<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
X of 1934
- -----
For the quarter ended March 31, 1996
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
- -----
For the transition period from to
----------------------- ----------------------
Commission File Number 1-5893
---------------------------------------------------------
MOVIE STAR, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 13-5651322
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
136 Madison Avenue, New York, N.Y. 10016
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(212) 684-3400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
The number of common shares outstanding on April 30, 1996 was 13,959,650.
<PAGE> 2
MOVIE STAR, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995*
----------- --------
(Unaudited)
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 1,078 $ 103
Receivables, net of allowances 9,731 8,789
Inventory (note 3) 15,114 36,085
Deferred income taxes 3,298 3,298
Prepaid expenses and other
current assets 963 381
------- -------
Total current assets 30,184 48,656
Property, plant and equipment (net) 4,821 6,053
Other assets 1,700 1,784
Deferred income taxes 711 711
------- -------
Total assets $37,416 $57,204
======= =======
Liabilities and Stockholders' Equity
Current liabilities
Notes payable $ 1,318 $15,803
Current maturities of long-term debt 1,222 29
Accounts payable and accrued expenses 9,142 10,176
------- -------
Total current liabilities 11,682 26,008
------- -------
Long-term debt 21,292 22,496
------- -------
Commitments and Contingencies (note 4)
Stockholders' equity
Common stock 160 160
Additional paid-in capital 3,731 3,731
Retained earnings 4,169 8,427
------- -------
8,060 12,318
Less: Treasury stock, at cost 3,618 3,618
------- -------
Total stockholders' equity 4,442 8,700
------- -------
Total liabilities and stockholders'
equity $37,416 $57,204
======= =======
</TABLE>
* Derived from audited financial statements.
See notes to consolidated condensed financial statements.
<PAGE> 3
MOVIE STAR, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------ ------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 12,408 $ 17,327 $ 70,056 $ 85,764
Cost of sales (note 3) 9,633 13,329 56,296 66,349
-------- -------- -------- --------
Gross profit 2,775 3,998 13,760 19,415
-------- -------- -------- --------
Selling, general and administrative
expenses 3,919 5,237 13,679 15,521
Estimated loss on abandonment of
leased premises (note 4) -- -- 1,170 --
Interest expense 794 955 3,169 3,504
-------- -------- -------- --------
4,713 6,192 18,018 19,025
-------- -------- -------- --------
(Loss) income before (benefit from)
provision for income taxes (1,938) (2,194) (4,258) 390
(Benefit from) provision for
income taxes -- (878) -- 156
-------- -------- -------- --------
Net (loss) income $ (1,938) $ (1,316) $ (4,258) $ 234
======== ======== ======== ========
Net (loss) income per share $ (.14) $ (.09) $ (.31) $ .02
======== ======== ======== ========
Weighted average number of shares
outstanding 13,959 13,959 13,959 13,959
======== ======== ======== ========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 4
MOVIE STAR, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
---------------------------
1996 1995
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (4,258) $ 234
Adjustments to reconcile net (loss) income to
net cash provided by (used in) operating activities:
Depreciation and amortization 610 929
Deferred income taxes -- 151
Loss on sale/abandonment of fixed assets 301 --
Changes in operating assets and liabilities:
Accounts receivable (942) (1,563)
Inventory 20,971 10,434
Prepaid expenses and other current assets (582) (1,004)
Other assets 4 30
Accounts payable and accrued expenses (1,034) (455)
-------- --------
Net cash provided by operating activities 15,070 8,756
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for fixed assets (263) (260)
Proceeds from sale of property, plant and equipment 664 --
-------- --------
Net cash provided by (used in)
investing activities 401 (260)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payment of short-term obligations (14,485) (9,031)
Payment of long-term debt obligations (11) (107)
-------- --------
Net cash used in financing activities (14,496) (9,138)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 975 (642)
CASH AND CASH EQUIVALENTS, beginning of period 103 922
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 1,078 $ 280
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during period for:
Interest $ 2,487 $ 2,654
======== ========
Income taxes (net of refunds received) $ (299) $ 19
======== ========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE> 5
MOVIE STAR, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
1. In the opinion of the Company, the accompanying consolidated condensed
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position
as of March 31, 1996 and the results of operations for the three and
nine months ended March 31, 1996 and 1995 and cash flows for the nine
months ended March 31, 1996 and 1995, respectively.
