than $1,500,000,
$3,000,000, $1,500,000 and $1,500,000, respectively, together with an assignment
of such life insurance policies to the Collateral Agent for the benefit of the
Lenders.
(l) Landlords Waivers; No-offset Letters. Use their best efforts to
------------------------------------
furnish to the Collateral Agent within sixty (60) days of the Effective Date or
the first date on which a Borrower maintains Inventory on leased premises, the
location of a contractor, processor or supplier or a warehouse (i) landlord
waivers in form and substance reasonably satisfactory to the Collateral Agent
from each of the Borrowers' landlords (including, without limitation, for the
premises of Miss Erika located at 333 North Street, Teterboro, New Jersey), (ii)
no-offset letters in form and substance reasonably satisfactory to the
Collateral Agent from each of the Borrowers' contractors, processors and
suppliers that may from time to time have possession of the Inventory with a
value in excess of $1 million, and (iii) warehouse letters in form and substance
reasonably satisfactory to the Collateral Agent from the owner of each of the
warehouses that may from time to time have possession of Inventory.
(m) Real Estate. If at any time any Loan Party or any of its
-----------
Subsidiaries acquires any fee interest in real property, such Loan Party shall
promptly execute, deliver and record, or cause such Subsidiary to execute,
deliver and record, a first priority mortgage and/or deed of trust in favor of
the Collateral Agent covering such real property
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interest, in form and substance reasonably satisfactory to the Collateral Agent,
and provide the Collateral Agent with a title insurance policy covering such
real property interest in an amount reasonably acceptable to the Collateral
Agent, a current ALTA survey thereof, a surveyor's certificate, a satisfactory
legal description of such property and an opinion from special counsel to such
Loan Party, each in form and substance reasonably satisfactory to the Collateral
Agent and as to such matters as the Collateral Agent may reasonably request
together with a report of title on forms of and issued by a title company
reasonably satisfactory to the Collateral Agent ("Title Company"), subject to
-------------
such exceptions as are reasonably satisfactory to the Collateral Agent, and, to
the extent necessary under applicable law, Uniform Commercial Code financing
statements covering fixtures, in each case appropriately completed and duly
executed, for filing in the appropriate county land office and evidence that
such Loan Party shall have paid to the Title Company all expenses of the Title
Company in connection with the issuance of such reports and in addition shall
have paid to the Title Company an amount equal to the recording and stamp taxes
(including mortgage recording taxes), if any, payable in connection with
recording such mortgages in the appropriate county land offices, each in form
and substance reasonably satisfactory to the Collateral Agent.
(n) Change in Collateral; Collateral Records. Give the Collateral
----------------------------------------
Agent not less than thirty (30) days' prior written notice of any change in the
location of any Collateral, other than to locations, that as of the date hereof
are known to the Collateral Agent and at which the Collateral Agent has filed
financing statements and otherwise fully perfected its Liens thereon, except for
(i) in-transit Inventory and (ii) new locations of Inventory in the possession
of third-party contractors, processors or suppliers where the value of such
Inventory does not exceed $100,000 for all such locations, provided that, in the
case of clause (ii), the Borrower owning such Inventory (A) provides the
Collateral Agent with prompt written notice of such new location, not more than
five (5) Business Days after the first date on which Inventory is located at
such new location, and (B) takes all action reasonably requested by the
Collateral Agent to grant to the Collateral Agent a perfected first priority
Lien on such Inventory. The Borrowers shall also advise the Collateral Agent
promptly, in reasonable detail, of any material adverse change relating to the
value of or the Lien granted on the Collateral. The Borrowers agree to execute
and deliver to the Collateral Agent for the benefit of the Lenders from time to
time, solely for the Collateral Agent's convenience in maintaining a record of
Collateral, such written statements and schedules as the Collateral Agent may
reasonably require, designating, identifying or describing the Collateral. The
Borrowers' failure, however, to promptly give the Collateral Agent such
statements or schedules shall not effect, diminish or modify or otherwise limit
the Collateral Agent's security interest in the Collateral.
(o) Borrowing Base. Maintain (i) all Loans and Letter of Credit
--------------
Obligations of each Borrower in compliance with the then current Borrowing Base
of each such Borrower on an individual basis and (ii) all Loans and Letter of
Credit Obligations in compliance with the then current Borrowing Base on a
combined basis.
(p) Intellectual Property Appraisals. Furnish to the Lenders within
--------------------------------
sixty (60) days of the Effective Date, appraisals, at the sole cost and expense
of the Borrowers, reasonably satisfactory to the Agents, of all trademarks
acquired by or otherwise transferred to
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Jeri-Jo from the Sellers pursuant to the Jeri-Jo Purchase Documents, such
appraisals to be performed by an appraisal firm acceptable to the Agents on an
"orderly liquidation value" basis.
(q) Post Office Box. In the case of Jeri-Jo, maintain the Post
---------------
Office Box and give the Administrative Agent at least thirty (30) days prior
written notice of the change in location of such Post Office Box. Jeri-Jo shall
irrevocably instruct all of its Account Debtors to remit all payments to be made
by checks or other drafts to the Post Office Box. Until the Administrative Agent
has advised Jeri-Jo to the contrary after the occurrence and during the
continuance of an Event of Default, Jeri-Jo may and will enforce, collect and
receive all amounts owing on its Account Receivable and all other proceeds from
the sale of Inventory for the Administrative Agent's benefit and on the Agent's
behalf, but at Jeri-Jo's expense; such privilege shall terminate, at the
election of the Administrative Agent, upon the occurrence and during the
continuance of any Event of Default. All checks, drafts, notes, money orders,
acceptances, cash and other evidences of Indebtedness received in the Post
Office Box or by Jeri-Jo from any Account Debtor, as proceeds from Accounts
Receivable of Jeri-Jo and all other proceeds from the sale of Inventory, shall
be held by Jeri-Jo in trust for the Administrative Agent. Jeri-Jo shall not
commingle such collections with its own funds or the funds of any other
Borrower, Subsidiary or Affiliate.
(r) Depository Account. (i) Cause all cash, all proceeds from
------------------
Accounts Receivable of Jeri-Jo (whether received at the Post Office Box or
otherwise) and all other proceeds from the sale of Inventory, to be deposited
into the Depository Account in the ordinary course of business of Jeri-Jo
consistent with past practice but in any event not less than once each Business
Day, (ii) instruct the Administrative Agent to cause all funds in the Depository
Account to be transferred to the Payment Office each Business Day, (iii)
instruct the Administrative Agent to cause all funds transferred to the Payment
Office to be credited to the Loan Account and applied to reduce the Obligations
outstanding from time to time, and (iv) take all such reasonable actions as the
Administrative Agent deems necessary or advisable to send all proceeds from
Accounts Receivable of Jeri-Jo and all other proceeds from the sale of
Inventory, to the Payment Office to be credited to the Loan Account and applied
to the Obligations.
SECTION 7.02. Negative Covenants. So long as any principal of or
------------------
interest on the Loans or any Letter of Credit Obligations (whether or not due)
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Company and the Borrowers will not without the prior written consent of the
Required Lenders:
(a) Liens, Etc. Create or suffer to exist, or permit any of their
-----------
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of their properties, rights or other assets, whether now owned or hereafter
acquired, or assign or otherwise transfer, or permit any of its Subsidiaries to
assign or otherwise transfer, any right to receive income, other than the
following ("Permitted Liens"):
---------------
(i) Liens created pursuant to the Loan Documents;
(ii) Liens existing on the date hereof, as set forth in Schedule
7.02(a)(ii) hereto, and the renewal and replacement of such Liens, provided
that any such
72
<PAGE>
renewal or replacement Lien shall be limited to the property or assets
covered by the Lien renewed or replaced and the Indebtedness secured by any
such renewal or replacement Lien shall be in an amount not greater than the
amount of Indebtedness secured by the Lien renewed or replaced;
(iii) Liens for taxes, assessments or governmental charges or
levies to the extent that the payment thereof shall not be required by
Section 7.01(c) hereof;
(iv) Liens created by operation of law or leases (other than
Liens created under Environmental Laws), such as landlords' liens,
materialmen's liens, mechanics' liens and other similar Liens, arising in
the ordinary course of business and securing claims the payment of which
shall not be required by Section 7.01(c) hereof;
(v) deposits, pledges or Liens (other than Liens arising
under ERISA or the Internal Revenue Code) securing (A) obligations incurred
in respect of workers' compensation, unemployment insurance or other forms
of governmental insurance or benefits, (B) the performance of bids,
tenders, leases, contracts (other than for the payment of money) and
statutory obligations, or (C) obligations on surety or appeal bonds, but
only to the extent such deposits, pledges or Liens are incurred or
otherwise arise in the ordinary course of business and secure obligations
which are not past due;
(vi) easements, rights-of-way, zoning and similar restrictions
and other similar charges and encumbrances on the use of real property and
minor irregularities in the title thereto which do not (A) secure
obligations for the payment of money, or (B) materially impair the value of
such property or materially impair the use thereof by the Borrowers, the
Guarantors or any of their Subsidiaries in the normal conduct of such
Person's business;
(vii) Liens created under the Factoring Agreements;
(viii) purchase money liens on or purchase money security
interests in equipment acquired or held in the ordinary course of business
of the Borrowers, the Guarantors and their Subsidiaries securing
Indebtedness not exceeding in any Fiscal Year of the Company the aggregate
principal amount of $500,000 for the Borrowers, the Guarantors and their
Subsidiaries;
(ix) Liens securing Capitalized Leases permitted by Section
7.02(g);
(x) Liens in favor of Old ME Corp. on the Capital Stock of
Miss Erika securing the Miss Erika Earn Out Payment; and
(xi) Liens in favor of the Sellers on the Capital Stock of
Jeri-Jo securing the Jeri-Jo Earn Out Payment.
73
<PAGE>
(b) Indebtedness. Create, incur or suffer to exist, or permit any of
------------
their Subsidiaries to create, incur or suffer to exist, any Indebtedness, other
than:
(i) Indebtedness created hereunder or under the Notes or any
Letter of Credit;
(ii) Indebtedness existing on the date hereof, as set forth in
Schedule 7.02(b)(ii) hereto, and any extensions of maturity, refinancing or
modification of the terms thereof, provided that such extension,
refinancing or modification (A) is pursuant to terms that are not less
favorable to the Borrowers or the Guarantors than the terms of the
Indebtedness being extended, refinanced or modified, (B) after giving
effect to the extension, refinancing or modification, such Indebtedness is
not greater than the amount of the Indebtedness outstanding immediately
prior to such extension, refinancing or modification, and (C) the
extension, refinancing or modification does not change the Persons liable
for such Indebtedness;
(iii) intercompany Indebtedness permitted by Section
7.02(f)(iii) owing to a Borrower by any other Borrower, provided that (A)
the repayment of such Indebtedness shall be subordinated to the payment of
the Obligations, pursuant to the terms of and evidenced by one or more
promissory notes, substantially in the form of Exhibits L-1, L-2 or L-3
hereto, as applicable, and (B) such notes shall be pledged to the
Collateral Agent for the benefit of the Lenders;
(iv) Indebtedness permitted by subsection (c) of this Section
7.02;
(v) Indebtedness secured by Liens permitted by clause (viii)
of subsection (a) of this Section 7.02;
(vi) Indebtedness under the Hedging Agreements;
(vii) Indebtedness under Capitalized Leases permitted by
Section 7.02(g);
(viii) to the extent that it constitutes Indebtedness, the
obligation of Miss Erika and Jeri-Jo with respect to the Miss Erika Earn
Out Payment and the Jeri-Jo Earn Out Payment, respectively;
(ix) intercompany Indebtedness of the Company and Norty's Inc.
permitted by Sections 7.02(f)(viii), (ix) and (xii) hereof;
(x) Indebtedness evidenced by the Company Notes or the
Indenture; and
74
<PAGE>
(xi) Indebtedness, in addition to the Indebtedness set forth
in clauses (i) through (x) of this Section 7.02(b), in an aggregate
principal amount not in excess of $1,000,000 at any time outstanding.
(c) Guaranties, Etc. Assume, guarantee, indorse or otherwise become
----------------
directly or contingently liable (including, without limitation, liable by way of
agreement, contingent or otherwise, to purchase, to provide funds for payment,
to supply funds to or otherwise invest in the debtor or otherwise to assure the
creditor against loss), in connection with any Indebtedness of any other Person,
other than:
(i) guaranties in favor of the Agents and the Lenders under
the Loan Documents;
(ii) guaranties by indorsement of negotiable instruments for
deposit or collection in the ordinary course of business;
(iii) guaranties existing on the date hereof, as set forth in
Schedule 7.02(c)(iii) hereto, but not any renewal or other modification
thereof provided that, if the Indebtedness guaranteed by such guaranty is
renewed, modified or extended pursuant to the terms of this Agreement, such
guaranty may be renewed or modified on terms no less favorable to the
Borrowers or the Guarantors than the guaranty being renewed or modified;
(iv) advances incurred in the ordinary course of a Borrower's
business, in an aggregate amount not to exceed (A) $2,000,000 at any time
outstanding to domestic contractors, processors or agents and (B)
$7,500,000 at any time outstanding between April 1 and October 31 of any
year and $4,000,000 at any time outstanding between November 1 and March 31
of any year to Style International, Inc., provided that the amounts set
forth in sub-clause (B) above may include (but not be increased by) an
amount of up to $500,000 at any one time outstanding to foreign
contractors, processors or agents other than Style International, Inc.;
(v) guaranties by the Company of Miss Erika's and Jeri-Jo's
obligations under the Miss Erika Acquisition Agreement and the Jeri-Jo
Purchase Agreement and the Warehouse Lease (as defined in the Jeri-Jo
Purchase Agreement), respectively;
(vi) guaranties in favor of contractors, processors or agents
of the Borrowers incurred in the ordinary course of a Borrower's business,
in an aggregate amount not to exceed $1,000,000 at any time outstanding;
and
(vii) guaranties by the Borrowers and any present or future
Subsidiaries of the Company, of the Company's obligations under the Company
Notes.
75
<PAGE>
(d) Merger, Consolidation, Sale of Assets, Etc.
-------------------------------------------
(i) Merge or consolidate with any Person, or permit any of
their Subsidiaries to merge or consolidate with, any Person; provided, however,
-------- -------
that any Loan Party (other than the Borrowers) including any Subsidiary of a
Loan Party formed or acquired after the Effective Date, may be merged into a
Guarantor (other than the Borrowers) or another such Subsidiary, or may
consolidate with another such Subsidiary, so long as (A) the Company gives the
Administrative Agent at least 60 days' prior written notice of such merger or
consolidation and (B) no Default or Event of Default shall have occurred and be
continuing either before or after giving effect to such transactions.
(ii) Sell, assign, lease or otherwise transfer or dispose
of, or permit any of its Subsidiaries to sell, assign, lease or otherwise
transfer or dispose of, whether in one transaction or in a series of related
transactions, any of its properties, rights or other assets whether now owned or
hereafter acquired to any Person, provided that (A) the Borrowers and their
Subsidiaries may sell Inventory in the ordinary course of business, (B) the
Company and its Subsidiaries may dispose of obsolete or worn-out property in the
ordinary course of business, (C) the Loan Parties may sell or otherwise dispose
of assets, other than Inventory, for fair market value, provided that the
aggregate Net Proceeds of such dispositions do not exceed $100,000 in any Fiscal
Year, (D) the Borrowers may sell Accounts Receivable to the Factor pursuant to
the Factoring Agreements, (E) Squire may sell, assign or otherwise transfer the
Capital Stock of Norty's, Inc. and Norty's, Inc. may sell, assign or otherwise
transfer any or all of its properties, rights and assets, and (F) the Company
and its Subsidiaries may enter into licensing agreements as a licensor.
(e) Nature of Business. Engage in, or permit any of their
------------------
Subsidiaries to engage in, any business other than the apparel business,
excluding manufacturing but not excluding contracting for manufacture or the
manufacture of samples.
(f) Investments, Etc. Make, or permit any of its Subsidiaries to
-----------------
make, any loan or advance to any Person or purchase, hold or otherwise acquire,
or permit any of its Subsidiaries to purchase, hold or otherwise acquire, any
Capital Stock, other securities, properties, assets or obligations of, or any
interest in, any Person, other than:
(i) Permitted Investments;
(ii) investments in Subsidiaries existing on the date
hereof, and other investments and loans existing on the date hereof, in
each case existing on the date hereof as set forth in Schedule 7.02(f)(ii)
hereto;
(iii) loans or advances made by a Borrower to any other
Borrower, provided that (A) the repayment of all such loans and advances is
subordinated to the payment of the Obligations pursuant to the terms of and
evidenced by one or more promissory notes substantially in the form of
Exhibits L-1, L-2 or L-3 hereto, as applicable, and (B) such notes shall be
pledged to the Collateral Agent for the benefit of the Lenders;
76
<PAGE>
(iv) loans or advances to employees in the ordinary course in
an aggregate amount not to exceed $100,000 at any time outstanding;
(v) loans, advances and guaranties permitted by Sections
7.02(c)(iv) and (vi);
(vi) investments in the Capital Stock of the Company permitted
by Section 7.02(i)(iii);
(vii) the Jeri-Jo Purchase;
(viii) loans or advances by any Borrower to the Company in the
ordinary course of business for the purpose of (A) the payment of taxes due
and owing by the Company, (B) paying principal, interest and expenses
required to be paid pursuant to the terms of the Company Notes and the
Indenture and/or to pay dividends on preferred equity issued by the Company
that has a dividend not higher than the interest on the Company Notes and
other terms no more restrictive for the Company and its Subsidiaries than
the terms of the Indenture, provided that no Event of Default shall have
occurred and be continuing, or would result therefrom, and (C) the purchase
of Capital Stock of the Company permitted by Section 7.02(i)(iii);
(ix) acquisitions by any Loan Party of Capital Stock or assets
provided that each of the following conditions has been satisfied and the
chief executive officer of the Company shall provide the Lenders with a
certificate stating that each of the following conditions has been
satisfied together with any additional information that the Agents may
reasonably request (A) both before and after giving effect to such
acquisition, no Default or Event of Default shall have occurred and be
continuing, (B) the consideration paid by any Loan Party in connection with
such acquisition shall be limited to the Capital Stock of the Company and
not more than $10 million of cash including all earnout or similar
payments, provided that, the current Overadvance Amount limits (as such
amounts are initially set forth in clause (i) of the definition of
"Overadvance Amount" in Section 1.01 hereof) shall each be reduced on a
dollar for dollar basis by the cash consideration paid by any Loan Party in
connection with such acquisition, (C) the entity or assets acquired in such
acquisition shall be in a line of business permitted by Section 7.02(e)
hereof, (D) the entity or assets acquired shall not require financing in
addition to that provided by this Agreement, (E) the independent directors
of the Company's board of directors and, in the case of an acquisition of
stock of a publicly traded company, the board of directors of the entity
being acquired shall approve such acquisition, (F) the Company shall obtain
and deliver to the Lenders a fairness opinion with respect to the
acquisition from an independent investment banking firm reasonably
acceptable to the Agents, and (G) in the case of the acquisition of stock,
the new subsidiary shall comply with the provisions of Section 7.01(b)
hereof and, in the case of the acquisition of stock or assets, the Loan
Parties shall take all action reasonably requested by the Collateral Agent
to grant to the Collateral Agent a perfected first priority Lien on all
Capital Stock and assets acquired;
77
<PAGE>
(x) purchases of inventory and supplies by any Borrower in the
ordinary course of business;
(xi) loans or advances by Norty's to Squire; and
(xi) other loans, advances or investments in an aggregate amount
not to exceed $1,000,000.
(g) Lease Obligations. Create, incur or suffer to exist, or permit
-----------------
any of their Subsidiaries to create, incur or suffer to exist, any obligations
as lessee (i) for the payment of rent for any real or personal property in
connection with any sale and leaseback transaction, or (ii) for the payment of
rent for any real or personal property under leases or agreements to lease other
than (A) obligations under Capitalized Leases (other than the existing
Capitalized Leases set forth on Schedule 7.02(g) hereto) which would not cause
the aggregate amount of all obligations under Capitalized Leases entered into
after the Effective Date owing by the Loan Parties in any Fiscal Year to exceed
the amounts set forth in subsection (h) of this Section 7.02, and (B) Operating
Lease Obligations which would not cause the aggregate amount of all Operating
Lease Obligations owing by the Loan Parties in any Fiscal Year to exceed
$7,000,000 or such greater amount as shall be approved by the Required Lenders.
(h) Capital Expenditures. Make or be committed to make, or permit
--------------------
any of its Subsidiaries to make or be committed to make, any expenditure (by
purchase or Capitalized Lease) for fixed or capital assets other than
expenditures (including obligations under Capitalized Leases) which would not
cause the aggregate amount of all such expenditures to exceed $2,000,000 for the
period beginning on the Effective Date and ending on October 31, 1998,
$5,000,000 for the Fiscal Year ending November 6, 1999, and $5,000,000 for each
Fiscal Year thereafter.
(i) Dividends, Prepayments, Etc. Declare or pay any dividends,
----------------------------
purchase or otherwise acquire for value any of its Capital Stock now or
hereafter outstanding, return any capital to its stockholders as such, or make
any other payment or distribution of assets to its stockholders as such, or
purchase or otherwise acquire for value any stock of any Loan Party, or make any
payment or prepayment of principal of, premium, if any, or interest on, or
redeem, defease or otherwise retire, any Indebtedness of any Loan Party (other
than Indebtedness under the Loan Documents) before its scheduled due date, or
permit any of its Subsidiaries to do any of the foregoing; provided, however,
-------- -------
that so long as no Default or Event of Default shall have occurred and be
continuing, or would result therefrom, (i) Miss Erika may make the Miss Erika
Earn-Out Payment, (ii) Jeri-Jo may make the Jeri-Jo Earn Out Payment, provided
however that any draw on the Letter of Credit which secures the Jeri-Jo Earn Out
Payment shall not be prohibited by this Section, (iii) the Company may
repurchase shares of its Capital Stock, provided, that the aggregate
consideration paid for all such purchases does not exceed $1,000,000 in the
aggregate, (iv) the Borrowers may pay dividends to the Company and the Company
may pay dividends in amounts necessary to (A) make the repurchase of its shares
of Capital Stock to the extent permitted by clause (iii) above, (B) to pay taxes
due and owing by the Company, and (C) to pay interest and expenses required to
be paid pursuant to the terms of the
78
<PAGE>
Company Notes and the Indenture and/or to pay dividends on preferred equity
issued by the Company that has a dividend not higher than the interest on the
Company Notes and other terms no more restrictive for the Company and
Subsidiaries than the terms of the Indenture,, (v) any Subsidiaries of the
Borrowers may pay dividends to the Borrowers, (vi) the Company may pay dividends
in the form of Capital Stock, and (vii) the Company or any Subsidiary may make
any earnout payment payable in connection with an acquisition otherwise
permitted by Section 7.02(f) (ix) hereof.
(j) Sale of Notes, Etc. Except pursuant to the Factoring Agreements
-------------------
and, in the absence of a continuing Event of Default, in the ordinary course of
business, sell, discount or otherwise dispose of notes, Accounts Receivable or
other obligations owing to a Loan Party or permit any of their Subsidiaries to
do so.
(k) Compromise of Receivable; Other Obligations.
-------------------------------------------
(i) Compromise or adjust any of the Accounts Receivable (or
extend the time for payment thereof) or grant any discounts, allowance or
credits thereon or permit any of their Subsidiaries to do so, in each case other
than (i) as permitted by the Factoring Agreements and (ii) in the absence of a
continuing Event of Default, in the ordinary course of business.
(ii) Forgive or compromise any principal of or interest on, or
amend, modify or waive, if the effect of such amendment, modification or waiver
is to forgive or compromise any principal of or interest on, the non-negotiable
limited recourse promissory notes described on Schedule 7.02(k)(ii) hereto or
release any security for such notes (except, in connection with a sale of such
notes, as provided in such notes or the pledge agreements related thereto as
such notes and pledge agreements existed on the Effective Date).
(l) Federal Reserve Regulations. Permit any Loan or the proceeds of
---------------------------
any Loan under this Agreement to be used for any purpose which violates or is
inconsistent with the provisions of Regulations G, T, U or X of the Board of
Governors of the Federal Reserve System.
(m) Transactions with Affiliates. Enter into or be a party to, or
----------------------------
permit any Subsidiary to enter into or be a party to any transaction with any
Affiliate of the Company except as otherwise expressly permitted in this
Agreement or except in the ordinary course of business in a manner and to an
extent necessary or desirable for the prudent operation of its business for fair
consideration and on terms no less favorable to the Company or such Subsidiary
as are available from unaffiliated third parties except for the employment,
compensation or consulting arrangements described in Schedule 7.02(m) hereto and
any renewals, extensions or modifications thereof on fair and reasonable terms
necessary or desirable for the prudent operation of its business.
(n) Environmental. The Loan Parties shall not allow the use,
-------------
handling, generation, storage, treatment, release or disposal of Hazardous
Materials at any property owned or leased by the Loan Parties except in
compliance with Environmental Laws so long as such
79
<PAGE>
use, handling, generation, storage, treatment, release or disposal of Hazardous
Materials does not result in a Material Adverse Effect.
(o) Factoring Agreements. Cause any voluntary termination by a Loan
--------------------
Party of any Factoring Agreement.
(p) Financial Covenants.
-------------------
(i) Net Worth. Permit Consolidated Net Worth of the Company and
---------
its Consolidated Subsidiaries at the end of each Fiscal Quarter to be less
than the amount set forth below opposite each such Fiscal Quarter end:
<TABLE>
<CAPTION>
Fiscal Minimum
Quarter End Net Worth
----------- ---------
<S> <C>
August 1, 1998 $38,800,000
October 31, 1998 $42,900,000
</TABLE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agents shall negotiate in good faith to
determine the Consolidated Net Worth for the Company and its Consolidated
Subsidiaries as of the end of each Fiscal Quarter covered by such financial
projections and, in the event that the Company and the Required Lenders are
unable to agree upon the amounts of such Consolidated Net Worth on or
before the date that is 30 days after the date that the Lenders have
received such financial projections, the Consolidated Net Worth at the end
of each Fiscal Quarter of the Fiscal Year covered by such financial
projections shall not be less than the amount set forth for the last Fiscal
Quarter end set forth above.
(ii) Leverage Ratio. Permit the ratio of Consolidated Total
--------------
Liabilities to Consolidated Net Worth of the Company and its Consolidated
Subsidiaries as of the end of each Fiscal Quarter to be greater than the
amount set forth below opposite each such Fiscal Quarter end:
<TABLE>
<CAPTION>
Fiscal Maximum
Quarter End Leverage Ratio
----------- --------------
<S> <C>
August 1, 1998 4.80 to 1.0
October 31, 1998 4.0 to 1.0
</TABLE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agents shall negotiate in good faith to
determine the ratio of Consolidated Total
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<PAGE>
Liabilities to Consolidated Net Worth of the Company and its Consolidated
Subsidiaries as of the end of each Fiscal Quarter covered by such financial
projections and, in the event that the Company and the Required Lenders are
unable to agree upon such ratio on or before the date that is 30 days after
the date that the Lenders have received such projections, such ratio as of
the end of each Fiscal Quarter of the Fiscal Year covered by such financial
projections shall not be greater than the ratio set forth for the last
Fiscal Quarter end set forth above.
(iii) Working Capital. Permit Working Capital at the end of
---------------
each Fiscal Quarter to be less than the amount set forth below opposite
each such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Minimum
Quarter End Working Capital
----------- ---------------
<S> <C>
August 1, 1998 $95,000,000
October 31, 1998 $100,000,000
</TABLE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agents shall negotiate in good faith to
determine the minimum Working Capital as of the end of each Fiscal Quarter
covered by such financial projections and, in the event that the Company
and the Required Lenders are unable to agree upon the amounts of such
Working Capital on or before the date that is 30 days after the date that
the Lenders have received such projections, the Working Capital at the end
of each Fiscal Quarter of the Fiscal Year covered by such financial
projections shall not be less than the amount set forth for the last Fiscal
Quarter end set forth above.
(iv) Fixed Charge Coverage Ratio. Permit the ratio of
---------------------------
Consolidated EBITDA of the Company and its Consolidated Subsidiaries to
Consolidated Fixed Charges of the Company and its Consolidated Subsidiaries
for each Fiscal Quarter to be less than the amount set forth below opposite
each such Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Minimum Fixed
Quarter End Charge Coverage Ratio
----------- ---------------------
<S> <C>
August 1, 1998 .60 to 1.0
October 31, 1998 1.30 to 1.0
</TABLE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agents shall negotiate in good faith to
determine the ratio of Consolidated EBITDA of the Company and its
Consolidated Subsidiaries to Consolidated Fixed Charges of the Company and
its Consolidated Subsidiaries as of the end of each Fiscal Quarter covered
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<PAGE>
by such financial projections and, in the event that the Company and the
Required Lenders are unable to agree upon the amounts of such ratio on or
before the date that is 30 days after the date that the Lenders have
received such projections, such ratio for each Fiscal Quarter of the Fiscal
Year covered by such financial projections shall not be less than the ratio
set forth for the last Fiscal Quarter end set forth above.
(v) Cash Flow Ratio. Permit the ratio of Consolidated EBIT of
---------------
the Company and its Consolidated Subsidiaries to Consolidated Net Interest
Expense of the Company and its Consolidated Subsidiaries at the end of each
Fiscal Quarter be less than the amount set forth below opposite each such
Fiscal Quarter:
<TABLE>
<CAPTION>
Fiscal Minimum
Quarter End Cash Flow Ratio
----------- ---------------
<S> <C>
August 1, 1998 .70 to 1.0
October 31, 1998 2.0 to 1.0
</TABLE>
provided that, upon receipt of the financial projections required to be
delivered to the Lenders pursuant to Section 7.01(a)(vi) hereof for each
Fiscal Year, the Company and the Agents shall negotiate in good faith to
determine the ratio of Consolidated EBIT of the Company and its
Consolidated Subsidiaries to Consolidated Net Interest Expense of the
Company and its Consolidated Subsidiaries as of the end of each Fiscal
Quarter covered by such financial projections and, in the event that the
Company and the Required Lenders are unable to agree upon such ratio on or
before the date that is 30 days after the date that the Lenders have
received such projections, such ratio at the end of each Fiscal Quarter of
the Fiscal Year covered by such financial projections shall not be less
than the ratio set forth for the last Fiscal Quarter set forth above.
(q) Fiscal Periods. Change the Fiscal Months, Fiscal Years and
--------------
Fiscal Quarters as set forth on Schedule 1.01B, except as otherwise agreed to in
writing by the Agents.
(r) Amendment or Waiver of the Indenture and the Company Notes;
-----------------------------------------------------------
Prepayment of Company Notes. (i) Agree, or permit any of its Subsidiaries to
- ---------------------------
agree, to any amendment or other change to (or make any payment consistent with
any amendment or other change to), or waive any of its rights under, the
Indenture or the Company Notes or refinance any of the Company Notes, provided
that the Company, the Borrowers or any of their Subsidiaries may agree to any
amendment or other change (A) to cure any ambiguity, defect or inconsistency
therein, or (B) to comply with the requirements of the Securities and Exchange
Commission in order to effect or maintain the qualification of the Indenture
under the Trust Indenture Act; or
(ii) directly or indirectly, by deposit of monies or otherwise,
prepay, purchase, redeem, retire, defease or otherwise acquire, or make any
payment on account of any principal of, premium or interest payable in
connection with the prepayment, redemption, defeasance or retirement of any
Company Notes, provided that any such prepayment, redemption, defeasance or
retirement may be made with the Net Proceeds of any issuance, sale, assignment,
82
<PAGE>
transfer or other disposition by the Company or any of its Subsidiaries of any
Capital Stock, debt securities or assets of the Company or any of its
Subsidiaries so long as (A) no Default or Event of Default shall have occurred
and be continuing or would result therefrom, (B) both immediately before and
after giving effect thereto the Loans and Letter of Credit Obligations do not
exceed the Borrowing Base Before Overadvance Amount. Notwithstanding anything
to the contrary contained in this Section 7.02(r)(ii) (x) payments of regularly
scheduled interest may be made pursuant to the terms of the Company Notes and
the Indenture and (y) the Company may use the Net Proceeds from the issuance of
Capital Stock consisting of common Equity or preferred equity with a dividend
not higher than the interest on the Company Notes and having other terms no more
restrictive for the Company and its Subsidiaries than the terms of the Indenture
to prepay, purchase, redeem, retire, defease or otherwise acquire Company Notes.
(s) Year 2000 Compatibility. Each of the Borrowers and the
-----------------------
Guarantors shall take all action necessary to assure that the Borrowers' and the
Guarantors' computer-based systems are to operate and effectively process data
including datafields requiring references to dates on and after January 1, 2000.
At the request of the Agent, the Borrowers and the Guarantors shall provide to
the Agent written assurances and other evidence acceptable to the Agent and the
Lenders of the Borrowers' and the Guarantors' compliance with this Section
7.02(s).
ARTICLE VIII
MANAGEMENT, COLLECTION AND STATUS OF
ACCOUNTS RECEIVABLE AND OTHER COLLATERAL
SECTION 8.01. Management of Collateral. (a) After the occurrence
------------------------
and during the continuance of an Event of Default and subject to the prior
rights of the Factor under the Factoring Agreements and the Assignment
Agreement, the Collateral Agent may for the benefit of the Lenders, send a
notice of assignment and/or notice of the Collateral Agent's security interest
to any and all Account Debtors or any third party holding or otherwise concerned
with any of the Collateral, and thereafter the Collateral Agent on behalf of the
Lenders shall have the sole right to collect the Accounts Receivable and/or take
possession of the Collateral and the books and records relating thereto. The
Company and the Borrowers shall not and shall not permit their Subsidiaries,
without prior written consent of the Collateral Agent, to grant any extension of
time of payment of any Account Receivable, compromise or settle any Account
Receivable for less than the full amount thereof, release, in whole or in part,
any Person or property liable for the payment thereof, or allow any credit or
discount whatsoever thereon, except (i) prior to the occurrence and during the
continuance of an Event of Default, in the ordinary course of business or (ii)
as permitted by the Factoring Agreements.
(b) (i) Subject to the prior rights of the Factor under the
Factoring Agreements and the Assignment Agreement, the Company and the Borrowers
hereby appoint the Collateral Agent or its designee on behalf of the Collateral
Agent as the Company's and the Borrowers' attorney-in-fact with power after the
occurrence and during the continuance of an Event of Default to endorse the
Company's or Borrower's name upon any notes, acceptances,
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checks, drafts, money orders or other evidences of payment or Collateral that
may come into its possession, to sign the Company's or a Borrower's name on any
invoice or bill of lading relating to any of the Accounts Receivable, drafts
against Account Debtors, assignments and verifications of Accounts Receivable
and notices to Account Debtors, to send verification of Accounts Receivable, to
notify the Postal Service authorities to change the address for delivery of mail
addressed to the Company and the Borrowers to such address as the Administrative
Agent may designate and to do all other acts and things necessary to carry out
this Agreement. All acts of said attorney or designee are hereby ratified and
approved, and said attorney or designate shall not be liable for any acts of
omission or commission (other than acts or omissions constituting gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction), nor for any error of judgment or mistake of fact or
law; this power being coupled with an interest is irrevocable until all of the
Loans and any other Obligations under the Loan Documents are paid in full and
all of the Commitments are terminated.
(ii) Subject to the prior rights of the Factor under the Factoring
Agreements and the Assignment Agreement, the Collateral Agent, without notice to
or consent of the Company, any Borrower or any Guarantor upon the occurrence and
during the continuance of an Event of Default (A) may sue upon or otherwise
collect, extend the time of payment of, or compromise or settle for cash, credit
or otherwise upon any terms, any of the Accounts Receivable or any securities,
instruments or insurance applicable thereto and/or release the Account Debtor
thereon; (B) is authorized and empowered to accept the return of the goods
represented by any of the Accounts Receivable, and (C) shall have the right to
receive, endorse, assign and/or deliver in its name or the name of the Company,
any Borrower or any Guarantor any and all checks, drafts, and other instruments
for the payment of money relating to the Accounts Receivable. The Company and
each Borrower and Guarantor hereby waive notice of presentment, protest and non-
payment of any instrument so endorsed, all in a commercially reasonable manner
and without discharging or in any way affecting liability hereunder.
(c) Nothing herein contained shall be construed to constitute the
Company, any Borrower or any Guarantor as agent of the Agents or the Lenders for
any purpose whatsoever, and the Agents and the Lenders shall not be responsible
or liable for any shortage, discrepancy, damage, loss or destruction of any part
of the Collateral wherever the same may be located and regardless of the cause
thereof (other than from acts or omissions of the Agents or the Lenders
constituting gross negligence or willful misconduct as determined by a final
judgment of a court of competent jurisdiction). The Agents and the Lenders
shall not, under any circumstances or in any event whatsoever, have any
liability for any error or omission or delay of any kind occurring in the
settlement, collection or payment of any of the Accounts Receivable or any
instrument received in payment thereof or for any damage resulting therefrom
(other than acts or omissions of the Agents or the Lenders constituting gross
negligence or willful misconduct as determined by a final judgment of a court of
competent jurisdiction). The Agents and the Lenders, by anything herein or in
any assignment or otherwise, do not assume any of the Company's, Borrowers' or
any Guarantor's obligations under any contract or agreement assigned to the
Agents and the Agents or the Lenders shall not be responsible in any way for the
performance by the Company or such Borrower of any of the terms and conditions
thereof.
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(d) If any of the Accounts Receivable includes a charge for any
tax payable to any Governmental Authority, subject to the prior rights of the
Factor under the Factoring Agreement and the Assignment Agreement, the
Collateral Agent is hereby authorized (but in no event obligated) in its
discretion to pay the amount thereof to the proper taxing authority for the
Company's, any Borrower's or any Guarantor's account and to charge the Company
or such Borrower or Guarantor therefor. The Company or such Borrower or
Guarantor shall notify the Collateral Agent if any Accounts Receivable include
any taxes due to any such authority and, in the absence of such notice and, the
Collateral Agent shall have the right to retain the full proceeds of such
Accounts Receivable and shall not be liable for any taxes that may be due from
the Company or such Borrower or Guarantor by reason of the sale and delivery
creating such Accounts Receivable.
SECTION 8.02. Accounts Receivable Documentation. Subject to the
---------------------------------
prior rights of the Factor under the Factoring Agreements and the Assignment
Agreement, the Company and each Borrower will at such intervals as the
Collateral Agent may reasonably require, execute and deliver confirmatory
written assignments of the Accounts Receivable to the Collateral Agent and
furnish such further schedules and/or information as the Collateral Agent may
reasonably require relating to the Accounts Receivable, including, without
limitation, sales invoices or the equivalent, credit memos issued, remittance
advises, reports and copies of deposit slips and copies of original shipping or
delivery receipts for all merchandise sold. In addition, the Company and each
Borrower shall notify the Collateral Agent of any material non-compliance in
respect of the representations, warranties and covenants contained in Section
8.03 below. The items to be provided under this Section 8.02 are to be in form
reasonably satisfactory to the Collateral Agent and are to be executed and
delivered to the Collateral Agent from time to time solely for its convenience
in maintaining records of the Collateral. The Company or any Borrower's failure
to give any of such items to the Collateral Agent shall not affect, terminate,
modify or otherwise limit the Collateral Agent's Lien in the Collateral.
Subject to the provisions of the Factoring Agreements, the Company and each
Borrower shall not re-date any invoice or sale or make sales on extended dating
beyond that customary in the Company's or such Borrower's industry, and shall
not re-bill any Accounts Receivable without promptly disclosing the same to the
Factor and the Collateral Agent and providing the Factor and the Collateral
Agent with copy of such re-billing, identifying the same as such. If the
Company or any Borrower becomes aware of anything materially detrimental to the
credit of any of the Company's or any of the Borrowers' customers' which is not
otherwise publicly known with respect to non-credit approved Accounts
Receivable, the Company or such Borrower will promptly advise the Collateral
Agent thereof.
SECTION 8.03. Status of Accounts Receivable and Other Collateral.
--------------------------------------------------
With respect to Collateral of the Borrowers and the Guarantors at the time the
Collateral becomes subject to the Collateral Agent's security interests, the
Borrowers and the Guarantors covenant, represent and warrant: (a) the Borrower
or such Guarantor shall be the sole owner of the Collateral owned by it, free
and clear of all Liens except the Lien of the Factor, the Lien in the favor of
the Collateral Agent for the benefit of the Lenders and Permitted Liens, fully
authorized to sell, transfer, pledge and/or grant a security interest in each
and every item of said Collateral; (b) to the knowledge of the Borrowers and the
Guarantors, at the time created, each Account
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Receivable shall be a good and valid account representing an undisputed bona
fide indebtedness incurred or an amount indisputably owed by the Account Debtor
therein named, for a fixed sum as set forth in the invoice relating thereto with
respect to an absolute sale and delivery upon the specified terms of goods sold
by a Borrower or Guarantor or work, labor and/or services theretofore rendered
by a Borrower or Guarantor; (c) to the best knowledge of the Borrowers and the
Guarantors and except as otherwise disclosed to the Factor and the Collateral
Agent, no Account Receivable is subject to any defense, offset, counterclaim,
discount or allowance except as may be stated in the invoice relating thereto or
discounts and allowances as may be customary in the Borrowers' or the
Guarantors' business, and, each of such Accounts Receivable will be paid when
due; (d) none of the transactions underlying or giving rise to any Accounts
Receivable shall violate any applicable material state or federal laws or
regulations; (e) except as disclosed to the Factor and the Collateral Agent, no
agreement under which any deduction or offset of any kind, other than normal
trade discounts and allowances, may be granted or shall have been made by the
Borrowers or the Guarantors at or before the time such Accounts Receivable is
created; (f) all documents and agreements relating to Accounts Receivable shall
be true and correct in all material respects and in all respects what they
purport to be; (g) to the best knowledge of the Borrowers and the Guarantors,
all signatures and endorsements that appear on all documents and agreements
relating to Accounts Receivable shall be genuine and all signatories and
endorsers shall have full capacity to contract; (h) the Borrowers and the
Guarantors shall maintain books and records pertaining to said Collateral in
such detail, form and scope as required by Section 7.01(l) hereof; (i) the
Borrowers and the Guarantors will promptly notify the Factor and the Collateral
Agent if any of their accounts arise out of contracts with the United States or
any department, agency, or instrumentality thereof and, subject to the prior
rights of the Factor under the Factoring Agreements and the Assignment
Agreement, will execute any instruments and take any steps required by the
Collateral Agent in order that all monies due or to become due under any such
contract shall be assigned to the Collateral Agent and notice thereof given to
the United States Government under the Federal Assignment of Claims Act; (j) the
Borrowers and the Guarantors will, immediately upon learning thereof, report to
the Collateral Agent any material loss or destruction of, or substantial damage
to, any of the Collateral, and any other material matters affecting the value,
enforceability or collectibility of any of the Collateral; (k) if any amount
payable under or in connection with any Account Receivable is evidenced by a
promissory note or other instrument, as such term is defined in the Uniform
Commercial Code, subject to the prior rights of the Factor under the Factoring
Agreements and the Assignment Agreement, such promissory note or instrument
shall be immediately pledged, endorsed, assigned and delivered to the Collateral
Agent as additional Collateral; (l) the Borrowers and the Guarantors shall not
redate any invoice or sale or make sales on extended dating beyond that which is
customary in the ordinary course of their business and in the industry; (m) the
Borrowers and the Guarantors shall conduct a physical count of their Inventory
not less than once each year and, upon the occurrence and during the continuance
of an Event of Default, at such other intervals as the Collateral Agent may
reasonably request and, if requested by the Collateral Agent, the Borrowers and
the Guarantors shall promptly supply the Collateral Agent with a copy of each
such count (in such form as is available) accompanied by a report of the value
(based on the lower of cost (on a FIFO basis) or market value) of such
Inventory; and (n) the Borrowers and the Guarantors are not and shall not be
entitled to pledge the Collateral Agent' or the Lenders' credit on any purchases
for or any purpose whatsoever.