The consolidated condensed financial statements and accompanying notes
are presented as required by Form 10-Q and do not contain certain
additional information required to be included in the Company's
year-end consolidated financial statements. The year-end consolidated
condensed balance sheet was derived from the Company's audited
financial statements. This Form 10-Q should be read in conjunction with
the Company's consolidated financial statements and notes included in
the 1995 Annual Report on Form 10-K.
2. The results of operations for the nine months ended March 31, 1996 are
not necessarily indicative of the results to be expected for the full
year.
3. Certain items included in these statements are based upon estimates.
The cost of sales is determined utilizing estimated gross profit rates.
The calculation of the actual cost of sales is predicated upon a
physical inventory taken only at the end of each fiscal year.
An approximate breakdown of the inventory in thousands is as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
------- -------
<S> <C> <C>
Raw materials $ 3,646 $ 6,870
Work-in-process 1,067 5,354
Finished goods 10,401 23,861
------- -------
$15,114 $36,085
======= =======
</TABLE>
4. In order to reduce overhead expenses and improve operating
efficiencies, the Company vacated two floors, separately leased to the
Company, and combined its operation into an existing floor leased by
the Company in the same building. The Company provided a reserve
in the second quarter of fiscal 1996 for estimated costs in connection
with vacating those leased premises of $900,000 and wrote-off the
remaining net book value of related leasehold improvements of $270,000.
In April 1996, the Company entered into an agreement to buy out the
remaining term of its sublease for one of the floors formerly occupied
by the Company. The Company remains obligated under a separate direct
lease for the same premises which requires the Company to pay rent from
May 1997 through April 1999.
In addition, the Company remains obligated under a lease for an
additional floor formerly occupied by the Company in the same building
through January 2002.
<PAGE> 6
The Company is seeking to reach agreements to settle its rent
obligations for the remaining term of the aforementioned leases with
respect to the vacated space. If the Company cannot reach an agreement
on terms acceptable to the Company, the Company may be required to
pay its rent obligations to the landlord on a monthly basis until the
end of the respective terms of the leases. Such rental payments
aggregate approximately $3,100,000, including estimated rent
escalations, for the balance of the terms of these leases. If the
Company is unable to settle its rent obligation, the Company may be
required to record an additional special charge for costs
associated with vacating these premises that may have a material
adverse effect on the Company's financial results.
Separately, the Company reached an agreement with the sublessor of the
premises it continues to occupy, settling the sublessor's claim for
certain rental arrears and reducing the Company's future rent
obligation during the remaining term of the lease.
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
The Company has incurred substantial losses for the two years ended June 30,
1995 and the nine months ended March 31, 1996 and, as previously disclosed,
expects to incur further losses in fiscal 1996. These losses arise primarily
from the Company's inability to maintain its gross profit margins due to a more
competitive market, the weak retail climate for the Company's products,
difficulties in sourcing its goods offshore and the fact that the Company has
not sufficiently reduced its overhead.
In September 1995, the Company announced its plans to divest itself of its men's
work and leisure shirt division to focus on its core intimate apparel business.
The liquidation of the assets of this division was substantially completed as of
December 31, 1995.
In April 1996, Barbara T. Khouri, the Company's Chief Executive Officer,
resigned, reflecting a mutual decision by Ms. Khouri and the Company. Ms.
Khouri, who was hired in August 1995, worked with senior management to
consolidate and realign the Company's operations to reduce costs and create an
organizational structure that is more productive, effective and efficient. The
Company's Chairman of the Board, Mark M. David, has resumed the duties of Chief
Executive Officer.
The Company has been advised by the American Stock Exchange that, in view of
the Company's recent financial performance, the Exchange considers the Company
to have fallen below certain of its continued listing guidelines and, as a
result, the Exchange is reviewing the Company's eligibility for continued
listing on the Exchange.