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SECTION 8.04. Collateral Custodian. Upon the occurrence and during
--------------------
the continuance of an Event of Default, the Collateral Agent may at any time and
from time to time employ and maintain in the premises of the Company and the
Borrowers a custodian selected by the Collateral Agent who shall have full
authority to do all acts necessary to protect the Collateral Agent's interests
in accordance with applicable law and the provisions of the Loan Documents. The
Company and the Borrowers hereby agree to cooperate with any such custodian and
to do whatever the Collateral Agent may reasonably request to preserve the
Collateral. All reasonable costs and expenses incurred by the Collateral Agent,
by reason of the employment of the custodian, shall be charged to the Loan
Account.
ARTICLE IX
THE AGENTS
SECTION 9.01. Authorization and Action. Each Lender (and each
------------------------
subsequent holder of any Note by its acceptance thereof) hereby irrevocably
appoints and authorizes CIT, in its capacity as the Administrative Agent, and
NationsBanc, in its capacity as Collateral Agent, to perform the duties of each
such Agent as set forth in this Agreement including: (i) to receive on behalf of
each Lender any payment of principal of or interest on the Notes outstanding
hereunder and all other amounts accrued hereunder paid to the Administrative
Agent, and, subject to Section 2.05 of this Agreement and the other provisions
of this Agreement, to distribute promptly to each Lender its Pro Rata Share of
all payments so received, (ii) to distribute to each Lender copies of all
material notices and agreements received by the Agents and not required to be
delivered to each Lender pursuant to the terms of this Agreement, provided that
the Agents shall not have any liability to the Lenders for the Agents'
inadvertent failure to distribute any such notice or agreements to the Lenders,
and (iii) subject to Section 12.03 of this Agreement, to take such action as the
Agents deem appropriate on its behalf to administer the Loans, Letters of Credit
and the Loan Documents and to exercise such other powers delegated to the Agents
by the terms hereof or the Loan Documents (including, without limitation, the
power to give or to refuse to give notices, waivers, consents, approvals and
instructions and the power to make or to refuse to make determinations and
calculations), together with such powers as are reasonably incidental thereto to
carry out the purposes hereof and thereof. As to any matters not expressly
provided for by this Agreement and the other Loan Documents (including, without
limitation, enforcement or collection of the Notes), the Agents shall not be
required to exercise any discretion or take any action, but shall be required to
act or to refrain from acting (and shall be fully protected in so acting or
refraining from acting) upon the instructions of the Required Lenders, and such
instructions of the Required Lenders shall be binding upon all Lenders and all
holders of Notes; provided, however, that the L/C Issuer shall not be required
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to refuse to honor a drawing under any Letter of Credit and the Agents shall not
be required to take any action which, in the reasonable opinion of the Agents,
exposes the Agents to liability or which is contrary to this Agreement or any
Loan Document or applicable law.
SECTION 9.02. Borrower's Default. In the event that (i) any Borrower
------------------
fails to pay when due the principal of or interest on any Note or any
Reimbursement Obligation or any other amount payable hereunder, or (ii) the
Administrative Agent receives written notice of the
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occurrence of an Event of Default, the Administrative Agent shall promptly give
written notice thereof to the Lenders, and shall take such action with respect
to such Event of Default as it shall be directed to take by the Required
Lenders; provided, however, that, unless and until the Administrative Agent
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shall have received such directions and except as otherwise expressly provided
in this Agreement, the Administrative Agent may take such action or refrain from
taking such action hereunder or under the other Loan Documents with respect to
an Event of Default or Default, as it shall deem advisable in the best interest
of the Lenders.
SECTION 9.03. Agents' Reliance, Etc. The Agents or any of their
----------------------
directors, officers, agents or employees shall not be liable for any action
taken or omitted to be taken by them under or in connection with this Agreement
or the other Loan Documents, except for their own gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction. Without limiting the generality of the foregoing, the Agents (i)
may treat the payee of any Note as the holder thereof until the Administrative
Agent receive written notice of the assignment or transfer thereof, pursuant to
Section 12.08 hereof, signed by such payee and in form satisfactory to the
Administrative Agent; (ii) may consult with legal counsel (including, without
limitation, counsel to the Agents or counsel to the Borrowers), independent
public accountants, and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, certificates, warranties or representations made in or in connection
with this Agreement or the other Loan Documents; (iv) shall not have any duty to
ascertain or to inquire as to the performance or observance of any of the terms,
covenants or conditions of this Agreement or the other Loan Documents on the
part of any Person or to inspect the Collateral or other property (including,
without limitation, the books and records) of any Person; (v) shall not be
responsible to any Lender for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Loan Documents or any other instrument or document furnished pursuant hereto or
thereto; (vi) shall not be deemed to have made any representation or warranty
regarding the existence, value or collectibility of the Collateral, the
existence, priority or perfection of the Collateral Agent's Lien thereon, or the
Borrowing Base or any certificate prepared by a Borrower in connection
therewith, nor shall the Agents be responsible or liable to the Lenders for any
failure to monitor or maintain the Borrowing Base or any portion of the
Collateral; and (vii) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telegram, telecopy,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 9.04. CIT, NationsBanc and Fleet. With respect to the Loans
--------------------------
made by it and the Notes issued to it and the Letters of Credit, each of CIT,
NationsBanc and Fleet and each of their Affiliates shall have the same rights
and powers under this Agreement as any other Lender and may exercise the same as
though it were not an Agent; and the term "Lender" or "any Lenders" shall,
unless otherwise expressly indicated, include CIT, NationsBanc and Fleet each in
its individual capacity. CIT, NationsBanc and Fleet and each of their
respective Affiliates may accept deposits from, lend money to, act as trustee or
paying agent under indentures of, and generally engage in any kind of business
with, any Borrower or any
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Guarantor, any of their Affiliates, or any Person who may do business with or
own securities of any Borrower or Guarantor, or any of their Affiliates, all as
if CIT, NationsBanc and Fleet were not Agents and without any duty to account
therefor to any Lenders. The Lenders acknowledge and agree that NationsBanc, as
Factor under the Factoring Agreements, CIT as a participant of Factor in the
Factoring Agreements, and the L/C Issuer, which may be an Affiliate of the
Collateral Agent, may take actions which are not in the interests of, or may
have an adverse effect on, the Lenders, or may omit to take actions which would
be in the interests of, or would have a favorable effect on, the Lenders, and
the Lenders will not assert any claim against the Collateral Agent based on
actions or omissions by NationsBanc, as Factor under the Factoring Agreements or
the Administrative Agent, as a participant of Factor, or the L/C Issuer and will
not assert any such actions or omissions as a defense or offset to the Lenders'
obligations hereunder.
SECTION 9.05. Lender Credit Decision. Each Lender acknowledges that
----------------------
it has, independently and without reliance upon the Agents or any other Lender,
made its own credit analysis and decision to enter into this Agreement. Each
Lender also acknowledges that it will, independently and without reliance upon
the Agents 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 and the other Loan Documents.
SECTION 9.06. Indemnification. Each Lender agrees to indemnify and
---------------
hold harmless each Agent (to the extent not reimbursed by any Borrower or any
Guarantor), ratably according to the Pro Rata Shares of each Lender, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against any
Agent in any way relating to or arising out of this Agreement or the other Loan
Documents or any action taken or omitted by any Agent under this Agreement or
the other Loan Documents; provided, however, that no Lender shall be liable to
-------- -------
any Agent for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements for which
there has been a final judicial determination that such resulted from such
Agent's gross negligence or willful misconduct. Without limiting the foregoing,
each Lender agrees to reimburse the Agents promptly upon demand for its ratable
share of any out-of-pocket expenses (including reasonable counsel fees,
disbursements and other charges) incurred by the Agents in connection with the
preparation, execution, delivery, administration, modification, amendment or
enforcement (whether through negotiation, legal proceedings or otherwise) of, or
legal advice in respect of rights or responsibilities under, this Agreement or
the other Loan Documents, to the extent that the Agents are not reimbursed in
full for such expenses by the Borrowers. The obligations of each Lender under
this Section 9.06 shall survive the termination of this Agreement and the other
Loan Documents and the payment of all other obligations of the Agents and the
Lenders under this Agreement and the other Loan Documents.
SECTION 9.07. Successor Agents. Any Agent may resign at any time by
----------------
giving written notice thereof to the Lenders and the Company. Upon any such
resignation, the Required Lenders shall have the right to appoint a successor
Agent, reasonably acceptable to the
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Company, with such rights and obligations hereunder as those previously held by
the retiring Agent, provided, the successor Agent may be appointed by the
--------
Required Lenders without any consultation with or consent of the Company or any
other Loan Party if an Event of Default or Default has occurred and is
continuing. If no successor Agent shall have been so appointed by the Required
Lenders, been accepted by the Company, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving of notice of resignation, then
the retiring Agent may, on behalf of the Lenders, appoint a successor Agent,
which shall be a Lender or a commercial bank or other financial institution
organized under the laws of the United States of America or any State thereof
and having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents. After any retiring Agent's resignation hereunder
as an Agent, the provisions of this Article IX shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was an Agent under this
Agreement and the other Loan Documents.
SECTION 9.08. Collateral Matters.
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(a) The Administrative Agent may from time to time, make such
disbursements and advances ("Agent Advances") which the Administrative Agent, in
--------------
its sole discretion, deems necessary or desirable to preserve or protect the
Collateral or any portion thereof, to enhance the likelihood or maximize the
amount of repayment by any Borrower, any Guarantor or other Person of the Loans,
Reimbursement Obligations or Letters of Credit and other Obligations or to pay
any other amount chargeable to any Borrower or Guarantor pursuant to the terms
of this Agreement, including, without limitation, costs, fees and expenses as
described in Section 12.05. The Agent Advances shall be repayable on demand and
be secured by the Collateral. The Agent Advances shall not constitute Loans but
shall otherwise constitute Obligations hereunder. Without limitation to its
obligations pursuant to Section 9.06, each Lender agrees that it shall make
available to the Administrative Agent, upon the Administrative Agent's demand,
in Dollars in immediately available funds, the amount equal to such Lender's Pro
Rata Share of each such Agent Advance. If such funds are not made available to
the Administrative Agent by such Lender the Administrative Agent shall be
entitled to recover such funds, on demand from such Lender together with
interest thereon, for each day from the date such payment was due until the date
such amount is paid to the Administrative Agent, at the Federal Funds Rate for
three Business Days and thereafter at the Base Rate.
(b) The Agents shall have no obligation whatsoever to any Lenders
to assure that the Collateral exists or is owned by any Borrower or any
Guarantor or is cared for, protected or insured or has been encumbered or that
the Liens granted to the Collateral Agent herein or pursuant hereto have been
properly or sufficiently or lawfully created, perfected, protected or enforced
or are entitled to any particular priority, or to exercise at all or in any
particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to the Agents in this Section 9.08 or in any of the Loan Documents, it
being understood and agreed that in respect of the Collateral, or
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any act, omission or event related thereto, the Collateral Agent may act in any
manner it may deem appropriate, in its sole discretion, given the Collateral
Agent's own interest in the Collateral as one of the Lenders and that the
Collateral Agent shall have no duty or liability whatsoever to any other Lender
other than for acts or omissions constituting gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction.
(c) The Lenders hereby irrevocably authorize the Collateral
Agent, at its option and in its discretion, to release any Lien granted to or
held by the Collateral Agent upon any Collateral upon termination of the
Revolving Credit Commitments and payment and satisfaction of all Loans and
Letter of Credit Obligations, (whether or not due) and all other Obligations
which have matured and which the Collateral Agent has been notified in writing
are then due and payable; or constituting property being sold or disposed of if
a Loan Party certifies to the Collateral Agent that the sale or disposition is
made in compliance with Section 7.02(d)(ii) hereof (and the Collateral Agent may
rely conclusively on any such certificate, without further inquiry); or
constituting property in which the Loan Parties owned no interest at the time
the Lien was granted or at any time thereafter; or (except as otherwise provided
in Section 12.03 of this Agreement) if approved, authorized or ratified in
writing by the Required Lenders. Without in any manner limiting the Collateral
Agent's authority to act without any specific or further authorization or
consent by the Required Lenders, upon request by the Collateral Agent at any
time, the Lenders shall confirm in writing the Collateral Agent's authority to
release particular types or items of Collateral pursuant to this Section
9.08(c).
ARTICLE X
EVENTS OF DEFAULT
SECTION 10.01. Events of Default. If any of the following Events of
-----------------
Default shall occur and be continuing:
(a) Any Loan Party shall fail to pay any principal of or interest
on any Loan, any Agent Advance, any Reimbursement Obligation, or any fee or
other amount when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise);
(b) Any representation or warranty made by any Loan Party or any
officer of such Loan Party under or in connection with any Loan Document shall
have been incorrect in any material respect when made;
(c) Any Loan Party shall fail to perform or observe any covenant
contained in (i) paragraphs (b), (c) (d), (f), (h), (k), (n), (o) or (p) of
Section 7.01, Section 7.02 or Article VIII of this Agreement, (ii) paragraphs
(b), (d), (e), (f)(i), (g), (h) or (j) of Section 5 of the Security Agreements,
or (iii) Section 4(a) or paragraphs (e), (f), (g) or (h) of Section 6 of the
Pledge Agreements;
(d) Any Loan Party shall default in the performance or observance
of (i) the covenants contained in Section 7.01(a) of this Agreement (other than
subparagraphs (v),
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(ix), (xii) and (xiii) thereof) and such default shall continue unremedied for a
period of 10 days, (ii) the covenants contained in subparagraphs (v), (ix),
(xii) and (xiii) of Section 7.01(a) of this Agreement and such default shall
continue unremedied for a period of 3 days, or (iii) any other covenant
contained in Section 7.01 of this Agreement (to the extent not otherwise
provided for in paragraphs (a), (b) or (c) of this Section 10.01) and such
default shall continue unremedied for a period of 20 days;
(e) Any Loan Party shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document to be performed or
observed by such Loan Party (to the extent not otherwise provided for in
paragraphs (a), (b), (c) or (d) of this Section 10.01) and such failure, if
capable of being remedied, shall remain unremedied for 20 days;
(f) Any Loan Party shall fail to pay any principal or interest on
any of its Indebtedness (excluding Indebtedness evidenced by the Notes) in
excess of $200,000, or any interest or premium thereon, when due (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness, or any other
default under any agreement or instrument relating to any such Indebtedness, or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of such
default or event is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness; or any such Indebtedness in excess of such amount
shall be declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated maturity
thereof;
(g) Any Loan Party (i) shall institute any proceeding or
voluntary case seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for such Loan Party or for any substantial
part of its property, (ii) shall be generally not paying its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
(iii) shall make a general assignment for the benefit of creditors, or (iv)
shall take any action to authorize or effect any of the actions set forth above
in this subsection (g);
(h) Any proceeding shall be instituted against any Loan Party
seeking to adjudicate it a bankrupt or insolvent, or seeking dissolution,
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for such
Loan Party or for any substantial part of its property, and either such
proceeding shall remain undismissed or unstayed for a period of 45 days or any
of the actions sought in such proceeding (including, without limitation, the
entry of an order for relief against it or the appointment of a receiver,
trustee, custodian or other similar official for it or for any substantial part
of its property) shall occur;
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(i) Any material provision of any Loan Document shall at any time
for any reason be declared by a court of competent jurisdiction to be null and
void, or the validity or enforceability thereof shall be contested by any Loan
Party, or a proceeding shall be commenced by any Loan Party or any Governmental
Authority or other regulatory body having jurisdiction over such Loan Party,
seeking to establish the invalidity or unenforceability thereof, or any Loan
Party shall deny in writing that such Loan Party has any liability or obligation
purported to be created under any Loan Document;
(j) Any Security Agreement, Pledge Agreement, any mortgage or any
other security document, after delivery thereof pursuant hereto, shall for any
reason not as a result of any act or omission of the Collateral Agent fail or
cease to create a valid and perfected and, except to the extent permitted by the
terms hereof or thereof, first priority Lien on or security interest in any
Collateral purported to be covered thereby;
(k) One or more judgments or orders (other than a judgment or
award described in subsections (g) or (h) of this Section 10.01) for the payment
of money exceeding any applicable insurance or bond coverage by more than
$200,000 in the aggregate for the Loan Parties shall be rendered against any
Loan Party and either (i) enforcement proceedings shall have been commenced by
any creditor upon any such judgment or order, or (ii) there shall be any period
of 30 consecutive days during which a stay of enforcement of any such judgment
or order, by reason of a pending appeal or otherwise, shall not be in effect;
(l) Any Loan Party or any of its ERISA Affiliates shall have made
a complete or partial withdrawal from a Multiemployer Plan, and, as a result of
such complete or partial withdrawal, such Loan Party or such ERISA Affiliate
incurs a withdrawal liability in an annual amount exceeding $200,000; or a
Multiemployer Plan enters reorganization status under Section 4241 of ERISA,
and, as a result thereof, such Loan Party's or such ERISA Affiliate's annual
contribution requirement with respect to such Multiemployer Plan increases in an
annual amount exceeding $200,000;
(m) Any Termination Event with respect to any Employee Plan shall
have occurred, and, 30 days after notice thereof shall have been given to any
Loan Party by the Administrative Agent, (i) such Termination Event (if
correctable) shall not have been corrected, and (ii) the then current value of
such Employee Plan's vested benefits exceeds the then current value of assets
allocable to such benefits in such Employee Plan by more than $200,000 (or, in
the case of a Termination Event involving liability under Section 409, 502(i),
502(l), 515, 4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Section 4971
or 4975 of the Internal Revenue Code, the liability is in excess of such
amount);
(n) A breach, default, event of default shall occur under any
Factoring Agreement, if such breach, default or event of default has resulted in
the Factor terminating such Factoring Agreement;
(o) A Change of Control shall have occurred;
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(p) A breach, default or event of default shall occur under the
Company Notes or the Indenture, if the effect of such breach, default or event
of default is to accelerate, or permit the acceleration of, the maturity of the
Company Notes;
then, and in any such event, the Administrative Agent may, and upon the
direction of the Required Lenders shall, by notice to the Company, (i) declare
the Total Commitment to be reduced to zero, whereupon the Total Commitment shall
forthwith be reduced to zero, (ii) declare all Loans and all Reimbursement
Obligations, all interest thereon and all other amounts payable under this
Agreement to be forthwith due and payable, whereupon the Loans, all
Reimbursement Obligations, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by each
Loan Party; provided, however, that upon the occurrence of any Event of Default
-------- -------
described in subsections (g) or (h) of this Section 10.01, the Loans, all
Reimbursement Obligations, all such interest and all such amounts shall become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are expressly waived by each Loan
Party, and (iii) exercise any and all of its other rights under applicable law,
hereunder and under the other Loan Documents.
SECTION 10.02. Deposit for Letters of Credit. Upon demand by the
-----------------------------
Administrative Agent after the occurrence and during the continuation of any
Event of Default, the Borrowers shall deposit with the Collateral Agent with
respect to each Letter of Credit then outstanding cash or equivalents,
acceptable to the Collateral Agent, and readily convertible into cash in an
amount equal to the greatest amount for which such Letter of Credit may be
drawn. Such deposits shall be held by the Collateral Agent in an interest
bearing account maintained by the Collateral Agent as security for, and to
provide for the payment of, the Letter of Credit Obligations.
ARTICLE XI
GUARANTY
SECTION 11.01. Guaranty. The Company hereby (i) irrevocably,
--------
absolutely and unconditionally guarantees the prompt payment, as and when due
and payable (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise), of all the Obligations, including, without limitation, all
amounts now or hereafter owing in respect of the Loan Documents, whether for
principal, interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to a Borrower whether or
not a claim for post-filing interest is allowed in such proceeding), fees,
expenses, indemnifications or otherwise, and (ii) agrees to pay any and all
expenses (including reasonable counsel fees and expenses) incurred by the
Agents, the Lenders, the L/C Issuer, NationsBanc or CIT in enforcing its rights
under this Article XI.
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SECTION 11.02. Obligations Unconditional.
-------------------------
(i) The Company hereby guarantees that the Obligations will
be paid strictly in accordance with the terms of the Loan Documents, regardless
of any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Agents, the Lenders, the L/C
Issuer, NationsBanc or CIT with respect thereto. The Company agrees that its
guarantee constitutes a guaranty of payment when due and not of collection, and
waives any right to require that any resort be had by the Agents, the Lenders,
the L/C Issuer, NationsBanc or CIT to any Collateral. The obligations of the
Company under this Article XI are independent of the obligations of the
Borrowers under this Agreement and the other Loan Documents and a separate
action or actions may be brought and prosecuted against the Company to enforce
this Article XI irrespective of whether any action is brought against the
Borrowers or whether the Borrowers are joined in any such action. The liability
of the Company hereunder shall be absolute and unconditional, irrespective of:
(i) any lack of validity or enforceability of any Loan Document or any agreement
or instrument relating thereto; (ii) any extension or change in the time, manner
or place of payment of, or in any other term in respect of, all or any of the
Obligations (including, without limitation, any extension for longer than the
original period), or any other amendment or waiver of or consent to any
departure from any provision of any Loan Document (including the creation or
existence of any Obligations in excess of the amounts permitted by any lending
formulas contained in this Agreement; (iii) any exchange or release of, or non-
perfection of any Lien on, any Collateral, or any release or amendment or waiver
of or consent to any departure from any other guaranty, for all or any of the
Obligations; (iv) the existence of any claim, set off, defense or other right
that the Company may have against any Person, including the Agents or the
Lenders; (v) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, any Borrower or any other Guarantor in respect
of the Obligations of the Company in respect hereof.
(ii) This Guaranty (i) is a continuing guaranty and shall
remain in full force and effect until such date on which all of the Obligations
and all other expenses to be paid by the Company pursuant hereto shall have been
satisfied in full after the Total Commitment shall have been terminated, (ii)
shall continue to be effective or shall be reinstated, as the case may be, if at
any time any payment of any of the Obligations is rescinded or must otherwise be
returned by the Agents, the Lenders, the L/C Issuer or NationsBanc upon the
insolvency, bankruptcy or reorganization of any Borrower or any Guarantor or
otherwise, all as though such payment had not been made, and (iii) shall be
binding upon the Company, its successors and assigns.
SECTION 11.03. Waivers. The Company hereby waives, to the extent
-------
permitted by applicable law, (i) promptness and diligence, (ii) notice of
acceptance and notice of the incurrence of any Obligation, (iii) notice of any
action taken by the Agents, the Lenders, the L/C Issuer, NationsBanc or any
Borrower or any other agreement or instrument relating thereto, (iv) all other
notices, demands and protests, and all other formalities of every kind in
connection with the enforcement of the Obligations or of the obligations of the
Company hereunder, the omission of or delay in which, but for the provisions of
this Section 11.03, might constitute grounds for relieving the Company of its
obligations hereunder, (v) any right to compel or direct
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the Agents or the Lenders to seek payment or recovery of any amounts owed under
this Article IX from any one particular fund or source, (vi) any requirement
that the Agents, the Lenders, the L/C Issuer or NationsBanc protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right
or take any action against any Person or any Collateral, and (vii) any other
defenses available to the Borrowers or the Company. All such waivers by the
Company shall be effective only to the extent permitted by applicable law.
SECTION 11.04. Subrogation. Until such time as the Obligations have
-----------
been satisfied in full and all Commitments have been terminated, the Company
hereby irrevocably agrees that it will not exercise any and all rights which it
has or may have at any time or from time to time (whether arising directly or
indirectly by operation of law or contract) to assert any claim against any
Borrower or any other Guarantor on account of any payments made under this
Agreement, including, without limitation, all existing and future rights of
subrogation, reimbursement, exoneration, contribution and/or indemnity. If any
amount shall be paid to the Company on account of such rights at any time when
all of such Obligations and all other Obligations shall not have been paid in
full, such amount shall be held in trust for the benefit of the Agents or the
Lenders, shall be segregated from the other funds of the Company and shall
forthwith be paid over to the Agents to be applied in whole or in part by the
Agents against the Obligations, whether matured or unmatured, in accordance with
the terms of this Agreement.
SECTION 11.05. No Waiver; Remedies. No failure on the part of the
-------------------
Agents, the Lenders, the L/C Issuer or NationsBanc to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedy provided by law.
SECTION 11.06. Stay of Acceleration. If acceleration of the time for
--------------------
payment of any amount payable by any Borrower in respect of the Obligations is
stayed upon the insolvency, bankruptcy or reorganization of such Borrower, all
such amounts otherwise subject to acceleration under the terms of this Agreement
shall nonetheless be payable by the Company hereunder forthwith on demand by the
Agents, Lenders, the L/C Issuer or NationsBanc.
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. Termination. (a) Except as otherwise permitted
-----------
herein, the Borrowers may terminate the Total Commitment and this Agreement only
by giving the Administrative Agent not less than sixty (60) days prior written
notice of termination, provided that if any Loan Party intends to conduct a
public sale or private sale pursuant to Rule 144A of the Securities Act of 1933
of securities as described in clause (i) of Section 2.08(a) hereof and gives the
Agents prompt notice after such Loan Party determines to conduct such sale, such
sixty (60) day notice requirement shall be reduced to fifteen (15) days.
Notwithstanding the foregoing, the Administrative Agent may terminate the Total
Commitment and this Agreement immediately by notice to the Company upon the
occurrence and during the continuance of an Event of
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Default, provided, however, that if the Event of Default is an event listed in
Sections 10.01(g) or (h) of this Agreement, the Agents and the Lenders may
regard the Total Commitment and the Agreement as terminated and notice to that
effect is not required. The Total Commitment and this Agreement, unless
terminated as herein provided on a Termination Anniversary Date, shall
automatically continue to the next Termination Anniversary Date. All Obligations
shall become due and payable as of the date of any termination under this
Section 12.01 and, pending a final accounting, the Administrative Agent may
withhold any balances in the Loan Account (unless supplied with an indemnity
satisfactory to the Agents) to cover all of the Obligations, whether absolute or
contingent. All of the Collateral Agent's and the Lenders' rights and Liens and
security interests shall continue after any termination until all Obligations
for the payment of money have been paid in cash and satisfied in full and all
Letters of Credit have been canceled and returned to the L/C Issuer or cash
collateralized to the reasonable satisfaction of the Agents. After such payment
and satisfaction, the Collateral Agent and the Lenders will, upon the reasonable
request of the Borrowers, execute all documents necessary to release, without
recourse, representation and warranty and at the expense of the Borrowers, its
Liens granted pursuant to the terms of this Agreement and the other Loan
Documents.
(b) Any Lender may elect not to renew its Commitment by giving
the Agents and the Borrowers written notice of its intention to not renew its
Commitment not less than 60 days prior to a Termination Anniversary Date. If
such Lender does not assign its rights, interests and obligations under this
Agreement pursuant to Section 12.08 hereof, then the Commitment of such Lender
shall be terminated as of such Termination Anniversary Date. The Borrowers
hereby, jointly and severally, agree to pay to the Administrative Agent on such
Termination Anniversary Date, for the account of such non-renewing Lender, the
principal amount of, and all accrued interest on, such Lender's Pro Rata Share
of all funded Loans and Reimbursement Obligations, together with any amounts
payable to such Lender pursuant to Section 12.16 and any fees or other amounts
owing to such Lender under this Agreement and such Lender's Note. If an Agent
makes any Loan or Agent Advance or assists a Borrower in opening or establishing
any Letter of Credit, during the period between a Lender giving notice of its
intention to not renew its Commitment and such Termination Anniversary Date, the
obligations of such non-renewing Lender pursuant to Sections 2.05, 3.01, 3.02,
4.02 and 9.08 of this Agreement shall be irrevocable, absolute and unconditional
with respect to such Loan, Agent Advance or Letter of Credit. Notwithstanding
such termination and repayment, the non-renewing Lender shall remain obligated
to the Administrative Agent and NationsBanc or CIT, as the case may be, under
Sections 3.02 and 3.03(b) for its Pro Rata Share (calculated immediately prior
to the Termination Anniversary Date on which such termination became effective)
of the aggregate maximum amount available for drawing under all outstanding
Letters of Credit on such Termination Anniversary Date (the "Retained
Obligations") until all Retained Obligations have been paid in full and the
Letters of Credit giving rise to such Retained Obligations have been canceled
and returned to the L/C Issuer. After the effective date of any such termination
and repayment pursuant to this Section 12.01(b), for purposes of Sections 3.02
and 3.03(b) of this Agreement such non-renewing Lender's Pro Rata Share shall be
a fraction (expressed as a percentage) the numerator of which shall be the
Retained Obligations and the denominator of which shall be the aggregate amount
of all unpaid Loans, Agent Advances and Letter of Credit Obligations.
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SECTION 12.02. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing and shall be mailed, sent by
overnight courier, telecopied, or delivered, if to any Lender, at its address
specified under its signature on the signature pages hereof; if to any Borrower
or the Company, at the following address:
Norton McNaughton, Inc.
463 Seventh Avenue
New York, New York 10018
Attention: Peter Boneparth, President
Telephone: (212) 947-2960
Telecopier: (212) 563-2766
with a copy to:
Haythe & Curley
237 Park Avenue
New York, New York 10017
Attention: Bradley P. Cost, Esq.
Telephone: (212) 880-6000
Telecopier: (212) 682-0200
if to the Administrative Agent, to it at the following address:
The CIT Group/Commercial Services, Inc.
1211 Avenue of the Americas
New York, New York 10036
Attention: Charles Carbone, Vice President
Telephone: (212) 382-9023
Telecopier: (212) 382-6814
if to the Collateral Agent, to it at the following address:
NationsBanc Commercial Corporation
1372 Broadway
New York, New York 10018
Attention: Carl Banilower, Senior Vice President
Telephone: (212) 768-5616
Telecopier: (212) 790-4636
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if to the Documentation Agent, to it at the following address:
Fleet Bank, NA
1185 Avenue of the Americas
New York, New York 10036
Attention: Stephen Leavenworth
Telephone: (212) 819-5437
Telecopier: (212) 819-4105
in each case with a copy to:
Schulte Roth & Zabel LLP
900 Third Avenue
New York, New York 10022
Attention: Frederic L. Ragucci, Esq.
Telephone: (212) 756-2000
Telecopier: (212) 593-5955
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party complying as to delivery with the terms
of this Section 12.02. All such notices and other communications shall be
effective (i) if mailed (by certified mail, postage prepaid and return receipt
requested), upon receipt or three Business Days after mailing whichever occurs
first, (ii) if telecopied, when transmitted and a confirmation is received,
provided the same is on a Business Day and, if not, on the next Business Day,
(iii) if sent by overnight courier, upon receipt or two Business Days after
delivered to such overnight courier, whichever occurs first, or (iv) if
delivered, upon delivery, provided the same is on a Business Day and, if not, on
the next Business Day, except that notices to the Agents or the L/C Issuer
pursuant to Articles II and III hereof shall not be effective until received by
the Agents or the L/C Issuer, as the case may be.
SECTION 12.03. Amendments, Etc. No amendment or waiver of any
----------------
provision of this Agreement or the other Loan Documents, and no consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by such Loan Party and the Required
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given; provided, however, that
-------- -------
no amendment, waiver or consent shall (i) increase the Commitment of any Lender,
reduce the principal of, or interest on, the Loans or the Reimbursement
Obligations payable to any Lender, reduce the amount of any fee payable for the
account of any Lender, or postpone or extend any date fixed for any payment of
principal of, or interest or fees on, the Loans or Letter of Credit Obligations
payable to any Lender, in each case without the written consent of any Lender
affected thereby, (ii) increase the Total Commitment without the written consent
of each Lender, (iii) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or amend the definition of
"Required Lenders", release all or a substantial portion of the Collateral
(except as otherwise provided in this Agreement and the
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other Loan Documents) or any of the Guarantors (other than inactive Guarantors),
amend, modify or waive Section 12.01 or this Section 12.03 of this Agreement, or
amend the definition of "Eligible Inventory", "Eligible Accounts Receivable"
"Net Amount of Eligible Accounts Receivable", "Overadvance Amount", "Borrowing
Base", "Eligible Amount of Prior Season Inventory" or "Borrowing Base Before
Overadvance Amount" if the effect of such amendment is to increase the aggregate
Availability of the Borrowers (after adding the Overadvance Amount) on a
combined basis, in each case without the written consent of each Lender.
Notwithstanding the foregoing, no amendment, waiver or consent shall, unless in
writing and signed by the Agents, affect the rights or duties of the Agents or
NationsBanc with respect to the Letter of Credit Guaranty (but not in its
capacity as a Lender) under this Agreement or the other Loan Documents.
SECTION 12.04. No Waiver; Remedies, Etc. No failure on the part of
-------------------------
any Lender or any Agent to exercise, and no delay in exercising, any right
hereunder or under any other Loan Document shall operate as a waiver thereof;
nor shall any single or partial exercise of any right under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right. The rights and remedies of the Lenders and the Agents provided herein
and in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the Lenders
and the Agents under any Loan Document against any party thereto are not
conditional or contingent on any attempt by the Lenders and the Agents to
exercise any of their rights under any other Loan Document against such party or
against any other Person.
SECTION 12.05. Expenses; Taxes; Attorneys' Fees. The Borrowers agree
--------------------------------
to jointly and severally pay or cause to be paid, on demand, and to save the
Agents (and, in the case of clauses (a) and (d) through (m) below, the Lenders)
harmless against liability for the payment of, all reasonable out-of-pocket
expenses, regardless of whether the transactions contemplated hereby are
consummated, including but not limited to reasonable fees and expenses of
counsel for the Agents (and, in the case of clauses (a) and (d) through (m)
below, the Lenders), accounting, due diligence, filing fees, periodic field
audits, investigation, monitoring of assets, syndication, miscellaneous
disbursements, examination, travel, lodging and meals, incurred by the Agents
(and, in the case of clauses (a) and (d) through (m) below, the Lenders) from
time to time arising from or relating to: (a) the negotiation, preparation,
execution, delivery, performance and administration of this Agreement and the
other Loan Documents, provided that the Borrowers shall not be obligated to
reimburse the Lenders under this clause (a) for out of pocket expenses in excess
of $20,000 for all Lenders (excluding the expenses of the Agents), (b) any
amendments, waivers or consents to this Agreement or the other Loan Documents
requested or signed by any Loan Party whether or not such documents become
effective or are given, (c) the preservation and protection of any of the
Agents' and the Lenders' rights under this Agreement or the other Loan
Documents, (d) the defense of any claim or action asserted or brought against
the Agents or the Lenders by any Person that arises from or relates to this
Agreement, any other Loan Document, the Agents' or the Lenders' claims against
the Borrowers or the other Loan Parties, or any and all matters in connection
therewith, (e) the commencement or defense of, or intervention in, any court
proceeding arising from or related to this Agreement or any other Loan Document,
(f) the filing of any petition, complaint, answer, motion or other
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pleading by the Agents or the Lenders, or the taking of any action in respect of
the Collateral or other security, in connection with this Agreement or any other
Loan Document, (g) the protection, collection, lease, sale, taking possession of
or liquidation of, any Collateral or other security in connection with this
Agreement or any other Loan Document, (h) any attempt to enforce any Lien on any
Collateral or other security in connection with this Agreement or any other Loan
Document, (i) any attempt to collect from the Borrowers or any other Loan Party
amounts owed hereunder or under any other Loan Document, (j) the receipt of any
advice with respect to any of the foregoing, (k) all liabilities and costs
arising from or in connection with the past, present or future operations of the
Loan Parties involving any damage to real or personal property or natural
resources or harm or injury alleged to have resulted from any Release of
Hazardous Materials on, upon or into such property, (l) any costs or liabilities
incurred in connection with the investigation, removal, cleanup and/or
remediation of any Hazardous Materials present or arising out of the operations
of any facility of the Loan Parties, or (m) any liabilities or costs incurred in
connection with any Lien arising under any Environmental Law. Without limitation
of the foregoing or any other provision of any Loan Document: (x) the Borrowers
jointly and severally agree to pay all stamp, document, transfer, recording or
filing taxes or fees (including, without limitation, mortgage recording taxes)
and similar impositions now or hereafter determined by the Agents or any of the
Lenders to be payable in connection with this Agreement or any other Loan
Document, and the Borrowers jointly and severally agree to save the Agents and
the Lenders harmless from and against any and all present or future claims,
liabilities or losses with respect to or resulting from any omission to pay or
delay in paying any such taxes, fees or impositions, and (y) if the Borrowers or
any Loan Party fail to perform any covenant or agreement contained herein or in
any other Loan Document, any Agent may itself perform or cause performance of
such covenant or agreement, and the expenses of the Agents incurred in
connection therewith shall be reimbursed on demand by the Borrowers.
SECTION 12.06. Right of Set-off. Upon the occurrence and during the
----------------
continuance of any Event of Default, each Lender may, and is hereby authorized
to, at any time and from time to time, without notice to any Borrower or
Guarantor (any such notice being expressly waived by the Borrowers and
Guarantors) and to the fullest extent permitted by law, set off and apply any
and all deposits (general or special, time or demand, provisional or final) at
any time held and other indebtedness at any time owing by such Lender to or for
the credit or the account of any Borrower or Guarantor against any and all joint
and several obligations of the Borrowers now or hereafter existing under any
Loan Document, irrespective of whether or not such Lender shall have made any
demand hereunder or thereunder and although such obligations may be contingent
or unmatured. Such set-off shall be subject to the provisions of Section 4.03.
Such Lender agrees to notify the Borrowers promptly after any such set-off and
application made by such Lender provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
the Agents under this Section 12.06 are in addition to the other rights and
remedies (including, without limitation, other rights of set-off) which such
Lender may have.
SECTION 12.07. Severability. Any provision of this Agreement, or of
------------
any other Loan Document to which any Borrower or any Guarantor is a party, which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such
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prohibition or unenforceability without invalidating the remaining portions
hereof or thereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 12.08. Assignments and Participations.
------------------------------
(a) Each Lender may, with the written consent of the Agents,
assign to one or more other lenders or other entities all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the Loans made by it, the Notes held by it and
its Pro Rata Share of Letter of Credit Obligations); provided, however, that (i)
-------- -------
such assignment is in an amount which is at least $10,000,000 or a multiple of
$1,000,000 in excess thereof (or the remainder of such Lender's Commitment),
(ii) each such assignment shall be of a constant, and not a varying, percentage
of all of the assigning Lender's rights and obligations under this Agreement,
(iii) no such assignment shall be made, other than by NationsBanc, CIT or Fleet,
prior to the Syndication Date, and (iv) the parties to each such assignment
shall execute and deliver to the Administrative Agent, for its acceptance, an
Assignment and Acceptance, together with any Note subject to such assignment and
such parties (other than the Borrowers or the Company) shall deliver to the
Administrative Agent a processing and recordation fee of $5,000. Upon such
execution, delivery and acceptance, from and after the effective date specified
in each Assignment and Acceptance, which effective date shall be at least three
Business Days after the delivery thereof to the Administrative Agent (or such
shorter period as shall be agreed to by the Administrative Agent and the parties
to such assignment), (A) the assignee thereunder shall become a "Lender"
hereunder and, in addition to the rights and obligations hereunder held by it
immediately prior to such effective date, have the rights and obligations
hereunder that have been assigned to it pursuant to such Assignment and
Acceptance and (B) the assigning Lender thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto). Any such assignment shall not adversely affect the Borrowers' rights
under this Agreement except that the assigning Lender shall not be responsible
for the obligations assigned.
(b) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto that: (i) other than as provided in
such Assignment and Acceptance, such assigning Lender 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 Agreement of any other instrument or document furnished pursuant
hereto, and (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the value, perfection or priority of
the Collateral or the financial condition of any Borrower or any Guarantor or
any of their Subsidiaries or the performance or observance by such Borrower or
such Guarantor or any of their Subsidiaries of any of their obligations under
this Agreement, any other Loan Document or any other instrument or document
furnished pursuant hereto.
102
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(c) The Administrative Agent shall maintain at its address
referred to in Section 12.02 hereof a copy of each Assignment and Acceptance
delivered to and accepted by it. Such copies shall be available for inspection
by any Borrower or any Guarantor or any Lender at any reasonable time and from
time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an assignee Lender, together with the Notes subject to
such assignment and the processing and recordation fee, if the Administrative
Agent consents, which consent will not be unreasonably withheld, to the proposed
Assignment, the Administrative Agent shall, if such Assignment and Acceptance
has been completed and is in substantially the form of Exhibit H hereto, (i)
accept such Assignment and Acceptance, and (ii) give prompt notice thereof to
the Borrower. Within three Business Days after its receipt of such notice, any
Borrower or any Guarantor, at its own expense, shall execute and deliver to the
Administrative Agent in exchange for the surrendered Note a new Note to the
order of such assignee Lender in an aggregate principal amount equal to the
Loans and Commitment assumed by it pursuant to such Assignment and Acceptance,
and if the assigning Lender has retained any Loans and Commitment hereunder, a
new Note to the order of the assigning Lender in an aggregate principal amount
equal to the Loans and 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 date of the
Administrative Agent's acceptance of such Assignment and Acceptance and shall
otherwise be in substantially the form of Exhibit A hereto. Promptly after each
such Assignment and Acceptance becomes effective, the Administrative Agent shall
prepare and distribute to each Lender and the Borrower a revised Schedule 1.01A
hereto after giving effect to such assignment, which revised Schedule 1.01A
shall replace the prior Schedule 1.01A and become part of this Agreement.
(e) Each Lender shall not sell participations in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Loans made by it and the
Notes held by it and the Letter of Credit Obligations).
(f) Nothing contained in this Section 12.08 shall prohibit any
Lender from pledging its Loans hereunder to a Federal Reserve Bank in support of
borrowings made by such Lender from such Federal Reserve Bank.
SECTION 12.09. Counterparts. This Agreement may be executed in any
------------
number of counterparts and by different parties hereto in separate counterparts,
each of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
SECTION 12.10 Headings. Section headings herein are included for
--------
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
103
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SECTION 12.11. Governing Law. This Agreement, the Notes and the other
-------------
Loan Documents shall be governed by, and construed in accordance with, the law
of the State of New York applicable to contracts made and to be performed in the
State of New York without regard to conflicts of law principles. Any legal
action or proceeding with respect to this Agreement or any other Loan Document
may be brought in the courts of the State of New York or of the United States
for the Southern District of New York, and, by execution and delivery of this
Agreement, the Company and each Borrower hereby irrevocably accept in respect of
its property, generally and unconditionally, the jurisdiction of the aforesaid
courts. The Company and each Borrower further irrevocably consent to the service
of process out of any of the aforementioned courts and in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to each Borrower or the Company at its address for notices
contained in Section 12.02, such service to become effective ten (10) days after
such mailing. Each Borrower and the Company hereby irrevocably appoint the
Secretary of State of the State of New York as its agent for service of process
in respect of any such action or proceeding. Nothing herein shall affect the
right of the Agents to service of process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Borrowers
and/or the Company in any other jurisdiction. The Company and each Borrower
hereby expressly and irrevocably waive, to the fullest extent permitted by law,
any objection which it may now or hereafter have to the laying of venue of any
such litigation brought in any such court referred to above and any claim that
any such litigation has been brought in an inconvenient forum. To the extent
that the Company or any Borrower has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service or
notice, attachment prior to judgment, attachment in aid of execution or
otherwise) with respect to itself or its property, such Person hereby
irrevocably waives such immunity in respect of its obligations under this
Agreement and the other Loan Documents.
SECTION 12.12. WAIVER OF JURY TRIAL, ETC. THE COMPANY AND EACH
--------------------------
BORROWER, THE LENDERS AND THE AGENTS HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT, THE NOTES OR OTHER LOAN DOCUMENTS, OR UNDER ANY AMENDMENT, WAIVER,
CONSENT, INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE
FUTURE MAY BE DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY BANKING
RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT, AND AGREE THAT ANY SUCH
ACTION, PROCEEDINGS OR COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE
A JURY. THE COMPANY AND EACH BORROWER CERTIFY THAT NO OFFICER, REPRESENTATIVE,
AGENT OR ATTORNEY OF THE AGENT OR ANY LENDER HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE AGENT OR ANY LENDER WOULD NOT, IN THE EVENT OF ANY ACTION,
PROCEEDING OR COUNTERCLAIM, SEEK TO ENFORCE THE FOREGOING WAIVERS. THE COMPANY
AND EACH BORROWER HEREBY ACKNOWLEDGE THAT THIS PROVISION IS A MATERIAL
INDUCEMENT FOR THE AGENTS AND THE LENDERS ENTERING INTO THIS AGREEMENT.
104
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SECTION 12.13. Consent by the Agents, Lenders. Except as otherwise
------------------------------
expressly set forth herein to the contrary, if the consent, approval,
satisfaction, determination, judgment, acceptance or similar action (an
"Action") of the Agents or the Lenders shall be permitted or required pursuant
------
to any provision hereof or any provision of any other agreement to which the
Company or any Borrower is a party and to which the Agents or the Lenders has
succeeded thereto, such Action shall be required to be in writing and may be
withheld or denied by any Agent or any Lender, as the case may be, with or
without any reason, and without being subject to question or challenge on the
grounds that such Action was not taken in good faith.
SECTION 12.14. No Party Deemed Drafter. The Company, each of the
-----------------------
Borrowers, the Lenders and the Agents agree that no party hereto shall be deemed
to be the drafter of this Agreement, and each of the Borrowers, the Company, the
Lenders and the Agents further agree that, in the event this Agreement is ever
construed by a court of law, such court shall not construe this Agreement or any
provision of this Agreement against any party hereto as the drafter of this
Agreement.
SECTION 12.15. Reinstatement; Certain Payments. If claim is ever made
-------------------------------
upon the Agents or the Lenders for repayment or recovery of any amount or
amounts received by the Agents or the Lenders in payment or on account of any of
the Obligations under this Agreement, the Agents or the Lenders shall give
prompt notice of such claim to each other Lender and the L/C Issuer, the Company
and the Borrowers, and if the Agents or the Lenders repays all or part of said
amount by reason of (i) any judgment, decree or order of any court or
administrative body having jurisdiction over the Agents or the Lenders or any of
their property, or (ii) any good faith settlement or compromise of any such
claim effected by the Agents or the Lenders with any such claimant, then and in
such event the Company and each Borrower agrees that (A) any such judgment,
decree, order, settlement or compromise shall be binding upon the Company and
the Borrowers notwithstanding the cancellation of any Note or other instrument
evidencing the Obligations under this Agreement or the other Loan Documents or
the termination of this Agreement or the other Loan Documents, and (B) it shall
be and remain liable to the Agents and the Lenders hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by the Agents or the Lenders .
SECTION 12.16. Indemnification. In addition to all of the Company's
---------------
or any Borrowers' other Obligations under this Agreement, each of the Company
and the Borrowers agree to, jointly and severally, defend, protect, indemnify
and hold harmless the Agents, the L/C Issuer, each Lender, and all of the
respective officers, directors, employees, attorneys, consultants and agents of
the Agents, the L/C Issuer and each Lender (collectively called the
"Indemnitees") from and against any and all losses, damages, liabilities,
-----------
obligations, penalties, fees, costs and expenses (including, without limitation,
attorneys' fees, costs and expenses) incurred by such Indemnitees, whether prior
to or from and after the Effective Date, whether direct, indirect or
consequential, as a result of or arising from or relating to or in connection
with any of the following: (i) the negotiation, preparation, execution or
performance or enforcement of this Agreement, any Loan Document or of any other
document executed in connection with the transactions contemplated by this
Agreement, (ii) the Lender's furnishing of funds to the Borrowers issuing
Letters of Credit for the account of the Borrowers under this Agreement,
105
<PAGE>
including, without limitation, the management of any such Loans or the
Reimbursement Obligations, (iii) any matter relating to the Jeri-Jo Purchase,
the Offering, the transactions, contemplated by the Jeri-Jo Purchase Documents
and the Offering Documents, financing transactions contemplated by this
Agreement or by any document executed in connection with the transactions
contemplated by this Agreement, the Jeri-Jo Purchase Documents or the Offering
Documents or (iv) any claim, litigation, investigation or proceeding relating to
any of the foregoing, whether or not any Indemnitee is a party thereto
(collectively, the "Indemnified Matters"); provided, however, that the Company
------------------- -------- -------
and the Borrowers shall have no obligation to any Indemnitee hereunder for any
Indemnified Matter caused by or resulting from the gross negligence or willful
misconduct of such Indemnitee, as determined by a final judgment of a court of
competent jurisdiction. Such indemnification for all of the foregoing losses,
damages, fees, costs and expenses of the Indemnitees are chargeable against the
Loan Account. To the extent that the undertaking to indemnify, pay and hold
harmless set forth in this Section 12.16 may be unenforceable because it is
violative of any law or public policy, the Company and the Borrowers shall
contribute the maximum portion which they are permitted to pay and satisfy under
applicable law, to the payment and satisfaction of all Indemnified Matters
incurred by the Indemnitees. The Indemnity shall survive the repayment of the
Obligations and the discharge of the Liens granted under the Loan Documents.
SECTION 12.17. Binding Effect. This Agreement shall become effective
--------------
when it shall have been executed by the Company, the Borrowers, the Agents and
the Lenders and when the conditions precedent set forth in Section 5.01 hereof
have been satisfied or waived by the Agents, and thereafter shall be binding
upon and inure to the benefit of the Company, each Borrower, the Agents and each
Lender, and their respective successors and assigns, except that the Company and
the Borrowers shall not have the right to assign their rights hereunder or any
interest herein without the prior written consent of all the Lenders, and the
assignment by any Lender shall be governed by Section 12.08 hereof.
SECTION 12.18. Releases of Collateral.
----------------------
(a) Upon the request of any Loan Party made in connection with
any sale, transfer or other disposition of Collateral permitted pursuant to
clauses (B), (C) or (E) of Section 7.02(d)(ii) of this Agreement (a "Permitted
---------
Disposition"), provided that, in the case of clause (E) of Section 7.02(d)(ii),
- -----------
the Net Proceeds of any such Permitted Disposition are paid to the
Administrative Agent pursuant to Section 2.07(k) of this Agreement, the
Collateral Agent shall, at the expense of the Loan Parties, promptly release,
without recourse, representation and warranty, its Lien on any such Collateral.
Notwithstanding anything to the contrary, the Collateral Agent shall not have
any obligation to release its Lien on any such Collateral if the Collateral
Agent determines, in its sole discretion exercised reasonably, that the
conditions of this subsection (b) of Section 12.18 have not been satisfied.
(b) The Loan Parties may exercise their rights under this
Section 12.18 at any time during the term of this Financing Agreement in
connection with a Permitted Disposition by delivering to the Collateral Agent,
not less than five Business Days prior to the date of the proposed Permitted
Disposition and release, a certificate substantially in the form of
106
<PAGE>
Exhibit K hereto (the "Release Certificate") of the chief executive officer of
-------------------
the Company which shall refer to this Section 12.18, identify the assets
proposed to be sold or disposed of and any documents that the Loan Parties are
requesting the Collateral Agent to sign in connection with any such proposed
release, and be accompanied by a counterpart of any such documents executed and
acknowledged by all parties thereto (if any) other than the Collateral Agent
(and in form for execution by the Collateral Agent) certifying, as of the date
of the Release Certificate, that (i) both immediately before and immediately
after giving effect to such requested release, no Default or Event of Default
shall have occurred and be continuing, (ii) the sale, transfer or disposition is
made in compliance with Section 7.02(d)(ii) hereof, and (iii) if the Net
Proceeds of such Permitted Disposition has been made or, as a condition to the
requested release, will be made to the Administrative Agent, provided that in
the event that the Release Certificate states that the Borrowers are required to
make a payment of such Net Proceeds, (A) such Release Certificate shall contain
a calculation of the amount of such payment and (B) prior to or simultaneously
with the release requested by the Loan Parties and the delivery by the
Collateral Agent of any documents relating thereto, the Administrative Agent
shall have received such payment within two Business Days after receipt by the
applicable Borrower.
SECTION 12.19. Confidentiality. Upon delivering to any Lender or
---------------
Agent or permitting any Lender or Agent to inspect, any written information
pursuant to this Agreement or the other Loan Documents, each Lender and or Agent
shall treat such information as confidential to the extent such information is
conspicuously marked confidential. Each Lender and Agent agrees to hold such
information in confidence from the date of disclosure thereof. Subject to the
other provisions of this Section 12.19, any Lender or Agent may disclose
confidential information to its officers, directors, employees, attorneys,
accountants or other professionals engaged by any Lender or Agent only after
determining that such third party has been instructed to hold such information
in confidence to the same extent as if it were a Lender. Notwithstanding the
foregoing, the provisions of this Section 12.19 shall not apply to information
within any one of the following categories or any combination thereof: (i)
information the substance of which, at the time of disclosure by any Lender or
Agent, has been disclosed to or is known to any creditor (other than information
as to which such creditor is then under an obligation of nondisclosure), or any
other Person other than (A) a director, officer, employee or agent of any Loan
Party or a professional engaged by a Loan Party or (B) a Person who is then
under an obligation of nondisclosure (otherwise than as a consequence of a
wrongful act of any Lender or Agent), (ii) information which any Lender or Agent
had in its possession prior to receipt thereof from the disclosing party, or
(iii) information received by any Lender or Agent from a third party having no
obligations of nondisclosure with respect thereto. Nothing contained in this
Section 12.19 shall prevent any disclosure: (i) believed in good faith by any
Lender or Agent to be required by any law or guideline or interpretation or
application thereof by any Governmental Authority, arbitrator or grand jury
charged with the interpretation or administration thereof or compliance with any
request or directive of any Governmental Authority, arbitrator or grand jury
(whether or not having the force of law), (ii) determined by counsel for any
Lender or Agent to be necessary or advisable in connection with enforcement or
preservation of rights under or in connection with this Agreement or any other
Loan Document or (iii) of any information which has been made public by a Person
other than any Lender or Agent. Any Lender or Agent shall have the right to
disclose any confidential information
107
<PAGE>
described in this Section 12.19 to the L/C Issuer and to an assignee or
prospective assignee or to a participant or prospective participant in the
Obligations hereunder, provided that the assigning or selling Lender or Agent
shall have obtained from such assignee or prospective assignee or participant or
prospective participant an agreement to hold such information in confidence to
the same extent as if it were a Lender.
SECTION 12.20. No Novation. This Amended and Restated Financing
-----------
Agreement does not extinguish the obligations for the payment of money
outstanding under the Existing Financing Agreement or discharge or release the
obligations under the Existing Financing Agreement or the Lien or priority of
any mortgage, pledge, security agreement or any other security therefor. Nothing
herein contained shall be construed as a substitution or novation of the
obligations outstanding under the Existing Financing Agreement or instruments
securing the same, which shall remain in full force and effect, except as
modified hereby or by instruments executed concurrently herewith. Nothing
expressed or implied in this Amended and Restated Financing Agreement shall be
construed as a release or other discharge of any Borrower or any Guarantor under
the Existing Financing Agreement from any of its obligations and liabilities as
a "Borrower" or "Guarantor" thereunder. Each of the Borrowers and the Guarantors
hereby (i) confirms and agrees that each Loan Document to which it is a party
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects except that on and after the Effective Date of
this Amendment all references in any such Loan Document to "the Financing
Agreement", "thereto", "thereof", "thereunder" or words of like import referring
to the Existing Financing Agreement shall mean the Existing Financing Agreement
as amended and restated by this Amended and Restated Financing Agreement and
(ii) confirms and agrees that to the extent that any such Loan Document purports
to assign or pledge to the Collateral Agent a security interest in or Lien on,
any collateral as security for the obligations of the Borrowers or the
Guarantors from time to time existing in respect of the Existing Financing
Agreement and the Loan Documents, such pledge, assignment and/or grant of the
security interest or Lien is hereby ratified and confirmed in all respects.
108
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
NORTON McNAUGHTON, INC.
By: /s/ Amanda J. Bokman
------------------------------
Title: VICE PRESIDENT
NORTON McNAUGHTON OF SQUIRE, INC.
By: /s/ Amanda J. Bokman
------------------------------
Title: VICE PRESIDENT
MISS ERIKA, INC.
By: /s/ Amanda J. Bokman
------------------------------
Title: EXECUTIVE VICE PRESIDENT
JJ ACQUISITION CORP.
By: /s/ Amanda J. Bokman
------------------------------
Title: VICE PRESIDENT
AGENTS AND LENDERS
------------------
THE CIT GROUP/COMMERCIAL SERVICES,
INC., as Administrative Agent and Lender
By: /s/ Charles Carbone
------------------------------
Title: VICE PRESIDENT
NATIONSBANC COMMERCIAL
CORPORATION, as Collateral Agent and Lender
By: /s/ Carl Banilower
------------------------------
Title:
-----------------------------
109
<PAGE>
FLEET BANK, NA,
as Documentation Agent and Lender
By: /s/ Stephen M. Leavenworth
---------------------------
Title: VICE PRESIDENT
LENDERS
-------
PNC BANK, NATIONAL ASSOCIATION
By: /s/ [ILLEGIBLE]
--------------------------
Title: SENIOR VICE PRESIDENT
110
<PAGE>
EXHIBIT A
---------
FORM OF REVOLVING CREDIT NOTE
$__________ Dated: ____________,199__
New York, New York
FOR VALUE RECEIVED, each of Norton McNaughton of Squire, Inc., a New
York corporation, Miss Erika, Inc., a Delaware corporation and JJ Acquisition
Corp., a Delaware corporation to be known as Jeri-Jo Knitwear, Inc.
(collectively, the "Borrowers"), HEREBY JOINTLY AND SEVERALLY PROMISE TO PAY to
---------
the order of ___________________ (the "Lender") (i) the principal amount of
------
___________ ($__________), or if less, the aggregate unpaid principal amount of
all Revolving Credit Loans (as defined in the Amended and Restated Financing
Agreement hereinafter referred to) made by the Lender to the Borrowers, payable
on the Final Maturity Date (as defined in the Amended and Restated Financing
Agreement) and (ii) interest on the unpaid principal amount of all Revolving
Credit Loans, from the date hereof until all such principal amounts are paid in
full, at such interest rates, and payable at such times, as are specified in the
Amended and Restated Financing Agreement.
Notwithstanding any other provision of this Revolving Credit Note,
interest paid or becoming due hereunder shall in no event exceed the maximum
rate permitted by applicable law. Both principal and interest are payable in
lawful money of the United States of America in immediately available funds to
The CIT Group/Commercial Services, Inc., as administrative agent (the
"Administrative Agent"), at its office located at 1211 Avenue of the Americas,
--------------------
New York, New York 10036 or such other office as the Administrative Agent may
designate.
This Revolving Credit Note is the Revolving Credit Note referred to
in, and is entitled to the benefits of, the Amended and Restated Financing
Agreement dated as of June 18, 1998 (as amended or otherwise modified from time
to time, the "Amended and Restated Financing Agreement"), by and among Norton
----------------------------------------
McNaughton, Inc., the Borrowers, the financial institutions from time to time
party to the Amended and Restated Financing Agreement, NationsBanc Commercial
Corporation, as collateral agent, the Administrative Agent and Fleet Bank N.A.,
as documentation agent. The Amended and Restated Financing Agreement, among
other things, contains provisions for certain stated events of default and also
for prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions specified therein. The Borrowers hereby waive
presentment for payment, demand, protest and notice of dishonor of this
Revolving Credit Note.
<PAGE>
This Revolving Credit Note shall be governed by, and construed and
interpreted in accordance with, the internal laws of the State of New York
applicable to contracts made and to be performed therein without consideration
as to choice of law.
NORTON McNAUGHTON OF SQUIRE, INC.
By: __________________________________
Name:
Title:
MISS ERIKA, INC.
By: __________________________________
Name:
Title:
JJ ACQUISITION CORP.
By: __________________________________
Name:
Title:
-2-
<PAGE>
EXHIBIT B-1
-----------
FORM OF SUBSIDIARY GUARANTY
GUARANTY, dated as of _____ __, _____, made by __________________, a
________ corporation (the "Guarantor"), in favor of each of the Lenders (as
---------
hereinafter defined) and NATIONSBANC COMMERCIAL CORPORATION, as collateral agent
for the Lenders (the "Collateral Agent") pursuant to the Amended and Restated
----------------
Financing Agreement referred to below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Norton McNaughton, Inc., a Delaware corporation (the
"Company"), Norton McNaughton of Squire, Inc., a New York corporation
-------
("Squire"), Miss Erika, Inc., a Delaware corporation ("Miss Erika"), certain
------ ----------
lenders (the "Existing Lenders"), NationsBanc Commercial Corporation, as
----------------
collateral agent (the "Collateral Agent") for the Existing Lenders and The CIT
----------------
Group/Commercial Services, Inc., as administrative agent (the "Administrative
--------------
Agent") for the Existing Lenders are parties to a Financing Agreement, dated as
- -----
of September 25, 1997, as amended by the First Amendment dated as of November
21, 1997 and the Second Amendment dated as of January 30, 1998 (as so amended,
the "Existing Financing Agreement");
----------------------------
WHEREAS, the Company, Squire and Miss Erika have requested that the
Existing Financing Agreement be amended and restated to, among other things, (i)
prepay the term loan in full, (ii) increase the revolving credit facility to
$175,000,000, (iii) extend the maturity date of the revolving credit facility,
and (iv) add JJ Acquisition Corp., a Delaware corporation to be known as Jeri-Jo
Knitwear, Inc. ("Jeri-Jo" and together with Squire and Miss Erika, each a
-------
"Borrower" and collectively, the "Borrowers") as a Borrower;
-------- ---------
WHEREAS, pursuant to such request, the Company, Squire, Miss Erika,
Jeri-Jo, the financial institutions from time to time party to the Amended and
Restated Financing Agreement (the "Lenders"), the Collateral Agent, the
-------
Administrative Agent and Fleet Bank, NA, as documentation agent (the
"Documentation Agent"), have entered into an Amended and Restated Financing
-------------------
Agreement, dated as of June 18, 1998 (such agreement, as amended, restated or
otherwise modified from time to time, being hereinafter referred to as the
"Amended and Restated Financing Agreement");
----------------------------------------
WHEREAS, [the Company] [a Borrower] directly owns all of the issued
and outstanding shares of capital stock of the Guarantor; and
WHEREAS, pursuant to Section 7.01(b) of the Amended and Restated
Financing Agreement, the Guarantor is required to execute and deliver to the
Collateral Agent a guaranty
<PAGE>
guaranteeing all Loans and Reimbursement Obligations (each as defined in the
Amended and Restated Financing Agreement) and all other obligations under the
Amended and Restated Financing Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans and to
assist the Borrowers in obtaining letters of credit, in each case pursuant to
the Amended and Restated Financing Agreement, the Guarantor hereby agrees with
the Lenders and the Collateral Agent as follows:
SECTION 1. Definitions. Reference is hereby made to the Amended and
-----------
Restated Financing Agreement for a statement of the terms thereof. All terms
used in this Guaranty which are defined therein and not otherwise defined herein
shall have the same meanings herein as set forth therein.
SECTION 2. Guaranty. The Guarantor hereby (i) irrevocably,
--------
absolutely and unconditionally guarantees the prompt payment by the Borrowers,
as and when due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), of all amounts now or hereafter owing in
respect of the Notes, the Amended and Restated Financing Agreement and the other
Loan Documents, including, without limitation, all Letter of Credit Obligations
and all Ledger Debt, whether for principal, interest (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to a Borrower whether or not a claim for post-filing
interest is allowed in such proceeding), fees, commissions, expenses,
indemnifications or otherwise (the "Obligations"), and (ii) agrees to pay any
-----------
and all expenses (including counsel fees and expenses) incurred by the
Collateral Agent and the Lenders in enforcing their rights under this Guaranty.
SECTION 3. Guarantor's Obligations Unconditional.
-------------------------------------
(a) The Guarantor hereby guarantees that the Obligations will be paid
strictly in accordance with the terms of the Loan Documents, regardless of any
law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Collateral Agent or the Lenders
with respect thereto. The Guarantor agrees that its guarantee constitutes a
guaranty of payment when due and not of collection and waives any right to
require that any resort be made by the Collateral Agent or the Lenders to any
Collateral. The obligations of the Guarantor under this Guaranty are
independent of the obligations under the Amended and Restated Financing
Agreement and the other Loan Documents, and a separate action or actions may be
brought and prosecuted against the Guarantor to enforce this Guaranty,
irrespective of whether any action is brought against any Borrower or whether
any Borrower is joined in any such action. The liability of the Guarantor
hereunder shall be absolute and unconditional irrespective of: (i) any lack of
validity or enforceability of any Loan Document or any agreement or instrument
relating thereto; (ii) any change in the time, manner or place of payment of, or
in any other term in respect of, all or any of the Obligations, or any other
amendment or waiver of or consent to any departure from any provision of any
Loan Document other than this Guaranty (including the creation or existence of
any Obligations in excess of the amount permitted by any lending formulas
contained in the Loan Documents or the amount evidenced by the Loan
-2-
<PAGE>
Documents); (iii) any exchange or release of, or non-perfection of any Lien on
or security interest in, any Collateral, or any release or amendment or waiver
of or consent to any departure from any other guaranty, for all or any of the
Obligations; (iv) the existence of any claim, set-off, defense or other right
that the Guarantor may have against any Person, including, without limitation,
the Collateral Agent or the Lenders, or (v) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, any Borrower or
any other guarantor in respect of the Obligations or the Guarantor in respect
hereof.
(b) This Guaranty (i) is a continuing guaranty and shall remain in
full force and effect until such date on which all of the Obligations and all
other expenses to be paid by the Guarantor pursuant hereto shall have been
satisfied in full after the Total Commitment shall have been terminated and all
Letters of Credit are canceled or cash collateralized, and (ii) shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment of any of the Obligations is rescinded or must otherwise be returned by
the Collateral Agent upon the insolvency, bankruptcy or reorganization of any
Borrower or otherwise, all as though such payment had not been made.
SECTION 4. Waivers. The Guarantor hereby waives, to the extent
-------
permitted by applicable law, (i) promptness and diligence; (ii) notice of
acceptance and notice of the incurrence of any Obligation by the Borrowers;
(iii) notice of any actions taken by the Collateral Agent, the Borrowers or any
Lender under any Loan Document or any other agreement or instrument relating
thereto; (iv) all other notices, demands and protests, and all other formalities
of every kind in connection with the enforcement of the Obligations or of the
obligations of the Guarantor hereunder, the omission of or delay in which, but
for the provisions of this Section 4, might constitute grounds for relieving the
Guarantor of its obligations hereunder; (v) any right to compel or direct the
Collateral Agent or the Lenders to seek payment or recovery of any amounts owed
under this Guaranty from any one particular fund or source; (vi) any requirement
that the Collateral Agent protect, secure, perfect or insure any security
interest or Lien or any property subject thereto or exhaust any right or take
any action against any Borrower or any other Person or any Collateral; and (vii)
any other defense available to the Guarantor.
SECTION 5. Subrogation. Until the Obligations have been satisfied in
-----------
full, the Guarantor hereby waives and irrevocably agrees it will not exercise
any and all rights which it has or may have at any time or from time to time
(whether arising directly or indirectly by operation of law or contract) to
assert any claim against any Borrower on account of any payments made under this
Guaranty or otherwise, including, without limitation, any and all existing and
future rights of subrogation, reimbursement, exoneration, contribution and/or
indemnity. If any amount shall be paid to the Guarantor on account of such
subrogation rights at any time when all of the Obligations and all such other
expenses shall not have been paid in full, such amount shall be held in trust
for the benefit of the Collateral Agent and the Lenders, shall be segregated
from the other funds of the Guarantor and shall forthwith be paid over to the
Collateral Agent to be applied in whole or in part by the Collateral Agent
against the Obligations, whether matured or unmatured, and all such other
expenses in accordance with the terms of the Amended and Restated Financing
Agreement.
-3-
<PAGE>
SECTION 6. Representations and Warranties. The Guarantor hereby
------------------------------
represents and warrants as follows:
(a) The Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation as set forth on the first page hereof; and (ii) has all requisite
corporate power and authority to execute, deliver and perform this Guaranty and
each other Loan Document to which the Guarantor is a party.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty and each other Loan Document to which the Guarantor is a party (i) have
been duly authorized by all necessary corporate action, (ii) do not contravene
its charter or by-laws or any applicable law, (iii) do not violate any
contractual restriction binding on or otherwise affecting the Guarantor, and
(iv) do not result in or require the creation of any Lien, security interest or
other charge or encumbrance upon or with respect to any of its properties other
than pursuant to any such Loan Document.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other regulatory body is required in
connection with the due execution, delivery and performance by the Guarantor of
this Guaranty or any of the other Loan Documents to which the Guarantor is a
party.
(d) Each of this Guaranty and the other Loan Documents to which the
Guarantor is a party is a legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws and general equity principles affecting the enforcement of
creditors' rights generally.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding against the Guarantor or to which any of
the properties of the Guarantor is subject, before any court or other
Governmental Authority or any arbitrator (i) which challenges the validity or
enforceability of this Guaranty or any of the other Loan Documents to which the
Guarantor is a party, or (ii) in which there is a reasonable possibility of an
adverse decision which would materially adversely affect the business,
operations or financial condition of the Guarantor.
(f) The Guarantor now has and will continue to have independent means
of obtaining information concerning the affairs, financial condition and
business of the Borrowers, and has no need of, or right to obtain from the
Collateral Agent or any Lender, any credit or other information concerning the
affairs, financial condition or business of the Borrowers that may come under
the control of the Collateral Agent or any Lender.
SECTION 7. Right of Set-off. Upon the occurrence and during the
----------------
continuance of any Event of Default, the Collateral Agent, the Administrative
Agent and the Lenders may, and are hereby authorized to, at any time and from
time to time, without notice to the Guarantor (any such notice being expressly
waived by the Guarantor) and to the fullest extent permitted by law, set-off and
apply any and all deposits (general or special, time or demand, provisional or
-4-
<PAGE>
final) at any time held and other indebtedness at any time owing by the
Collateral Agent, the Administrative Agent or any Lender to or for the credit of
the account of the Guarantor against any and all obligations of the Guarantor
now or hereafter existing under this Guaranty, irrespective of whether or not
the Collateral Agent, the Administrative Agent or any Lender shall have made any
demand under this Guaranty and although such obligations may be contingent or
unmatured. The Collateral Agent, the Administrative Agent and the Lenders agree
to notify the Guarantor promptly after any such set-off and application made by
the Collateral Agent, the Administrative Agent or such Lender, provided that the
failure to give such notice shall not affect the validity of such set-off and
application. The rights of the Collateral Agent, the Administrative Agent and
the Lenders under this Section 7 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which the Collateral
Agent, the Administrative Agent and the Lenders may have.
SECTION 8. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Guarantor, to it at its address at _______ ; if to the Collateral Agent,
to it at its address set forth in the Amended and Restated Financing Agreement;
or, as to any such Person, at such other address as shall be designated by such
Person in a written notice to such other Persons complying as to delivery with
the terms of this Section 8. All such notices and other communications shall be
effective (i) if sent by registered mail, return receipt requested, when
received or three Business Days after mailing, whichever first occurs, (ii) if
telecopied, when transmitted and a confirmation is received, provided the same
is on a Business Day and, if not, on the next Business Day, or (iii) if
delivered, upon delivery, provided the same is on a Business Day and, if not, on
the next Business Day.
SECTION 9. Consent to Jurisdiction; Waiver of Immunities.
---------------------------------------------
(a) The Guarantor hereby irrevocably submits to the jurisdiction of
any New York State or federal court sitting in New York City in any action or
proceeding arising out of or relating to this Guaranty, and the Guarantor hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State or federal court. The Guarantor
hereby irrevocably appoints ___________ (the "Process Agent"), with an office on
-------------
the date hereof at _____________________, as its agent to receive on behalf of
the Guarantor and its property service of copies of the summons and complaint
and any other process which may be served in any such action or proceeding.
Such service may be made by mailing (by certified or registered mail, postage
prepaid and return receipt requested) or delivering a copy of such process to
the Guarantor in care of the Process Agent at the Process Agent's above address,
and the Guarantor hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf. As an alternative method of service, the
Guarantor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Guarantor at its address specified in Section 8 hereof. The Guarantor agrees
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.
-5-
<PAGE>
(b) Nothing in this Section 9 shall affect the right of the Collateral
Agent to serve legal process in any other manner permitted by law or affect the
right of the Collateral Agent to bring any action or proceeding against the
Guarantor or its property in the courts of any other jurisdictions.
(c) The Guarantor hereby expressly and irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that the Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) with respect to itself or its property, the
Guarantor hereby irrevocably waives such immunity in respect of its obligations
under this Guaranty and the other Loan Documents.
SECTION 10. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND, BY
--------------------
ACCEPTANCE HEREOF, THE COLLATERAL AGENT AND THE LENDERS WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS GUARANTY, THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT, WAIVER, CONSENT,
INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE
DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 11. Miscellaneous.
-------------
(a) The Guarantor will make each payment hereunder in lawful money of
the United States of America and in immediately available funds to the
Administrative Agent, for the benefit of the Lenders, at such address specified
by the Administrative Agent from time to time by notice to the Guarantor.
(b) No amendment of any provision of this Guaranty shall be effective
unless it is in writing and signed by the Guarantor and the Collateral Agent,
and no waiver of any provision of this Guaranty, and no consent to any departure
by the Guarantor therefrom, shall be effective unless it is in writing and
signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(c) No failure on the part of the Collateral Agent, acting on behalf
of the Lenders, to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any right preclude any other or further exercise
thereof or the exercise of any other right. The rights and remedies of the
Collateral Agent and the Lenders provided herein and in the other Loan Documents
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law. The rights of the Collateral Agent and the Lenders
under any Loan Document
-6-
<PAGE>
against any party thereto are not conditional or contingent on any attempt by
the Collateral Agent and the Lenders to exercise any of their rights under any
other Loan Document against such party or against any other Person.
(d) Any provision of this Guaranty which is 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its
successors and assigns, and (ii) inure, together with all rights and remedies of
the Collateral Agent and the Lenders hereunder, to the benefit of the Collateral
Agent and the Lenders and their respective successors, transferees and assigns.
Without limiting the generality of clause (ii) of the immediately preceding
sentence, to the extent permitted by Section 12.08 of the Amended and Restated
Financing Agreement, any Lender may assign or otherwise transfer any Note held
by it, and assign or otherwise transfer its rights under any other Loan
Document, to any other Person, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Lenders herein
or otherwise. None of the rights or obligations of the Guarantor hereunder may
be assigned or otherwise transferred without the prior written consent of the
Collateral Agent.
(f) This Guaranty shall be governed by and construed in accordance
with the law of the State of New York applicable to contracts made and to be
performed therein without regard to conflict of law principles.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
[NAME OF GUARANTOR]
By: _________________________
Name:
Title:
-7-
<PAGE>
EXHIBIT B-2
-----------
FORM OF BORROWER GUARANTY
GUARANTY, dated as of ____ ___, _____, made by __________________, a
________ corporation (the "Guarantor"), in favor of each of the Lenders (as
---------
hereinafter defined) and NATIONSBANC COMMERCIAL CORPORATION, as collateral agent
for the Lenders (the "Collateral Agent") pursuant to the Amended and Restated
----------------
Financing Agreement referred to below.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Norton McNaughton, Inc., a Delaware corporation (the
"Company"), [Norton McNaughton of Squire, Inc., a New York corporation]
-------
[("Squire")], [Miss Erika, Inc., a Delaware corporation] [("Miss Erika")] [the
------ ----------
Guarantor], certain lenders (the "Existing Lenders"), NationsBanc Commercial
----------------
Corporation, as collateral agent (the "Collateral Agent") for the Existing
----------------
Lenders and The CIT Group/Commercial Services, Inc., as administrative agent
(the "Administrative Agent") for the Existing Lenders are parties to a Financing
--------------------
Agreement, dated as of September 25, 1997, as amended by the First Amendment
dated as of November 21, 1997, the Second Amendment dated as of January 30, 1998
and the Third Amendment dated as of June 12, 1998 (as so amended, the "Existing
--------
Financing Agreement");
- -------------------
WHEREAS, the Company, Squire and Miss Erika [the Guarantor] have
requested that the Existing Financing Agreement be amended and restated to,
among other things, (i) prepay the term loan in full, (ii) increase the
revolving credit facility to $175,000,000, (iii) extend the maturity date of the
revolving credit facility and (iv) add [JJ Acquisition Corp., a Delaware
corporation to be known as Jeri-Jo Knitwear, Inc. ("Jeri-Jo")] [the Guarantor]
-------
as a borrower;
WHEREAS, pursuant to such request the Company, [Squire], [Miss Erika],
[Jeri-Jo] [the Guarantor], the financial institutions from time to time party to
the Amended and Restated Financing Agreement (the "Lenders"), the Collateral
-------
Agent, the Administrative Agent and Fleet Bank, NA, as documentation agent, (the
"Documentation Agent") have entered into an Amended and Restated Financing
-------------------
Agreement, dated as of June 18, 1998 (such agreement, as amended, restated or
otherwise modified from time to time, being hereinafter referred to as the
"Amended and Restated Financing Agreement");
----------------------------------------
WHEREAS, the Company directly owns all of the issued and outstanding
shares of capital stock of the Guarantor; and
<PAGE>
WHEREAS, pursuant to Section 5.01(d)(ii) of the Amended and Restated
Financing Agreement, the Guarantor is required to execute and deliver to the
Collateral Agent a guaranty guaranteeing all Loans and Reimbursement Obligations
(each as defined in the Amended and Restated Financing Agreement) of [Squire]
[Miss Erika] [Jeri-Jo] (collectively, the "Borrowers") and all other obligations
---------
of the Borrowers under the Amended and Restated Financing Agreement;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans and to
assist the Borrowers in obtaining letters of credit, in each case pursuant to
the Amended and Restated Financing Agreement, the Guarantor hereby agrees with
the Lenders and the Collateral Agent as follows:
SECTION 1. Definitions. Reference is hereby made to the Amended and
-----------
Restated Financing Agreement for a statement of the terms thereof. All terms
used in this Guaranty which are defined therein and not otherwise defined herein
shall have the same meanings herein as set forth therein.
SECTION 2. Guaranty. The Guarantor hereby (i) irrevocably,
--------
absolutely and unconditionally guarantees the prompt payment by the Borrowers,
as and when due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), of all amounts now or hereafter owing by the
Borrowers in respect of the Notes, the Amended and Restated Financing Agreement
and the other Loan Documents, including, without limitation, all Letter of
Credit Obligations and all Ledger Debt of the Borrowers, whether for principal,
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to any Borrower whether or not a claim
for post-filing interest is allowed in such proceeding), fees, commissions,
expenses, indemnifications or otherwise (the "Obligations"), and (ii) agrees to
-----------
pay any and all expenses (including counsel fees and expenses) incurred by the
Collateral Agent and the Lenders in enforcing their rights under this Guaranty.
SECTION 3. Guarantor's Obligations Unconditional.
-------------------------------------
(a) The Guarantor hereby guarantees that the Obligations will be
paid strictly in accordance with the terms of the Loan Documents, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of the Collateral Agent or the Lenders
with respect thereto. The Guarantor agrees that its guarantee constitutes a
guaranty of payment when due and not of collection and waives any right to
require that any resort be made by the Collateral Agent or the Lenders to any
Collateral. The obligations of the Guarantor under this Guaranty are independent
of the obligations under the Amended and Restated Financing Agreement and the
other Loan Documents, and a separate action or actions may be brought and
prosecuted against the Guarantor to enforce this Guaranty, irrespective of
whether any action is brought against any Borrower or whether any Borrower is
joined in any such action. The liability of the Guarantor hereunder shall be
absolute and unconditional irrespective of: (i) any lack of validity or
enforceability of any Loan Document or any agreement or instrument relating
thereto; (ii) any change in the time, manner or place of payment of, or in any
other term in respect of, all or any of the Obligations, or any other amendment
or waiver of
-2-
<PAGE>
or consent to any departure from any provision of any Loan Document other than
this Guaranty (including the creation or existence of any Obligations in excess
of the amount permitted by any lending formulas contained in the Loan Documents
or the amount evidenced by the Loan Documents); (iii) any exchange or release
of, or non-perfection of any Lien on or security interest in, any Collateral, or
any release or amendment or waiver of or consent to any departure from any other
guaranty, for all or any of the Obligations; (iv) the existence of any claim,
set-off, defense or other right that the Guarantor may have against any Person,
including, without limitation, the Collateral Agent or the Lenders, or (v) any
other circumstance which might otherwise constitute a defense available to, or a
discharge of, any Borrower or any other guarantor in respect of the Obligations
or the Guarantor in respect hereof.
(b) This Guaranty (i) is a continuing guaranty and shall remain in
full force and effect until such date on which all of the Obligations and all
other expenses to be paid by the Guarantor pursuant hereto shall have been
satisfied in full after the Total Commitment shall have been terminated and all
Letters of Credit are canceled or cash collateralized, and (ii) shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment of any of the Obligations is rescinded or must otherwise be returned by
the Collateral Agent upon the insolvency, bankruptcy or reorganization of any
Borrower or otherwise, all as though such payment had not been made.
SECTION 4. Waivers. The Guarantor hereby waives, to the extent
-------
permitted by applicable law, (i) promptness and diligence; (ii) notice of
acceptance and notice of the incurrence of any Obligation by any Borrower; (iii)
notice of any actions taken by the Collateral Agent, the Borrowers or any Lender
under any Loan Document or any other agreement or instrument relating thereto;
(iv) all other notices, demands and protests, and all other formalities of every
kind in connection with the enforcement of the Obligations or of the obligations
of the Guarantor hereunder, the omission of or delay in which, but for the
provisions of this Section 4, might constitute grounds for relieving the
Guarantor of its obligations hereunder; (v) any right to compel or direct the
Collateral Agent or the Lenders to seek payment or recovery of any amounts owed
under this Guaranty from any one particular fund or source; (vi) any requirement
that the Collateral Agent protect, secure, perfect or insure any security
interest or Lien or any property subject thereto or exhaust any right or take
any action against the Borrowers or any other Person or any Collateral; and
(vii) any other defense available to the Guarantor.
SECTION 5. Subrogation. Until the Obligations have been satisfied in
-----------
full, the Guarantor hereby waives and irrevocably agrees it will not exercise
any and all rights which it has or may have at any time or from time to time
(whether arising directly or indirectly by operation of law or contract) to
assert any claim against the Borrowers on account of any payments made under
this Guaranty or otherwise, including, without limitation, any and all existing
and future rights of subrogation, reimbursement, exoneration, contribution
and/or indemnity. If any amount shall be paid to the Guarantor on account of
such subrogation rights at any time when all of the Obligations and all such
other expenses shall not have been paid in full, such amount shall be held in
trust for the benefit of the Collateral Agent and the Lenders, shall be
segregated from the other funds of the Guarantor and shall forthwith be paid
over to the Collateral Agent to be applied in whole or in part by the Collateral
Agent against the Obligations,
-3-
<PAGE>
whether matured or unmatured, and all such other expenses in accordance with the
terms of the Amended and Restated Financing Agreement.
SECTION 6. Representations and Warranties. The Guarantor hereby
------------------------------
represents and warrants as follows:
(a) The Guarantor (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation as set forth on the first page hereof; and (ii) has all requisite
corporate power and authority to execute, deliver and perform this Guaranty and
each other Loan Document to which the Guarantor is a party.
(b) The execution, delivery and performance by the Guarantor of this
Guaranty and each other Loan Document to which the Guarantor is a party (i) have
been duly authorized by all necessary corporate action, (ii) do not contravene
its charter or by-laws or any applicable law, (iii) do not violate any
contractual restriction binding on or otherwise affecting the Guarantor, and
(iv) do not result in or require the creation of any Lien, security interest or
other charge or encumbrance upon or with respect to any of its properties other
than pursuant to any such Loan Document.
(c) No authorization, approval or other action by, and no notice to
or filing with, any Governmental Authority or other regulatory body is required
in connection with the due execution, delivery and performance by the Guarantor
of this Guaranty or any of the other Loan Documents to which the Guarantor is a
party.
(d) Each of this Guaranty and the other Loan Documents to which the
Guarantor is a party is a legal, valid and binding obligation of the Guarantor,
enforceable against the Guarantor in accordance with its terms, except as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws and general equity principles affecting the enforcement of
creditors' rights generally.
(e) There is no pending or, to the best knowledge of the Guarantor,
threatened action, suit or proceeding against the Guarantor or to which any of
the properties of the Guarantor is subject, before any court or other
Governmental Authority or any arbitrator (i) which challenges the validity or
enforceability of this Guaranty or any of the other Loan Documents to which the
Guarantor is a party, or (ii) in which there is a reasonable possibility of an
adverse decision which would materially adversely affect the business,
operations or financial condition of the Guarantor.
(f) The Guarantor now has and will continue to have independent
means of obtaining information concerning the affairs, financial condition and
business of the Borrowers, and has no need of, or right to obtain from the
Collateral Agent or any Lender, any credit or other information concerning the
affairs, financial condition or business of the Borrowers that may come under
the control of the Collateral Agent or any Lender.
SECTION 7. Right of Set-off. Upon the occurrence and during the
----------------
continuance of any Event of Default, the Collateral Agent, the Administrative
Agent and the Lenders may,
-4-
<PAGE>
and are hereby authorized to, at any time and from time to time, without notice
to the Guarantor (any such notice being expressly waived by the Guarantor) and
to the fullest extent permitted by law, set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Collateral Agent, the Administrative
Agent or any Lender to or for the credit of the account of the Guarantor against
any and all obligations of the Guarantor now or hereafter existing under this
Guaranty, irrespective of whether or not the Collateral Agent, the
Administrative Agent or any Lender shall have made any demand under this
Guaranty and although such obligations may be contingent or unmatured. The
Collateral Agent, the Administrative Agent and the Lenders agree to notify the
Guarantor promptly after any such set-off and application made by the Collateral
Agent, the Administrative Agent or such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of the Collateral Agent, the Administrative Agent and the Lenders
under this Section 7 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Collateral Agent, the
Administrative Agent and the Lenders may have.
SECTION 8. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Guarantor, to it at its address at _______ ; if to the Collateral Agent,
to it at its address set forth in the Amended and Restated Financing Agreement;
or, as to any such Person, at such other address as shall be designated by such
Person in a written notice to such other Persons complying as to delivery with
the terms of this Section 8. All such notices and other communications shall be
effective (i) if sent by registered mail, return receipt requested, when
received or three Business Days after mailing, whichever first occurs, (ii) if
telecopied, when transmitted and a confirmation is received, provided the same
is on a Business Day and, if not, on the next Business Day, or (iii) if
delivered, upon delivery, provided the same is on a Business Day and, if not, on
the next Business Day.
SECTION 9. Consent to Jurisdiction; Waiver of Immunities.
---------------------------------------------
(a) The Guarantor hereby irrevocably submits to the jurisdiction of
any New York State or federal court sitting in New York City in any action or
proceeding arising out of or relating to this Guaranty, and the Guarantor hereby
irrevocably agrees that all claims in respect of such action or proceeding may
be heard and determined in such New York State or federal court. The Guarantor
hereby irrevocably appoints ___________ (the "Process Agent"), with an office on
-------------
the date hereof at _____________________, as its agent to receive on behalf of
the Guarantor and its property service of copies of the summons and complaint
and any other process which may be served in any such action or proceeding.