Results of Operations
Net sales decreased by $4,919,000 (28%) to $12,408,000 and by $15,708,000 (18%)
to $70,056,000 for the three and nine months ended March 31, 1996,
respectively, compared to the similar periods in 1995. These decreases in sales
resulted primarily from lower sales in the popular-priced intimate apparel
product line. The lower sales resulted from the elimination of trade business
from that product line, the weak retail climate for the Company's products and
the inability of the Company to source effectively.
The gross profit percentage decreased from 23.1% to 22.4% and from 22.6% to
19.6% for the three and nine months ended March 31, 1996, respectively, compared
to the similar periods in 1995. The decrease was due primarily to lower margins
in the Company's popular-priced intimate apparel product line. The lower margins
resulted from a more competitive market, the weak retail climate for the
Company's products, the inability of the Company to source effectively and the
Company's effort to sell off discontinued inventory and reduce inventory levels.
The Company's inability to source effectively resulted in the receipt and
acceptance of lesser quality goods, unscheduled and costly air shipments and the
inability, in certain instances, to make timely delivery of quality finished
product to our customers. As a result, certain customers either canceled orders,
returned goods or took deductions.
<PAGE> 8
Selling, general and administrative expenses decreased by $1,318,000 to
$3,919,000 for the three months ended March 31, 1996 as compared to 1995. This
decrease was due to management focusing its efforts on reducing overhead
expenses and lower sales volume. Specifically, this decrease resulted from
reductions in salary expense of $361,000, rent of $135,000 sales related
expenses of $573,000, which included reductions in shipping costs of $241,000
and sample making of $222,000, and a net decrease in other general overhead
expenses.
Selling, general and administrative expenses decreased by $1,842,000 to
$13,679,000 for the nine months ended March 31, 1996 as compared to 1995. This
decrease was due to management focusing its efforts on reducing overhead
expenses and lower sales volume. Specifically, this decrease resulted from
reductions in salary expense of $508,000, sales related expenses of $1,204,000,
which included reductions in shipping costs of $476,000, commissions of
$133,000 and sample making of $405,000 and a net decrease in other general
overhead expenses.
In order to reduce overhead expenses and improve operating efficiencies, the
Company vacated two floors, separately leased to the Company, and combined its
operation into an existing floor leased by the Company in the same building.
The Company provided a reserve in the second quarter of fiscal 1996 for
estimated costs in connection with vacating those leased premises of $900,000
and wrote-off the remaining net book value of related leasehold improvements
of $270,000.
It is anticipated that the realignment of the Company's operations during the
second quarter of 1996 will reduce selling, general and administrative costs in
excess of $2,000,000 annually, effective January 1, 1996.
Interest expense for the three and nine-month periods ended March 31, 1996
decreased by $161,000 and $335,000 respectively from the comparable periods in
1995 due to lower borrowing levels during those periods.
The Company had a loss from operations of $1,938,000 for the three months ended
March 31, 1996 compared to a loss from operations of $2,194,000 for the same
period in 1995. The Company had a loss from operations of $4,258,000 for the
nine months ended March 31,1996 compared to income from operations of $390,000
for the same period in 1995. These decreases were due principally to lower sales
and margins and the estimated loss on the abandonment of leased premises, offset
partially by lower selling, general and administrative expenses and lower
interest expense.
No income tax benefit was provided by the Company for the three and nine months
ended March 31, 1996 compared to a benefit from income taxes of $878,000 and a
provision for income taxes of $156,000 for the three and nine months ended March
31, 1995, respectively.
As a result of the above factors, the financial results reflect net losses from
operations of $1,938,000 and $4,258,000 for the three and nine months ended
March 31,1996 compared to a net loss of $1,316,000 and net income of $234,000
for the comparable periods in 1995.
Liquidity and Capital Resources
For the nine months ended March 31, 1996, the Company's working capital
decreased by $4,146,000 to $18,502,000, principally from operating losses,
offset partially by proceeds from the sale of property, plant and equipment.
During the nine months ended March 31, 1996, cash and cash equivalents increased
by $975,000. The Company used cash for the purchase of fixed assets of $263,000
and the payment of notes payable of
<PAGE> 9
$14,485,000. These activities were principally funded by cash generated by
operating activities of $15,070,000 and proceeds from the sale of property,
plant and equipment of $664,000.