Such service may be made by mailing (by certified or registered mail, postage
prepaid and return receipt requested) or delivering a copy of such process to
the Guarantor in care of the Process Agent at the Process Agent's above address,
and the Guarantor hereby irrevocably authorizes and directs the Process Agent to
accept such service on its behalf. As an alternative method of service, the
Guarantor also irrevocably consents to the service of any and all process in any
such action or proceeding by the mailing of copies of such process to the
Guarantor at its address specified in Section 8 hereof. The Guarantor agrees
that a final judgment in any such action or proceeding shall be
-5-
<PAGE>
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Nothing in this Section 9 shall affect the right of the
Collateral Agent to serve legal process in any other manner permitted by law or
affect the right of the Collateral Agent to bring any action or proceeding
against the Guarantor or its property in the courts of any other jurisdictions.
(c) The Guarantor hereby expressly and irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of venue of any such litigation brought in any such court
referred to above and any claim that any such litigation has been brought in an
inconvenient forum. To the extent that the Guarantor has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service or notice, attachment prior to judgment, attachment in
aid of execution or otherwise) with respect to itself or its property, the
Guarantor hereby irrevocably waives such immunity in respect of its obligations
under this Guaranty and the other Loan Documents.
SECTION 10. WAIVER OF JURY TRIAL. EACH OF THE GUARANTOR AND, BY
--------------------
ACCEPTANCE HEREOF, THE COLLATERAL AGENT AND THE LENDERS WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS GUARANTY, THE LOAN DOCUMENTS OR UNDER ANY AMENDMENT, WAIVER, CONSENT,
INSTRUMENT, DOCUMENT OR OTHER AGREEMENT DELIVERED OR WHICH IN THE FUTURE MAY BE
DELIVERED IN CONNECTION THEREWITH, OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS GUARANTY, AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR
COUNTERCLAIM SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 11. Miscellaneous.
-------------
(a) The Guarantor will make each payment hereunder in lawful money
of the United States of America and in immediately available funds to the
Administrative Agent, for the benefit of the Lenders, at such address specified
by the Administrative Agent from time to time by notice to the Guarantor.
(b) No amendment of any provision of this Guaranty shall be
effective unless it is in writing and signed by the Guarantor and the Collateral
Agent, and no waiver of any provision of this Guaranty, and no consent to any
departure by the Guarantor therefrom, shall be effective unless it is in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(c) No failure on the part of the Collateral Agent, acting on behalf
of the Lenders, to exercise, and no delay in exercising, any right hereunder or
under any other Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any right preclude any other or further exercise
thereof or the exercise of any other right. The rights and
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<PAGE>
remedies of the Collateral Agent and the Lenders provided herein and in the
other Loan Documents are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law. The rights of the Collateral Agent
and the Lenders under any Loan Document against any party thereto are not
conditional or contingent on any attempt by the Collateral Agent and the Lenders
to exercise any of their rights under any other Loan Document against such party
or against any other Person.
(d) Any provision of this Guaranty which is 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(e) This Guaranty shall (i) be binding on the Guarantor and its
successors and assigns, and (ii) inure, together with all rights and remedies of
the Collateral Agent and the Lenders hereunder, to the benefit of the Collateral
Agent and the Lenders and their respective successors, transferees and assigns.
Without limiting the generality of clause (ii) of the immediately preceding
sentence, to the extent permitted by Section 12.08 of the Amended and Restated
Financing Agreement, any Lender may assign or otherwise transfer any Note held
by it, and assign or otherwise transfer its rights under any other Loan
Document, to any other Person, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Lenders herein
or otherwise. None of the rights or obligations of the Guarantor hereunder may
be assigned or otherwise transferred without the prior written consent of the
Collateral Agent.
(f) This Guaranty shall be governed by and construed in accordance
with the law of the State of New York applicable to contracts made and to be
performed therein without regard to conflict of law principles.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed by an officer thereunto duly authorized, as of the date first above
written.
[NAME OF GUARANTOR]
By: _________________________
Name:
Title:
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<PAGE>
EXHIBIT C-1
FORM OF BORROWER SECURITY AGREEMENT
-----------------------------------
SECURITY AGREEMENT, dated as of _____ ___, _____ made by
_________________________, a ________ corporation (the "Grantor"), in favor of
-------
NATIONSBANC COMMERCIAL CORPORATION, as collateral agent for the Lenders parties
to the Amended and Restated Financing Agreement referred to below (in such
capacity, the "Collateral Agent").
----------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Norton McNaughton, Inc., a Delaware corporation (the
"Company"), [Norton McNaughton of Squire, Inc., a New York corporation
-------
("Squire")], [Miss Erika, Inc., a Delaware corporation ("Miss Erika")] [the
------ ----------
Grantor], certain lenders (the "Existing Lenders"), NationsBanc Commercial
----------------
Corporation, as collateral agent (the "Collateral Agent") for the Existing
----------------
Lenders and The CIT Group/Commercial Services, Inc., as administrative agent
(the "Administrative Agent") for the Existing Lenders are parties to a Financing
--------------------
Agreement, dated as of September 25, 1997, as amended by the First Amendment
dated as of November 21, 1997, the Second Amendment dated as of January 30, 1998
and the Third Amendment dated as of June 12, 1998 (as so amended, the "Existing
--------
Financing Agreement");
- -------------------
WHEREAS, pursuant to the Existing Financing Agreement, the Existing
Lenders extended credit to Squire and Miss Erika [the Grantor] consisting of (i)
a term loan in the original principal amount of $15,000,000 and (ii) revolving
credit loans in an aggregate principal amount at any one time outstanding not to
exceed $125,000,000, a portion of which included letters of credit issued with
the assistance of the Collateral Agent and the Existing Lenders for the account
of Squire and Miss Erika [the Grantor];
WHEREAS, the Company, Squire and Miss Erika [the Grantor] have
requested that the Existing Financing Agreement be amended and restated to,
among other things (i) prepay the term loan in full, (ii) increase the revolving
credit facility to provide revolving credit loans to the Borrowers at any one
time outstanding not to exceed $175,000,000 (the "Revolving Credit Loans", and
----------------------
each a "Loan" and collectively, the "Loans"), which may include letters of
---- -----
credit (the "Letters of Credit") issued with the assistance of the Collateral
-----------------
Agent and the Lenders for the account of the Borrowers, (iii) extend the
maturity date of the revolving credit facility and (iv) add [the Grantor] [JJ
Acquisition Corp., a Delaware corporation to be known as Jeri-Jo Knitwear,
<PAGE>
Inc.("Jeri-Jo" and together with Squire and Miss Erika each, a "Borrower" and
------- --------
collectively, the "Borrowers")] as a Borrower;
---------
WHEREAS, pursuant to such request the Company, Squire, Miss Erika,
[the Grantor] [Jeri-Jo], the Collateral Agent, the Administrative Agent, Fleet
Bank, NA, as documentation agent (the "Documentation Agent"), and the financial
-------------------
institutions from time to time party thereto (the "Lenders") have entered into
-------
an Amended and Restated Financing Agreement, dated as of June __, 1998 (such
agreement, as amended, restated or otherwise modified from time to time, being
hereinafter referred to as the "Amended and Restated Financing Agreement"); and
----------------------------------------
WHEREAS, it is a condition precedent to the Lenders making any Loan or
assisting the Grantor in obtaining the issuance of any Letter of Credit pursuant
to the Amended and Restated Financing Agreement that the Grantor shall have
executed and delivered to the Collateral Agent a security agreement providing
for the grant to the Collateral Agent for the benefit of the Lenders of a
security interest in all personal property of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans and to
assist the Grantor in obtaining the issuance of Letters of Credit pursuant to
the Amended and Restated Financing Agreement, the Grantor hereby agrees with the
Collateral Agent as follows:
SECTION 1. Definitions. Reference is hereby made to the Amended and
-----------
Restated Financing Agreement for a statement of the terms thereof. All terms
used in this Agreement which are defined in the Amended and Restated Financing
Agreement or in Article 9 of the Uniform Commercial Code (the "Code") currently
----
in effect in the State of New York and which are not otherwise defined herein
shall have the same meanings herein as set forth therein.
SECTION 2. Grant of Security Interest. As collateral security for
--------------------------
all of the Obligations (as defined in Section 3 hereof), the Grantor hereby
pledges and collaterally assigns to the Collateral Agent, and grants to the
Collateral Agent for the benefit of the Lenders a continuing security interest
in, all personal property and fixtures of the Grantor, wherever located and
whether now or hereafter existing and whether now owned or hereafter acquired,
of every kind and description, tangible or intangible (the "Collateral"),
----------
including, without limitation, all of the Grantor's right, title and interest in
and to the following:
(a) all equipment of any kind including, without limitation, all
furniture, fixtures and machinery, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired, together with all
substitutes, replacements, accessions and additions thereto, and all tools,
parts, accessories and attachments used in connection therewith (hereinafter
collectively referred to as the "Equipment");
---------
(b) all inventory of any kind wherever located and whether now or
hereafter existing and whether now owned or hereafter acquired, (including,
without limitation, all types of inventory, merchandise, goods, property and
other assets that are held by the Grantor for sale, lease
-2-
<PAGE>
or other disposition or to be furnished under a contract for services, whether
such inventory, merchandise, goods, property and other assets are raw, in
process, finished, trim or piece goods, and materials used or consumed in the
business of the Grantor, and goods returned to or repossessed by the Grantor and
goods in which the Grantor has an interest in mass or in joint or other interest
or right of any kind, including consigned goods and goods being processed), and
all accessions thereto and products thereof and all packing and shipping
materials (any and all such inventory, accessions and products being hereinafter
referred to as the "Inventory");
---------
(c) (i) all present and future accounts, contract rights, chattel
paper, documents, instruments, general intangibles and other obligations of any
kind arising out of or in connection with the sale, lease or other disposition
of goods or the rendering of services or otherwise; (ii) all of the Grantor's
right, title and interest, and all of the Grantor's rights, remedies, security
and Liens, in, to and in respect of any credit insurance, accounts (including,
without limitation, rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party), guaranties or other contracts of suretyship with respect to accounts,
and deposits or other security for the obligation of any Account Debtor; (iii)
all rights relating to the sale or other transfer of property to, or the
construction, renovation, processing or other improvement of property by or for
the Grantor; (iv) all rights now or hereafter existing in and to all letters of
credit, security agreements, leases and other contracts now or hereafter
existing and securing or otherwise relating to such accounts, contract rights,
chattel paper, instruments, documents, general intangibles or other rights or
obligations (including, without limitation, the contracts described in SCHEDULE
I hereto); (v) all goods relating to, or which by sale have resulted in,
accounts, including, without limitation, all goods described in invoices or
other documents or instruments with respect to, or otherwise representing or
evidencing, any accounts, and all returned, reclaimed or repossessed goods; and
(vi) all credit balances and other amounts due and owing to the Grantor under
the [amended and restated] factoring agreement between NationsBanc Commercial
Corporation and the Grantor dated as of ___________ __, 199_, as amended,
restated or otherwise modified from time to time (the "Factoring Agreement") and
-------------------
all agreements which replace or supersede the Factoring Agreement (any and all
such accounts, contract rights, chattel paper, instruments, documents, general
intangibles and obligations being hereinafter referred to collectively as the
"Receivables", and any and all such credit insurance, guaranties, letters of
-----------
credit, security agreements, leases and other contracts being hereinafter
referred to collectively as the "Related Contracts");
-----------------
(d) (i) all trademarks, service marks, trade names, business names,
trade styles, designs, logos and other source or business identifiers and all
general intangibles of like nature, now or hereafter owned, adopted, acquired or
used by the Grantor (including, without limitation, all trademarks, service
marks, trade names, business names, trade styles, designs, logos and other
source or business identifiers described in SCHEDULE II or VI hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other records of the Grantor relating to the distribution of
products and services in connection with which any of
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<PAGE>
such marks are used, and all income, royalties, damages and payments now or
hereafter due and/or payable under and with respect thereto, including, without
limitation, payments under all licenses entered into in connection therewith and
damages and payments for past and future infringements or dilution's thereof and
the right to sue for past, present and future infringements and dilutions
thereof (hereinafter referred to collectively as the "Trademarks"), and (ii) all
----------
licenses, contracts or other agreements, whether written or oral,
naming the Grantor as licensor or licensee and providing for the grant of any
right to use any Trademark, including, without limitation, all Trademark
Licenses described in SCHEDULE II hereto, together with any goodwill connected
with and symbolized by any such trademark licenses or agreements and the right
to prepare for sale and sell any and all Inventory now or hereafter owned by the
Grantor and now or hereafter covered by such licenses (hereinafter referred to
collectively as the "Trademark Licenses");
------------------
(e) (i) all letters patent, design patents and utility patents, and
all inventions, trade secrets, proprietary information and technology, know-how,
formulae and other general intangibles of like nature, now existing or hereafter
acquired (including, without limitation, all letters patent, design patents and
utility patents described in SCHEDULE III hereto), all applications,
registrations and recordings thereof (including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof (hereinafter referred to collectively as the "Patents"), and (ii) all
-------
licenses, contracts or other agreements, whether written or oral, naming the
Grantor as licensee or licensor and providing for the grant of any right to
manufacture, use or sell any invention covered by any patent (hereinafter
referred to collectively as the "Patent Licenses") (including, without
---------------
limitation, all Patent Licenses set forth in SCHEDULE III hereto);
(f) (i) all copyrights, including, without limitation, all original
works of authorship fixed in any tangible medium of expression, acquired or used
by the Grantor (including, without limitation, all copyrights described in
SCHEDULE IV hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Copyright Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof (hereinafter referred to collectively as the "Copyrights"), and
----------
(ii) all licenses, contracts or other agreements, whether written or oral,
naming the Grantor as licensee or licensor and providing for the grant of any
right to use or sell any works covered by any copyright (hereinafter referred to
collectively as the "Copyright Licenses" and together with the Trademark
------------------
Licenses and the Patent Licenses, the "Licenses") (including, without
--------
limitation, all Copyright Licenses set forth in SCHEDULE IV hereto);
(g) (i) all moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, the Collateral
Agent, the Administrative Agent or any Lender from or for the Grantor, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and all
of the Grantor's sums and credits with, and all of the Grantor's
-4-
<PAGE>
claims against the Collateral Agent, the Administrative Agent or any Lender at
any time existing; (ii) all rights, interests, choses in action, causes of
actions, claims and all other intangible property of every kind and nature, in
each instance whether now owned or hereafter acquired by the Grantor, including,
without limitation, all corporate and other business records, all loans,
royalties, and all other forms of obligations receivable whatsoever (other than
Receivables); (iii) all computer programs, software, printouts and other
computer materials, customer lists, credit files, correspondence, advertising
materials and other source or business identifiers; (iv) all customer and
supplier contracts, sale orders, rights under license and franchise agreements,
and other contracts and contract rights[, including without limitation, all
rights of Grantor in the Miss Erika Acquisition Agreement and all related
agreements] [, including without limitation, all rights of Grantor in the Jeri-
Jo Purchase Agreement and all related agreements]; (v) all interests in
partnerships, limited liability companies and joint ventures, including all
moneys due from time to time in respect thereof; (vi) all federal, state and
local tax refunds and federal, state and local tax refund claims and all
judgments in favor of Grantor and all of Grantor's rights with respect thereto;
(vii) all right, title and interest under leases, subleases, licenses and
concessions and other agreements relating to personal property, including all
moneys due from time to time in respect thereof; (viii) all payments due or made
to the Grantor in connection with any requisition, confiscation, condemnation,
seizure or forfeiture of any property by any Person or Governmental Authority;
(ix) all lock-box and all deposit accounts (general or special) or other
accounts with any bank or other financial institution, including, without
limitation, all depository or other accounts maintained by the Grantor at the
Administrative Agent, the Collateral Agent or any Lender and all funds on
deposit therein; (x) all credits with and other claims against third parties
(including carriers and shippers) (other than Receivables); (xi) all rights to
indemnification; (xii) all reversionary interests in pension and profit sharing
plans and reversionary, beneficial and residual interests in trusts; (xiii) all
proceeds of insurance of which the Grantor is the beneficiary; (xiv) all letters
of credit, guaranties, liens, security interests and other security held by or
granted to the Grantor; (xv) all instruments, files, records, ledger sheets and
documents covering or relating to any of the Collateral; and (xvi) all general
intangibles, whether or not similar to the foregoing, in each instance, however
and wherever arising;
(h) the books and records of the Grantor relating to any of the
foregoing Collateral, including, without limitation, all customer contracts,
sale orders, minute books, ledgers, records, computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence and advertising materials, in each case indicating, summarizing
or evidencing any of the Collateral; and
(i) all cash and non-cash proceeds of any and all of the foregoing
Collateral (including, without limitation, (i) damages and payments for past or
future infringements of the Trademarks, the Patents or the Copyrights and (ii)
the right to sue for past, present and future infringements of the Trademarks,
the Patents or the Copyrights) and, to the extent not otherwise included, all
payments under insurance (whether or not the Collateral Agent is the loss payee
thereof) and any indemnity, warranty or guaranty payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral;
-5-
<PAGE>
in each case howsoever the Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise); provided that,
--------
nothing hereunder constitutes or shall be deemed to constitute the grant of a
security interest in favor of the Collateral Agent in the Grantor's interest in
any Related Contract or other contract right, any License or other license
agreement, any lease or any other general intangible (other than any of the
foregoing constituting an account or a general intangible for money due or to
become due to which Section 9-318(4) of the Code applies) (each such contract
right, license agreement, lease and other general intangible, other than those
described in the preceding parenthesis, being hereinafter referred to as
"Excluded Property"), if the granting of a security interest therein by the
-----------------
Grantor to the Collateral Agent is prohibited by the terms and provisions of the
written agreement, document or instrument creating or evidencing such Excluded
Property, and either (i) such agreement, document or instrument was entered into
prior to the date of this Agreement, or (ii) such agreement, document or
instrument is entered into after the date of this Agreement and the Grantor
delivers to the Collateral Agent a copy of such agreement, document or
instrument, provided, however, that (1) if and when the prohibition which
-------- -------
prevents the granting by the Grantor to the Collateral Agent of a security
interest in any Excluded Property is removed or otherwise terminated, the
Collateral Agent will be deemed to have, and at all times to have had, a
security interest in such Excluded Property, and (2) the Grantor shall use its
reasonable efforts to exclude from any written agreement, document or instrument
entered into on or after the date of this Agreement creating or evidencing any
contract right, license, lease or general intangible, any prohibition against
the granting by the Grantor to the Collateral Agent of a security interest
therein to the extent that such exclusion or such efforts would not result in
such agreement, document or instrument containing terms which are less favorable
to the Grantor than would be the case but for such exclusion or such efforts or
would result in a decision by the Persons proposed to be parties to such
agreement, document or instrument not to enter into such agreement, document or
instrument. Notwithstanding anything set forth herein to the contrary, the
Collateral Agent will be deemed to have, and at all times to have had, a
security interest in the proceeds of such Excluded Property.
SECTION 3. Security for Obligations. The security interest created
------------------------
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
-----------
(a) the prompt payment by the Grantor, as and when due and payable,
of all amounts from time to time owing by it in respect of the Amended and
Restated Financing Agreement, the Notes, its Guaranty and the other Loan
Documents, including, without limitation, principal of and interest on the Loans
(including, without limitation, all interest that accrues after the commencement
of any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of the Grantor, whether or not a claim for post-filing
interest is allowed in such proceeding), all Letter of Credit Obligations and
Ledger Debt and all interest thereon, all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any Loan Document; and
-6-
<PAGE>
(b) the due performance and observance by the Grantor of all of its
other obligations from time to time existing in respect of the Amended and
Restated Financing Agreement, the Notes, its Guaranty and all other Loan
Documents.
SECTION 4. Representations and Warranties. The Grantor represents
------------------------------
and warrants as follows:
(a) There is no pending or, to the knowledge of the Grantor,
threatened action, suit, proceeding or claim before any court or other
Governmental Authority or any arbitrator, or any order, judgment or award by any
court or other Governmental Authority or arbitrator, that may adversely affect
the grant by the Grantor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or the exercise by the Collateral Agent
of any of its rights or remedies hereunder.
(b) All taxes, assessments and other governmental charges imposed
upon the Grantor or any property of the Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except (i)
to the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine and Lien resulting from the non-payment thereof
and with respect to which adequate reserves in accordance with GAAP have been
established for the payment thereof and (ii) Liens permitted by Section
7.01(c)(ii)(B) of the Amended and Restated Financing Agreement.
(c) All Equipment and Inventory is located at the addresses specified
therefor in SCHEDULE V hereto or at such other locations permitted by the terms
of Section 5(b) hereof. The Grantor's chief place of business and chief
executive office, the place where the Grantor keeps its records concerning
Receivables and all originals of all chattel paper which constitute Receivables
are located at the addresses specified therefor in SCHEDULE V hereto. None of
the Receivables is evidenced by a promissory note or other instrument unless
such promissory note or instrument has been pledged to the Collateral Agent.
Set forth in SCHEDULE VI hereto is a complete and correct list of each trade
name used by the Grantor.
(d) The Grantor has delivered to the Collateral Agent complete and
correct copies of each Related Contract described on SCHEDULE I hereto, which
represent all of the Related Contracts existing on the date of this Agreement,
the Factoring Agreement, the Miss Erika Acquisition Agreement, the Jeri-Jo
Purchase Agreement and each License described in SCHEDULE II, SCHEDULE III and
Schedule IV hereto, including in each such case all schedules and exhibits
thereto. Each Related Contract, Factoring Agreement and License sets forth the
entire agreement and understanding of the parties thereto relating to the
subject matter thereof, and there are no other agreements, arrangements or
understandings, written or oral, relating to the matters covered thereby or the
rights of the Grantor in respect thereof. Each Related Contract now existing
is, and each other Related Contract will be, the legal, valid and binding
obligation of the parties thereto, enforceable against such parties in
accordance with its terms, subject as to enforceability to applicable
bankruptcy, insolvency, reorganization and similar laws affecting creditors'
rights and to general principles of equity. To the knowledge of the Grantor, no
default
-7-
<PAGE>
thereunder by any such party has occurred, nor does any defense, offset,
deduction or counterclaim exist thereunder in favor of any such party.
(e) The Grantor owns and controls, or otherwise possesses adequate
rights to use, all Trademarks, Patents and Copyrights, which are the only
trademarks, patents and copyrights necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. SCHEDULE II
hereto sets forth a true and complete list of all Trademarks and Trademark
Licenses owned or used by the Grantor as of the date hereof. SCHEDULE III
hereto sets forth a true and complete list of all Patents and Patent Licenses
owned or used by the Grantor as of the date hereof. SCHEDULE IV hereto sets
forth a true and complete list of all Copyrights and Copyright Licenses owned or
used by the Grantor as of the date hereof. All of such Copyrights, Patents and
Trademarks are subsisting and in full force and effect, have not been adjudged
invalid or unenforceable, are valid and enforceable and have not been abandoned
in whole or in part. Except as set forth in SCHEDULE II, III or IV hereto, none
of such Copyrights, Patents or Trademarks is the subject of any licensing or
franchising agreement. The Grantor has no knowledge of any conflict with the
rights of others to any Trademark, Patent or Copyright and, to the best
knowledge of the Grantor, the Grantor is not now infringing or in conflict with
any such rights of others in any material respect, and to the best knowledge of
the Grantor, no other Person is now infringing or in conflict in any material
respect with any such properties, assets and rights owned or used by the
Grantor.
(f) The Grantor is the sole and exclusive owner of the Collateral
free and clear of any Lien, except for (i) the security interest created by this
Agreement, (ii) the security interests and other encumbrances permitted by the
Amended and Restated Financing Agreement and (iii) sales of assets permitted by
the terms of the Amended and Restated Financing Agreement. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office, except (i)
such as may have been filed in favor of the Collateral Agent relating to this
Agreement, and (ii) such as may have been filed to perfect or protect any
security interest or encumbrance permitted by the Amended and Restated Financing
Agreement.
(g) The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene law or any contractual restriction
binding on or otherwise affecting the Grantor or any of its properties and will
not result in or require the creation of any Lien, security interest or other
charge or encumbrance upon or with respect to any of its properties.
(h) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority or any other Person, is required for
(i) the grant by the Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral or (ii) the exercise by the
Collateral Agent of any of its rights and remedies hereunder, except (A) for the
filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in SCHEDULE VII hereto, (B)
with respect to the perfection of the security interest created hereby in the
United States Trademarks, United States Patents and United States Copyrights for
the recording of the Assignment for Security (Trademarks), substantially in the
form of Exhibit A hereto, the Assignment for Security (Patents), substantially
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in the form of Exhibit B hereto, or the Assignment for Security (Copyrights),
substantially in the form of Exhibit C hereto, as applicable, in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable or (C) with respect to the perfection of the security interest
created hereby in foreign Trademarks, Patents and Copyrights, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to Patents, Trademarks, Copyrights, Patent
Licenses, Trademark Licenses and Copyright Licenses.
(i) This Agreement creates valid security interests in favor of the
Collateral Agent for the benefit of the Lenders in the Collateral, as security
for the Obligations. The Collateral Agent's having possession of all
instruments and cash constituting Collateral from time to time, the recording of
the Assignment for Security (Trademarks), the Assignment for Security (Patents)
and the Assignment for Security (Copyrights), as applicable, executed pursuant
hereto in the United States Patent and Trademark Office and the United States
Copyright Office, as applicable, and the filing of the financing statements
described in SCHEDULE VII hereto and, with respect to Patents, Trademarks and
Copyrights hereafter existing and not covered by an Assignment for Security
(Trademarks), an Assignment for Security (Patents) or an Assignment for Security
(Copyrights), as applicable, the recording in the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, of
appropriate instruments of assignment, result in the perfection of such security
interests. Such security interests are, or in the case of Collateral in which
the Grantor obtains rights after the date hereof, will be, perfected, first
priority security interests, subject only to the security interests and other
encumbrances permitted pursuant to the Amended and Restated Financing Agreement.
SECTION 5. Covenants as to the Collateral. So long as any of the
------------------------------
Obligations shall remain outstanding or the Total Commitment shall not have
terminated, unless the Collateral Agent shall otherwise consent in writing:
(a) Further Assurances. The Grantor will at its expense, at any time
------------------
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or reasonably
desirable or that the Collateral Agent may reasonably request in order (i) to
perfect and protect the security interest purported to be created hereby; (ii)
to enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously each chattel paper included in the Receivables and each License
and Related Contract and, at the request of the Collateral Agent, each of its
records pertaining to the Collateral with a legend, in form and substance
reasonably satisfactory to the Collateral Agent, indicating that such chattel
paper, License, Related Contract or Collateral is subject to the security
interest created hereby, (B) if any Receivable shall be evidenced by a
promissory note or other instrument or chattel paper, delivering and pledging to
the Collateral Agent hereunder any such note, instrument or chattel paper duly
endorsed and accompanied by executed instruments of transfer or assignment, all
in form and substance reasonably satisfactory to the Collateral Agent, (C)
executing and filing such financing or continuation statements, or amendments
thereto, as may be necessary or reasonably desirable or that the Collateral
Agent may reasonably request in order to perfect and preserve the security
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interest purported to be created hereby, and (D) furnishing to the Collateral
Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.
(b) Location of Equipment and Inventory. The Grantor will keep the
-----------------------------------
Equipment and Inventory (other than used Equipment and Inventory sold in the
ordinary course of business in accordance with Section 5(g) hereof) at the
locations specified therefor in Section 4(c) hereof, or, upon written notice to
the Collateral Agent in accordance with Section 7.01(n) of the Amended and
Restated Financing Agreement accompanied by a new SCHEDULE V hereto indicating
each new location of the Equipment and Inventory, at such other locations in the
continental United States as the Grantor may elect, provided that (i) the
Grantor shall promptly have taken all action requested by the Collateral Agent
to grant to the Collateral Agent a perfected, first priority security interest
in such Equipment and Inventory, and (ii) the Collateral Agent's rights in such
Equipment and Inventory, including, without limitation, the existence,
perfection and priority of the security interest created hereby in such
Equipment and Inventory, are not adversely affected thereby.
(c) Condition of Equipment. The Grantor will maintain or cause to be
----------------------
maintained in good working order and condition, excepting ordinary wear and tear
and damage due to casualty, all of the Equipment. The Grantor shall promptly
furnish to the Collateral Agent a statement describing in reasonable detail any
loss or damage in excess of $100,000 to any Equipment or Inventory due to
casualty.
(d) Taxes, Etc. The Grantor will pay promptly when due all property
----------
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except (i) to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the
payment thereof or (ii) Liens permitted by Section 7.01(c)(ii)(B) of the Amended
and Restated Financing Agreement.
(e) Insurance.
---------
(i) The Grantor will, at its own expense, maintain insurance as
required by Section 7.01(h) of the Amended and Restated Financing Agreement.
Each policy for liability insurance shall provide for all losses to be paid on
behalf of the Collateral Agent and the Grantor as their respective interests may
appear. Each policy for property damage insurance shall provide for all losses
(except for losses of less than $__________ per occurrence and losses accruing
during the continuance of an Event of Default), to be adjusted with, and paid
directly to the Collateral Agent. Each such policy shall in addition (A) name
the Grantor and the Collateral Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the Collateral Agent) as their
interests may appear, (B) contain the agreement by the insurer that any loss
thereunder shall be payable, notwithstanding any action, inaction or breach of
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representation or warranty by the Grantor, (C) provide that there shall be no
recourse against the Collateral Agent for payment of premiums or other amounts
with respect thereto, and (D) provide that at least 30 days' prior written
notice of cancellation or of lapse shall be given to the Collateral Agent by the
insurer. The Grantor will, if so requested by the Collateral Agent, deliver to
the Collateral Agent original or duplicate policies of such insurance and, as
often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. The Grantor will also, at the
request of the Collateral Agent, execute and deliver instruments of assignment
of such insurance policies and cause the respective insurers to acknowledge
notice of such assignment.
(ii) Payment under any liability insurance maintained by the Grantor
pursuant to this Section 5(e) may be paid directly to the Person who shall have
incurred liability covered by such insurance. In the case of any loss involving
damage to Equipment or Inventory as to which clause (iii) of this Section 5(e)
is not applicable, the Grantor will, in the exercise of its reasonable business
judgment, make or cause to be made the necessary repairs to or replacements of
such Equipment and Inventory, and any proceeds of insurance maintained by the
Grantor pursuant to this Section 5(e) shall upon receipt by the Collateral
Agent, be paid to the Grantor as reimbursement for the costs of such repairs or
replacements.
(iii) Upon the occurrence and during the continuance of an Event of
Default or the actual or constructive total loss (in excess of $_____ per
occurrence) of any Equipment or Inventory, all insurance payments in respect of
such Equipment and Inventory shall be paid to the Collateral Agent and applied
as specified in Section 7(b) hereof.
(f) Provisions Concerning the Receivables, the Related Contracts and
----------------------------------------------------------------
the Licenses.
- ------------
(i) The Grantor will (A) give the Collateral Agent at least 30 days'
prior written notice of any change in the Grantor's name, identity or corporate
structure, (B) keep its chief place of business and chief executive office and
all originals of all chattel paper which constitute Receivables at the
location(s) specified therefor in SCHEDULE V hereof or such other location for
which the Grantor has complied with all of the provisions of Section 5(b)
hereof, and (C) keep adequate records concerning the Receivables and such
chattel paper and permit representatives of the Collateral Agent during normal
business hours, upon reasonable notice and without undue interruption of the
business of the Grantor to inspect and make abstracts from such records and
chattel paper pursuant to the terms of the Amended and Restated Financing
Agreement, provided that such notice shall not be required during the
continuance of an Event of Default.
(ii) The Grantor will duly perform and observe all of its obligations
under each Related Contract and, except as otherwise provided in the Factoring
Agreement and in this subsection (f), continue to collect, at its own expense,
all amounts due or to become due under the Receivables. In connection with such
collections and subject to the prior rights of the Factor under the Factoring
Agreement and the Assignment Agreement, the Grantor may (and, at the Collateral
Agent's direction, will) take such action as the Grantor or the Collateral Agent
may
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deem necessary or advisable to enforce collection or performance of the
Receivables; provided, however, subject to the prior rights of the Factor under
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the Factoring Agreement and the Assignment Agreement, the Collateral Agent shall
have the right at any time, upon the occurrence and during the continuance of an
Event of Default, to notify the Account Debtors or obligors under any
Receivables of the assignment of such Receivables to the Collateral Agent and to
direct such Account Debtors or obligors to make payment of all amounts due or to
become due to the Grantor thereunder directly to the Collateral Agent or its
designated agent and, upon such notification and at the expense of the Grantor
and to the extent permitted by law, 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 Grantor might have done. After
receipt by the Grantor of a notice from the Collateral Agent that the Collateral
Agent has notified or intends to notify the Account Debtors or obligors under
any Receivables as referred to in the proviso to the immediately preceding
sentence and subject to the prior rights of the Factor under the Factoring
Agreement and the Assignment Agreement, (A) all amounts and proceeds (including
instruments) received by the Grantor in respect of the Receivables shall be
received in trust for the benefit of the Collateral Agent hereunder, shall be
segregated from other funds of the Grantor and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary
indorsement) to be held as cash collateral and either (1) credited to the Loan
Account so long as no Event of Default shall have occurred and be continuing or
(2) if any Event of Default shall have occurred and be continuing, applied as
specified in Section 7(b) hereof, and (B) the Grantor will not adjust, settle or
compromise the amount or payment of any Receivable or release wholly or partly
any Account Debtor or obligor thereof or allow any credit or discount thereon.
In addition, subject to prior rights of the Factor under the Factoring Agreement
and the Assignment Agreement, upon the occurrence and during the continuance of
an Event of Default, the Collateral Agent shall have the right to notify the
United States Postal Service authorities to change the address for delivery of
mail addressed to the Grantor to such address as the Collateral Agent may
designate and to do all other acts and things necessary to carry out this
Agreement. For the avoidance of doubt, as long as the Factoring Agreement
remains in effect, the Collateral Agent will not exercise any rights with
respect to the Receivables prohibited by or which are inconsistent with the
terms of the Factoring Agreements or the Assignment Agreement.
(iii) Upon the occurrence and during the continuance of any breach or
default under any Related Contract referred to in SCHEDULE I hereto or otherwise
specified in writing by the Collateral Agent from time to time or any License
referred to in SCHEDULE II, III or IV hereto by any party thereto other than the
Grantor, the Grantor will (A) promptly after obtaining knowledge thereof, give
the Collateral Agent written notice of the nature and duration thereof,
specifying what action, if any, it has taken and proposes to take with respect
thereto, and (B) upon written instructions from the Collateral Agent and at the
Grantor's expense, take such action as the Collateral Agent may deem reasonably
necessary or advisable in respect thereof.
(iv) The Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any Related Contract referred to in SCHEDULE I hereto
or otherwise specified by the Collateral Agent from time to time or any License
referred to in SCHEDULE II, III or IV hereto purports to
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<PAGE>
exercise any of its rights or affect any of its obligations thereunder which is
reasonably likely to have a Material Adverse Effect, together with a copy of any
reply by the Grantor thereto.
(v) The Grantor will take all action necessary to maintain all
Licenses in full force and effect, except where such failure to maintain would
not be reasonably likely to have a Material Adverse Effect. The Grantor will
not, without the prior written consent of the Collateral Agent, cancel,
terminate, amend or otherwise modify in any respect, or waive any provision of,
any Related Contract referred to in SCHEDULE I hereto or any License referred to
in SCHEDULE II, III or IV hereto to the extent such action is reasonably likely
to have a Material Adverse Effect.
(g) Transfers and Other Liens.
-------------------------
(i) The Grantor will not sell, assign (by operation of law or
otherwise), lease, exchange or otherwise transfer or dispose of any of the
Collateral except to the extent permitted under Section 7.02(d)(ii) of the
Amended and Restated Financing Agreement, subject to the obligation of the
Grantor to make payments pursuant to Section 2.07(g) of the Amended and Restated
Financing Agreement.
(ii) The Grantor will not create or suffer to exist any Lien,
security interest or other charge or encumbrance upon or with respect to any
Collateral, except for (A) the Liens and security interest created by this
Agreement and the other Loan Documents and (B) the Liens, security interests and
other encumbrances permitted by the Amended and Restated Financing Agreement .
(h) Trademarks, Patents and Copyrights.
----------------------------------
(i) If applicable, the Grantor has duly executed and delivered
the Assignment for Security (Trademarks) in the form attached hereto as Exhibit
A, the Assignment for Security (Patents) in the form attached hereto as Exhibit
B and the Assignment for Security (Copyrights) in the form attached hereto as
Exhibit C. The Grantor (either itself or through licensees) will, and will cause
each licensee thereof to, take all action reasonably necessary to maintain all
of the Trademarks, Patents and Copyrights in full force and effect, including,
without limitation, using the proper statutory notices and markings and using
the Trademarks on each applicable trademark class of goods in order to so
maintain the Trademarks in full force free from any claim of abandonment for
nose, and the Grantor will not (and will not permit any licensee thereof to) do
any act or knowingly omit to do any act whereby any Trademark or Copyright may
become invalidated; provided, however, that so long as no Event of Default
-------- -------
has occurred and is continuing, the Grantor shall have no obligation to use or
to maintain any Trademark or Copyright (A) that relates solely to any product or
work that has been, or is in the process of being, discontinued, abandoned or
terminated, (B) that is being replaced with a trademark or copyright
substantially similar to the Trademark or Copyright, as the case may be,that may
be abandoned or otherwise become invalid, so long as such replacement Trademark
or Copyright, as the case may be is subject to the security interest purported
to be created by this Agreement, (C) that is substantially the same as another
Trademark or Copyright, as the case
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<PAGE>
may be, that is in full force, so long as such other Trademark or Copyright, as
the case may be, is subject to the Lien and security interest created by this
Agreement, or (D) that is not necessary for the operation of Grantor's business
and is discontinued or disposed of in the ordinary course of business. The
Grantor will cause to be taken all necessary steps in any proceeding before the
United States Patent and Trademark Office and the United States Copyright Office
to maintain each registration of the Trademarks, the Patents and the Copyrights
(other than those Trademarks and Copyrights described in the proviso to the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings and payment of taxes. If any
Trademark, Patent or Copyright is infringed, misappropriated or diluted in any
material respect by a third party, the Grantor shall (x) upon learning of such
infringement, misappropriation or dilution, promptly notify the Collateral Agent
and (y) to the extent the Grantor shall deem appropriate under the
circumstances, promptly sue for infringement, misappropriation or dilution, seek
injunctive relief where appropriate and recover any and all damages for such
infringement, misappropriation or dilution, or take such other actions as the
Grantor shall deem appropriate under the circumstances to protect such
Trademark, Patent or Copyright. The Grantor shall furnish to the Collateral
Agent from time to time (but, unless an Event of Default has occurred and is
continuing, no more frequently than annually) statements and schedules further
identifying and describing the Patents, the Trademarks and the Copyrights and
such other reports in connection with the Patents, the Trademarks and the
Copyrights as the Collateral Agent may reasonably request, all in reasonable
detail and promptly upon request of the Collateral Agent, following receipt by
the Collateral Agent of any such statements, schedules or reports, the Grantor
shall modify this Agreement by amending SCHEDULES II, III or IV hereto, as the
case may be, to include any Patent, Trademark or Copyright which becomes part of
the Collateral under this Agreement. Notwithstanding anything herein to the
contrary, upon the occurrence and during the continuance of an Event of Default
the Grantor may not abandon or otherwise permit a Trademark, Patent or Copyright
to become invalid without the prior written consent of the Collateral Agent, and
if any Trademark, Patent or Copyright is infringed, misappropriated or diluted
in any material respect by a third party, the Grantor will take such action as
the Collateral Agent shall deem appropriate under the circumstances to protect
such Trademark, Patent or Copyright.
(ii) In no event shall the Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the issuance of any Patent with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, unless it gives the Collateral Agent written notice thereof, but in
no event later than 5 Business Days after the filing of any such application.
Upon request of the Collateral Agent, the Grantor shall execute and deliver any
and all assignments, agreements, instruments, documents and papers as the
Collateral Agent may reasonably request to evidence the Collateral Agent's
security interest hereunder in such Trademark, Patent or Copyright and the
general intangibles of the Grantor relating thereto or represented thereby, and
the Grantor hereby constitutes the Collateral Agent its attorney-in-fact to
execute and file, during the continuance of an Event of Default, all such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed, and such power (being coupled with an interest) shall be
irrevocable until the termination of the Total
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Commitment, the repayment of all of the Obligations in full and the termination
of the Loan Documents.
(j) Inspection and Reporting. The Grantor shall permit the
------------------------
Collateral Agent, the Administrative Agent or any Lender, or any agents or
representatives thereof or such professionals or other Persons as the Collateral
Agent may designate (i) to examine and inspect the books and records of the
Grantor and take copies and extracts therefrom, (ii) to verify materials,
leases, notes, receivables, inventory and other assets of the Grantor from time
to time, and (iii) to conduct physical counts, appraisals and/or valuations at
the locations of the Grantor, in each case as provided and subject to the
confidentiality requirements set forth in the Amended and Restated Financing
Agreement.
SECTION 6. Additional Provisions Concerning the Collateral.
-----------------------------------------------
(a) The Grantor hereby authorizes the Collateral Agent to file,
without the signature of the Grantor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral.
(b) The Grantor hereby irrevocably appoints the Collateral Agent the
Grantor's attorney-in-fact and proxy, with full authority in the place and stead
of the Grantor and in the name of the Grantor or otherwise, from time to time in
the Collateral Agent's discretion upon the occurrence and during the continuance
of an Event of Default, to take any action and to execute any instrument which
the Collateral Agent may deem necessary or advisable to accomplish the purposes
of this Agreement (subject to the rights of the Grantor under Section 5(f)
hereof), including, without limitation, (i) to obtain and adjust insurance
required to be paid to the Collateral Agent pursuant to Section 5(e) hereof, and
to receive, indorse and collect any drafts or other instruments, documents and
chattel paper in connection therewith, (ii) to ask, demand, collect, sue for,
recover, compound, receive and give acquittance and receipts for moneys due and
to become due under or in respect of any Collateral, (iii) to receive, indorse,
and collect any drafts or other instruments, documents and chattel paper in
connection with clause (i) or (ii) above, and (iv) to file any claims or take
any action or institute any proceedings which the Collateral Agent may deem
necessary or desirable for the collection of any Collateral or otherwise to
enforce the rights of the Collateral Agent with respect to any Collateral.
(c) For the purpose of enabling the Collateral Agent to exercise
rights and remedies hereunder at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose, the Grantor hereby grants to the Collateral Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to the Grantor) to use, assign, license or
sublicense any of the Patents, Trademarks or Copyrights now owned or hereafter
acquired by the Grantor, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof. Notwithstanding anything contained herein to the contrary,
but subject to the provisions of the Amended and Restated Financing Agreement
that limits the right of the Grantor to dispose of its property and Section 5(h)
hereof, so long as no Event of
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Default shall have occurred and be continuing,the Grantor may exploit, use,
enjoy, protect, license, sublicense, assign, sell, dispose of or take other
actions with respect to the Patents, Trademarks or Copyrights in the ordinary
course of the business of the Grantor. In furtherance of the foregoing, unless
an Event of Default shall have occurred and be continuing the Collateral Agent
shall promptly from time to time, upon the request of the Grantor, execute and
deliver any instruments, certificates or other documents, in the form so
requested, which the Grantor shall have certified are appropriate (in its
judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to this clause (c) as to any
Patents, Trademarks or Copyrights and the release of the Lien created hereby).