Inventory at March 31, 1996, decreased by $19,264,000 to $15,114,000 from
$34,378,000 at March 31, 1995 from the liquidation of the men's work and leisure
shirt division, which accounted for $10,553,000 (55%) of the decrease, as well
as reductions in the inventory of other divisions from the prior year's levels.
In April 1996, the Company reached an agreement with holders of approximately
$10,635,000 of the Company's outstanding 12.875% unsecured subordinated
debentures ( "Restructured Bonds"). The holders of the Restructured Bonds agreed
to exchange such bonds for the issuance of an equivalent principal amount of a
new series of notes bearing interest at a rate of 8% per annum, payable
semi-annually (April 1 and October 1) which will be senior to the 12.875%
debentures ("New Senior Notes"). Additionally, the holders of the Restructured
Bonds agreed to defer the receipt of interest due April 1, 1996 (approximately
$684,000). The Company paid the interest due on the remaining 12.875%
debentures. The holders of the Restructured Bonds have also agreed to accept New
Senior Notes in exchange for the April 1, 1996 deferred interest related to the
Restructured Bonds and for the October 1996 interest payment under the New
Senior Notes. The aggregate principal amount of the New Senior Notes will then
approximate $11,772,000, will not provide for any amortization of principal and
will mature in September 2001. Upon the completion of the proposed exchange, the
aggregate principal indebtedness of the New Senior Notes and the 12.875%
subordinated debentures will be approximately $23,587,000.
The New Senior Notes will carry the right to convert up to $750,000 of the notes
into 2,000,000 shares of the Company's common stock at a price of $0.375 per
share. In addition, the holders of the new series of notes will have the right
to designate one member of the Company's Board of Directors.
When the proposed exchange is completed (expected to occur by June 30, 1996),
the Company will be in a position to deliver to the Indenture Trustee the
debentures acquired and receive credit for the entire principal amount of
$10,635,000 in lieu of making mandatory annual sinking fund payments through
October 1998. The Company's obligation to make mandatory sinking fund payments
on the 12.875% debentures will resume in October 1999.
If the proposed exchange is not completed, the Company intends to reduce the
required sinking fund payment of $3,750,000 due in 1996 on its outstanding
subordinated debentures by delivering to the Trustee the $2,550,000 of
debentures previously purchased by the Company. Based upon the Company's
recent financial results and the anticipated loss in fiscal 1996, the Company
does not presently anticipate that its earnings will be sufficient to pay the
interest and principal due in October 1996. In addition, management believes
that without significant improvements in sales and operating results, it is
unlikely that future sinking fund obligations in years after 1996 can be met.
In such event, the Company will have to rely on its short-term financing (see
below) to make the payment of interest that was deferred in April 1996 as well
as the sinking fund and interest payments due in October 1996. If the Company
does not have sufficient availability under the new line of credit for the
purpose of making these payments, the Company believes it will be able to
negotiate with its lender for additional availability by providing the lender
with certain additional collateral. There can be no assurance that the
Company will have sufficient availability under its short-term line of credit
to make sinking fund and interest payments in calendar year 1997 or, if
available, that the Company's lender will allow it to utilize the short-term
line of credit for such purposes or, if not available, that the Company will
be able to negotiate for any additional availability for that purpose. If the
Company is unable to utilize its short-term line to meet its sinking fund and
interest payment obligations in calendar year 1997, the Company will have to
seek alternative sources for the payment of such obligations.
The Company does not anticipate any future significant purchases of its stock or
debentures and anticipates that capital expenditures for fiscal 1996 will be
less than $400,000.
<PAGE> 10
In April 1996, the Company consummated an agreement with an asset based lending
financial institution, Rosenthal & Rosenthal, Inc., providing for a secured
revolving line of credit of up to $13,500,000 for a period of two years to cover
the Company's projected needs for operating capital and letters of credit to
fund the purchase of imported goods. Direct borrowings under the Rosenthal &
Rosenthal line bear interest at the annual rate of 2.5% above the prime rate of
Chase Manhattan Bank. Availability under the line of credit is subject to
certain agreed upon formulas. At the closing of the new financing, the unused
portion of this line of credit totaled approximately $5,000,000 after
outstanding letters of credit of $5,400,000. Under the terms of the new
financing, the Company has agreed to pledge substantially all of its assets,
except the Company's domestic inventory and real property. The new credit
facility replaces the financing agreement which the Company had with two banks.