Further, upon the payment in full of all of the Obligations and cancellation or
termination of the Total Commitments, the Collateral Agent (subject to Section
10(e) hereof) shall transfer to the Grantor all of the Collateral Agent's right,
title and interest in and to the Patents, Trademarks and Copyrights, and the
Licenses, all without recourse, representation or warranty whatsoever. The
exercise of rights and remedies hereunder by the Collateral Agent shall not
terminate the rights of the holders of any licenses or sublicenses theretofore
granted by the Grantor in accordance with the second sentence of this clause
(c). The Grantor hereby releases the Collateral Agent from any claims, causes of
action and demands at any time arising out of or with respect to any actions
taken or omitted to be taken by the Collateral Agent under the powers of
attorney granted herein other than actions taken or omitted to be taken through
the Collateral Agent's gross negligence or willful misconduct.
(d) If the Grantor fails to perform any agreement contained herein,
the Collateral Agent may itself perform, or cause performance of, such agreement
or obligation, in the name of the Grantor or the Collateral Agent, and the
expenses of the Collateral Agent incurred in connection therewith shall be
payable by the Grantor pursuant to Section 8 hereof and shall be secured by the
Collateral.
(e) The powers conferred on the Collateral Agent hereunder are solely
to protect its interest in the Collateral and shall not impose any duty upon it
to exercise any such powers. Except for the safe custody of any Collateral in
its possession and the accounting for moneys actually received by it hereunder,
the Collateral Agent shall have no duty as to any Collateral or as to the taking
of any necessary steps to preserve rights against prior parties or any other
rights pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding (i) the Grantor
shall remain liable under the Related Contracts, Factoring Agreement and
Licenses and otherwise with respect to any of the Collateral to the extent set
forth therein to perform all of its obligations thereunder to the same extent as
if this Agreement had not been executed, (ii) the exercise by the Collateral
Agent of any of its rights hereunder shall not release the Grantor from any of
its obligations under the Related Contracts, Factoring Agreement and Licenses or
otherwise in respect of the Collateral, and (iii) the Collateral Agent shall not
have any obligation or liability by reason of this Agreement under the Related
Contracts, Factoring Agreement and Licenses or with respect to any of the other
Collateral, nor shall the Collateral Agent be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
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SECTION 7. Remedies Upon Default. If any Event of Default shall have
---------------------
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all of the rights and remedies of a secured party upon default
under the Code (whether or not the Code applies to the affected Collateral), and
also may (i) require the Grantor to, and the Grantor hereby agrees that it will
at its expense and upon request of the Collateral Agent forthwith, assemble all
or part of the Collateral as directed by the Collateral Agent and make it
available to the Collateral Agent at a place or places to be designated by the
Collateral Agent which is reasonably convenient to both parties and (ii) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of the Collateral Agent's
offices or elsewhere, for cash, on credit or for future delivery, and at such
price or prices and upon such other terms as the Collateral Agent may deem
commercially reasonable. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least 10 Business Days' notice to the Grantor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. The Collateral 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. The Grantor hereby waives any claims against the Collateral
Agent and the Lenders arising by reason of the fact that the price at which the
Collateral may have been sold at a private sale was less than the price which
might have been obtained at a public sale or was less than the aggregate amount
of the Obligations, even if the Collateral Agent accepts the first offer
received and does not offer the Collateral to more than one offeree and waives
all rights which the Grantor may have to require that all or any part of the
Collateral be marshalled upon any sale (public or private) thereof. In addition
to the foregoing, (i) upon written notice from the Collateral Agent, the Grantor
shall cease any use of the Trademarks, Patents or Copyrights or any mark, patent
or copyright similar thereto for any purpose described in such notice; (ii) the
Collateral Agent may, at any time and from time to time, upon 10 days' prior
notice to the Grantor, license, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any of the Trademarks, Patents
and Copyrights, throughout the world for such term or terms, on such conditions,
and in such manner, as the Collateral Agent shall in its sole discretion
determine; and (iii) the Collateral Agent may, at any time, pursuant to the
authority granted in Section 6 hereof (such authority being effective upon the
occurrence of an Event of Default), execute and deliver on behalf of the
Grantor, one or more instruments of assignment of the Trademarks, Patents and
Copyrights (or any application or registration thereof), in form suitable for
filing, recording or registration in any country.
(b) Any cash held by the Collateral Agent as Collateral and all cash
proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part the Collateral may,
in the discretion of the Collateral Agent, be held by the Collateral Agent as
collateral for, and/or then or at any time thereafter applied in whole or in
part
-17-
<PAGE>
by the Collateral Agent against, all or any part of the Obligations as
provided in Section 4.04(b) of the Amended and Restated Financing Agreement.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent
and the Lenders are legally entitled, the Grantor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in any
applicable Loan Document for interest on overdue principal thereof or such other
rate as shall be fixed by applicable law, together with the costs of collection
and the reasonable fees, costs, expenses of any attorneys employed by the
Collateral Agent to collect such deficiency.
SECTION 8. Indemnity and Expenses.
----------------------
(a) The Grantor agrees to indemnify and hold the Collateral Agent
harmless from and against any and all claims, damages, losses, liabilities,
obligations, penalties, costs or expenses (including, without limitation,
reasonable legal fees and disbursements of Collateral Agent's counsel) to the
extent that they arise out of or otherwise result from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting solely and directly from the Collateral Agent's
gross negligence or willful misconduct as determined by a final judgment of a
court of competent jurisdiction.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all costs and expenses, including the reasonable fees and
disbursements of the Collateral Agent's counsel and of any experts and agents,
which the Collateral Agent may incur in connection with (i) the preparation,
negotiation, execution, delivery, recordation, administration, amendment, waiver
or other modification or termination of this Agreement, or (ii) the custody,
preservation, use or operation of, or the sale of, collection from, or other
realization upon, any Collateral, (iii) the exercise or enforcement of any of
the rights of the Collateral Agent hereunder, or (iv) the failure by the Grantor
to perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Grantor or the Collateral Agent, to the parties and at the addresses
specified in the Amended and Restated Financing Agreement; or as to either such
Person at such other address as shall be designated by such Person in a written
notice to such other Person complying as to delivery with the terms of this
Section 9. All such notices and other communications shall be effective (i) if
sent by certified mail, return receipt requested, when received or 3 Business
Days after mailing, whichever first occurs, (ii) if telecopied, when transmitted
and confirmation is received, provided same is on a Business Day and, if not, on
the next Business Day or (iii) if delivered, upon delivery, provided same is on
a Business Day and, if not, on the next Business Day.
SECTION 10. Miscellaneous.
-------------
-18-
<PAGE>
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Collateral
Agent, and no waiver of any provision of this Agreement, and no consent to any
departure by the Grantor therefrom, shall be effective unless it is in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Collateral Agent to exercise, and
no delay in exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Collateral Agent provided herein
and in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent under any Loan Document against any party thereto are not
conditional or contingent on any attempt by the Collateral Agent to exercise any
of its rights under any other Loan Document against such party or against any
other Person.
(c) Any provision of this Agreement which is 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in
the Collateral and shall (i) remain in full force and effect until the payment
in full of the Obligations after the Total Commitment has been terminated and
all Letters of Credit have been canceled or cash collateralized, and (ii) be
binding on the Grantor and its successors and assigns and shall inure, together
with all rights and remedies of the Collateral Agent hereunder, to the benefit
of the Collateral Agent and the Lenders their respective permitted successors,
transferees and assigns. Without limiting the generality of clause (ii) of the
immediately preceding sentence and subject to the terms of the Amended and
Restated Financing Agreement, the Collateral Agent and Lenders may assign or
otherwise transfer their rights under this Agreement and any other Loan
Document, to any other Person and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Collateral
Agent and the Lenders herein or otherwise. None of the rights or obligations of
the Grantor hereunder may be assigned or otherwise transferred without the prior
written consent of the Collateral Agent, and any such assignment or transfer
shall be null and void.
(e) Upon the satisfaction in full of the Obligations after the
Total Commitment has been terminated and all Letters of Credit have been
canceled or cash collateralized, (i) this Agreement and the security interests
created hereby shall terminate and all rights to the Collateral shall revert to
the Grantor, and (ii) the Collateral Agent will, upon the Grantor's request and
at the Grantor's expense promptly, (A) return to the Grantor such of the
Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (B) execute and deliver to the Grantor such
documents as the Grantor shall
-19-
<PAGE>
reasonably request to evidence such termination, all without any representation,
warranty or recourse whatsoever.
(f) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and effect of perfection or non-
perfection of the security interest created hereby or remedies hereunder, in
respect of any particular Collateral are governed by the law of a jurisdiction
other than the State of New York.
-20-
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[GRANTOR]
By:___________________________
Name:_________________________
Title:________________________
-21-
<PAGE>
SCHEDULE I TO SECURITY AGREEMENT
RELATED CONTRACTS
<PAGE>
SCHEDULE II TO SECURITY AGREEMENT
TRADEMARKS
AND
TRADEMARK LICENSES
<PAGE>
SCHEDULE III TO SECURITY AGREEMENT
PATENTS AND PATENT LICENSES
<PAGE>
SCHEDULE IV TO SECURITY AGREEMENT
COPYRIGHTS AND COPYRIGHT LICENSES
<PAGE>
SCHEDULE V TO SECURITY AGREEMENT
I. Locations of Equipment and Inventory
II. Grantor's chief place of business, chief executive office and place where
the Grantor keeps its books and records
<PAGE>
SCHEDULE VI TO SECURITY AGREEMENT
TRADE NAMES
<PAGE>
SCHEDULE VII TO SECURITY AGREEMENT
UCC-1 FINANCING STATEMENTS
<PAGE>
EXHIBIT A
ASSIGNMENT FOR SECURITY
-----------------------
(TRADEMARKS)
----------
WHEREAS, _________________________ (the "Assignor") has adopted, used
--------
and is using the trademarks and service marks listed on the annexed Schedule 1A,
which trademarks and service marks are registered or applied for in the United
States Patent and Trademark Office (the "Trademarks");
----------
WHEREAS, the Assignor, has entered into a Security Agreement dated
____ ___, 199_ (the "Security Agreement") in favor of NATIONSBANC COMMERCIAL
------------------
CORPORATION., as collateral agent for certain lenders (the "Assignee"); and
--------
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned
to the Assignee and granted to the Assignee a security interest in all right,
title and interest of the Assignor in, to and under the Trademarks together with
the good-will of the business symbolized by the Trademarks and the applications
and restrictions thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
----------
observance of the Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign unto the Assignee and
grants to the Assignee a security interest in the Collateral to secure the
prompt payment, performance and observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the
rights and remedies of the Assignee with respect to the Collateral are more
fully set forth in the Security Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of _____________ __, 199__.
__________________________
By:_______________________
Name:_____________________
Title:____________________
<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this ____ day of _______________, 19__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is the
________________ of _________________________, a _________ corporation, and
that he executed the foregoing instrument in the firm name of _________________,
and that he had authority to sign the same, and he acknowledged to me that he
executed the same as the act and deed of said firm for the uses and purposes
therein mentioned.
____________________________
<PAGE>
SCHEDULE 1A TO ASSIGNMENT FOR SECURITY
--------------------------------------
(TRADEMARKS AND TRADEMARK APPLICATIONS)
---------------------------------------
<PAGE>
EXHIBIT B
ASSIGNMENT FOR SECURITY
-----------------------
(PATENTS)
-------
WHEREAS, _________________________(the "Assignor") holds all right,
--------
title and interest in the letter patents, design patents and utility patents
listed on the annexed Schedule 1B, which patents are issued or applied for in
the United States Patent and Trademark Office (the "Patents");
-------
WHEREAS, the Assignor, has entered into a Security Agreement dated
____ __, 199_ (the "Security Agreement") in favor of NATIONSBANC COMMERCIAL
------------------
CORPORATION, as collateral agent for certain lenders (the "Assignee"); and
--------
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned
to the Assignee and granted to the Assignee a security interest in all right,
title and interest of the Assignor in, to and under the Patents and the
applications and registrations thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
----------
observance of the Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign unto the Assignee and
grants to the Assignee a security interest in the Collateral to secure the
prompt payment, performance and observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the
rights and remedies of the Assignee with respect to the Collateral are more
fully set forth in the Security Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of _____ __, 199_.
__________________________
By:_______________________
Name:_____________________
Title:____________________
<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this ____ day of _____, 199_, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is
the ______________ of ____________________, a ____________ corporation, and that
he executed the foregoing instrument in the firm name of ______________________,
and that he had authority to sign the same, and he acknowledged to me that he
executed the same as the act and deed of said firm for the uses and purposes
therein mentioned.
_____________________________
<PAGE>
SCHEDULE 1B TO ASSIGNMENT FOR SECURITY
(PATENTS AND PATENT APPLICATIONS)
-------------------------------
<PAGE>
EXHIBIT C
ASSIGNMENT FOR SECURITY
-----------------------
(COPYRIGHTS)
----------
WHEREAS, _________________________(the "Assignor") holds all right,
--------
title and interest in the copyrights listed on the annexed Schedule 1C, which
copyrights are registered in the United States Copyright Office (the
"Copyrights");
----------
WHEREAS, the Assignor, has entered into a Security Agreement dated
_____ ___, 199_ (the "Security Agreement") in favor of NATIONSBANC COMMERCIAL
------------------
CORPORATION, as collateral agent for certain lenders (the "Assignee"); and
--------
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned
to the Assignee and granted to the Assignee a security interest in all right,
title and interest of the Assignor in, to and under the Copyrights and the
registrations thereof, and all proceeds thereof, including, without limitation,
any and all causes of action which may exist by reason of infringement thereof
(the "Collateral"), to secure the payment, performance and observance of the
----------
Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign unto the Assignee and
grants to the Assignee a security interest in the Collateral to secure the
prompt payment, performance and observance of the Obligations.
The Assignor does hereby further acknowledge and affirm that the
rights and remedies of the Assignee with respect to the Collateral are more
fully set forth in the Security Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of ______ __, 199_.
__________________________
By:_______________________
Name:_____________________
Title:____________________
<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this ____ day of ____, 199_, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is the
________________ of _________________________, a __________ corporation, and
that he executed the foregoing instrument in the firm name of _________________,
and that he had authority to sign the same, and he acknowledged to me that he
executed the same as the act and deed of said firm for the uses and purposes
therein mentioned.
_____________________________
<PAGE>
SCHEDULE 1C TO ASSIGNMENT FOR SECURITY
(COPYRIGHTS AND COPYRIGHT APPLICATIONS)
-------------------------------------
<PAGE>
EXHIBIT C-2
FORM OF GUARANTOR SECURITY AGREEMENT
------------------------------------
SECURITY AGREEMENT, dated as of _____ __, 199_, made by
_________________________, a _______ corporation (the "Grantor"), in favor of
-------
NATIONSBANC COMMERCIAL CORPORATION, as collateral agent for the Lenders parties
to the Amended and Restated Financing Agreement referred to below (in such
capacity, the "Collateral Agent").
----------------
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, Norton McNaughton, Inc., a Delaware corporation (the
"Company"), Norton McNaughton of Squire, Inc., a New York corporation
-------
("Squire"), Miss Erika, Inc., a Delaware corporation ("Miss Erika"), certain
------ ----------
lenders (the "Existing Lenders"), NationsBanc Commercial Corporation, as
----------------
collateral agent (the "Collateral Agent") for the Existing Lenders and The CIT
----------------
Group/Commercial Services, Inc., as administrative agent (the "Administrative
--------------
Agent") for the Existing Lenders are parties to a Financing Agreement, dated as
- -----
of September 25, 1997, as amended by the First Amendment dated as of November
21, 1997, the Second Amendment dated as of January 30, 1998 and the Third
Amendment dated as of June 12, 1998 (as so amended, the "Existing Financing
------------------
Agreement");
- ---------
WHEREAS, pursuant to the Existing Financing Agreement, the Existing
Lenders extended credit to Squire and Miss Erika consisting of (i) a term loan
in the original principal amount of $15,000,000 and (ii) revolving credit loans
in an aggregate principal amount at any one time outstanding not to exceed
$125,000,000, a portion of which included letters of credit issued with the
assistance of the Collateral Agent and the Lenders for the account of Squire and
Miss Erika;
WHEREAS, the Company, Squire and Miss Erika have requested that the
Existing Financing Agreement be amended and restated to, among other things (i)
prepay the term loan in full, (ii) increase the revolving credit facility to
provide revolving credit loans to the Borrowers at any one time outstanding not
to exceed $175,000,000 (the "Revolving Credit Loans" and each a "Loan" and
---------------------- ----
collectively, the "Loans"), which may include letters of credit (the "Letters of
----- ----------
Credit"), (iii) extend the maturity date of the revolving facility and (iv) add
- ------
JJ Acquisition Corp., a Delaware corporation to be known as Jeri-Jo Knitwear,
Inc. ("Jeri-Jo" and together with Squire and Miss Erika each, a "Borrower" and
------- --------
collectively, the "Borrowers") as a Borrower;
---------
WHEREAS, pursuant to such request the Company, Squire, Miss Erika,
Jeri-Jo, the Collateral Agent, the Administrative Agent, Fleet Bank, NA, as
documentation agent (the "Documentation Agent"), and the financial institutions
-------------------
from time to time party thereto (the "Lenders") have entered into an Amended and
-------
Restated Financing Agreement, dated as of
<PAGE>
June 18, 1998 (such agreement, as amended, restated or otherwise modified from
time to time, being hereinafter referred to as the "Amended and Restated
--------------------
Financing Agreement"); and
- -------------------
WHEREAS, it is a condition precedent to the Lenders making any Loan or
assisting the Borrowers in obtaining the issuance of any Letter of Credit
pursuant to the Amended and Restated Financing Agreement that the Grantor shall
have executed and delivered to the Collateral Agent a security agreement
providing for the grant to the Collateral Agent for the benefit of the Lenders
of a security interest in all personal property of the Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans and to
assist the Borrowers in obtaining the issuance of Letters of Credit pursuant to
the Amended and Restated Financing Agreement, the Grantor hereby agrees with the
Collateral Agent as follows:
SECTION 1. Definitions. Reference is hereby made to the Amended and
-----------
Restated Financing Agreement for a statement of the terms thereof. All terms
used in this Agreement which are defined in the Amended and Restated Financing
Agreement or in Article 9 of the Uniform Commercial Code (the "Code") currently
----
in effect in the State of New York and which are not otherwise defined herein
shall have the same meanings herein as set forth therein.
SECTION 2. Grant of Security Interest. As collateral security for
--------------------------
all of the Guaranteed Obligations (as defined in Section 3 hereof), the Grantor
hereby pledges and collaterally assigns to the Collateral Agent, and grants to
the Collateral Agent for the benefit of the Lenders a continuing security
interest in, all personal property and fixtures of the Grantor, wherever located
and whether now or hereafter existing and whether now owned or hereafter
acquired, of every kind and description, tangible or intangible (the
"Collateral"), including, without limitation, all of the Grantor's right, title
----------
and interest in and to the following:
(a) all equipment of any kind including, without limitation, all
furniture, fixtures and machinery, wherever located and whether now or hereafter
existing and whether now owned or hereafter acquired, together with all
substitutes, replacements, accessions and additions thereto, and all tools,
parts, accessories and attachments used in connection therewith (hereinafter
collectively referred to as the "Equipment");
---------
(b) all inventory of any kind wherever located and whether now or
hereafter existing and whether now owned or hereafter acquired, (including,
without limitation, all types of inventory, merchandise, goods, property and
other assets that are held by the Grantor for sale, lease or other disposition
or to be furnished under a contract for services, whether such inventory,
merchandise, goods, property and other assets are raw, in process, finished,
trim or piece goods, and materials used or consumed in the business of the
Grantor, and goods returned to or repossessed by the Grantor and goods in which
the Grantor has an interest in mass or in joint or other interest or right of
any kind, including consigned goods and goods being processed), and all
accessions thereto and products thereof and all packing and shipping materials
(any and all such inventory, accessions and products being hereinafter referred
to as the "Inventory");
---------
-2-
<PAGE>
(c) (i) all present and future accounts, contract rights, chattel
paper, documents, instruments, general intangibles and other obligations of any
kind arising out of or in connection with the sale, lease or other disposition
of goods or the rendering of services or otherwise; (ii) all of the Grantor's
right, title and interest, and all of the Grantor's rights, remedies, security
and Liens, in, to and in respect of any credit insurance, accounts (including,
without limitation, rights of stoppage in transit, replevin, repossession,
reclamation and other rights and remedies of an unpaid vendor, lienor or secured
party), guaranties or other contracts of suretyship with respect to accounts,
and deposits or other security for the obligation of any Account Debtor; (iii)
all rights relating to the sale or other transfer of property to, or the
construction, renovation, processing or other improvement of property by or for
the Grantor; (iv) all rights now or hereafter existing in and to all letters of
credit, security agreements, leases and other contracts now or hereafter
existing and securing or otherwise relating to such accounts, contract rights,
chattel paper, instruments, documents, general intangibles or other rights or
obligations (including, without limitation, the contracts described in SCHEDULE
I hereto); and (v) all goods relating to, or which by sale have resulted in,
accounts, including, without limitation, all goods described in invoices or
other documents or instruments with respect to, or otherwise representing or
evidencing, any accounts, and all returned, reclaimed or repossessed goods (any
and all such accounts, contract rights, chattel paper, instruments, documents,
general intangibles and obligations being hereinafter referred to collectively
as the "Receivables", and any and all such credit insurance, guaranties, letters
-----------
of credit, security agreements, leases and other contracts being hereinafter
referred to collectively as the "Related Contracts");
-----------------
(d) (i) all trademarks, service marks, trade names, business names,
trade styles, designs, logos and other source or business identifiers and all
general intangibles of like nature, now or hereafter owned, adopted, acquired or
used by the Grantor (including, without limitation, all trademarks, service
marks, trade names, business names, trade styles, designs, logos and other
source or business identifiers described in SCHEDULE II or VI hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Patent and Trademark Office or in any similar office or agency of the United
States, any state thereof or any other country or any political subdivision
thereof), and all reissues, extensions or renewals thereof, together with all
goodwill of the business symbolized by such marks and all customer lists,
formulae and other records of the Grantor relating to the distribution of
products and services in connection with which any of such marks are used, and
all income, royalties, damages and payments now or hereafter due and/or payable
under and with respect thereto, including, without limitation, payments under
all licenses entered into in connection therewith and damages and payments for
past and future infringements or dilution's thereof and the right to sue for
past, present and future infringements and dilutions thereof (hereinafter
referred to collectively as the "Trademarks"), and (ii) all licenses, contracts
----------
or other agreements, whether written or oral, naming the Grantor as licensor or
licensee and providing for the grant of any right to use any Trademark,
including, without limitation, all Trademark Licenses described in SCHEDULE II
hereto, together with any goodwill connected with and symbolized by any such
trademark licenses or agreements and the right to prepare for sale and sell any
and all Inventory now or hereafter owned by the Grantor and now or hereafter
covered by such licenses (hereinafter referred to collectively as the "Trademark
---------
Licenses");
- --------
-3-
<PAGE>
(e) (i) all letters patent, design patents and utility patents, and
all inventions, trade secrets, proprietary information and technology, know-how,
formulae and other general intangibles of like nature, now existing or hereafter
acquired (including, without limitation, all letters patent, design patents and
utility patents described in SCHEDULE III hereto), all applications,
registrations and recordings thereof (including, without limitation,
applications, registrations and recordings in the United States Patent and
Trademark Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues,
divisions, continuations, continuations in part and extensions or renewals
thereof (hereinafter referred to collectively as the "Patents"), and (ii) all
-------
licenses, contracts or other agreements, whether written or oral, naming the
Grantor as licensee or licensor and providing for the grant of any right to
manufacture, use or sell any invention covered by any patent (hereinafter
referred to collectively as the "Patent Licenses") (including, without
---------------
limitation, all Patent Licenses set forth in SCHEDULE III hereto);
(f) (i) all copyrights, including, without limitation, all original
works of authorship fixed in any tangible medium of expression, acquired or used
by the Grantor (including, without limitation, all copyrights described in
SCHEDULE IV hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Copyright Office or in any similar office or agency of the
United States or any other country or any political subdivision thereof), and
all reissues, divisions, continuations, continuations in part and extensions or
renewals thereof (hereinafter referred to collectively as the "Copyrights"), and
----------
(ii) all licenses, contracts or other agreements, whether written or oral,
naming the Grantor as licensee or licensor and providing for the grant of any
right to use or sell any works covered by any copyright (hereinafter referred to
collectively as the "Copyright Licenses" and together with the Trademark
------------------
Licenses and the Patent Licenses, the "Licenses") (including, without
--------
limitation, all Copyright Licenses set forth in SCHEDULE IV hereto);
(g) (i) all moneys, securities and other property and the proceeds
thereof, now or hereafter held or received by, or in transit to, the Collateral
Agent, the Administrative Agent or any Lender from or for the Grantor, whether
for safekeeping, pledge, custody, transmission, collection or otherwise, and all
of the Grantor's sums and credits with, and all of the Grantor's claims against
the Collateral Agent, the Administrative Agent or any Lender at any time
existing; (ii) all rights, interests, choses in action, causes of actions,
claims and all other intangible property of every kind and nature, in each
instance whether now owned or hereafter acquired by the Grantor, including,
without limitation, all corporate and other business records, all loans,
royalties, and all other forms of obligations receivable whatsoever (other than
Receivables); (iii) all computer programs, software, printouts and other
computer materials, customer lists, credit files, correspondence, advertising
materials and other source or business identifiers; (iv) all customer and
supplier contracts, sale orders, rights under license and franchise agreements,
and other contracts and contract rights[, including without limitation, all
rights of Grantor in the Miss Erika Acquisition Agreement and the Jeri-Jo
Purchase Agreement and all related agreements]; (v) all interests in
partnerships, limited liability companies and joint ventures, including all
moneys due from time to time in respect thereof; (vi) all federal, state and
local tax refunds and federal, state and local tax refund claims and all
judgments in favor of Grantor and all of
-4-
<PAGE>
Grantor's rights with respect thereto; (vii) all right, title and interest under
leases, subleases, licenses and concessions and other agreements relating to
personal property, including all moneys due from time to time in respect
thereof; (viii) all payments due or made to the Grantor in connection with any
requisition, confiscation, condemnation, seizure or forfeiture of any property
by any Person or Governmental Authority; (ix) all lock-box and all deposit
accounts (general or special) or other accounts with any bank or other financial
institution, including, without limitation, all depository or other accounts
maintained by the Grantor at the Administrative Agent, the Collateral Agent or
any Lender and all funds on deposit therein; (x) all credits with and other
claims against third parties (including carriers and shippers) (other than
Receivables); (xi) all rights to indemnification; (xii) all reversionary
interests in pension and profit sharing plans and reversionary, beneficial and
residual interests in trusts; (xiii) all proceeds of insurance of which the
Grantor is the beneficiary; (xiv) all letters of credit, guaranties, liens,
security interests and other security held by or granted to the Grantor; (xv)
all instruments, files, records, ledger sheets and documents covering or
relating to any of the Collateral; and (xvi) all general intangibles, whether or
not similar to the foregoing, in each instance, however and wherever arising;
(h) the books and records of the Grantor relating to any of the
foregoing Collateral, including, without limitation, all customer contracts,
sale orders, minute books, ledgers, records, computer programs, software,
printouts and other computer materials, customer lists, credit files,
correspondence and advertising materials, in each case indicating, summarizing
or evidencing any of the Collateral; and
(i) all cash and non-cash proceeds of any and all of the foregoing
Collateral (including, without limitation, (i) damages and payments for past or
future infringements of the Trademarks, the Patents or the Copyrights and (ii)
the right to sue for past, present and future infringements of the Trademarks,
the Patents or the Copyrights) and, to the extent not otherwise included, all
payments under insurance (whether or not the Collateral Agent is the loss payee
thereof) and any indemnity, warranty or guaranty payable by reason of loss or
damage to or otherwise with respect to any of the foregoing Collateral;
in each case howsoever the Grantor's interest therein may arise or
appear (whether by ownership, security interest, claim or otherwise); provided
--------
that, nothing hereunder constitutes or shall be deemed to constitute the grant
of a security interest in favor of the Collateral Agent in the Grantor's
interest in any Related Contract or other contract right, any License or other
license agreement, any lease or any other general intangible (other than any of
the foregoing constituting an account or a general intangible for money due or
to become due to which Section 9-318(4) of the Code applies) (each such contract
right, license agreement, lease and other general intangible, other than those
described in the preceding parenthesis, being hereinafter referred to as
"Excluded Property"), if the granting of a security interest therein by the
- ------------------
Grantor to the Collateral Agent is prohibited by the terms and provisions of the
written agreement, document or instrument creating or evidencing such Excluded
Property, and either (i) such agreement, document or instrument was entered into
prior to the date of this Agreement, or (ii) such agreement, document or
instrument is entered into after the date of this Agreement and the Grantor
delivers to the Collateral Agent a copy of such agreement, document or
instrument,
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<PAGE>
provided, however, that (1) if and when the prohibition which prevents the
- -------- -------
granting by the Grantor to the Collateral Agent of a security interest in any
Excluded Property is removed or otherwise terminated, the Collateral Agent will
be deemed to have, and at all times to have had, a security interest in such
Excluded Property, and (2) the Grantor shall use its reasonable efforts to
exclude from any written agreement, document or instrument entered into on or
after the date of this Agreement creating or evidencing any contract right,
license, lease or general intangible, any prohibition against the granting by
the Grantor to the Collateral Agent of a security interest therein to the extent
that such exclusion or such efforts would not result in such agreement, document
or instrument containing terms which are less favorable to the Grantor than
would be the case but for such exclusion or such efforts or would result in a
decision by the Persons proposed to be parties to such agreement, document or
instrument not to enter into such agreement, document or instrument.
Notwithstanding anything set forth herein to the contrary, the Collateral Agent
will be deemed to have, and at all times to have had, a security interest in the
proceeds of such Excluded Property.
SECTION 3. Security for Guaranteed Obligations. The security
-----------------------------------
interest created hereby in the Collateral constitutes continuing collateral
security for all of the following obligations, whether now existing or hereafter
incurred (the "Guaranteed Obligations"):
----------------------
(a) the prompt payment by the Grantor, as and when due and payable,
of all amounts from time to time owing by it in respect of [its guaranty made
pursuant to Article XI of the Amended and Restated Financing Agreement] [its
Guaranty, dated as of _____ __, _____ (as amended or otherwise modified from
time to time, the "Guaranty")], in favor of each of the Lenders and the
--------
Collateral Agent, including, without limitation, principal of and interest on
the Loans (including, without limitation, all interest that accrues after the
commencement of any case, proceeding or other action relating to the bankruptcy,
insolvency or reorganization of any Borrower, whether or not a claim for post-
filing interest is allowed in such proceeding), all Letter of Credit Obligations
and Ledger Debt and all interest thereon, all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any Loan Document to which it is a party; and
(b) the due performance and observance by the Grantor of all of its
other obligations from time to time existing in respect of [Article XI of the
Amended and Restated Financing Agreement] [its Guaranty] and all other Loan
Documents to which it is a party.
SECTION 4. Representations and Warranties. The Grantor represents
------------------------------
and warrants as follows:
(a) There is no pending or, to the knowledge of the Grantor,
threatened action, suit, proceeding or claim before any court or other
Governmental Authority or any arbitrator, or any order, judgment or award by any
court or other Governmental Authority or arbitrator, that may adversely affect
the grant by the Grantor, or the perfection, of the security interest purported
to be created hereby in the Collateral, or the exercise by the Collateral Agent
of any of its rights or remedies hereunder.
-6-
<PAGE>
(b) All taxes, assessments and other governmental charges imposed
upon the Grantor or any property of the Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except (i)
to the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine and Lien resulting from the non-payment thereof
and with respect to which adequate reserves in accordance with GAAP have been
established for the payment thereof and (ii) Liens permitted by Section
7.01(c)(ii)(B) of the Amended and Restated Financing Agreement.
(c) All Equipment and Inventory is located at the addresses
specified therefor in SCHEDULE V hereto or at such other locations permitted by
the terms of Section 5(b) hereof. The Grantor's chief place of business and
chief executive office, the place where the Grantor keeps its records concerning
Receivables and all originals of all chattel paper which constitute Receivables
are located at the addresses specified therefor in SCHEDULE V hereto. None of
the Receivables is evidenced by a promissory note or other instrument unless
such promissory note or instrument has been pledged to the Collateral Agent. Set
forth in SCHEDULE VI hereto is a complete and correct list of each trade name
used by the Grantor.
(d) The Grantor has delivered to the Collateral Agent complete and
correct copies of each Related Contract described on SCHEDULE I hereto, which
represent all of the Related Contracts existing on the date of this Agreement [,
the Acquisition Agreement] [, the Jeri-Jo Purchase Agreement] and each License
described in SCHEDULE II, SCHEDULE III and Schedule IV hereto, including in each
such case all schedules and exhibits thereto. Each Related Contract and License
sets forth the entire agreement and understanding of the parties thereto
relating to the subject matter thereof, and there are no other agreements,
arrangements or understandings, written or oral, relating to the matters covered
thereby or the rights of the Grantor in respect thereof. Each Related Contract
now existing is, and each other Related Contract will be, the legal, valid and
binding obligation of the parties thereto, enforceable against such parties in
accordance with its terms, subject as to enforceability to applicable
bankruptcy, insolvency, reorganization and similar laws affecting creditors'
rights and to general principles of equity. To the knowledge of the Grantor, no
default thereunder by any such party has occurred, nor does any defense, offset,
deduction or counterclaim exist thereunder in favor of any such party.
(e) The Grantor owns and controls, or otherwise possesses adequate
rights to use, all Trademarks, Patents and Copyrights, which are the only
trademarks, patents and copyrights necessary to conduct its business in
substantially the same manner as conducted as of the date hereof. SCHEDULE II
hereto sets forth a true and complete list of all Trademarks and Trademark
Licenses owned or used by the Grantor as of the date hereof. SCHEDULE III
hereto sets forth a true and complete list of all Patents and Patent Licenses
owned or used by the Grantor as of the date hereof. SCHEDULE IV hereto sets
forth a true and complete list of all Copyrights and Copyright Licenses owned or
used by the Grantor as of the date hereof. All of such Copyrights, Patents and
Trademarks are subsisting and in full force and effect, have not been adjudged
invalid or unenforceable, are valid and enforceable and have not been abandoned
in whole or in part. Except as set forth in SCHEDULE II, III or IV hereto, none
of such Copyrights, Patents or
-7-
<PAGE>
Trademarks is the subject of any licensing or franchising agreement. The Grantor
has no knowledge of any conflict with the rights of others to any Trademark,
Patent or Copyright and, to the best knowledge of the Grantor, the Grantor is
not now infringing or in conflict with any such rights of others in any material
respect, and to the best knowledge of the Grantor, no other Person is now
infringing or in conflict in any material respect with any such properties,
assets and rights owned or used by the Grantor.
(f) The Grantor is the sole and exclusive owner of the Collateral
free and clear of any Lien, except for (i) the security interest created by this
Agreement, (ii) the security interests and other encumbrances permitted by the
Amended and Restated Financing Agreement and (iii) sales of assets permitted by
the terms of the Amended and Restated Financing Agreement. No effective
financing statement or other instrument similar in effect covering all or any
part of the Collateral is on file in any recording or filing office, except (i)
such as may have been filed in favor of the Collateral Agent relating to this
Agreement, and (ii) such as may have been filed to perfect or protect any
security interest or encumbrance permitted by the Amended and Restated Financing
Agreement.
(g) The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene law or any contractual restriction
binding on or otherwise affecting the Grantor or any of its properties and will
not result in or require the creation of any Lien, security interest or other
charge or encumbrance upon or with respect to any of its properties.
(h) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority or any other Person, is required
for (i) the grant by the Grantor, or the perfection, of the security interest
purported to be created hereby in the Collateral or (ii) the exercise by the
Collateral Agent of any of its rights and remedies hereunder, except (A) for the
filing under the Uniform Commercial Code as in effect in the applicable
jurisdiction of the financing statements described in SCHEDULE VII hereto, (B)
with respect to the perfection of the security interest created hereby in the
United States Trademarks, United States Patents and United States Copyrights for
the recording of the Assignment for Security (Trademarks), substantially in the
form of Exhibit A hereto, the Assignment for Security (Patents), substantially
in the form of Exhibit B hereto, or the Assignment for Security (Copyrights),
substantially in the form of Exhibit C hereto, as applicable, in the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable or (C) with respect to the perfection of the security interest
created hereby in foreign Trademarks, Patents and Copyrights, for registrations
and filings in jurisdictions located outside of the United States and covering
rights in such jurisdictions relating to Patents, Trademarks, Copyrights, Patent
Licenses, Trademark Licenses and Copyright Licenses.
(i) This Agreement creates valid security interests in favor of the
Collateral Agent for the benefit of the Lenders in the Collateral, as security
for the Guaranteed Obligations. The Collateral Agent's having possession of all
instruments and cash constituting Collateral from time to time, the recording of
the Assignment for Security (Trademarks), the Assignment for Security (Patents)
and the Assignment for Security (Copyrights), as applicable, executed pursuant
hereto in the United States Patent and Trademark Office and the United States
-8-
<PAGE>
Copyright Office, as applicable, and the filing of the financing statements
described in SCHEDULE VII hereto and, with respect to Patents, Trademarks and
Copyrights hereafter existing and not covered by an Assignment for Security
(Trademarks), an Assignment for Security (Patents) or an Assignment for Security
(Copyrights), as applicable, the recording in the United States Patent and
Trademark Office or the United States Copyright Office, as applicable, of
appropriate instruments of assignment, result in the perfection of such security
interests. Such security interests are, or in the case of Collateral in which
the Grantor obtains rights after the date hereof, will be, perfected, first
priority security interests, subject only to the security interests and other
encumbrances permitted pursuant to the Amended and Restated Financing Agreement.
SECTION 5. Covenants as to the Collateral. So long as any of the
------------------------------
Guaranteed Obligations shall remain outstanding or the Total Commitment shall
not have terminated, unless the Collateral Agent shall otherwise consent in
writing:
(a) Further Assurances. The Grantor will at its expense, at any
------------------
time and from time to time, promptly execute and deliver all further instruments
and documents and take all further action that may be necessary or reasonably
desirable or that the Collateral Agent may reasonably request in order (i) to
perfect and protect the security interest purported to be created hereby; (ii)
to enable the Collateral Agent to exercise and enforce its rights and remedies
hereunder in respect of the Collateral; or (iii) otherwise to effect the
purposes of this Agreement, including, without limitation: (A) marking
conspicuously each chattel paper included in the Receivables and each License
and Related Contract and, at the request of the Collateral Agent, each of its
records pertaining to the Collateral with a legend, in form and substance
reasonably satisfactory to the Collateral Agent, indicating that such chattel
paper, License, Related Contract or Collateral is subject to the security
interest created hereby, (B) if any Receivable shall be evidenced by a
promissory note or other instrument or chattel paper, delivering and pledging to
the Collateral Agent hereunder any such note, instrument or chattel paper duly
endorsed and accompanied by executed instruments of transfer or assignment, all
in form and substance reasonably satisfactory to the Collateral Agent, (C)
executing and filing such financing or continuation statements, or amendments
thereto, as may be necessary or reasonably desirable or that the Collateral
Agent may reasonably request in order to perfect and preserve the security
interest purported to be created hereby, and (D) furnishing to the Collateral
Agent from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Collateral Agent may reasonably request, all in reasonable
detail.
(b) Location of Equipment and Inventory. The Grantor will keep the
-----------------------------------
Equipment and Inventory (other than used Equipment and Inventory sold in the
ordinary course of business in accordance with Section 5(g) hereof) at the
locations specified therefor in Section 4(c) hereof, or, upon written notice to
the Collateral Agent in accordance with Section 7.01(n) of the Amended and
Restated Financing Agreement accompanied by a new SCHEDULE V hereto indicating
each new location of the Equipment and Inventory, at such other locations in the
continental United States as the Grantor may elect, provided that (i) the
Grantor shall promptly have taken all action requested by the Collateral Agent
to grant to the Collateral Agent a perfected, first priority security interest
in such Equipment and Inventory, and (ii) the Collateral
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<PAGE>
Agent's rights in such Equipment and Inventory, including, without limitation,
the existence, perfection and priority of the security interest created hereby
in such Equipment and Inventory, are not adversely affected thereby.
(c) Condition of Equipment. The Grantor will maintain or cause to
----------------------
be maintained in good working order and condition, excepting ordinary wear and
tear and damage due to casualty, all of the Equipment. The Grantor shall
promptly furnish to the Collateral Agent a statement describing in reasonable
detail any loss or damage in excess of $100,000 to any Equipment or Inventory
due to casualty.
(d) Taxes, Etc. The Grantor will pay promptly when due all property
----------
and other taxes, assessments and governmental charges or levies imposed upon,
and all claims (including claims for labor, materials and supplies) against, the
Equipment and Inventory, except (i) to the extent the validity thereof is being
contested in good faith by proper proceedings which stay the imposition of any
penalty, fine or Lien resulting from the non-payment thereof and with respect to
which adequate reserves in accordance with GAAP have been set aside for the
payment thereof or (ii) Liens permitted by Section 7.01(c)(ii)(B) of the Amended
and Restated Financing Agreement.
(e) Insurance.
---------
(i) The Grantor will, at its own expense, maintain insurance as
required by Section 7.01(h) of the Amended and Restated Financing Agreement.
Each policy for liability insurance shall provide for all losses to be paid on
behalf of the Collateral Agent and the Grantor as their respective interests may
appear. Each policy for property damage insurance shall provide for all losses
(except for losses of less than $__________ per occurrence and losses accruing
during the continuance of an Event of Default), to be adjusted with, and paid
directly to the Collateral Agent. Each such policy shall in addition (A) name
the Grantor and the Collateral Agent as insured parties thereunder (without any
representation or warranty by or obligation upon the Collateral Agent) as their
interests may appear, (B) contain the agreement by the insurer that any loss
thereunder shall be payable, notwithstanding any action, inaction or breach of
representation or warranty by the Grantor, (C) provide that there shall be no
recourse against the Collateral Agent for payment of premiums or other amounts
with respect thereto, and (D) provide that at least 30 days' prior written
notice of cancellation or of lapse shall be given to the Collateral Agent by the
insurer. The Grantor will, if so requested by the Collateral Agent, deliver to
the Collateral Agent original or duplicate policies of such insurance and, as
often as the Collateral Agent may reasonably request, a report of a reputable
insurance broker with respect to such insurance. The Grantor will also, at the
request of the Collateral Agent, execute and deliver instruments of assignment
of such insurance policies and cause the respective insurers to acknowledge
notice of such assignment.
(ii) Payment under any liability insurance maintained by the Grantor
pursuant to this Section 5(e) may be paid directly to the Person who shall have
incurred liability covered by such insurance. In the case of any loss involving
damage to Equipment or Inventory as to which clause (iii) of this Section 5(e)
is not applicable, the Grantor will, in the exercise of its
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<PAGE>
reasonable business judgment, make or cause to be made the necessary repairs to
or replacements of such Equipment and Inventory, and any proceeds of insurance
maintained by the Grantor pursuant to this Section 5(e) shall upon receipt by
the Collateral Agent, be paid to the Grantor as reimbursement for the costs of
such repairs or replacements.
(iii) Upon the occurrence and during the continuance of an
Event of Default or the actual or constructive total loss (in excess of $_____
per occurrence) of any Equipment or Inventory, all insurance payments in respect
of such Equipment and Inventory shall be paid to the Collateral Agent and
applied as specified in Section 7(b) hereof.
(f) Provisions Concerning the Receivables, the Related Contracts and
----------------------------------------------------------------
the Licenses.