In April 1996, the Company entered into an agreement to buy out the remaining
term of its sublease for one of the floors formerly occupied by the Company. The
Company remains obligated under a separate direct lease for the same premises
which requires the Company to pay rent from May 1997 through April 1999.
In addition, the Company remains obligated under a lease for an additional floor
formerly occupied by the Company in the same building through January 2002.
The Company is seeking to reach agreements to settle its rent obligation for the
remaining term of the aforementioned leases with respect to the vacated space.
If the Company cannot reach an agreement on terms acceptable to the Company, the
Company may be required to pay its rent obligations to the landlord on a
monthly basis until the end of the respective terms of the leases. Such rental
payments aggregate approximately $3,100,000, including estimated rent
escalations, for the balance of the terms of these leases. If the Company is
unable to settle its rent obligation, the Company may be required to record an
additional special charge for costs associated with vacating these premises
that may have a material adverse effect on the Company's financial results.
Separately, the Company has also reached an agreement with the sublessor of the
premises it continues to occupy, settling the sublessor's claim for certain
rental arrears and reducing the Company's future rent obligation during the
remaining term of the lease.
Management believes its available borrowing under its new secured revolving line
of credit, along with anticipated internally generated funds, will be sufficient
to cover its working capital requirements through December 31, 1996.
<PAGE> 11
SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS UNDER
THE SECURITIES LITIGATION REFORM ACT OF 1995
Except for historical information contained herein, this Quarterly Report on
Form 10-Q contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 which involve certain risks and
uncertainties. The Company's actual results or outcomes may differ materially
from those anticipated. Important factors that the Company believes might
cause such differences are discussed in the cautionary statements accompanying
the forward-looking statements and under the caption "Management's Discussion
and Analysis of Finacial Condition and Results of Operations" in this Form
10-Q. In assessing forward-looking statements contained herein, readers are
urged to carefully read those statements.
<PAGE> 12
PART II Other Information
Item 1 - Legal proceedings - Not Applicable
Item 2 - Changes in Securities - Not Applicable
Item 3 - Defaults Upon Senior Securities - Not Applicable
Item 4 - Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5 - Other Information - None
Item 6 - (a) Exhibits
Exhibit
Number Exhibit Method of Filing
- ------ ------- ----------------
10.5 Financing Agreement Filed herewith.
dated as of
April 24, 1996
between Rosenthal
& Rosenthal, Inc. and
the Registrant.
10.5.1 Side Letter re Covenants Filed herewith.
dated as of
April 24, 1996 with
Rosenthal & Rosenthal, Inc.
10.5.2 Security Agreement Filed herewith.
dated as of
April 24, 1996
between Rosenthal &
` Rosenthal, Inc. and
the Registrant.
10.5.3 Security Agreement - Filed herewith.
Inventory dated as of
April 24, 1996 between
Rosenthal & Rosenthal, Inc.
and the Registrant.
10.5.4 Security Agreement and Filed herewith.
Mortgage - Trademarks
dated as of April 24,
1996 between Rosenthal &
Rosenthal, Inc. and the Registrant.
<PAGE> 13
10.5.5 Negative Pledge - Real Filed herewith.
Property dated as of
April 24, 1996 between
Rosenthal & Rosenthal,
Inc. and the Registrant.
10.5.6 Assignment of Leases, Filed herewith.
Rents and Security
Deposits dated as of
April 24, 1996 between
Rosenthal & Rosenthal,
Inc. and the Registrant.
(b) Form 8-K Report - None
27 Financial Data Schedule Submitted only
with the
electronic
filing of this
document
pursuant to the
EDGAR rules.
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.
MOVIE STAR, INC.