- ------------
(i) The Grantor will (A) give the Collateral Agent at least 30
days' prior written notice of any change in the Grantor's name, identity or
corporate structure, (B) keep its chief place of business and chief executive
office and all originals of all chattel paper which constitute Receivables at
the location(s) specified therefor in SCHEDULE V hereof or such other location
for which the Grantor has complied with all of the provisions of Section 5(b)
hereof, and (C) keep adequate records concerning the Receivables and such
chattel paper and permit representatives of the Collateral Agent during normal
business hours, upon reasonable notice and without undue interruption of the
business of the Grantor to inspect and make abstracts from such records and
chattel paper pursuant to the terms of the Amended and Restated Financing
Agreement, provided that such notice shall not be required during the
continuance of an Event of Default.
(ii) The Grantor will duly perform and observe all of its
obligations under each Related Contract and, except as otherwise provided in
this subsection (f), continue to collect, at its own expense, all amounts due or
to become due under the Receivables. In connection with such collections, the
Grantor may (and, at the Collateral Agent's direction, will) take such action as
the Grantor or the Collateral Agent may deem necessary or advisable to enforce
collection or performance of the Receivables; provided, however, the Collateral
-------- -------
Agent shall have the right at any time, upon the occurrence and during the
continuance of an Event of Default, to notify the Account Debtors or obligors
under any Receivables of the assignment of such Receivables to the Collateral
Agent and to direct such Account Debtors or obligors to make payment of all
amounts due or to become due to the Grantor thereunder directly to the
Collateral Agent or its designated agent and, upon such notification and at the
expense of the Grantor and to the extent permitted by law, 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 Grantor might
have done. After receipt by the Grantor of a notice from the Collateral Agent
that the Collateral Agent has notified or intends to notify the Account Debtors
or obligors under any Receivables as referred to in the proviso to the
immediately preceding sentence, (A) all amounts and proceeds (including
instruments) received by the Grantor in respect of the Receivables shall be
received in trust for the benefit of the Collateral Agent hereunder, shall be
segregated from other funds of the Grantor and shall be forthwith paid over to
the Collateral Agent in the same form as so received (with any necessary
indorsement) to be held as cash collateral and either (1)
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<PAGE>
credited to the Loan Account so long as no Event of Default shall have occurred
and be continuing or (2) if any Event of Default shall have occurred and be
continuing, applied as specified in Section 7(b) hereof, and (B) the Grantor
will not adjust, settle or compromise the amount or payment of any Receivable or
release wholly or partly any Account Debtor or obligor thereof or allow any
credit or discount thereon. In addition, upon the occurrence and during the
continuance of an Event of Default, the Collateral Agent shall have the right to
notify the United States Postal Service authorities to change the address for
delivery of mail addressed to the Grantor to such address as the Collateral
Agent may designate and to do all other acts and things necessary to carry out
this Agreement.
(iii) Upon the occurrence and during the continuance of any
breach or default under any Related Contract referred to in SCHEDULE I hereto or
otherwise specified in writing by the Collateral Agent from time to time or any
License referred to in SCHEDULE II, III or IV hereto by any party thereto other
than the Grantor, the Grantor will (A) promptly after obtaining knowledge
thereof, give the Collateral Agent written notice of the nature and duration
thereof, specifying what action, if any, it has taken and proposes to take with
respect thereto, and (B) upon written instructions from the Collateral Agent and
at the Grantor's expense, take such action as the Collateral Agent may deem
reasonably necessary or advisable in respect thereof.
(iv) The Grantor will, at its expense, promptly deliver to the
Collateral Agent a copy of each notice or other communication received by it by
which any other party to any Related Contract referred to in SCHEDULE I hereto
or otherwise specified by the Collateral Agent from time to time or any License
referred to in SCHEDULE II, III or IV hereto purports to exercise any of its
rights or affect any of its obligations thereunder which is reasonably likely to
have a Material Adverse Effect, together with a copy of any reply by the Grantor
thereto.
(v) The Grantor will take all action necessary to maintain all
Licenses in full force and effect, except where such failure to maintain would
not be reasonably likely to have a Material Adverse Effect. The Grantor will
not, without the prior written consent of the Collateral Agent, cancel,
terminate, amend or otherwise modify in any respect, or waive any provision of,
any Related Contract referred to in SCHEDULE I hereto or any License referred to
in SCHEDULE II, III or IV hereto to the extent such action is reasonably likely
to have a Material Adverse Effect.
(g) Transfers and Other Liens.
-------------------------
(i) The Grantor will not sell, assign (by operation of law or
otherwise), lease, exchange or otherwise transfer or dispose of any of the
Collateral except to the extent permitted under Section 7.02(d)(ii) of the
Amended and Restated Financing Agreement, subject to the obligation of the
Borrowers to make payments pursuant to Section 2.07(g) of the Amended and
Restated Financing Agreement.
(ii) The Grantor will not create or suffer to exist any Lien,
security interest or other charge or encumbrance upon or with respect to
any Collateral, except for (A) the Liens and security interest created by
this Agreement and the other Loan Documents and (B) the
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<PAGE>
Liens, security interests and other encumbrances permitted by the Amended and
Restated Financing Agreement.
(h) Trademarks, Patents and Copyrights.
----------------------------------
(i) If applicable, the Grantor has duly executed and delivered
the Assignment for Security (Trademarks) in the form attached hereto as Exhibit
A, the Assignment for Security (Patents) in the form attached hereto as Exhibit
B and the Assignment for Security (Copyrights) in the form attached hereto as
Exhibit C. The Grantor (either itself or through licensees) will, and will cause
each licensee thereof to, take all action reasonably necessary to maintain all
of the Trademarks, Patents and Copyrights in full force and effect, including,
without limitation, using the proper statutory notices and markings and using
the Trademarks on each applicable trademark class of goods in order to so
maintain the Trademarks in full force free from any claim of abandonment for
non-use
, and the Grantor will not (and will not permit any licensee thereof to) do
any act or knowingly omit to do any act whereby any Trademark or Copyright may
become invalidated; provided, however, that so long as no Event of Default has
-------- -------
occurred and is continuing, the Grantor shall have no obligation to use or to
maintain any Trademark or Copyright (A) that relates solely to any product or
work that has been, or is in the process of being, discontinued, abandoned or
terminated, (B) that is being replaced with a trademark or copyright
substantially similar to the Trademark or Copyright, as the case may be, that
may be abandoned or otherwise become invalid, so long as such replacement
Trademark or Copyright, as the case may be is subject to the security interest
purported to be created by this Agreement, (C) that is substantially the same as
another Trademark or Copyright, as the case may be, that is in full force, so
long as such other Trademark or Copyright, as the case may be, is subject to the
Lien and security interest created by this Agreement, or (D) that is not
necessary for the operation of Grantor's business and is discontinued or
disposed of in the ordinary course of business. The Grantor will cause to be
taken all necessary steps in any proceeding before the United States Patent and
Trademark Office and the United States Copyright Office to maintain each
registration of the Trademarks, the Patents and the Copyrights (other than those
Trademarks and Copyrights described in the proviso to the immediately preceding
sentence), including, without limitation, filing of renewals, affidavits of use,
affidavits of incontestability and opposition, interference and cancellation
proceedings and payment of taxes. If any Trademark, Patent or Copyright is
infringed, misappropriated or diluted in any material respect by a third party,
the Grantor shall (x) upon learning of such infringement, misappropriation or
dilution, promptly notify the Collateral Agent and (y) to the extent the Grantor
shall deem appropriate under the circumstances, promptly sue for infringement,
misappropriation or dilution, seek injunctive relief where appropriate and
recover any and all damages for such infringement, misappropriation or dilution,
or take such other actions as the Grantor shall deem appropriate under the
circumstances to protect such Trademark, Patent or Copyright. The Grantor shall
furnish to the Collateral Agent from time to time (but, unless an Event of
Default has occurred and is continuing, no more frequently than annually)
statements and schedules further identifying and describing the Patents, the
Trademarks and the Copyrights and such other reports in connection with the
Patents, the Trademarks and the Copyrights as the Collateral Agent may
reasonably request, all in reasonable detail and promptly upon request of the
Collateral Agent, following receipt by the Collateral Agent of any such
statements, schedules or reports, the
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<PAGE>
Grantor shall modify this Agreement by amending SCHEDULES II, III or IV hereto,
as the case may be, to include any Patent, Trademark or Copyright which becomes
part of the Collateral under this Agreement. Notwithstanding anything herein to
the contrary, upon the occurrence and during the continuance of an Event of
Default the Grantor may not abandon or otherwise permit a Trademark, Patent or
Copyright to become invalid without the prior written consent of the Collateral
Agent, and if any Trademark, Patent or Copyright is infringed, misappropriated
or diluted in any material respect by a third party, the Grantor will take such
action as the Collateral Agent shall deem appropriate under the circumstances to
protect such Trademark, Patent or Copyright.
(ii) In no event shall the Grantor, either itself or through
any agent, employee, licensee or designee, file an application for the
registration of any Trademark or Copyright or the issuance of any Patent with
the United States Patent and Trademark Office or the United States Copyright
Office, as applicable, unless it gives the Collateral Agent written notice
thereof, but in no event later than 5 Business Days after the filing of any such
application. Upon request of the Collateral Agent, the Grantor shall execute and
deliver any and all assignments, agreements, instruments, documents and papers
as the Collateral Agent may reasonably request to evidence the Collateral
Agent's security interest hereunder in such Trademark, Patent or Copyright and
the general intangibles of the Grantor relating thereto or represented thereby,
and the Grantor hereby constitutes the Collateral Agent its attorney-in-fact to
execute and file, during the continuance of an Event of Default, all such
writings for the foregoing purposes, all acts of such attorney being hereby
ratified and confirmed, and such power (being coupled with an interest) shall be
irrevocable until the termination of the Total Commitment, the repayment of all
of the Guaranteed Obligations in full and the termination of each of the Loan
Documents.
(j) Inspection and Reporting. The Grantor shall permit the Collateral
------------------------
Agent, the Administrative Agent or any Lender, or any agents or representatives
thereof or such professionals or other Persons as the Collateral Agent may
designate (i) to examine and inspect the books and records of the Grantor and
take copies and extracts therefrom, (ii) to verify materials, leases, notes,
receivables, inventory and other assets of the Grantor from time to time, and
(iii) to conduct physical counts, appraisals and/or valuations at the locations
of the Grantor, in each case as provided and subject to the confidentiality
requirements set forth in the Amended and Restated Financing Agreement.
SECTION 6. Additional Provisions Concerning the Collateral.
-----------------------------------------------
(a) The Grantor hereby authorizes the Collateral Agent to file,
without the signature of the Grantor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral.
(b) The Grantor hereby irrevocably appoints the Collateral Agent the
Grantor's attorney-in-fact and proxy, with full authority in the place and stead
of the Grantor and in the name of the Grantor or otherwise, from time to time in
the Collateral Agent's discretion upon the occurrence and during the continuance
of an Event of Default, to take any action and to
-14-
<PAGE>
execute any instrument which the Collateral Agent may deem necessary or
advisable to accomplish the purposes of this Agreement (subject to the rights of
the Grantor under Section 5(f) hereof), including, without limitation, (i) to
obtain and adjust insurance required to be paid to the Collateral Agent pursuant
to Section 5(e) hereof, and to receive, indorse and collect any drafts or other
instruments, documents and chattel paper in connection therewith, (ii) to ask,
demand, collect, sue for, recover, compound, receive and give acquittance and
receipts for moneys due and to become due under or in respect of any Collateral,
(iii) to receive, indorse, and collect any drafts or other instruments,
documents and chattel paper in connection with clause (i) or (ii) above, and
(iv) to file any claims or take any action or institute any proceedings which
the Collateral Agent may deem necessary or desirable for the collection of any
Collateral or otherwise to enforce the rights of the Collateral Agent with
respect to any Collateral.
(c) For the purpose of enabling the Collateral Agent to exercise
rights and remedies hereunder at such time as the Collateral Agent shall be
lawfully entitled to exercise such rights and remedies, and for no other
purpose, the Grantor hereby grants to the Collateral Agent, to the extent
assignable, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to the Grantor) to use, assign, license or
sublicense any of the Patents, Trademarks or Copyrights now owned or hereafter
acquired by the Grantor, wherever the same may be located, including in such
license reasonable access to all media in which any of the licensed items may be
recorded or stored and to all computer programs used for the compilation or
printout thereof. Notwithstanding anything contained herein to the contrary,
but subject to the provisions of the Amended and Restated Financing Agreement
that limits the right of the Grantor to dispose of its property and Section 5(h)
hereof, so long as no Event of Default shall have occurred and be continuing,
the Grantor may exploit, use, enjoy, protect, license, sublicense, assign, sell,
dispose of or take other actions with respect to the Patents, Trademarks or
Copyrights in the ordinary course of the business of the Grantor. In
furtherance of the foregoing, unless an Event of Default shall have occurred and
be continuing the Collateral Agent shall promptly from time to time, upon the
request of the Grantor, execute and deliver any instruments, certificates or
other documents, in the form so requested, which the Grantor shall have
certified are appropriate (in its judgment) to allow it to take any action
permitted above (including relinquishment of the license provided pursuant to
this clause (c) as to any Patents, Trademarks or Copyrights and the release of
the Lien created hereby). Further, upon the payment in full of all of the
Guaranteed Obligations and cancellation or termination of the Total Commitments,
the Collateral Agent (subject to Section 10(e) hereof) shall transfer to the
Grantor all of the Collateral Agent's right, title and interest in and to the
Patents, Trademarks and Copyrights, and the Licenses, all without recourse,
representation or warranty whatsoever. The exercise of rights and remedies
hereunder by the Collateral Agent shall not terminate the rights of the holders
of any licenses or sublicenses theretofore granted by the Grantor in accordance
with the second sentence of this clause (c). The Grantor hereby releases the
Collateral Agent from any claims, causes of action and demands at any time
arising out of or with respect to any actions taken or omitted to be taken by
the Collateral Agent under the powers of attorney granted herein other than
actions taken or omitted to be taken through the Collateral Agent's gross
negligence or willful misconduct.
-15-
<PAGE>
(d) If the Grantor fails to perform any agreement contained
herein, the Collateral Agent may itself perform, or cause performance of, such
agreement or obligation, in the name of the Grantor or the Collateral Agent, and
the expenses of the Collateral Agent incurred in connection therewith shall be
payable by the Grantor pursuant to Section 8 hereof and shall be secured by the
Collateral.
(e) The powers conferred on the Collateral Agent hereunder are
solely to protect its interest in the Collateral and shall not impose any duty
upon it to exercise any such powers. Except for the safe custody of any
Collateral in its possession and the accounting for moneys actually received by
it hereunder, the Collateral Agent shall have no duty as to any Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Collateral.
(f) Anything herein to the contrary notwithstanding (i) the
Grantor shall remain liable under the Related Contracts and Licenses and
otherwise with respect to any of the Collateral to the extent set forth therein
to perform all of its obligations thereunder to the same extent as if this
Agreement had not been executed, (ii) the exercise by the Collateral Agent of
any of its rights hereunder shall not release the Grantor from any its
obligations under the Related Contracts and Licenses or otherwise in respect of
the Collateral, and (iii) the Collateral Agent shall not have any obligation or
liability by reason of this Agreement under the Related Contracts and Licenses
or with respect to any of the other Collateral, nor shall the Collateral Agent
be obligated to perform any of the obligations or duties of the Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.
SECTION 7. Remedies Upon Default. If any Event of Default shall
---------------------
have occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party
upon default under the Code (whether or not the Code applies to the affected
Collateral), and also may (i) require the Grantor to, and the Grantor hereby
agrees that it will at its expense and upon request of the Collateral Agent
forthwith, assemble all or part of the Collateral as directed by the Collateral
Agent and make it available to the Collateral Agent at a place or places to be
designated by the Collateral Agent which is reasonably convenient to both
parties and (ii) without notice except as specified below, sell the Collateral
or any part thereof in one or more parcels at public or private sale, at any of
the Collateral Agent's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Collateral Agent may deem commercially reasonable. The Grantor agrees that, to
the extent notice of sale shall be required by law, at least 10 Business Days'
notice to the Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable notification.
The Collateral Agent shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Collateral 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. The Grantor hereby waives any
claims against the Collateral Agent and the
-16-
<PAGE>
Lenders arising by reason of the fact that the price at which the Collateral may
have been sold at a private sale was less than the price which might have been
obtained at a public sale or was less than the aggregate amount of the
Guaranteed Obligations, even if the Collateral Agent accepts the first offer
received and does not offer the Collateral to more than one offeree and waives
all rights which the Grantor may have to require that all or any part of the
Collateral be marshalled upon any sale (public or private) thereof. In addition
to the foregoing, (i) upon written notice from the Collateral Agent, the Grantor
shall cease any use of the Trademarks, Patents or Copyrights or any mark, patent
or copyright similar thereto for any purpose described in such notice; (ii) the
Collateral Agent may, at any time and from time to time, upon 10 days' prior
notice to the Grantor, license, whether general, special or otherwise, and
whether on an exclusive or non-exclusive basis, any of the Trademarks, Patents
and Copyrights, throughout the world for such term or terms, on such conditions,
and in such manner, as the Collateral Agent shall in its sole discretion
determine; and (iii) the Collateral Agent may, at any time, pursuant to the
authority granted in Section 6 hereof (such authority being effective upon the
occurrence of an Event of Default), execute and deliver on behalf of the
Grantor, one or more instruments of assignment of the Trademarks, Patents and
Copyrights (or any application or registration thereof), in form suitable for
filing, recording or registration in any country.
(b) Any cash held by the Collateral Agent as Collateral and all
cash proceeds received by the Collateral Agent in respect of any sale of or
collection from, or other realization upon, all or any part the Collateral may,
in the discretion of the Collateral Agent, be held by the Collateral Agent as
collateral for, and/or then or at any time thereafter applied in whole or in
part by the Collateral Agent against, all or any part of the Guaranteed
Obligations as provided in Section 4.04(b) of the Amended and Restated Financing
Agreement.
(c) In the event that the proceeds of any such sale, collection
or realization are insufficient to pay all amounts to which the Collateral Agent
and the Lenders are legally entitled, the Grantor shall be liable for the
deficiency, together with interest thereon at the highest rate specified in any
applicable Loan Document for interest on overdue principal thereof or such other
rate as shall be fixed by applicable law, together with the costs of collection
and the reasonable fees, costs, expenses of any attorneys employed by the
Collateral Agent to collect such deficiency.
SECTION 8. Indemnity and Expenses.
----------------------
(a) The Grantor agrees to indemnify and hold the Collateral
Agent harmless from and against any and all claims, damages, losses,
liabilities, obligations, penalties, costs or expenses (including, without
limitation, reasonable legal fees and disbursements of Collateral Agent's
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely and directly from the Collateral
Agent's gross negligence or willful misconduct as determined by a final judgment
of a court of competent jurisdiction.
(b) The Grantor will upon demand pay to the Collateral Agent the
amount of any and all costs and expenses, including the reasonable fees and
disbursements of the Collateral
-17-
<PAGE>
Agent's counsel and of any experts and agents, which the Collateral Agent may
incur in connection with (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, waiver or other modification or
termination of this Agreement, or (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Collateral, (iii) the exercise or enforcement of any of the rights of the
Collateral Agent hereunder, or (iv) the failure by the Grantor to perform or
observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
------------
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Grantor or the Collateral Agent, to the parties and at the addresses
specified in the Amended and Restated Financing Agreement; or as to either such
Person at such other address as shall be designated by such Person in a written
notice to such other Person complying as to delivery with the terms of this
Section 9. All such notices and other communications shall be effective (i) if
sent by certified mail, return receipt requested, when received or 3 Business
Days after mailing, whichever first occurs, (ii) if telecopied, when transmitted
and confirmation is received, provided same is on a Business Day and, if not, on
the next Business Day or (iii) if delivered, upon delivery, provided same is on
a Business Day and, if not, on the next Business Day.
SECTION 10. Miscellaneous.
-------------
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Grantor and the Collateral
Agent, and no waiver of any provision of this Agreement, and no consent to any
departure by the Grantor therefrom, shall be effective unless it is in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Collateral Agent to exercise, and
no delay in exercising, any right hereunder or under any other Loan Document
shall operate as a waiver thereof; nor shall any single or partial exercise of
any such right preclude any other or further exercise thereof or the exercise of
any other right. The rights and remedies of the Collateral Agent provided herein
and in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent under any Loan Document against any party thereto are not
conditional or contingent on any attempt by the Collateral Agent to exercise any
of its rights under any other Loan Document against such party or against any
other Person.
(c) Any provision of this Agreement which is 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in
the Collateral and shall (i) remain in full force and effect until the payment
in full of the Guaranteed Obligations after the Total Commitment has been
-18-
<PAGE>
canceled or cash collateralized, and (ii) be binding on the Grantor and its
successors and assigns and shall inure, together with all rights and remedies of
the Collateral Agent hereunder, to the benefit of the Collateral Agent and the
Lenders their respective permitted successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence and
subject to the terms of the Amended and Restated Financing Agreement, the
Collateral Agent and Lenders may assign or otherwise transfer their rights under
this Agreement and any other Loan Document, to any other Person and such other
Person shall thereupon become vested with all of the benefits in respect thereof
granted to the Collateral Agent and the Lenders herein or otherwise. None of the
rights or obligations of the Grantor hereunder may be assigned or otherwise
transferred without the prior written consent of the Collateral Agent, and any
such assignment or transfer shall be null and void.
(e) Upon the satisfaction in full of the Guaranteed Obligations after
the Total Commitment has been terminated and all Letters of Credit have been
canceled or cash collateralized, (i) this Agreement and the security interests
created hereby shall terminate and all rights to the Collateral shall revert to
the Grantor, and (ii) the Collateral Agent will, upon the Grantor's request and
at the Grantor's expense promptly, (A) return to the Grantor such of the
Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof, and (B) execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination,
all without any representation, warranty or recourse whatsoever.
(f) This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York, except as
required by mandatory provisions of law and except to the extent that the
validity and perfection or the perfection and effect of perfection or non-
perfection of the security interest created hereby or remedies hereunder, in
respect of any particular Collateral are governed by the law of a jurisdiction
other than the State of New York.
-19-
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
[GRANTOR]
By:________________________________
Name:______________________________
Title:_____________________________
-20-
<PAGE>
SCHEDULE I TO SECURITY AGREEMENT
RELATED CONTRACTS
<PAGE>
SCHEDULE II TO SECURITY AGREEMENT
TRADEMARKS
AND
TRADEMARK LICENSES
<PAGE>
SCHEDULE III TO SECURITY AGREEMENT
PATENTS AND PATENT LICENSES
<PAGE>
SCHEDULE IV TO SECURITY AGREEMENT
COPYRIGHTS AND COPYRIGHT LICENSES
<PAGE>
SCHEDULE V TO SECURITY AGREEMENT
I. Locations of Equipment and Inventory
II. Grantor's chief place of business, chief executive office and place
where the Grantor keeps its books and records
<PAGE>
SCHEDULE VI TO SECURITY AGREEMENT
TRADE NAMES
<PAGE>
SCHEDULE VII TO SECURITY AGREEMENT
UCC-1 FINANCING STATEMENTS
<PAGE>
EXHIBIT A
ASSIGNMENT FOR SECURITY
-----------------------
(TRADEMARKS)
----------
WHEREAS, _________________________ (the "Assignor") has adopted,
--------
used and is using the trademarks and service marks listed on the annexed
Schedule 1A, which trademarks and service marks are registered or applied for in
the United States Patent and Trademark Office (the "Trademarks");
----------
WHEREAS, the Assignor, has entered into a Security Agreement dated
____ __, 1998 (the "Security Agreement") in favor of NATIONSBANC COMMERCIAL
------------------
CORPORATION., as collateral agent for certain lenders (the "Assignee"); and
--------
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned
to the Assignee and granted to the Assignee a security interest in all right,
title and interest of the Assignor in, to and under the Trademarks together with
the good-will of the business symbolized by the Trademarks and the applications
and restrictions thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance
----------
and observance of the Guaranteed Obligations (as defined in the Security
Agreement);
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign unto the Assignee and
grants to the Assignee a security interest in the Collateral to secure the
prompt payment, performance and observance of the Guaranteed Obligations.
The Assignor does hereby further acknowledge and affirm that the
rights and remedies of the Assignee with respect to the Collateral are more
fully set forth in the Security Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of _____________ __, 199__.
_________________________
By:_______________________
Name:_____________________
Title:______________________
<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this ____ day of _______________, 199__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is the
________________ of _________________________, a _________ corporation, and that
he executed the foregoing instrument in the firm name of _____________________,
and that he had authority to sign the same, and he acknowledged to me that he
executed the same as the act and deed of said firm for the uses and purposes
therein mentioned.
________________________
<PAGE>
SCHEDULE 1A TO ASSIGNMENT FOR SECURITY
--------------------------------------
(TRADEMARKS AND TRADEMARK APPLICATIONS)
---------------------------------------
<PAGE>
EXHIBIT B
ASSIGNMENT FOR SECURITY
-----------------------
(PATENTS)
-------
WHEREAS, _________________________(the "Assignor") holds all right,
--------
title and interest in the letter patents, design patents and utility patents
listed on the annexed Schedule 1A, which patents are issued or applied for in
the United States Patent and Trademark Office (the "Patents");
-------
WHEREAS, the Assignor, has entered into a Security Agreement dated
____ __, 1998 (the "Security Agreement") in favor of NATIONSBANC COMMERCIAL
------------------
CORPORATION, as collateral agent for certain lenders (the "Assignee"); and
--------
WHEREAS, pursuant to the Security Agreement, the Assignor has assigned
to the Assignee and granted to the Assignee a security interest in all right,
title and interest of the Assignor in, to and under the Patents and the
applications and registrations thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance and
----------
observance of the Guaranteed Obligations (as defined in the Security Agreement);
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign unto the Assignee and
grants to the Assignee a security interest in the Collateral to secure the
prompt payment, performance and observance of the Guaranteed Obligations.
The Assignor does hereby further acknowledge and affirm that the
rights and remedies of the Assignee with respect to the Collateral are more
fully set forth in the Security Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of __________ __, 199__.
_________________________
By:_______________________
Name:_____________________
Title:______________________
<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this ____ day of _______________, 199__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is the
________________ of _________________________, a ___________ corporation, and
that he executed the foregoing instrument in the firm name of ________________,
and that he had authority to sign the same, and he acknowledged to me that he
executed the same as the act and deed of said firm for the uses and purposes
therein mentioned.
_____________________________
<PAGE>
SCHEDULE 1B TO ASSIGNMENT FOR SECURITY
(PATENTS AND PATENT APPLICATIONS)
-------------------------------
<PAGE>
EXHIBIT C
ASSIGNMENT FOR SECURITY
-----------------------
(COPYRIGHTS)
----------
WHEREAS, _________________________(the "Assignor") holds all right,
--------
title and interest in the copyrights listed on the annexed Schedule 1A, which
copyrights are registered in the United States Copyright Office (the
"Copyrights");
----------
WHEREAS, the Assignor, has entered into a Security Agreement dated
______ __, 1998 (the "Security Agreement") in favor of NATIONSBANC COMMERCIAL
------------------
CORPORATION, as collateral agent for certain lenders (the "Assignee");
--------
WHEREAS, pursuant to the Security Agreement, the Assignor has
assigned to the Assignee and granted to the Assignee a security interest in all
right, title and interest of the Assignor in, to and under the Copyrights and
the registrations thereof, and all proceeds thereof, including, without
limitation, any and all causes of action which may exist by reason of
infringement thereof (the "Collateral"), to secure the payment, performance
----------
and observance of the Guaranteed Obligations (as defined in the Security
Agreement);
NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged, the Assignor does hereby assign unto the Assignee and
grants to the Assignee a security interest in the Collateral to secure the
prompt payment, performance and observance of the Guaranteed Obligations.
The Assignor does hereby further acknowledge and affirm that the
rights and remedies of the Assignee with respect to the Collateral are more
fully set forth in the Security Agreement, the terms and provisions of which are
hereby incorporated herein by reference as if fully set forth herein.
IN WITNESS WHEREOF, the Assignor has caused this Assignment to be duly
executed by its officer thereunto duly authorized as of __________ __, 199__.
_________________________
By:_______________________
Name:_____________________
Title:______________________
<PAGE>
STATE OF NEW YORK
ss.:
COUNTY OF NEW YORK
On this ____ day of _______________, 199__, before me personally came
________________, to me known to be the person who executed the foregoing
instrument, and who, being duly sworn by me, did depose and say that he is the
________________ of _________________________, a __________ corporation, and
that he executed the foregoing instrument in the firm name of ________________,
and that he had authority to sign the same, and he acknowledged to me that he
executed the same as the act and deed of said firm for the uses and purposes
therein mentioned.
_____________________________
<PAGE>
SCHEDULE 1C TO ASSIGNMENT FOR SECURITY
(COPYRIGHTS AND COPYRIGHT APPLICATIONS)
-------------------------------------
<PAGE>
EXHIBIT D-1
FORM OF BORROWER PLEDGE AGREEMENT
---------------------------------
PLEDGE AND SECURITY AGREEMENT dated as of _____ __, 199_, made by
__________________, a ___________ corporation (the "Pledgor"), in favor of
-------
NATIONSBANC COMMERCIAL CORPORATION, as collateral agent for the Lenders parties
to the Amended and Restated Financing Agreement referred to below (in such
capacity, the "Collateral Agent").
----------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Norton McNaughton, Inc., a Delaware corporation (the
"Company"), [Norton McNaughton of Squire, Inc., a New York corporation
-------
("Squire")], [Miss Erika, Inc., a Delaware corporation ("Miss Erika")] [the
------ ----------
Pledgor], certain lenders (the "Existing Lenders"), NationsBanc Commercial
----------------
Corporation as collateral agent (the "Collateral Agent") for the Existing
----------------
Lenders and The CIT Group/Commercial Services, Inc. as administrative agent (the
"Administrative Agent") for the Existing Lenders are parties to a Financing
--------------------
Agreement, dated as of September 25, 1997, as amended by the First Amendment
dated as of November 21, 1997, the Second Amendment dated as of January 30, 1998
and the Third Amendment dated as of June 12, 1998 (as so amended, the "Existing
--------
Financing Agreement");
- -------------------
WHEREAS, pursuant to the Existing Financing Agreement, the Existing
Lenders extended credit to Squire and Miss Erika [the Pledgor] consisting of (i)
a term loan in the original principal amount of $15,000,000 and (ii) revolving
credit loans in an aggregate principal amount at any one time outstanding not to
exceed $125,000,000, a portion of which included letters of credit issued with
the assistance of the Collateral Agent and the Existing Lenders for the account
of Squire and Miss Erika [the Pledgor];
WHEREAS, the Company, Squire and Miss Erika [the Pledgor] have
requested that the Existing Financing Agreement be amended and restated to,
among other things (i) prepay the term loan in full, (ii) increase the revolving
credit facility to provide revolving credit loans to the Borrowers at any one
time outstanding not to exceed $175,000,000 (the "Revolving Credit Loans", and
----------------------
each a "Loan" and collectively, the "Loans"), which may include letters of
---- -----
credit (the "Letters of Credit") issued with the assistance of the Collateral
-----------------
Agent and the Lenders for the account of the Borrowers, (iii) extend the
maturity date of the revolving credit facility and (iv) add [the Pledgor] [JJ
Acquisition Corp., a Delaware corporation to be known as Jeri-Jo Knitwear, Inc.
("Jeri-Jo" and together with Squire and Miss Erika each, a "Borrower" and
------- --------
collectively, the "Borrowers")] as a Borrower;
---------
WHEREAS, pursuant to such request the Company, [Squire], [Miss Erika],
[Jeri-Jo] [the Pledgor], the Collateral Agent, the Administrative Agent, Fleet
Bank, NA, as documentation agent (the "Documentation Agent") and the financial
-------------------
institutions from time to time party thereto (the "Lenders") have entered into
-------
an Amended and Restated Financing
<PAGE>
Agreement, dated as of June 18, 1998 (such agreement, as amended, restated or
otherwise modified from time to time, being hereinafter referred to as the
"Amended and Restated Financing Agreement");
-----------------------------------------
WHEREAS, it is a condition precedent to the Lenders making and
maintaining Loans and assisting the Pledgor in obtaining Letters of Credit under
the Amended and Restated Financing Agreement that the Pledgor shall have
executed and delivered to the Collateral Agent a pledge and security agreement
providing for the pledge to the Collateral Agent of, and the grant to the
Collateral Agent for the benefit of the Lenders of a security interest in,
certain indebtedness from time to time owing to the Pledgor and certain of the
outstanding shares of capital stock from time to time owned by the Pledgor of
each Subsidiary now or hereafter existing and in which Pledgor has any interest
at any time; and
WHEREAS, the Pledgor has determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of
the Pledgor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Collateral Agent and the Lenders to enter into
the Amended and Restated Financing Agreement with the Pledgor, the Pledgor
hereby agrees with the Collateral Agent as follows:
SECTION 1. Definitions. All terms used in this Agreement which are
-----------
defined in the Amended and Restated Financing Agreement or in Article 8 or
Article 9 of the Uniform Commercial Code (the "Code") currently in effect in the
----
State of New York and which are not otherwise defined herein shall have the same
meanings herein as set forth therein.
SECTION 2. Pledge and Grant of Security Interest. As collateral
-------------------------------------
security for all of the Obligations (as defined in Section 3 hereof), the
Pledgor hereby pledges and collaterally assigns to the Collateral Agent, and
grants to the Collateral Agent for the benefit of the Lenders a continuing
security interest in, the following (the "Pledged Collateral"):
------------------
(a) the indebtedness described in Schedule I hereto and all
indebtedness from time to time required to be pledged to the Collateral Agent
pursuant to the terms of the Amended and Restated Financing Agreement (the
"Pledged Debt"), the promissory notes and other instruments evidencing the
------------
Pledged Debt and all interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(b) the shares of stock described in Schedule II hereto (the "Pledged
-------
Shares") issued by the corporations described in such Schedule II (the "Existing
- ------ --------
Subsidiaries"), the certificates representing the Pledged Shares, all options
- ------------
and other rights, contractual or otherwise, in respect thereof and all
dividends, cash, instruments and other property (including but not limited to,
any stock dividend and any distribution in connection with a stock split) from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the Pledged Shares;
-2-
<PAGE>
(c) the shares of stock at any time and from time to time acquired by
the Pledgor, of any and all Subsidiaries, whether now or hereafter existing, all
or a portion of the stock of which is acquired by the Pledgor at any time (such
Subsidiaries, together with the Existing Subsidiaries, being hereinafter
referred to collectively as the "Pledged Subsidiaries" and individually as a
--------------------
"Pledged Subsidiary"), the certificates representing such shares, all options
------------------
and other rights, contractual or otherwise, in respect thereof and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(d) all additional shares of stock, from time to time acquired by the
Pledgor, of any Pledged Subsidiary, the certificates representing such
additional shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares; and
(e) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor
and howsoever its interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
SECTION 3. Security for Obligations. The security interest created
------------------------
hereby in the Pledged Collateral constitutes continuing collateral security for
all of the following obligations whether now existing or hereafter incurred (the
"Obligations"):
-----------
(a) the prompt payment by the Pledgor, as and when due and payable,
of all amounts from time to time owing by it in respect of the Amended and
Restated Financing Agreement, the Notes, its Guaranty and the other Loan
Documents, including, without limitation, principal of and interest on the Loans
(including, without limitation, all interest that accrues after the commencement
of any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of the Pledgor, whether or not a claim for post-filing
interest is allowed in such proceeding), all Letter of Credit Obligations and
all Ledger Debt and all interest thereon, all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any Loan Document; and
(b) the due performance and observance by the Pledgor of all of its
other obligations from time to time existing in respect of the Amended and
Restated Financing Agreement and the other Loan Documents.
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<PAGE>
SECTION 4. Delivery of the Pledged Collateral.
----------------------------------
(a) All promissory notes currently evidencing the Pledged Debt and
all certificates currently representing the Pledged Shares shall be delivered to
the Collateral Agent on or prior to the execution and delivery of this
Agreement. All other promissory notes, certificates and instruments constituting
Pledged Collateral from time to time or required to be pledged to the Collateral
Agent pursuant to the terms of the Amended and Restated Financing Agreement (the
"Additional Collateral") shall be delivered to the Collateral Agent within 10
---------------------
Business Days of receipt thereof by or on behalf of Pledgor. All such promissory
notes, certificates and instruments shall be held by or on behalf of the
Collateral Agent pursuant hereto and shall be delivered in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Collateral Agent. Within 10 Business Days of the receipt by
Pledgor of the Additional Collateral, a Pledge Amendment, duly executed by the
Pledgor, in substantially the form of Schedule III hereto (a "Pledge Amendment")
----------------
shall be delivered to the Collateral Agent, in respect of the Additional
Collateral which are to be pledged pursuant to this Agreement and the Amended
and Restated Financing Agreement, which Pledge Amendment shall from and after
delivery thereof constitute part of Schedules I and II hereto. The Pledgor
hereby authorizes the Collateral Agent to attach each Pledge Amendment to this
Agreement and agrees that all promissory notes, certificates or instruments
listed on any Pledge Amendment delivered to the Collateral Agent shall for all
purposes hereunder constitute Pledged Collateral and the Pledgor shall be deemed
upon delivery thereof to have made the representations and warranties set forth
in Section 5 with respect to such Additional Collateral.
(b) If the Pledgor shall receive, by virtue of its being or having
been an owner of any Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spin-off or split-off), promissory note or other instrument, (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash
(except such dividends permitted to be retained by the Pledgor pursuant to
Section 7 hereof) or in securities or other property or (iv) dividends or other
distributions in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, the Pledgor shall receive such stock certificate, promissory note,
instrument, option, right, payment or distribution in trust for the benefit of
the Collateral Agent, shall segregate it from the Pledgor's other property and
shall deliver it forthwith to the Collateral Agent in the exact form received,
with any necessary indorsement and/or appropriate stock powers duly executed in
blank, to be held by the Collateral Agent as Pledged Collateral and as further
collateral security for the Obligations.
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<PAGE>
SECTION 5. Representations and Warranties. The Pledgor represents
------------------------------
and warrants as follows:
(a) The Existing Subsidiaries set forth in Schedule II hereto are the
Pledgor's only Subsidiaries existing on the date hereof. The Pledged Shares
have been duly authorized and validly issued, are fully paid and nonassessable
and constitute 100% of the issued shares of capital stock of the Pledged
Subsidiaries as of the date hereof. All other shares of stock constituting
Pledged Collateral will be, when issued, duly authorized and validly issued,
fully paid and nonassessable.
(b) The promissory notes[s] currently evidencing the Pledged Debt
have been, and all other promissory notes from time to time evidencing Pledged
Debt, when executed and delivered, will have been, duly authorized, executed and
delivered by the respective makers thereof, and all such promissory notes are or
will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective
terms, subject as to enforceability to applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights and to general
principles of equity.
(c) The Pledgor is and will be at all times the legal and beneficial
owner of the Pledged Collateral free and clear of any Lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement and Liens permitted by the Amended and Restated Financing
Agreement.
(d) The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene law or any material contractual
restriction binding on or affecting the Pledgor or any of its properties and
will not result in or require the creation of any Lien, security interest or
other charge or encumbrance upon or with respect to any of its properties other
than pursuant to this Agreement and the other Loan Documents.
(e) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority is required to be obtained or made by
the Pledgor for (i) the due execution, delivery and performance by the Pledgor
of this Agreement, (ii) the grant by the Pledgor, or the perfection, of the
security interest purported to be created hereby in the Pledged Collateral or
(iii) the exercise by the Collateral Agent or the Lenders of any of their rights
and remedies hereunder, except as may be required in connection with any sale of
any Pledged Collateral by laws affecting the offering and sale of securities
generally.
(f) This Agreement creates a valid security interest in favor of the
Collateral Agent in the Pledged Collateral, as security for the Obligations.
The Collateral Agent's having possession of the promissory notes evidencing the
Pledged Debt, the certificates representing the Pledged Shares and all other
certificates, instruments and cash constituting Pledged Collateral from time to
time results in the perfection of such security interest. Such security
interest is, or in the case of Pledged Collateral in which the Pledgor obtains
rights after the date hereof, will be, a perfected, first priority security
interest. All action necessary or desirable to perfect and protect such
security interest has been duly taken, except for the Collateral Agent's having
possession of certificates, instruments and cash constituting Pledged Collateral
after the date hereof.
-5-
<PAGE>
SECTION 6. Covenants as to the Pledged Collateral. So long as any
--------------------------------------
Obligations shall remain outstanding, the Pledgor will, unless the Collateral
Agent shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and
permit the Collateral Agent or any agents or representatives thereof at any time
or from time to time to examine and make copies of and abstracts from such
records pursuant to the terms of Section 7.01(f) of the Amended and Restated
Financing Agreement;
(b) at its expense, upon the request of the Collateral Agent,
promptly deliver to the Collateral Agent a copy of each material notice or other
communication received by it in respect of the Pledged Collateral;
(c) at its expense, defend the Collateral Agent's right, title and
security interest in and to the Pledged Collateral against the claims of any
Person;
(d) at its expense, at any time and from time to time, promptly
execute and deliver all further instruments and documents and take all further
action that may be necessary or that the Collateral Agent may reasonably request
in order to (i) perfect and protect the security interest purported to be
created hereby, (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Pledged Collateral or (iii)
otherwise effect the purposes of this Agreement, including, without limitation,
delivering to the Collateral Agent, after the occurrence and during the
continuation of an Event of Default, irrevocable proxies in respect of the
Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange or
otherwise dispose of any Pledged Collateral or any interest therein (other than
the Pledged Shares issued by Norty's, Inc.) except as permitted by Section
7(a)(i) hereof;
(f) not create or suffer to exist any Lien, security interest or
other charge or encumbrance upon or with respect to any Pledged Collateral
except for the security interest created hereby or pursuant to any other Loan
Document and Liens permitted by the Amended and Restated Financing Agreement;
(g) not make or consent to any amendment or other modification or
waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral other
than pursuant to the Loan Documents and applicable securities laws;
(h) not permit the issuance of (i) any additional shares of any class
of capital stock of any Pledged Subsidiary, (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the occurrence or non-
occurrence of any event or condition into, or exchangeable for, any such shares
of capital stock or (iii) any warrants, options, contracts or other commitments
entitling any Person to purchase or otherwise acquire any such shares of capital
stock; and
-6-
<PAGE>
(i) not take or fail to take any action which would in any manner
impair the enforceability of the Collateral Agent's security interest in any
Pledged Collateral.
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged
--------------------------------------------------------
Collateral.
- ----------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor may exercise any and all voting and other
consensual rights pertaining to any Pledged Collateral for any purpose not
inconsistent with the terms of this Agreement, the Amended and Restated
Financing Agreement or the other Loan Documents; provided, however, that (A) the
-------- -------
Pledgor will not exercise or refrain from exercising any such right, as the case
may be, if the Collateral Agent gives it notice that, in the Collateral Agent's
reasonable judgment, such action would have a Material Adverse Effect and (B)
the Pledgor will give the Collateral Agent at least 5 Business Days' notice of
the manner in which it intends to exercise, or the reasons for refraining from
exercising, any such right which is reasonably likely to have a Material Adverse
Effect;
(ii) the Pledgor may receive and retain any and all dividends or
interest paid in respect of the Pledged Collateral; provided, however, that any
-------- -------
and all (A) dividends and interest paid or payable other than in cash in respect
of, and instruments and other property received, receivable or otherwise
distributed in respect of or in exchange for, any Pledged Collateral, (B)
dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, shall be, and shall
forthwith be delivered to the Collateral Agent to hold as, Pledged Collateral
and shall, if received by the Pledgor, be received in trust for the benefit of
the Collateral Agent, shall be segregated from the other property or funds of
the Pledgor, and shall be forthwith delivered to the Collateral Agent in the
exact form received with any necessary indorsement and/or appropriate stock
powers duly executed in blank, to be held by the Collateral Agent as Pledged
Collateral and as further collateral security for the Obligations; and
(iii) the Collateral Agent will execute and deliver (or cause to
be executed and delivered) to the Pledgor all such proxies and other instruments
as the Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which it is entitled to exercise pursuant
to paragraph (i) of this Section 7(a) and to receive the dividends which it is
authorized to receive and retain pursuant to paragraph (ii) of this Section
7(a).
(b) Upon the occurrence and during the continuance of an Event of
Default and to the extent not inconsistent with the Amended and Restated
Financing Agreement:
(i) all rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
paragraph (i) of subsection (a) of this Section 7, and to receive the dividends
and interest payments which it would otherwise
-7-
<PAGE>
be authorized to receive and retain pursuant to paragraph (ii) of subsection (a)
of this Section 7, shall cease, and all such rights shall thereupon become
vested in the Collateral Agent which shall thereupon have the sole right to
exercise such voting and other consensual rights and to receive and hold as
Pledged Collateral such dividends and interest payments;
(ii) the Collateral Agent is authorized to notify each debtor
with respect to the Pledged Debt to make payment directly to the Collateral
Agent and may collect any and all monies due or to become due to the Pledgor in
respect of the Pledged Debt and the Pledgor hereby authorizes each such debtor
to make such payment directly to the Collateral Agent without any duty of
inquiry;
(iii) without limiting the generality of the foregoing, the
Collateral Agent may at its option exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining to
any of the Pledged Collateral as if it were the absolute owner thereof,
including, without limitation, the right to exchange, in its discretion, any and
all of the Pledged Collateral upon the merger, consolidation, reorganization,
recapitalization or other adjustment of any Pledged Subsidiary, or upon the
exercise by any Pledged Subsidiary of any right, privilege or option pertaining
to any Pledged Collateral, and, in connection therewith, to deposit and deliver
any and all of the Pledged Collateral with any committee, depository, transfer
agent, registrar or other designated agent upon such terms and conditions as it
may determine; and
(iv) all dividends and interest payments which are received by
the Pledgor contrary to the provisions of paragraph (i) of this Section 7(b)
shall be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of the Pledgor, and shall be forthwith paid over to
the Collateral Agent as Pledged Collateral in the exact form received with any
necessary indorsement and/or appropriate stock powers duly executed in blank, to
be held by the Collateral Agent as Pledged Collateral and as further collateral
security for the Obligations.
SECTION 8. Additional Provisions Concerning the Pledged Collateral.
-------------------------------------------------------
(a) The Pledgor hereby authorizes the Collateral Agent to file,
without the signature of the Pledgor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Pledged Collateral.
(b) The Pledgor hereby irrevocably appoints the Collateral Agent the
Pledgor's attorney-in-fact and proxy, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise, from time to time in
the Collateral Agent's discretion exercised reasonably and during the
continuance of an Event of Default, to take any action and to execute any
instrument which the Collateral Agent may deem necessary or reasonably advisable
to accomplish the purposes of this Agreement (subject to the rights of the
Pledgor under Section 7(a) hereof), including, without limitation, to receive,
indorse and collect all instruments made payable to the Pledgor representing any
dividend, interest payment or other distribution in respect of any Pledged
Collateral and to give full discharge for the same.
-8-
<PAGE>
(c) If the Pledgor fails to perform any agreement or obligation
contained herein, the Collateral Agent itself may perform, or cause performance
of, such agreement or obligation, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 10 hereof.
(d) Other than the exercise of reasonable care to assure the safe
custody of the Pledged Collateral while held hereunder, the Collateral Agent
shall have no duty or liability to preserve rights pertaining thereto and shall
be relieved of all responsibility for the Pledged Collateral upon surrendering
it or tendering surrender of it to the Pledgor. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Collateral Agent accords its own
property, it being understood that the Collateral Agent shall not have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
(e) The Collateral Agent may at any time after the occurrence and
during the continuation of an Event of Default and to the extent not
inconsistent with the Amended and Restated Financing Agreement in its discretion
(i) without notice to the Pledgor, transfer or register in the name of the
Collateral Agent or any of its nominees any or all of the Pledged Collateral,
subject only to the revocable rights of the Pledgor under Section 7(a) hereof,
and (ii) exchange certificates or instruments constituting Pledged Collateral
for certificates or instruments of smaller or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default shall have
---------------------
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party on
default under the Code then in effect in the State of New York; and without
limiting the generality of the foregoing and without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Collateral Agent may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least 10 Business Days' notice to the Pledgor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Collateral 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.
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<PAGE>
(b) The Pledgor recognizes that it is impracticable to effect a
public sale of all or any part of the Pledged Shares or any other securities
constituting Pledged Collateral and that the Collateral Agent may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges that
any such private sale may be at prices and on terms less favorable to the seller
than the prices and other terms which might have been obtained at a public sale
and, notwithstanding the foregoing, agrees that such private sales shall be
deemed to have been made in a commercially reasonable manner and that the
Collateral Agent shall have no obligation to delay sale of any such securities
for the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act. The Pledgor
further acknowledges and agrees that any offer to sell such securities which has
been (i) publicly advertised on a bona fide basis in a newspaper or other
publication of general circulation in the financial community of New York, New
York (to the extent that such an offer may be so advertised without prior
registration under the Securities Act) or (ii) made privately in the manner
described above to not less than fifteen bona fide offerees shall be deemed to
---- ----
involve a "public sale" for the purposes of Section 9-504(3) of the Code (or any
successor or similar, applicable statutory provision) as then in effect in the
State of New York, notwithstanding that such sale may not constitute a "public
offering" under the Securities Act, and that the Collateral Agent may, in such
event, bid for the purchase of such securities.
(c) Any cash held by the Collateral Agent as Pledged Collateral and
all cash proceeds received by the Collateral Agent in respect of any sale of,
collection from, or other realization upon, all or any part of the Pledged
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Collateral Agent pursuant
to Section 10 hereof) in whole or in part by the Collateral Agent against, all
or any part of the Obligations in such order as the Collateral Agent shall elect
consistent with the provisions of the Amended and Restated Financing Agreement.
Any surplus of such cash or cash proceeds held by the Collateral Agent and
remaining after payment in full of all of the Obligations shall be paid over to
the Pledgor or to such person as may be lawfully entitled to receive such
surplus.
(d) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent or
any Lender is legally entitled, the Pledgor shall be liable for the deficiency,
together with interest thereon at the highest rate specified in the Amended and
Restated Financing Agreement for interest on overdue principal thereof or such
other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees of any attorneys employed by the Collateral
Agent and any Lender to collect such deficiency.
SECTION 10. Indemnity and Expenses.
----------------------
(a) The Pledgor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities
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resulting solely and directly from the Collateral Agent's gross negligence or
willful misconduct as determined by a final judgment of a court of competent
jurisdiction.
(b) The Pledgor will upon demand pay to the Collateral Agent the
amount of any and all reasonable costs and expenses, including the reasonable
fees and disbursements of the Collateral Agent's counsel and of any experts and
agents, which the Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
the Collateral Agent or any of the Lenders hereunder, or (iv) the failure by the
Pledgor to perform or observe any of the provisions hereof.
SECTION 11. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Pledgor, to it at its address specified in the Amended and Restated
Financing Agreement, and if to the Collateral Agent, to it at its address
specified in the Amended and Restated Financing Agreement, or as to either such
Person at such other address as shall be designated by such Person in a written
notice to such other Person complying as to delivery with the terms of this
Section 11. All such notices and other communications shall be effective (i) if
sent by certified mail, return receipt requested, when received or 3 Business
Days after mailing, whichever first occurs, (ii) if telecopied, when transmitted
and confirmation is received, provided same is on a Business Day and, if not, on
the next Business Day, or (iii) if delivered, upon delivery, provided same is on
a Business Day and, if not, on the next Business Day.
SECTION 12. Consent to Jurisdiction, Etc.
-----------------------------
(a) Any legal action or proceeding with respect to this Agreement or
any document related thereto may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, the Pledgor hereby accepts
unconditionally the jurisdiction of the aforesaid courts. The Pledgor hereby
irrevocably waives any objection, including without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which the
----- --- ----------
Pledgor may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
(b) The Pledgor irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Pledgor
at its address referred to in Section 11 hereof.
(c) Nothing contained in this Section 12 shall affect the right of
the Collateral Agent to serve legal process in any other manner permitted by law
or to commence legal proceedings or otherwise proceed against the Pledgor in any
other jurisdiction.
SECTION 13. Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE
--------------------
COLLATERAL AGENT (BY ACCEPTING THIS AGREEMENT) WAIVES ANY RIGHT TO
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A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS
UNDER THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ARISING FROM ANY OTHER LOAN
DOCUMENT AND AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY.
SECTION 14. Miscellaneous.
-------------
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Pledgor and the Collateral
Agent, and no waiver of any provision of this Agreement, and no consent to any
departure by the Pledgor therefrom, shall be effective unless it is in writing
and signed by the Collateral Agent, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
(b) No failure on the part of the Collateral Agent to exercise, and
no delay in exercising, any right hereunder or under any other document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The rights and remedies of the Collateral Agent provided herein and
in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent under any document against any party thereto are not
conditional or contingent on any attempt by the Collateral Agent to exercise any
of its rights under any other document against such party or against any other
person.
(c) Any provision of this Agreement which is 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
payment in full or release of the Obligations after the Total Commitment has
been terminated and all Letters of Credit have been canceled or cash
collateralized and (ii) be binding on the Pledgor and by its acceptance hereof,
the Collateral Agent, and their respective successors and assigns and shall
inure, together with all rights and remedies of the Collateral Agent and the
Lenders hereunder, to the benefit of the Pledgor, the Collateral Agent and the
Lenders and their respective successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Collateral Agent may assign or otherwise transfer its rights and obligations
under this Agreement to any other Person pursuant to the terms of the Amended
and Restated Financing Agreement, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Collateral
Agent herein or otherwise. Upon any such assignment or transfer, all references
in this Agreement to the Collateral Agent shall mean the assignee of the
Collateral Agent. None of the rights or obligations of the Pledgor hereunder
may be assigned or otherwise transferred without the prior written consent of
the Collateral Agent.
-12-
<PAGE>
(e) Upon the satisfaction in full of the Obligations after the Total
Commitment has been terminated and all Letters of Credit have been canceled or
cash collateralized, (i) this Agreement and the security interest created hereby
shall terminate and all rights to the Pledged Collateral shall revert to the
Pledgor, and (ii) the Collateral Agent will, upon the Pledgor's request and at
the Pledgor's expense promptly, (A) return to the Pledgor such of the Pledged
Collateral as shall not have been sold or otherwise disposed of or applied
pursuant to the terms hereof and (B) execute and deliver to the Pledgor, without
recourse, representation or warranty, such documents as the Pledgor shall
reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance
with the law of the State of New York, except as required by mandatory
provisions of law and except to the extent that the validity and perfection or
the perfection and the effect of perfection or non-perfection of the security
interest created hereby, or remedies hereunder, in respect of any particular
Pledged Collateral are governed by the law of a jurisdiction other than the
State of New York.
-13-
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
[PLEDGOR]
By: ___________________________________
Name:___________________________________
Title:__________________________________
ACCEPTED AND AGREED:
NATIONSBANC COMMERCIAL CORPORATION,
as Collateral Agent
By:____________________________
Name:__________________________
Title:_________________________
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<PAGE>
SCHEDULE I TO PLEDGE AND SECURITY AGREEMENT
Pledged Debt
------------
Principal Amount
Name of Maker Description Outstanding as of
- ------------- ----------- -----------------
<PAGE>
SCHEDULE II TO PLEDGE AND SECURITY AGREEMENT
Pledged Shares
--------------
Certificate
Name of Issuer Number of Shares Class No.(s)
- -------------- ---------------- ----- -----------
<PAGE>
SCHEDULE III
TO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated ___________________________, is delivered
pursuant to Section 4 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement, dated _____ __, 199_, as it may heretofore have been or
hereafter may be amended or otherwise modified or supplemented from time to time
and that the promissory notes or shares listed on this Pledge Amendment shall be
and become part of the Pledged Collateral referred to in said Pledge Agreement
and shall secure all of the Obligations referred to in said Pledge Agreement.
Pledged Debt
------------
Principal Amount
Name of Maker Description Outstanding as of
- ------------- ----------- -----------------
Pledged Shares
--------------
Certificate
Name of Issuer Number of Shares Class No.(s)
- -------------- ---------------- ----- -----------
PLEDGOR
By: ________________________
Name:
Title:
<PAGE>
EXHIBIT D-2
FORM OF PARENT PLEDGE AGREEMENT
-------------------------------
PLEDGE AND SECURITY AGREEMENT dated as of ____________, 199_, made by
NORTON MCNAUGHTON, INC., a Delaware corporation (the "Pledgor"), in favor of
-------
NATIONSBANC COMMERCIAL CORPORATION, as collateral agent for the Lenders parties
to the Amended and Restated Financing Agreement referred to below (in such
capacity, the "Collateral Agent").
----------------
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Pledgor, Norton McNaughton of Squire, Inc., a New York
corporation ("Squire"), Miss Erika, Inc., a Delaware corporation ("Miss Erika"),
------ ----------
certain lenders (the "Existing Lenders"), NationsBanc Commercial Corporation as
----------------
collateral agent (the "Collateral Agent") for the Existing Lenders and The CIT
----------------
Group/Commercial Services, Inc. as administrative agent (the "Administrative
--------------
Agent") for the Existing Lenders are parties to a Financing Agreement, dated as
- -----
of September 25, 1997, as amended by the First Amendment dated as of November
21, 1997, the Second Amendment dated as of January 30, 1998 and the Third
Amendment dated as of June 12, 1998 (as so amended, the "Existing Financing
------------------
Agreement";
- ---------
WHEREAS, pursuant to the Existing Financing Agreement, the Existing
Lenders extended credit to Squire and Miss Erika consisting of (i) a term loan
in the original principal amount of $15,000,000 and (ii) revolving credit loans
in an aggregate principal amount at any one time outstanding not to exceed
$125,000,000, a portion of which included letters of credit issued with the
assistance of the Collateral Agent and the Existing Lenders for the account of
Squire and Miss Erika;
WHEREAS, the Pledgor, Squire and Miss Erika have requested that the
Existing Financing Agreement be amended and restated to, among other things (i)
prepay the term loan in full, (ii) increase the revolving credit facility to
provide revolving credit loans to the Borrowers at any one time outstanding not
to exceed $175,000,000 (the "Revolving Credit Loans", and each a "Loan" and
---------------------- ----
collectively, the "Loans"), which may include letters of credit (the "Letters of
----- ----------
Credit") issued with the assistance of the Collateral Agent and the Lenders for
- ------
the account of the Borrowers, (iii) extend the maturity date of the revolving
credit facility and (iv) add JJ Acquisition Corp., a Delaware corporation to be
known as Jeri-Jo Knitwear, Inc. ("Jeri-Jo")as a borrower;
-------
WHEREAS, pursuant to such request, the Pledgor, Squire, Miss Erika,
Jeri-Jo, the Collateral Agent, the Administrative Agent, ,Fleet Bank NA, as
documentation agent (the "Documentation Agent"), and the financial institutions
-------------------
from time to time party thereto (the "Lenders") have entered into an Amended and
-------
Restated Financing Agreement, dated as of June
<PAGE>
18, 1998 (such agreement, as amended, restated or otherwise modified from time
to time, being hereinafter referred to as the "Amended and Restated Financing
------------------------------
Agreement");
- ---------
WHEREAS, pursuant to Article XI of the Amended and Restated Financing
Agreement, the Pledgor has guaranteed all of the obligations of the Borrowers to
the Collateral Agent, the Administrative Agent and the Lenders under the Amended
and Restated Financing Agreement;
WHEREAS, as collateral security for the obligations of the Pledgor to
the Collateral Agent, the Administrative Agent, the Documentation Agent and the
Lenders under Article XI of the Amended and Restated Financing Agreement, the
Pledgor has agreed to execute and deliver to the Collateral Agent a pledge and
security agreement providing for the pledge to the Collateral Agent of, and the
grant to the Collateral Agent for the benefit of the Lenders of a security
interest in, certain indebtedness from time to time owing to the Pledgor and
certain of the outstanding shares of capital stock from time to time owned by
the Pledgor of each Subsidiary now or hereafter existing and in which Pledgor
has any interest at any time; and
WHEREAS, the Pledgor has determined that the execution, delivery and
performance of this Agreement directly benefits, and is in the best interest of
the Pledgor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Collateral Agent and the Lenders to enter into
the Amended and Restated Financing Agreement with the Pledgor, the Pledgor
hereby agrees with the Collateral Agent as follows:
SECTION 1. Definitions. All terms used in this Agreement which are
-----------
defined in the Amended and Restated Financing Agreement or in Article 8 or
Article 9 of the Uniform Commercial Code (the "Code") currently in effect in the
----
State of New York and which are not otherwise defined herein shall have the same
meanings herein as set forth therein.
SECTION 2. Pledge and Grant of Security Interest. As collateral
-------------------------------------
security for all of the Obligations (as defined in Section 3 hereof), the
Pledgor hereby pledges and collaterally assigns to the Collateral Agent, and
grants to the Collateral Agent for the benefit of the Lenders a continuing
security interest in, the following (the "Pledged Collateral"):
------------------
(a) the indebtedness described in Schedule I hereto and all
indebtedness from time to time required to be pledged to the Collateral Agent
pursuant to the terms of the Amended and Restated Financing Agreement (the
"Pledged Debt"), the promissory notes and other instruments evidencing the
------------
Pledged Debt and all interest, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the Pledged Debt;
(b) the shares of stock described in Schedule II hereto (the "Pledged
-------
Shares") issued by the corporations described in such Schedule II (the "Existing
- ------ --------
Subsidiaries"), the certificates representing the Pledged Shares, all options
- ------------
and other rights, contractual or otherwise, in respect thereof and all
dividends, cash, instruments and other property (including
-2-
<PAGE>
but not limited to, any stock dividend and any distribution in connection with a
stock split) from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares;
(c) the shares of stock at any time and from time to time acquired by
the Pledgor, of any and all Subsidiaries, whether now or hereafter existing, all
or a portion of the stock of which is acquired by the Pledgor at any time (such
Subsidiaries, together with the Existing Subsidiaries, being hereinafter
referred to collectively as the "Pledged Subsidiaries" and individually as a
--------------------
"Pledged Subsidiary"), the certificates representing such shares, all options
------------------
and other rights, contractual or otherwise, in respect thereof and all
dividends, cash, instruments and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of such shares;
(d) all additional shares of stock, from time to time acquired by the
Pledgor, of any Pledged Subsidiary, the certificates representing such
additional shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of such additional shares; and
(e) all proceeds of any and all of the foregoing;
in each case, whether now owned or hereafter acquired by the Pledgor
and howsoever its interest therein may arise or appear (whether by ownership,
security interest, claim or otherwise).
SECTION 3. Security for Guaranteed Obligations. The security
-----------------------------------
interest created hereby in the Pledged Collateral constitutes continuing
collateral security for all of the following obligations whether now existing or
hereafter incurred (the "Guaranteed Obligations"):
----------------------
(a) the prompt payment by the Pledgor, as and when due and payable, of
all amounts from time to time owing by it in respect of its guaranty made
pursuant to Article XI of the Amended and Restated Financing Agreement,
including, without limitation, principal of and interest on the Loans
(including, without limitation, all interest that accrues after the commencement
of any case, proceeding or other action relating to the bankruptcy, insolvency
or reorganization of any Borrower, whether or not a claim for post-filing
interest is allowed in such proceeding), all Letter of Credit Obligations and
Ledger Debt and all interest thereon, all fees, commissions, expense
reimbursements, indemnifications and all other amounts due or to become due
under any Loan Document to which it is a party; and
(b) the due performance and observance by the Pledgor of all of its
other obligations from time to time existing in respect of Article XI of the
Amended and Restated Financing Agreement and the other Loan Documents to which
it is a party.
-3-
<PAGE>
SECTION 4. Delivery of the Pledged Collateral.
----------------------------------
(a) All promissory notes currently evidencing the Pledged Debt and all
certificates currently representing the Pledged Shares shall be delivered to the
Collateral Agent on or prior to the execution and delivery of this Agreement.
All other promissory notes, certificates and instruments constituting Pledged
Collateral from time to time or required to be pledged to the Collateral Agent
pursuant to the terms of the Amended and Restated Financing Agreement (the
"Additional Collateral") shall be delivered to the Collateral Agent within 10
---------------------
Business Days of receipt thereof by or on behalf of Pledgor. All such
promissory notes, certificates and instruments shall be held by or on behalf of
the Collateral Agent pursuant hereto and shall be delivered in suitable form for
transfer by delivery or shall be accompanied by duly executed instruments of
transfer or assignment in blank, all in form and substance reasonably
satisfactory to the Collateral Agent. Within 10 Business Days of the receipt by
Pledgor of the Additional Collateral, a Pledge Amendment, duly executed by the
Pledgor, in substantially the form of Schedule III hereto (a "Pledge Amendment")
----------------
shall be delivered to the Collateral Agent, in respect of the Additional
Collateral which are to be pledged pursuant to this Agreement and the Amended
and Restated Financing Agreement, which Pledge Amendment shall from and after
delivery thereof constitute part of Schedules I and II hereto. The Pledgor
hereby authorizes the Collateral Agent to attach each Pledge Amendment to this
Agreement and agrees that all promissory notes, certificates or instruments
listed on any Pledge Amendment delivered to the Collateral Agent shall for all
purposes hereunder constitute Pledged Collateral and the Pledgor shall be deemed
upon delivery thereof to have made the representations and warranties set forth
in Section 5 with respect to such Additional Collateral.
(b) If the Pledgor shall receive, by virtue of its being or having
been an owner of any Pledged Collateral, any (i) stock certificate (including,
without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spin-off or split-off), promissory note or other instrument, (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash
(except such dividends permitted to be retained by the Pledgor pursuant to
Section 7 hereof) or in securities or other property or (iv) dividends or other
distributions in connection with a partial or total liquidation or dissolution
or in connection with a reduction of capital, capital surplus or paid-in
surplus, the Pledgor shall receive such stock certificate, promissory note,
instrument, option, right, payment or distribution in trust for the benefit of
the Collateral Agent, shall segregate it from the Pledgor's other property and
shall deliver it forthwith to the Collateral Agent in the exact form received,
with any necessary indorsement and/or appropriate stock powers duly executed in
blank, to be held by the Collateral Agent as Pledged Collateral and as further
collateral security for the Guaranteed Obligations.
-4-
<PAGE>
SECTION 5. Representations and Warranties. The Pledgor represents
------------------------------
and warrants as follows:
(a) The Existing Subsidiaries set forth in Schedule II hereto are the
Pledgor's only directly-owned Subsidiaries existing on the date hereof. The
Pledged Shares have been duly authorized and validly issued, are fully paid and
nonassessable and constitute 100% of the issued shares of capital stock of the
Pledged Subsidiaries as of the date hereof. All other shares of stock
constituting Pledged Collateral will be, when issued, duly authorized and
validly issued, fully paid and nonassessable.
(b) The promissory notes[s] currently evidencing the Pledged Debt have
been, and all other promissory notes from time to time evidencing Pledged Debt,
when executed and delivered, will have been, duly authorized, executed and
delivered by the respective makers thereof, and all such promissory notes are or
will be, as the case may be, legal, valid and binding obligations of such
makers, enforceable against such makers in accordance with their respective
terms, subject as to enforceability to applicable bankruptcy, insolvency,
reorganization and similar laws affecting creditors' rights and to general
principles of equity.
(c) The Pledgor is and will be at all times the legal and beneficial
owner of the Pledged Collateral free and clear of any Lien, security interest,
option or other charge or encumbrance except for the security interest created
by this Agreement and Liens permitted by the Amended and Restated Financing
Agreement.
(d) The exercise by the Collateral Agent of any of its rights and
remedies hereunder will not contravene law or any material contractual
restriction binding on or affecting the Pledgor or any of its properties and
will not result in or require the creation of any Lien, security interest or
other charge or encumbrance upon or with respect to any of its properties other
than pursuant to this Agreement and the other Loan Documents.
(e) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority is required to be obtained or made by
the Pledgor for (i) the due execution, delivery and performance by the Pledgor
of this Agreement, (ii) the grant by the Pledgor, or the perfection, of the
security interest purported to be created hereby in the Pledged Collateral or
(iii) the exercise by the Collateral Agent or the Lenders of any of their rights
and remedies hereunder, except as may be required in connection with any sale of
any Pledged Collateral by laws affecting the offering and sale of securities
generally.
(f) This Agreement creates a valid security interest in favor of the
Collateral Agent in the Pledged Collateral, as security for the Guaranteed
Obligations. The Collateral Agent's having possession of the promissory notes
evidencing the Pledged Debt, the certificates representing the Pledged Shares
and all other certificates, instruments and cash constituting Pledged Collateral
from time to time results in the perfection of such security interest. Such
security interest is, or in the case of Pledged Collateral in which the Pledgor
obtains rights after the date hereof, will be, a perfected, first priority
security interest. All action necessary or desirable to perfect and protect
such security interest has been duly taken, except for the
-5-
<PAGE>
Collateral Agent's having possession of certificates, instruments and cash
constituting Pledged Collateral after the date hereof.
SECTION 6. Covenants as to the Pledged Collateral. So long as any
--------------------------------------
Guaranteed Obligations shall remain outstanding, the Pledgor will, unless the
Collateral Agent shall otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and permit
the Collateral Agent or any agents or representatives thereof at any time or
from time to time to examine and make copies of and abstracts from such records
pursuant to the terms of Section 7.01(f) of the Amended and Restated Financing
Agreement;
(b) at its expense, upon the request of the Collateral Agent, promptly
deliver to the Collateral Agent a copy of each material notice or other
communication received by it in respect of the Pledged Collateral;
(c) at its expense, defend the Collateral Agent's right, title and
security interest in and to the Pledged Collateral against the claims of any
Person;
(d) at its expense, at any time and from time to time, promptly
execute and deliver all further instruments and documents and take all further
action that may be necessary or that the Collateral Agent may reasonably request
in order to (i) perfect and protect the security interest purported to be
created hereby, (ii) enable the Collateral Agent to exercise and enforce its
rights and remedies hereunder in respect of the Pledged Collateral or (iii)
otherwise effect the purposes of this Agreement, including, without limitation,
delivering to the Collateral Agent, after the occurrence and during the
continuation of an Event of Default, irrevocable proxies in respect of the
Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange or
otherwise dispose of any Pledged Collateral or any interest therein (other than
the Pledged Shares issued by Norty's, Inc.) except as permitted by Section
7(a)(i) hereof;
(f) not create or suffer to exist any Lien, security interest or other
charge or encumbrance upon or with respect to any Pledged Collateral except for
the security interest created hereby or pursuant to any other Loan Document and
Liens permitted by the Amended and Restated Financing Agreement;
(g) not make or consent to any amendment or other modification or
waiver with respect to any Pledged Collateral or enter into any agreement or
permit to exist any restriction with respect to any Pledged Collateral other
than pursuant to the Loan Documents and applicable securities laws;
(h) not permit the issuance of (i) any additional shares of any class
of capital stock of any Pledged Subsidiary, (ii) any securities convertible
voluntarily by the holder thereof or automatically upon the occurrence or non-
occurrence of any event or condition into, or exchangeable for, any such shares
of capital stock or (iii) any warrants, options, contracts or
-6-
<PAGE>
other commitments entitling any Person to purchase or otherwise acquire any such
shares of capital stock; and
(i) not take or fail to take any action which would in any manner
impair the enforceability of the Collateral Agent's security interest in any
Pledged Collateral.
SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged
--------------------------------------------------------
Collateral.
- ----------
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) the Pledgor may exercise any and all voting and other
consensual rights pertaining to any Pledged Collateral for any purpose not
inconsistent with the terms of this Agreement, the Amended and Restated
Financing Agreement or the other Loan Documents; provided, however, that (A) the
-------- -------
Pledgor will not exercise or refrain from exercising any such right, as the case
may be, if the Collateral Agent gives it notice that, in the Collateral Agent's
reasonable judgment, such action would have a Material Adverse Effect and (B)
the Pledgor will give the Collateral Agent at least 5 Business Days' notice of
the manner in which it intends to exercise, or the reasons for refraining from
exercising, any such right which is reasonably likely to have a Material Adverse
Effect;
(ii) the Pledgor may receive and retain any and all dividends or
interest paid in respect of the Pledged Collateral; provided, however, that any
-------- -------
and all (A) dividends and interest paid or payable other than in cash in respect
of, and instruments and other property received, receivable or otherwise
distributed in respect of or in exchange for, any Pledged Collateral, (B)
dividends and other distributions paid or payable in cash in respect of any
Pledged Collateral in connection with a partial or total liquidation or
dissolution or in connection with a reduction of capital, capital surplus or
paid-in surplus, and (C) cash paid, payable or otherwise distributed in
redemption of, or in exchange for, any Pledged Collateral, shall be, and shall
forthwith be delivered to the Collateral Agent to hold as, Pledged Collateral
and shall, if received by the Pledgor, be received in trust for the benefit of
the Collateral Agent, shall be segregated from the other property or funds of
the Pledgor, and shall be forthwith delivered to the Collateral Agent in the
exact form received with any necessary indorsement and/or appropriate stock
powers duly executed in blank, to be held by the Collateral Agent as Pledged
Collateral and as further collateral security for the Guaranteed Obligations;
and
(iii) the Collateral Agent will execute and deliver (or cause to
be executed and delivered) to the Pledgor all such proxies and other instruments
as the Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which it is entitled to exercise pursuant
to paragraph (i) of this Section 7(a) and to receive the dividends which it is
authorized to receive and retain pursuant to paragraph (ii) of this Section
7(a).
(b) Upon the occurrence and during the continuance of an Event of
Default and to the extent not inconsistent with the Amended and Restated
Financing Agreement:
-7-
<PAGE>
(i) all rights of the Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
paragraph (i) of subsection (a) of this Section 7, and to receive the dividends
and interest payments which it would otherwise be authorized to receive and
retain pursuant to paragraph (ii) of subsection (a) of this Section 7, shall
cease, and all such rights shall thereupon become vested in the Collateral Agent
which shall thereupon have the sole right to exercise such voting and other
consensual rights and to receive and hold as Pledged Collateral such dividends
and interest payments;
(ii) the Collateral Agent is authorized to notify each debtor
with respect to the Pledged Debt to make payment directly to the Collateral
Agent and may collect any and all monies due or to become due to the Pledgor in
respect of the Pledged Debt and the Pledgor hereby authorizes each such debtor
to make such payment directly to the Collateral Agent without any duty of
inquiry;
(iii) without limiting the generality of the foregoing, the
Collateral Agent may at its option exercise any and all rights of conversion,
exchange, subscription or any other rights, privileges or options pertaining to
any of the Pledged Collateral as if it were the absolute owner thereof,
including, without limitation, the right to exchange, in its discretion, any and
all of the Pledged Collateral upon the merger, consolidation, reorganization,
recapitalization or other adjustment of any Pledged Subsidiary, or upon the
exercise by any Pledged Subsidiary of any right, privilege or option pertaining
to any Pledged Collateral, and, in connection therewith, to deposit and deliver
any and all of the Pledged Collateral with any committee, depository, transfer
agent, registrar or other designated agent upon such terms and conditions as it
may determine; and
(iv) all dividends and interest payments which are received by
the Pledgor contrary to the provisions of paragraph (i) of this Section 7(b)
shall be received in trust for the benefit of the Collateral Agent, shall be
segregated from other funds of the Pledgor, and shall be forthwith paid over to
the Collateral Agent as Pledged Collateral in the exact form received with any
necessary indorsement and/or appropriate stock powers duly executed in blank, to
be held by the Collateral Agent as Pledged Collateral and as further collateral
security for the Guaranteed Obligations.
SECTION 8. Additional Provisions Concerning the Pledged Collateral.
-------------------------------------------------------
(a) The Pledgor hereby authorizes the Collateral Agent to file,
without the signature of the Pledgor where permitted by law, one or more
financing or continuation statements, and amendments thereto, relating to the
Pledged Collateral.
(b) The Pledgor hereby irrevocably appoints the Collateral Agent the
Pledgor's attorney-in-fact and proxy, with full authority in the place and stead
of the Pledgor and in the name of the Pledgor or otherwise, from time to time in
the Collateral Agent's discretion exercised reasonably and during the
continuance of an Event of Default, to take any action and to execute any
instrument which the Collateral Agent may deem necessary or reasonably advisable
to accomplish the purposes of this Agreement (subject to the rights of the
Pledgor under Section 7(a) hereof), including, without limitation, to receive,
indorse and collect all instruments made
-8-
<PAGE>
payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of any Pledged Collateral and to give full discharge for
the same.
(c) If the Pledgor fails to perform any agreement or obligation
contained herein, the Collateral Agent itself may perform, or cause performance
of, such agreement or obligation, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor pursuant to
Section 10 hereof.
(d) Other than the exercise of reasonable care to assure the safe
custody of the Pledged Collateral while held hereunder, the Collateral Agent
shall have no duty or liability to preserve rights pertaining thereto and shall
be relieved of all responsibility for the Pledged Collateral upon surrendering
it or tendering surrender of it to the Pledgor. The Collateral Agent shall be
deemed to have exercised reasonable care in the custody and preservation of the
Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Collateral Agent accords its own
property, it being understood that the Collateral Agent shall not have
responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Collateral Agent has or is deemed to have
knowledge of such matters, or (ii) taking any necessary steps to preserve rights
against any parties with respect to any Pledged Collateral.
(e) The Collateral Agent may at any time after the occurrence and
during the continuation of an Event of Default and to the extent not
inconsistent with the Amended and Restated Financing Agreement in its discretion
(i) without notice to the Pledgor, transfer or register in the name of the
Collateral Agent or any of its nominees any or all of the Pledged Collateral,
subject only to the revocable rights of the Pledgor under Section 7(a) hereof,
and (ii) exchange certificates or instruments constituting Pledged Collateral
for certificates or instruments of smaller or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default shall have
---------------------
occurred and be continuing:
(a) The Collateral Agent may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for herein or
otherwise available to it, all of the rights and remedies of a secured party on
default under the Code then in effect in the State of New York; and without
limiting the generality of the foregoing and without notice except as specified
below, sell the Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Collateral Agent may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of sale
shall be required by law, at least 10 Business Days' notice to the Pledgor of
the time and place of any public sale or the time after which any private sale
is to be made shall constitute reasonable notification. The Collateral Agent
shall not be obligated to make any sale of Pledged Collateral regardless of
notice of sale having been given. The Collateral Agent may adjourn any public
or private sale from time to time by announcement at
-9-
<PAGE>
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.
(b) The Pledgor recognizes that it is impracticable to effect a public
sale of all or any part of the Pledged Shares or any other securities
constituting Pledged Collateral and that the Collateral Agent may, therefore,
determine to make one or more private sales of any such securities to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment and not
with a view to the distribution or resale thereof. The Pledgor acknowledges
that any such private sale may be at prices and on terms less favorable to the
seller than the prices and other terms which might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that such private sales
shall be deemed to have been made in a commercially reasonable manner and that
the Collateral Agent shall have no obligation to delay sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act.
The Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial community
of New York, New York (to the extent that such an offer may be so advertised
without prior registration under the Securities Act) or (ii) made privately in
the manner described above to not less than fifteen bona fide offerees shall be
---- ----
deemed to involve a "public sale" for the purposes of Section 9-504(3) of the
Code (or any successor or similar, applicable statutory provision) as then in
effect in the State of New York, notwithstanding that such sale may not
constitute a "public offering" under the Securities Act, and that the Collateral
Agent may, in such event, bid for the purchase of such securities.
(c) Any cash held by the Collateral Agent as Pledged Collateral and
all cash proceeds received by the Collateral Agent in respect of any sale of,
collection from, or other realization upon, all or any part of the Pledged
Collateral may, in the discretion of the Collateral Agent, be held by the
Collateral Agent as collateral for, and/or then or at any time thereafter
applied (after payment of any amounts payable to the Collateral Agent pursuant
to Section 10 hereof) in whole or in part by the Collateral Agent against, all
or any part of the Guaranteed Obligations in such order as the Collateral Agent
shall elect consistent with the provisions of the Amended and Restated Financing
Agreement. Any surplus of such cash or cash proceeds held by the Collateral
Agent and remaining after payment in full of all of the Guaranteed Obligations
shall be paid over to the Pledgor or to such person as may be lawfully entitled
to receive such surplus.
(d) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Collateral Agent or
any Lender is legally entitled, the Pledgor shall be liable for the deficiency,
together with interest thereon at the highest rate specified in the Amended and
Restated Financing Agreement for interest on overdue principal thereof or such
other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees of any attorneys employed by the Collateral
Agent and any Lender to collect such deficiency.
SECTION 10. Indemnity and Expenses.
----------------------
-10-
<PAGE>
(a) The Pledgor agrees to indemnify the Collateral Agent from and
against any and all claims, losses and liabilities growing out of or resulting
from this Agreement (including, without limitation, enforcement of this
Agreement), except claims, losses or liabilities resulting solely and directly
from the Collateral Agent's gross negligence or willful misconduct as determined
by a final judgment of a court of competent jurisdiction.
(b) The Pledgor will upon demand pay to the Collateral Agent the
amount of any and all reasonable costs and expenses, including the reasonable
fees and disbursements of the Collateral Agent's counsel and of any experts and
agents, which the Collateral Agent may incur in connection with (i) the
administration of this Agreement, (ii) the custody, preservation, use or
operation of, or the sale of, collection from, or other realization upon, any
Pledged Collateral, (iii) the exercise or enforcement of any of the rights of
the Collateral Agent or any of the Lenders hereunder, or (iv) the failure by the
Pledgor to perform or observe any of the provisions hereof.
SECTION 11. Notices, Etc. All notices and other communications
-------------
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered, if
to the Pledgor, to it at its address specified in the Amended and Restated
Financing Agreement, and if to the Collateral Agent, to it at its address
specified in the Amended and Restated Financing Agreement, or as to either such
Person at such other address as shall be designated by such Person in a written
notice to such other Person complying as to delivery with the terms of this
Section 11. All such notices and other communications shall be effective (i) if
sent by certified mail, return receipt requested, when received or 3 Business
Days after mailing, whichever first occurs, (ii) if telecopied, when transmitted
and confirmation is received, provided same is on a Business Day and, if not, on
the next Business Day, or (iii) if delivered, upon delivery, provided same is on
a Business Day and, if not, on the next Business Day.
SECTION 12. Consent to Jurisdiction, Etc.
-----------------------------
(a) Any legal action or proceeding with respect to this Agreement or
any document related thereto may be brought in the courts of the State of New
York or of the United States of America for the Southern District of New York,
and, by execution and delivery of this Agreement, the Pledgor hereby accepts
unconditionally the jurisdiction of the aforesaid courts. The Pledgor hereby
irrevocably waives any objection, including without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens, which the
----- --- ----------
Pledgor may now or hereafter have to the bringing of any such action or
proceeding in such respective jurisdictions.
(b) The Pledgor irrevocably consents to the service of process of any
of the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to the Pledgor
at its address referred to in Section 11 hereof.
(c) Nothing contained in this Section 12 shall affect the right of the
Collateral Agent to serve legal process in any other manner permitted by law or
to commence legal proceedings or otherwise proceed against the Pledgor in any
other jurisdiction.
-11-
<PAGE>
SECTION 13. Waiver of Jury Trial. EACH OF THE PLEDGOR AND THE
--------------------
COLLATERAL AGENT (BY ACCEPTING THIS AGREEMENT) WAIVES ANY RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM CONCERNING ANY RIGHTS UNDER THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ARISING FROM ANY OTHER LOAN DOCUMENT AND
AGREES THAT ANY SUCH ACTION, PROCEEDING OR COUNTERCLAIM SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
SECTION 14. Miscellaneous.
-------------
(a) No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Pledgor and the Collateral Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
the Pledgor therefrom, shall be effective unless it is in writing and signed by
the Collateral Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
(b) No failure on the part of the Collateral Agent to exercise, and no
delay in exercising, any right hereunder or under any other document shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The rights and remedies of the Collateral Agent provided herein
and in the other Loan Documents are cumulative and are in addition to, and not
exclusive of, any rights or remedies provided by law. The rights of the
Collateral Agent under any document against any party thereto are not
conditional or contingent on any attempt by the Collateral Agent to exercise any
of its rights under any other document against such party or against any other
person.
(c) Any provision of this Agreement which is 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 portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Pledged Collateral and shall (i) remain in full force and effect until the
payment in full or release of the Guaranteed Obligations after the Total
Commitment has been terminated and all Letters of Credit have been canceled or
cash collateralized and (ii) be binding on the Pledgor and by its acceptance
hereof, the Collateral Agent, and their respective successors and assigns and
shall inure, together with all rights and remedies of the Collateral Agent and
the Lenders hereunder, to the benefit of the Pledgor, the Collateral Agent and
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of clause (ii) of the immediately preceding sentence,
the Collateral Agent may assign or otherwise transfer its rights and obligations
under this Agreement to any other Person pursuant to the terms of the Amended
and Restated Financing Agreement, and such other Person shall thereupon become
vested with all of the benefits in respect thereof granted to the Collateral
Agent herein or otherwise. Upon any such assignment or transfer, all references
in this Agreement to the Collateral Agent shall mean the assignee of the
Collateral
-12-
<PAGE>
Agent. None of the rights or obligations of the Pledgor hereunder may be
assigned or otherwise transferred without the prior written consent of the
Collateral Agent.
(e) Upon the satisfaction in full of the Guaranteed Obligations after
the Total Commitment has been terminated and all Letters of Credit have been
canceled or cash collateralized, (i) this Agreement and the security interest
created hereby shall terminate and all rights to the Pledged Collateral shall
revert to the Pledgor, and (ii) the Collateral Agent will, upon the Pledgor's
request and at the Pledgor's expense promptly, (A) return to the Pledgor such of
the Pledged Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof and (B) execute and deliver to the Pledgor,
without recourse, representation or warranty, such documents as the Pledgor
shall reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance
with the law of the State of New York, except as required by mandatory
provisions of law and except to the extent that the validity and perfection or
the perfection and the effect of perfection or non-perfection of the security
interest created hereby, or remedies hereunder, in respect of any particular
Pledged Collateral are governed by the law of a jurisdiction other than the
State of New York.
-13-
<PAGE>
IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
NORTON MCNAUGHTON, INC.
By: _____________________________________
Name: _____________________________________
Title:_____________________________________
ACCEPTED AND AGREED:
NATIONSBANC COMMERCIAL CORPORATION,
as Collateral Agent
By: __________________________
Name: __________________________
Title:__________________________
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<PAGE>
SCHEDULE I TO PLEDGE AND SECURITY AGREEMENT
Pledged Debt
------------
Principal Amount
Name of Maker Description Outstanding as of
------------- ----------- -----------------
<PAGE>
SCHEDULE II TO PLEDGE AND SECURITY AGREEMENT
Pledged Shares
--------------
Certificate
Name of Issuer Number of Shares Class No.(s)
-------------- ---------------- ----- ------
<PAGE>
SCHEDULE III
TO
PLEDGE AND SECURITY AGREEMENT
PLEDGE AMENDMENT
----------------
This Pledge Amendment, dated ___________________________, is delivered
pursuant to Section 4 of the Pledge Agreement referred to below. The
undersigned hereby agrees that this Pledge Amendment may be attached to the
Pledge Agreement, dated September 25, 1997, as it may heretofore have been or
hereafter may be amended or otherwise modified or supplemented from time to time
and that the promissory notes or shares listed on this Pledge Amendment shall be
and become part of the Pledged Collateral referred to in said Pledge Agreement
and shall secure all of the Obligations referred to in said Pledge Agreement.