By: /s/ MARK M. DAVID
--------------------------
MARK M. DAVID
Chairman
Chief Executive Officer
By: /s/ SAUL POMERANTZ
--------------------------
SAUL POMERANTZ
Senior Vice President;
Chief Financial Officer
May 15, 1996
<PAGE> 14
EXHIBIT INDEX
Exhibit
Number Exhibit Method of Filing
- ------ ------- ----------------
10.5 Financing Agreement Filed herewith.
dated as of
April 24, 1996
between Rosenthal
& Rosenthal, Inc. and
the Registrant.
10.5.1 Side Letter re Covenants Filed herewith.
dated as of
April 24, 1996 with
Rosenthal & Rosenthal, Inc.
10.5.2 Security Agreement Filed herewith.
dated as of
April 24, 1996
between Rosenthal &
Rosenthal, Inc. and
the Registrant.
10.5.3 Security Agreement - Filed herewith.
Inventory dated as of
April 24, 1996 between
Rosenthal & Rosenthal, Inc.
and the Registrant.
10.5.4 Security Agreement and Filed herewith.
Mortgage - Trademarks
dated as of April 24,
1996 between Rosenthal &
Rosenthal, Inc. and the Registrant.
10.5.5 Negative Pledge - Real Filed herewith.
Property dated as of
April 24, 1996 between
Rosenthal & Rosenthal,
Inc. and the Registrant.
10.5.6 Assignment of Leases, Filed herewith.
Rents and Security
Deposits dated as of
April 24, 1996 between
Rosenthal & Rosenthal,
Inc. and the Registrant.
27 Financial Data Schedule Submitted only
with the
electronic
filing of this
document
pursuant to the
EDGAR rules.
<PAGE> 1
ROSENTHAL & ROSENTHAL, INC.
Financing Agreement
AGREEMENT dated April 24, 1996 between MOVIE STAR, INC. ("Borrower"), a
corporation duly organized and presently existing in good standing under the
laws of the State of New York whose chief executive office is at 136 Madison
Avenue, New York, NY 10016, and ROSENTHAL & ROSENTHAL, INC. ("Lender"), a New
York corporation with an address at 1370 Broadway, New York, New York 10018.
Borrower desires to obtain loans and other financial accommodations from Lender
on a revolving basis upon the security of the "Collateral" as herein defined.
Now, therefore, Borrower and Lender agree as follows.
SECTION 1 DEFINITIONS
As used in this Agreement, these terms shall have the following meanings which
shall be applicable to both the singular and plural forms of such terms.
1.1 "ACCOUNT DEBTOR" shall mean the account debtor with respect to a
Receivable and any other person who is obligated on such Receivable.
1.2 "ADVANCE RECEIVABLE PERCENTAGE" and "ADVANCE INVENTORY PERCENTAGE"
shall mean the respective percentages specified in Section 2.1 hereof.
1.3 "AFFILIATE" of a party shall mean any entity controlling,
controlled by, or under common control with, the party, and the term
"controlling" and such variations thereof shall mean ownership of a majority of
the voting power of a party.
1.4 "BUSINESS DAY" shall mean a day on which Lender and major banks in
New York City are open for the regular transaction of business.
1.5 "LETTER OF CREDIT" shall mean any letter of credit which Lender
assists Borrower in procuring pursuant to this Agreement and "LINE OF CREDIT"
shall mean the total available amount of advances on any basis up to $13,500,000
(the "Maximum Amount").
1.6 "LOAN ACCOUNT" shall mean the Loan Account as described in Section
2.1 hereof.
1.7 "MAXIMUM RATE" shall have the meaning provided in Section 9.2
hereof.
1.8 "OBLIGATIONS" shall mean all obligations, liabilities and
indebtedness of Borrower to Lender or an Affiliate of Lender, however evidenced,
arising under this Agreement, under any other or supplemental financing provided
to Borrower by Lender or an Affiliate of Lender, or independent hereof or
thereof, whether now existing or incurred from time to time hereafter and
whether before or after termination hereof, absolute or contingent, joint or
several, matured or unmatured, direct or indirect, primary or secondary,
liquidated or unliquidated, and whether arising directly or acquired from others
(whether acquired outright, by assignment unconditionally or as collateral
security from another and including, without limitation, participations or
interest of Lender in obligations of Borrower to others), and including (without
limitation) all of Lender's charges, commissions, fees, interest, expenses,
costs and reasonable attorneys' fees chargeable to Borrower in connection
therewith.