Pledged Debt
------------
Principal Amount
Name of Maker Description Outstanding as of
------------- ----------- -----------------
Pledged Shares
--------------
Certificate
Name of Issuer Number of Shares Class No(s)
-------------- ---------------- ----- -----------
PLEDGOR
By: _______________________________
Name:
Title:
<PAGE>
EXHIBIT H
FORM OF
ASSIGNMENT AND ACCEPTANCE
Dated ________ __, 199__
Reference is made to the Amended and Restated Financing Agreement,
dated as of June __, 1998 (as the same may be further amended, supplemented or
otherwise modified from time to time, the "Amended and Restated Financing
------------------------------
Agreement") by and among Norton McNaughton of Squire, Inc., Miss Erika, Inc.,
- ---------
and JJ Acquisition Corp. to be known as Jeri-Jo Knitwear, Inc. (each a
"Borrower" and collectively the "Borrowers"), Norton McNaughton, Inc., certain
-------- ---------
lenders (each a "Lender" and collectively, the "Lenders"), NationsBanc
------ -------
Commercial Corporation, as collateral agent for the Lenders (in such capacity,
the "Collateral Agent"), The CIT Group/Commercial Services, Inc., as
----------------
administrative agent for the Lenders (in such capacity, the "Administrative
--------------
Agent") and Fleet Bank, NA, as documentation agent for the Lenders (in such
- -----
capacity, the "Documentation Agent"). Terms defined in the Amended and Restated
-------------------
Financing Agreement are used herein as therein defined.
_____________ (solely in its capacity as a Lender under the Amended
and Restated Financing Agreement) (the "Assignor") and ______________ (the
--------
"Assignee") agree as follows:
--------
1. The Assignor hereby sells and assigns to the Assignee, without
recourse, representation or warranty, and the Assignee hereby purchases and
assumes from the Assignor, a ___%* interest (the "Assigned Interest") in and to
-----------------
all of the Assignor's rights and obligations, solely as a Lender, under the
Amended and Restated Financing Agreement and the other Loan Documents as of the
Effective Date (as defined below) (including, without limitation, (i) if the
Commitments shall not have been terminated, the Assignor's Commitment set forth
in Section 2.01 of the Amended and Restated Financing Agreement; (ii) the
outstanding principal amount of the Revolving Credit Loans made by the Assignor;
(iii) the Lender's Pro Rata Share of the Reimbursement Obligations; and (iv) the
Notes evidencing the Assignor's Loans).
2. The Assignor (i) represents and warrants as of the date hereof
that its Commitment (without giving effect to assignments thereof which have not
yet become effective) is ____%; (ii) represents and warrants that it is the
legal and beneficial owner of the interest it is assigning hereunder; (iii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made by or in connection with
the Amended and Restated Financing Agreement, the execution, legality, validity,
enforceability,
________________
* Specify percentage to no more than 4 decimal points.
<PAGE>
genuineness, sufficiency or value of the Amended and Restated Financing
Agreement, any other Loan Document, or any other instrument or document
furnished pursuant thereto; (iv) makes no representation or warranty and assumes
no responsibility with respect to the financial condition of the Borrowers or
the performance or observance by the Borrowers of any of their obligations under
the Amended and Restated Financing Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto; and (v) attaches the
Notes referred to in paragraph 1 above, and requests that the Administrative
Agent exchange each such Note for new Notes (appropriately dated so that no loss
of interest accrued prior to the Effective Date shall result with respect to the
portion of the Loans assigned or the portion of the Loans retained by the
Assignor), consisting of a Revolving Credit Note in the principal amount of
$__________, payable to the order of the Assignee, and a Revolving Credit Note
in the principal amount of $___________ payable to the order of the Assignor.
(a) The Assignee represents and warrants that it has become a
party hereto solely in reliance upon its own independent investigation of the
financial and other circumstances surrounding the Borrowers, the Collateral, the
Loans and the Letters of Credit and all aspects of the transactions evidenced by
or referred to in the Loan Documents, or has otherwise satisfied itself thereto,
and that it is not relying upon any representation, warranty or statement
(except any such representation, warranty or statement expressly set forth in
this Agreement) of the Assignor in connection with the assignment made under
this Agreement. The Assignee further acknowledges that the Assignee will,
independently and without reliance upon the Collateral Agent, the Administrative
Agent, the Assignor or any other Lender and based upon the Assignee's review of
such documents and information as the Assignee deems appropriate at the time,
make and continue to make its own credit decisions in entering into this
Agreement and taking or not taking action under the Loan Documents. The Assignor
shall have no duty or responsibility either initially or on a continuing basis
to make any such investigation or any such appraisal on behalf of the Assignee
or to provide the Assignee with any credit or other information with respect
thereto, whether coming into its possession before the making of the initial
extension of credit under the Amended and Restated Financing Agreement or at any
time or times thereafter.
(b) The Assignee represents and warrants to the Assignor that it
has experience and expertise in the making of loans such as the Loans or with
respect to the other types of credit which may be extended under the Amended and
Restated Financing Agreement; that it has acquired its Assigned Interest for its
own account and not with any intention of selling all or any portion of such
interest; and that it has received, reviewed and approved copies of all Loan
Documents.
(c) The Assignor shall not be responsible to the Assignee for the
execution, effectiveness, accuracy, completeness, legal effect, genuineness,
validity, enforceability, collectibility or sufficiency of any of the Loan
Documents or for any representations, warranties, recitals or statements made
therein or in any written or oral statement or in any financial or other
statements, instruments, reports, certificates or any other documents made or
furnished or made available by the Assignor to the Assignee or by or on behalf
of the Borrower to the Assignor or the Assignee in connection with the Loan
Documents and the
-2-
<PAGE>
transactions contemplated thereby or for the financial condition or business
affairs of the Borrower or any other Person liable for the payment of any Loans
or payment of amounts owed in connection with other extensions of credit under
the Amended and Restated Financing Agreement or the value of the Collateral or
any other matter. The Assignor shall not be required to ascertain or inquire as
to the performance or observance of any of the terms, conditions, provisions,
covenants or agreements contained in any of the Loan Documents or as to the use
of the proceeds of the Loans or other extensions of credit under the Amended and
Restated Financing Agreement or as to the existence or possible existence of any
Event of Default or Default.
(d) Each party to this Agreement represents and warrants to the
other party to this Agreement that it has full power and authority to enter into
this Agreement and to perform its obligations under this Agreement in accordance
with the provisions of this Agreement, that this Agreement has been duly
authorized, executed and delivered by such party and that this Agreement
constitutes a legal, valid and binding obligation of such party, enforceable in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, moratorium or other similar laws affecting creditors' rights
generally and by general equitable principles.
(e) Each party to this Agreement represents and warrants that the
making and performance by it of this Agreement do not and will not violate any
law or regulation of the jurisdiction of its incorporation or any other law or
regulation applicable to it.
(f) Each party to this Agreement represents and warrants that all
consents, licenses, approvals, authorizations, exemptions, registrations,
filings, opinions and declarations from or with any agency, department,
administrative authority, statutory corporation or judicial entity necessary for
the validity or enforceability of its obligations under this Agreement have been
obtained, and no governmental authorizations other than any already obtained are
required in connection with its execution, delivery and performance of this
Agreement.
(g) The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned and that such interest is free
and clear of any Lien.
(h) The Assignor makes no representation or warranty and assumes
no responsibility with respect to the operations, condition (financial or
otherwise), business or assets of the Borrowers or any of their Subsidiaries or
the performance or observance by the Borrowers of any of their obligations under
the Amended and Restated Financing Agreement or any other Loan Document.
(i) The Assignee appoints and authorizes the Collateral Agent,
and the Administrative Agent to take such action as agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Collateral
Agent, the Administrative Agent, respectively, by the terms thereof, together
with such powers as are reasonably incidental thereto.
-3-
<PAGE>
(j) The Assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms of the Amended and
Restated Financing Agreement are required to be performed by it as a Lender.
(k) The Assignee confirms that it has received all documents and
information it has deemed appropriate to make its own credit analysis and
decision to enter into this Agreement.
(l) The Assignee specifies as its address for notices the office
set forth beneath its name on the signature pages hereof.
3. The effective date for this Assignment and Acceptance shall be
___________ (the "Effective Date"), which date is at least three Business Days
--------------
after the execution of this Assignment and Acceptance and the delivery hereof to
the Administrative Agent for acceptance.
4. Upon such acceptance, as of the Effective Date (i) the Assignee
shall, in addition to the rights and obligations under the Amended and Restated
Financing Agreement and the other Loan Documents held by it immediately prior to
the Effective Date, have the rights and obligations under the Amended and
Restated Financing Agreement and the other Loan Documents that have been
assigned to it pursuant to this Agreement, and (ii) the Assignor shall, to the
extent provided in this Agreement, relinquish its rights and be released from
its obligations under the Amended and Restated Financing Agreement and the other
Loan Documents that have been assigned by the Assignor to the Assignee pursuant
to this Agreement.
5. Upon such acceptance, from and after the Effective Date, the
Administrative Agent shall make all payments under the Amended and Restated
Financing Agreement and the Notes in respect of the rights assigned hereby
(including, without limitation, all payments of principal, interest and fees
with respect thereto) to the Assignee. If the Assignor receives or collects any
payment of interest or fees attributable to the interests assigned to Assignee
by this Agreement which has accrued after the Effective Date, the Assignor shall
distribute to the Assignee such payment. If the Assignee receives or collects
any payment of interest or fees which is not attributable to the interests
assigned to the Assignee by this Agreement or which has accrued on or prior to
the Effective Date, the Assignee shall distribute to the Assignor such payment.
-4-
<PAGE>
6. This Agreement shall be governed by, and construed and
interpreted in accordance with, the laws of the State of New York applicable to
contracts made and to be performed entirely therein without consideration as to
choice of law.
[NAME OF ASSIGNOR]
By: ___________________________
Name:
Title:
Date:
NOTICE ADDRESS AND PAYMENT
INSTRUCTIONS FOR ASSIGNOR
_________________________________
_________________________________
_________________________________
Telephone No.____________________
Telecopy No. ____________________
[NAME OF ASSIGNEE]
By: ___________________________
Name:
Title:
Date:
NOTICE ADDRESS AND PAYMENT
INSTRUCTIONS FOR ASSIGNEE
_________________________________
_________________________________
_________________________________
Telephone No.____________________
Telecopy No. ____________________
ACCEPTED this _____ day
of ______________, 19___
THE CIT GROUP/COMMERCIAL
SERVICES, INC., as Administrative Agent
By: _______________________
Name:
Title:
-5-
<PAGE>
EXHIBIT L-1
FORM OF SUBORDINATED INTERCOMPANY REVOLVING CREDIT NOTE
$_____________ Dated: ________ __, 199_
New York, New York
FOR VALUE RECEIVED, Norton McNaughton of Squire, Inc., a New York
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of [Miss
--------
Erika, Inc., a Delaware corporation] [JJ Acquisition Corp., a Delaware
corporation to be known as Jeri-Jo Knitwear, Inc.] (the "Lender") (i) the
------
principal amount of One Hundred Seventy-Five Million Dollars ($175,000,000), or
if less, an amount equal to the aggregate unpaid principal amount of loans made
from time to time by the Lender to the Borrower, payable on the same terms and
conditions as the Revolving Credit Note (as defined in the Amended Restated
Financing Agreement dated as of June 18, 1998 by and among Norton McNaughton,
Inc., a Delaware corporation, the Borrower, the Lender, [Miss Erika, Inc., a
Delaware corporation] [JJ Acquisition Corp., a Delaware corporation to be known
as Jeri-Jo Knitwear, Inc.], the financial institutions from time to time party
thereto, NationsBanc Commercial Corporation, as collateral agent (the
"Collateral Agent"), The CIT Group/Commercial Services, Inc., as administrative
- -----------------
agent (the "Administrative Agent"), and Fleet Bank, NA, as documentation agent
--------------------
(the "Documentation Agent," and together with the Collateral Agent, the
-------------------
Administrative Agent and the aforementioned financial institutions, collectively
the "Senior Lenders") (as amended or otherwise modified from time to time, the
--------------
"Amended and Restated Financing Agreement")) and (ii) interest in an amount
- -----------------------------------------
equal to the unpaid principal amount of the Revolving Credit Note, from the date
hereof until all such principal amounts are paid in full, at the same interest
rates, and payable at the same times, as are specified in the Amended and
Restated Financing Agreement with respect to the Revolving Credit Note.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Amended and Restated Financing Agreement.
The payment of the principal of, all accrued and unpaid interest on
and any other amounts that now or hereafter may be owing by the Borrower to the
Lender pursuant to this Note (collectively, the "Subordinated Debt") is hereby
-----------------
expressly made subordinate and subject in right of payment to the prior payment
and satisfaction in full of any and all Obligations.
The Senior Lenders are irrevocably authorized and empowered but shall
have no obligation, in any proceeding with respect to the Borrower under any
federal or state bankruptcy or insolvency law, or any other reorganization,
dissolution or liquidation proceedings with respect to the Borrower, to file a
proof of claim on behalf of the Lender with respect to the principal of and
interest on this Note, to accept and receive any payment or distribution which
<PAGE>
may be payable or deliverable at any time upon or in respect of this Note in an
amount not in excess of the Obligations then outstanding, and to take such other
action (including voting the principal of and interest on this Note) as may be
reasonably necessary to effectuate the foregoing. The Lender shall provide to
the Senior Lenders all information and documents necessary to present claims or
seek enforcement as aforesaid and will duly and promptly take such action as the
Senior Lenders may request to collect the principal of and interest on this Note
for the account of the Senior Lenders and to file appropriate claims or proofs
of claim with respect thereto. Without limiting the foregoing, the Lender shall
execute and deliver to the Senior Lenders such powers of attorney, assignments
or other instruments as the Senior Lenders may request in order to enable them
to enforce any and all claims with respect to this Note and to collect and
receive any and all payments or distributions which may be payable or
deliverable upon or with respect to this Note. If the Senior Lenders do not
exercise their right to vote the principal of and interest on this Note or
otherwise act in any such reorganization proceeding as set forth in this
paragraph (including the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or extension),
the Lender shall not take any action or vote in any way so as to contest (a) the
validity or enforceability of the Amended and Restated Financing Agreement or
any Loan Document, (b) the rights and duties of the Senior Lenders established
in the Amended and Restated Financing Agreement and the Loan Documents, or (c)
the validity or enforceability of the subordination provisions set forth in this
Note.
The Senior Lenders may: (i) enter into any agreement or arrangement
with the Loan Parties under the Amended and Restated Financing Agreement with
respect to the Obligations and any amendments thereto, as the Senior Lenders may
deem proper; (ii) extend the time for payment and/or renew any or all of the
Obligations; and (iii) surrender any security, collateral or guarantees held
with respect to any or all of the Obligations, make any settlements and
compromises thereof as it may deem proper and take any other action whether or
not similar to the foregoing, all without notice to or consent from the Lender
and without in any way impairing or affecting the subordination provisions of
this Note thereby.
Subject to the provisions of the following paragraph, should any
payment with respect to the Subordinated Debt be received by the Lender in any
form and from any source whatsoever prior to the payment in full in cash of all
of the Obligations after all Commitments have terminated and all Letters of
Credit have been canceled or cash collateralized, the Lender immediately shall
deliver to the Senior Lenders any monies, securities or other property so
received by it, or its equivalent in cash, with proper endorsements or
assignments if necessary and without recourse, to be applied (in the case of
cash) to, or held as collateral (in the case of securities or other non-cash
property) for the payment or prepayment of the Obligations; and pending such
delivery, the Lender shall hold such monies, securities or other property as
trustee for the account of the Senior Lenders.
Notwithstanding anything to the contrary stated herein, the Borrower
may make payments of, and the Lender may demand, receive and retain payments of
(i) accrued and unpaid interest on the principal amount of this Note when due,
strictly in accordance with the terms and provisions of this Note and (ii) the
principal amount of this Note strictly in accordance with the
-2-
<PAGE>
terms and provisions of this Note, unless, in the case of clauses (i) and (ii)
above, a Default or an Event of Default has occurred and is continuing or would
result from the making of such payment. Except as otherwise provided in this
paragraph, the Lender shall not take, demand, receive or accelerate any payment
of the Subordinated Debt and the Borrower shall not give, make or permit any
such payment other than where expressly approved by the Senior Lenders and the
Lender shall not assert, participate in or bring any sort of action, suit or
proceeding (including, without limitation, bankruptcy or insolvency proceedings)
either at law or in equity for the enforcement, collection or realization of all
or any part of the Subordinated Debt. Notwithstanding the foregoing, should any
action be taken, at any time, by or against the Borrower for any relief or
arrangement under any federal or state bankruptcy or insolvency law, the
Subordinated Debt shall be subordinated to the prior payment of the Obligations
of the Senior Lenders in accordance with the subordination provisions described
herein. The Borrower will (x) not make any payment in respect of any of the
Subordinated Debt, or take any other action, in contravention of the provisions
of this Note and (y) promptly notify the Collateral Agent in writing of the
occurrence of a Default or an Event of Default not later than one Business Day
after the occurrence thereof shall have become known to the Borrower.
The Lender shall have no right to accelerate or to commence legal
action to enforce collection of all or any part of the principal of and interest
on this Note except in the event that the Borrower files or has filed against it
(other than by the Lender) a petition under the United States Bankruptcy Code
(11 U.S.C. (S) 101 et seq.), as amended, and any successor statute, provided
------- --------
that any such involuntary proceeding which is commenced against the Borrower is
not dismissed or discharged within 45 days after commencement thereof, provided,
--------
however, that any amount received by the Lender in advance of its scheduled due
- -------
date (without giving effect to any acceleration) hereunder as a result of any
acceleration permitted above, prior to payment in full in cash of the
Obligations and the termination of the Amended and Restated Financing Agreement,
shall be held in trust and paid to the Senior Lenders.
The Lender covenants and agrees with the Senior Lenders that, except
as otherwise specifically permitted by this Note, the Lender shall not, directly
or indirectly: (i) demand or receive payment of, (ii) exchange, cancel,
discharge, forgive or modify, (iii) request or obtain collateral, security or
guarantees for, (iv) except in favor of the Senior Lenders, effect a
subordination, assignment, pledge, transfer, sale or other hypothecation of, or
(v) commence any legal action with respect to, the whole or any part of the
principal of and interest on this Note. The Lender further agrees that until
such time as all of the Obligations is paid and satisfied in full in cash, it
shall not assert or be entitled to any subrogation rights. This Note may not be
amended without obtaining the prior written consent of the Collateral Agent.
All rights and interests of the Senior Lenders hereunder, and all
agreements and obligations of the Lender and the Borrower hereunder, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Amended and Restated Financing Agreement or any Loan
Document or any other agreement or instrument relating thereto, (ii) any change
in the time, manner or place of payment of, or in any other term in respect of,
all or any of the Obligations, or any other amendment or waiver of or any
consent to departure from the Amended and Restated Financing Agreement or any
Loan Document, (iii) any exchange or
-3-
<PAGE>
release of, or non-perfection of any Lien on or security interest in, any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Obligations, or (iv) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Loan Parties in respect of the Obligations or the Lender or
the Borrower in respect of this Note.
The Lender waives any and all demands, presentments or notices (other
than notices specifically provided for in this Note) to which it otherwise might
be entitled, including, without limitation, any and all notices (i) of the
creation or accrual of any of the Obligations, (ii) of any extension,
modification or renewal of any of the Obligations and (iii) of the Senior
Lenders' reliance on the subordination provisions of this Note.
The Borrower may at any time prepay the whole or any part of the
unpaid principal amount of this Note, without penalty or premium, with interest
accrued to the date fixed for prepayment.
-4-
<PAGE>
This Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice of
law.
NORTON McNAUGHTON OF SQUIRE, INC.
By: ______________________
Name:
Title:
ACCEPTED AND AGREED:
[MISS ERIKA, INC.]
[JJ ACQUISITION CORP.]
By:________________________
Name:
Title:
PAY TO THE ORDER OF:
NATIONSBANC COMMERCIAL CORPORATION,
as Collateral Agent
[MISS ERIKA, INC.]
[JJ ACQUISITION CORP.]
By:________________________
Name:
Title:
-5-
<PAGE>
EXHIBIT L-2
FORM OF SUBORDINATED INTERCOMPANY REVOLVING CREDIT NOTE
$_____________ Dated: ________ __, 199_
New York, New York
FOR VALUE RECEIVED, Miss Erika, Inc., a Delaware corporation (the
"Borrower"), HEREBY PROMISES TO PAY to the order of [Norton McNaughton of
--------
Squire, Inc., a New York corporation] [JJ Acquisition Corp., a Delaware
corporation to be known as Jeri-Jo Knitwear, Inc.] (the "Lender") (i) the
------
principal amount of One Hundred Seventy-Five Million Dollars ($175,000,000), or
if less, an amount equal to the aggregate unpaid principal amount of loans made
from time to time by the Lender to the Borrower, payable on the same terms and
conditions as the Revolving Credit Note (as defined in the Amended Restated
Financing Agreement dated as of June 18, 1998 by and among Norton McNaughton,
Inc., a Delaware corporation, the Borrower, the Lender, [Norton McNaughton of
Squire, Inc. a New York corporation] [JJ Acquisition Corp., a Delaware
corporation to be known as Jeri-Jo Knitwear, Inc., a Delaware corporation], the
financial institutions from time to time party thereto, NationsBanc Commercial
Corporation, as collateral agent (the "Collateral Agent"), The CIT
----------------
Group/Commercial Services, Inc., as administrative agent (the "Administrative
--------------
Agent"), and Fleet Bank, NA, as documentation agent (the "Documentation Agent,"
- ----- -------------------
and together with the Collateral Agent, the Administrative Agent and the
aforementioned financial institutions, collectively the "Senior Lenders") (as
--------------
amended or otherwise modified from time to time, the "Amended and Restated
--------------------
Financing Agreement")) and (ii) interest in an amount equal to the unpaid
- -------------------
principal amount of the Revolving Credit Note, from the date hereof until all
such principal amounts are paid in full, at the same interest rates, and payable
at the same times, as are specified in the Amended and Restated Financing
Agreement with respect to the Revolving Credit Note. Capitalized terms used
herein and not otherwise defined herein shall have the meanings set forth in the
Amended and Restated Financing Agreement.
The payment of the principal of, all accrued and unpaid interest on
and any other amounts that now or hereafter may be owing by the Borrower to the
Lender pursuant to this Note (collectively, the "Subordinated Debt") is hereby
-----------------
expressly made subordinate and subject in right of payment to the prior payment
and satisfaction in full of any and all Obligations.
The Senior Lenders are irrevocably authorized and empowered but shall
have no obligation, in any proceeding with respect to the Borrower under any
federal or
<PAGE>
state bankruptcy or insolvency law, or any other reorganization, dissolution or
liquidation proceedings with respect to the Borrower, to file a proof of claim
on behalf of the Lender with respect to the principal of and interest on this
Note, to accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of this Note in an amount not in
excess of the Obligations then outstanding, and to take such other action
(including voting the principal of and interest on this Note) as may be
reasonably necessary to effectuate the foregoing. The Lender shall provide to
the Senior Lenders all information and documents necessary to present claims or
seek enforcement as aforesaid and will duly and promptly take such action as the
Senior Lenders may request to collect the principal of and interest on this Note
for the account of the Senior Lenders and to file appropriate claims or proofs
of claim with respect thereto. Without limiting the foregoing, the Lender shall
execute and deliver to the Senior Lenders such powers of attorney, assignments
or other instruments as the Senior Lenders may request in order to enable them
to enforce any and all claims with respect to this Note and to collect and
receive any and all payments or distributions which may be payable or
deliverable upon or with respect to this Note. If the Senior Lenders do not
exercise their right to vote the principal of and interest on this Note or
otherwise act in any such reorganization proceeding as set forth in this
paragraph (including the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or extension),
the Lender shall not take any action or vote in any way so as to contest (a) the
validity or enforceability of the Amended and Restated Financing Agreement or
any Loan Document, (b) the rights and duties of the Senior Lenders established
in the Amended and Restated Financing Agreement and the Loan Documents, or (c)
the validity or enforceability of the subordination provisions set forth in this
Note.
The Senior Lenders may: (i) enter into any agreement or arrangement
with the Loan Parties under the Amended and Restated Financing Agreement with
respect to the Obligations and any amendments thereto, as the Senior Lenders may
deem proper; (ii) extend the time for payment and/or renew any or all of the
Obligations; and (iii) surrender any security, collateral or guarantees held
with respect to any or all of the Obligations, make any settlements and
compromises thereof as it may deem proper and take any other action whether or
not similar to the foregoing, all without notice to or consent from the Lender
and without in any way impairing or affecting the subordination provisions of
this Note thereby.
Subject to the provisions of the following paragraph, should any
payment with respect to the Subordinated Debt be received by the Lender in any
form and from any source whatsoever prior to the payment in full in cash of all
of the Obligations after all Commitments have terminated and all Letters of
Credit have been canceled or cash collateralized, the Lender immediately shall
deliver to the Senior Lenders any monies, securities or other property so
received by it, or its equivalent in cash, with proper endorsements or
assignments if necessary and without recourse, to be applied (in the case of
cash) to, or held as collateral (in the case of securities or other non-cash
property) for the payment or prepayment of the Obligations; and pending such
delivery, the Lender
-2-
<PAGE>
shall hold such monies, securities or other property as trustee for the account
of the Senior Lenders.
Notwithstanding anything to the contrary stated herein, the Borrower
may make payments of, and the Lender may demand, receive and retain payments of
(i) accrued and unpaid interest on the principal amount of this Note when due,
strictly in accordance with the terms and provisions of this Note and (ii) the
principal amount of this Note strictly in accordance with the terms and
provisions of this Note, unless, in the case of clauses (i) and (ii) above, a
Default or an Event of Default has occurred and is continuing or would result
from the making of such payment. Except as otherwise provided in this
paragraph, the Lender shall not take, demand, receive or accelerate any payment
of the Subordinated Debt and the Borrower shall not give, make or permit any
such payment other than where expressly approved by the Senior Lenders and the
Lender shall not assert, participate in or bring any sort of action, suit or
proceeding (including, without limitation, bankruptcy or insolvency proceedings)
either at law or in equity for the enforcement, collection or realization of all
or any part of the Subordinated Debt. Notwithstanding the foregoing, should any
action be taken, at any time, by or against the Borrower for any relief or
arrangement under any federal or state bankruptcy or insolvency law, the
Subordinated Debt shall be subordinated to the prior payment of the Obligations
of the Senior Lenders in accordance with the subordination provisions described
herein. The Borrower will (x) not make any payment in respect of any of the
Subordinated Debt, or take any other action, in contravention of the provisions
of this Note and (y) promptly notify the Collateral Agent in writing of the
occurrence of a Default or an Event of Default not later than one Business Day
after the occurrence thereof shall have become known to the Borrower.
The Lender shall have no right to accelerate or to commence legal
action to enforce collection of all or any part of the principal of and interest
on this Note except in the event that the Borrower files or has filed against it
(other than by the Lender) a petition under the United States Bankruptcy Code
(11 U.S.C. (S) 101 et seq.), as amended, and any successor statute, provided
------- --------
that any such involuntary proceeding which is commenced against the Borrower is
not dismissed or discharged within 45 days after commencement thereof, provided,
--------
however, that any amount received by the Lender in advance of its scheduled due
- -------
date (without giving effect to any acceleration) hereunder as a result of any
acceleration permitted above, prior to payment in full in cash of the
Obligations and the termination of the Amended and Restated Financing Agreement,
shall be held in trust and paid to the Senior Lenders.
The Lender covenants and agrees with the Senior Lenders that, except
as otherwise specifically permitted by this Note, the Lender shall not, directly
or indirectly: (i) demand or receive payment of, (ii) exchange, cancel,
discharge, forgive or modify, (iii) request or obtain collateral, security or
guarantees for, (iv) except in favor of the Senior Lenders, effect a
subordination, assignment, pledge, transfer, sale or other hypothecation of, or
(v) commence any legal action with respect to, the whole or any part of the
principal of and interest on this Note. The Lender further agrees that until
such
-3-
<PAGE>
time as all of the Obligations is paid and satisfied in full in cash, it
shall not assert or be entitled to any subrogation rights. This Note may not be
amended without obtaining the prior written consent of the Collateral Agent.
All rights and interests of the Senior Lenders hereunder, and all
agreements and obligations of the Lender and the Borrower hereunder, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Amended and Restated Financing Agreement or any Loan
Document or any other agreement or instrument relating thereto, (ii) any change
in the time, manner or place of payment of, or in any other term in respect of,
all or any of the Obligations, or any other amendment or waiver of or any
consent to departure from the Amended and Restated Financing Agreement or any
Loan Document, (iii) any exchange or release of, or non-perfection of any Lien
on or security interest in, any collateral, or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Obligations, or (iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Loan Parties in respect of the
Obligations or the Lender or the Borrower in respect of this Note.
The Lender waives any and all demands, presentments or notices (other
than notices specifically provided for in this Note) to which it otherwise might
be entitled, including, without limitation, any and all notices (i) of the
creation or accrual of any of the Obligations, (ii) of any extension,
modification or renewal of any of the Obligations and (iii) of the Senior
Lenders' reliance on the subordination provisions of this Note.
The Borrower may at any time prepay the whole or any part of the
unpaid principal amount of this Note, without penalty or premium, with interest
accrued to the date fixed for prepayment.
-4-
<PAGE>
This Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice of
law.
MISS ERIKA, INC.
By: ______________________
Name:
Title:
ACCEPTED AND AGREED:
[NORTON McNAUGHTON OF SQUIRE, INC.]
[JJ ACQUISITION CORP.]
By: ________________________
Name:
Title:
PAY TO THE ORDER OF:
NATIONSBANC COMMERCIAL CORPORATION,
as Collateral Agent
[NORTON McNAUGHTON OF SQUIRE, INC.]
[JJ ACQUISITION CORP.]
By: ______________________
Name:
Title:
-5-
<PAGE>
EXHIBIT L-3
FORM OF SUBORDINATED INTERCOMPANY REVOLVING CREDIT NOTE
$_____________ Dated: ________ __, 199_
New York, New York
FOR VALUE RECEIVED, JJ Acquisition Corp. a Delaware corporation to be
known as Jeri-Jo Knitwear, Inc., a Delaware corporation (the "Borrower"), HEREBY
--------
PROMISES TO PAY to the order of [Norton McNaughton of Squire, Inc., a New York
corporation] [Miss Erika, Inc., a Delaware corporation] (the "Lender") (i) the
------
principal amount of One Hundred Seventy-Five Million Dollars ($175,000,000), or
if less, an amount equal to the aggregate unpaid principal amount of loans made
from time to time by the Lender to the Borrower, payable on the same terms and
conditions as the Revolving Credit Note (as defined in the Amended Restated
Financing Agreement dated as of June 18, 1998 by and among Norton McNaughton,
Inc., a Delaware corporation, the Borrower, the Lender, [Norton McNaughton of
Squire, Inc. a New York corporation] [JJ Acquisition Corp., a Delaware
corporation to be known as Jeri-Jo Knitwear, Inc.], the financial institutions
from time to time party thereto, NationsBanc Commercial Corporation, as
collateral agent (the "Collateral Agent"), The CIT Group/Commercial Services,
----------------
Inc., as administrative agent (the "Administrative Agent"), and Fleet Bank, NA,
--------------------
as documentation agent (the "Documentation Agent," and together with the
-------------------
Collateral Agent, the Administrative Agent and the aforementioned financial
institutions, collectively the "Senior Lenders") (as amended or otherwise
--------------
modified from time to time, the "Amended and Restated Financing Agreement")) and
----------------------------------------
(ii) interest in an amount equal to the unpaid principal amount of the Revolving
Credit Note, from the date hereof until all such principal amounts are paid in
full, at the same interest rates, and payable at the same times, as are
specified in the Amended and Restated Financing Agreement with respect to the
Revolving Credit Note. Capitalized terms used herein and not otherwise defined
herein shall have the meanings set forth in the Amended and Restated Financing
Agreement.
The payment of the principal of, all accrued and unpaid interest on
and any other amounts that now or hereafter may be owing by the Borrower to the
Lender pursuant to this Note (collectively, the "Subordinated Debt") is hereby
-----------------
expressly made subordinate and subject in right of payment to the prior payment
and satisfaction in full of any and all Obligations.
The Senior Lenders are irrevocably authorized and empowered but shall
have no obligation, in any proceeding with respect to the Borrower under any
federal or
<PAGE>
state bankruptcy or insolvency law, or any other reorganization, dissolution or
liquidation proceedings with respect to the Borrower, to file a proof of claim
on behalf of the Lender with respect to the principal of and interest on this
Note, to accept and receive any payment or distribution which may be payable or
deliverable at any time upon or in respect of this Note in an amount not in
excess of the Obligations then outstanding, and to take such other action
(including voting the principal of and interest on this Note) as may be
reasonably necessary to effectuate the foregoing. The Lender shall provide to
the Senior Lenders all information and documents necessary to present claims or
seek enforcement as aforesaid and will duly and promptly take such action as the
Senior Lenders may request to collect the principal of and interest on this Note
for the account of the Senior Lenders and to file appropriate claims or proofs
of claim with respect thereto. Without limiting the foregoing, the Lender shall
execute and deliver to the Senior Lenders such powers of attorney, assignments
or other instruments as the Senior Lenders may request in order to enable them
to enforce any and all claims with respect to this Note and to collect and
receive any and all payments or distributions which may be payable or
deliverable upon or with respect to this Note. If the Senior Lenders do not
exercise their right to vote the principal of and interest on this Note or
otherwise act in any such reorganization proceeding as set forth in this
paragraph (including the right to vote to accept or reject any plan of partial
or complete liquidation, reorganization, arrangement, composition or extension),
the Lender shall not take any action or vote in any way so as to contest (a) the
validity or enforceability of the Amended and Restated Financing Agreement or
any Loan Document, (b) the rights and duties of the Senior Lenders established
in the Amended and Restated Financing Agreement and the Loan Documents, or (c)
the validity or enforceability of the subordination provisions set forth in this
Note.
The Senior Lenders may: (i) enter into any agreement or arrangement
with the Loan Parties under the Amended and Restated Financing Agreement with
respect to the Obligations and any amendments thereto, as the Senior Lenders may
deem proper; (ii) extend the time for payment and/or renew any or all of the
Obligations; and (iii) surrender any security, collateral or guarantees held
with respect to any or all of the Obligations, make any settlements and
compromises thereof as it may deem proper and take any other action whether or
not similar to the foregoing, all without notice to or consent from the Lender
and without in any way impairing or affecting the subordination provisions of
this Note thereby.
Subject to the provisions of the following paragraph, should any
payment with respect to the Subordinated Debt be received by the Lender in any
form and from any source whatsoever prior to the payment in full in cash of all
of the Obligations after all Commitments have terminated and all Letters of
Credit have been canceled or cash collateralized, the Lender immediately shall
deliver to the Senior Lenders any monies, securities or other property so
received by it, or its equivalent in cash, with proper endorsements or
assignments if necessary and without recourse, to be applied (in the case of
cash) to, or held as collateral (in the case of securities or other non-cash
property) for the payment or prepayment of the Obligations; and pending such
delivery, the Lender
-2-
<PAGE>
shall hold such monies, securities or other property as trustee for the account
of the Senior Lenders.
Notwithstanding anything to the contrary stated herein, the Borrower
may make payments of, and the Lender may demand, receive and retain payments of
(i) accrued and unpaid interest on the principal amount of this Note when due,
strictly in accordance with the terms and provisions of this Note and (ii) the
principal amount of this Note strictly in accordance with the terms and
provisions of this Note, unless, in the case of clauses (i) and (ii) above, a
Default or an Event of Default has occurred and is continuing or would result
from the making of such payment. Except as otherwise provided in this
paragraph, the Lender shall not take, demand, receive or accelerate any payment
of the Subordinated Debt and the Borrower shall not give, make or permit any
such payment other than where expressly approved by the Senior Lenders and the
Lender shall not assert, participate in or bring any sort of action, suit or
proceeding (including, without limitation, bankruptcy or insolvency proceedings)
either at law or in equity for the enforcement, collection or realization of all
or any part of the Subordinated Debt. Notwithstanding the foregoing, should any
action be taken, at any time, by or against the Borrower for any relief or
arrangement under any federal or state bankruptcy or insolvency law, the
Subordinated Debt shall be subordinated to the prior payment of the Obligations
of the Senior Lenders in accordance with the subordination provisions described
herein. The Borrower will (x) not make any payment in respect of any of the
Subordinated Debt, or take any other action, in contravention of the provisions
of this Note and (y) promptly notify the Collateral Agent in writing of the
occurrence of a Default or an Event of Default not later than one Business Day
after the occurrence thereof shall have become known to the Borrower.
The Lender shall have no right to accelerate or to commence legal
action to enforce collection of all or any part of the principal of and interest
on this Note except in the event that the Borrower files or has filed against it
(other than by the Lender) a petition under the United States Bankruptcy Code
(11 U.S.C. (S) 101 et seq.), as amended, and any successor statute, provided
------- --------
that any such involuntary proceeding which is commenced against the Borrower is
not dismissed or discharged within 45 days after commencement thereof, provided,
--------
however, that any amount received by the Lender in advance of its scheduled due
- -------
date (without giving effect to any acceleration) hereunder as a result of any
acceleration permitted above, prior to payment in full in cash of the
Obligations and the termination of the Amended and Restated Financing Agreement,
shall be held in trust and paid to the Senior Lenders.
The Lender covenants and agrees with the Senior Lenders that, except
as otherwise specifically permitted by this Note, the Lender shall not, directly
or indirectly: (i) demand or receive payment of, (ii) exchange, cancel,
discharge, forgive or modify, (iii) request or obtain collateral, security or
guarantees for, (iv) except in favor of the Senior Lenders, effect a
subordination, assignment, pledge, transfer, sale or other hypothecation of, or
(v) commence any legal action with respect to, the whole or any part of the
principal of and interest on this Note. The Lender further agrees that until
such
-3-
<PAGE>
time as all of the Obligations is paid and satisfied in full in cash, it shall
not assert or be entitled to any subrogation rights. This Note may not be
amended without obtaining the prior written consent of the Collateral Agent.
All rights and interests of the Senior Lenders hereunder, and all
agreements and obligations of the Lender and the Borrower hereunder, shall
remain in full force and effect irrespective of: (i) any lack of validity or
enforceability of the Amended and Restated Financing Agreement or any Loan
Document or any other agreement or instrument relating thereto, (ii) any change
in the time, manner or place of payment of, or in any other term in respect of,
all or any of the Obligations, or any other amendment or waiver of or any
consent to departure from the Amended and Restated Financing Agreement or any
Loan Document, (iii) any exchange or release of, or non-perfection of any Lien
on or security interest in, any collateral, or any release or amendment or
waiver of or consent to departure from any guaranty, for all or any of the
Obligations, or (iv) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, the Loan Parties in respect of the
Obligations or the Lender or the Borrower in respect of this Note.
The Lender waives any and all demands, presentments or notices (other
than notices specifically provided for in this Note) to which it otherwise might
be entitled, including, without limitation, any and all notices (i) of the
creation or accrual of any of the Obligations, (ii) of any extension,
modification or renewal of any of the Obligations and (iii) of the Senior
Lenders' reliance on the subordination provisions of this Note.
The Borrower may at any time prepay the whole or any part of the
unpaid principal amount of this Note, without penalty or premium, with interest
accrued to the date fixed for prepayment.
-4-
<PAGE>
This Note shall be governed by, and construed and interpreted in
accordance with, the internal laws of the State of New York applicable to
contracts made and to be performed therein without consideration as to choice of
law.
JERI-JO KNITWEAR, INC.
By: ______________________
Name:
Title:
ACCEPTED AND AGREED:
[NORTON McNAUGHTON OF SQUIRE, INC.]
[MISS ERIKA, INC.]
By:________________________
Name:
Title:
PAY TO THE ORDER OF:
NATIONSBANC COMMERCIAL CORPORATION,
as Collateral Agent
[NORTON McNAUGHTON OF SQUIRE, INC.]
[MISS ERIKA, INC.]
By:________________________
Name:
Title:
-5-
<PAGE>
EXHIBIT 99
PRESS RELEASE
FOR: Norton McNaughton, Inc.
APPROVED BY: Peter Boneparth
Chief Operating Officer
Amanda Bokman
Chief Financial Officer
FOR IMMEDIATE RELEASE (212) 947-2960
- ---------------------
CONTACT: Investor Relations:
David Walke/Shannon Moody
Press: Michael McMullan
Morgen-Walke Associates
(212) 850-5600
NORTON MCNAUGHTON, INC. COMPLETES ACQUISITION OF
JERI-JO KNITWEAR INC. AND JAMIE SCOTT, INC.
New York, New York, June 18, 1998 - Norton McNaughton, Inc.
(Nasdaq: NRTY) today announced that it has completed the acquisition of
Jeri-Jo Knitwear Inc. and Jamie Scott, Inc., acquiring substantially all the
assets and assuming substantially all the liabilities of the privately-held
apparel importers of moderately-priced juniors' and misses' updated sportswear.
The terms of the transaction provided for the payment of $55 million in
cash at closing, with additional consideration payable in cash and Company
common stock based on the performance of Jeri-Jo/Jamie Scott following the
closing. Jeri-Jo/Jamie Scott will operate as a separate subsidiary under the
direction of current management.
The acquisition was financed with a portion of the proceeds of the
previously announced $125 million Senior Note offering completed today.
Concurrent with the closing of the acquisition, the Company entered into a $175
million secured revolving credit facility with NationsBank Commercial
Corporation, The CIT Group/Commercial Services, Inc. and Fleet Bank N.A. The
facility will be used to finance ongoing working capital requirements of the
combined entity.
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NRTY: COMPLETES ACQUISITION OF JERI-JO KNITWEAR INC. PAGE: 2
AND JAMIE SCOTT, INC.
Peter Boneparth, President and Chief Operating Officer of Norton
McNaughton, commented, "We are delighted to be adding Jeri-Jo's products to
Norton McNaughton, Inc.'s family of brands. Over the years, Jeri-Jo has
developed an excellent franchise in the moderate juniors' and misses' sportswear
markets, and this opportunity affords us the ability to expand both the breadth
and depth of our product offerings among our retail customers."
Mr. Boneparth concluded, "It has been management's objective to seek
companies that provide Norton McNaughton with the ability to further penetrate
retail accounts, as well as add new ones. The Jeri-Jo transaction exemplifies
this and is in keeping with management's strategy of acquiring companies that
are accretive to earnings, have strong management teams in place and broaden our
distribution channels."
Norton McNaughton, Inc. designs, contracts for the manufacture of and
markets a broad line of brand name, moderately priced women's career and casual
clothing. The Company's product lines include collections of related separates
coordinated by color and style, as well as casual weekend wear and related
knitwear separates. The Company markets its products under its nationally known
labels, including Norton McNaughton(R) and Norton Studio(R), Erika(R), through
its subsidiary Miss Erika, Inc. and Energie(R), Currants(R) and Jamie Scott(R),
through its subsidiary Jeri-Jo Knitwear, Inc.
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This press release contains forward-looking information about the Company's
anticipated operating results, including following the acquisition of Jeri-Jo.
The Company's ability, including following the acquisition of Jeri-Jo, to
achieve its projected results is dependent on many factors which are outside of
management's control. Some of the most significant factors, including following
the acquisition of Jeri-Jo, would be a further deterioration in retailing
conditions for women's and juniors' apparel, a further increase in price
pressures and other competitive factors, any of which could result in an
unanticipated decrease in gross profit margins, unanticipated problems arising
with Jeri-Jo's business or the integration of Jeri-Jo's business with that of
the Company, the unanticipated loss of a major customer, the unanticipated loss
of a major contractor or supplier, and weather conditions which could impact
retail traffic and the Company's ability, including following the acquisition of
Jeri-Jo, to ship on a timely basis. Accordingly, there can be no assurance that
the Company, including following the acquisition of Jeri-Jo, will achieve its
anticipated operating results.
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