1.9 "PRIME RATE" shall mean the prime commercial loan rate from time to
time publicly announced in New York City by The Chase Manhattan Bank, N.A.
1.10 "RECEIVABLES" shall mean all obligations to Borrower for the
payment of money arising out of the sale of goods or the rendering of services
by Borrower, now existing or hereafter arising, however evidenced, including
without limitation all accounts, contract rights, general intangibles,
documents, chattel paper and instruments (as each of such terms is defined in
the New York Uniform Commercial Code).
1.11 "ELIGIBLE RECEIVABLES" shall mean Receivables owned or created by
Borrower in the regular course of its business which are and at all times shall
continue to be acceptable to Lender in all respects. "ELIGIBLE INVENTORY" shall
mean inventory of imported finished goods on Borrower's premises (or in
Borrower's warehouse) within the continental United States in which Lender has a
first and only perfected security interest, and which is being used by the
Borrower to fill anticipated orders up to a maximum of $1,000,000 and current
outstanding orders and is, and at all times shall continue to be, acceptable in
all respects to Lender in
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its sole discretion. "ELIGIBLE LETTER OF CREDIT INVENTORY" shall mean inventory
(other than Eligible Inventory) consisting of imported finished goods which has
been purchased with Letter of Credit proceeds and which is, and at all times
shall continue to be, acceptable in all respects to Lender in its sole
discretion and in which Lender has a first and only perfected security interest.
The value of Eligible Inventory and Eligible Letter of Credit Inventory shall be
calculated at the lower of cost or market. In determining eligibility of
Receivables, Lender may, but need not, rely on ageings, reports and schedules of
Receivables furnished by Borrower, but reliance thereon by Lender from time to
time shall not be deemed to limit Lender's right to revise standards of
eligibility at any time or any other rights of Lender. Standards of eligibility
for Receivables or inventory may be fixed and revised from time to time solely
by Lender in its exclusive and sole discretion. In general, a Receivable shall
not be deemed eligible unless the Account Debtor on such Receivable is and at
all times continues to be acceptable to Lender and neither the Receivables nor
inventory shall be deemed eligible unless each complies in all respects with the
representations, covenants and warranties made by Borrower with respect thereto.
1.12 "NET AMOUNT OF ELIGIBLE RECEIVABLES" shall mean the gross amount
of Eligible Receivables less sales, excise or similar taxes, returns, discounts,
claims, credits and allowances of any nature at any time issued, owing, granted,
outstanding or claimed, and less (without duplication) all amounts payable by
any Account Debtor on Eligible Receivables if any Eligible Receivable of such
Account Debtor is unpaid more than one hundred and twenty (120) days following
its invoice date.
SECTION 2 LOANS
2.1 Lender shall, in its sole discretion, make loans to Borrower or
procure for Borrower Letters of Credit, from time to time, at Borrower's
request, which loans and Letters of Credit in the aggregate shall in no event
exceed (a) the Maximum Amount or (b) the sum of (i) eighty percent (80%) (the
"Advance Receivable Percentage") of the Net Amount of Eligible Receivables which
have been validly assigned to Lender and in which Lender holds a perfected
security interest pursuant to the terms hereof ranking prior to and free and
clear of all interests, claims, and rights of others and (ii) fifty percent
(50%) (the "Advance Inventory Percentage") of the sum of Eligible Inventory and
Eligible Letter of Credit Inventory (in each case determined at the lower of
cost or market) which have been validly assigned to Lender and in which Lender
holds a perfected security interest pursuant to the terms hereof ranking prior
to and free and clear of all interests, claims, and rights of others; provided
however that the aggregate amount of loans against Eligible Inventory and
Eligible Letter of Credit Inventory shall not exceed $6,000,000; provided
further that the aggregate face amount of Letters of Credit outstanding at any
time pursuant to this Agreement shall not exceed $10,000,000.
Each Letter of Credit shall be in form and substance satisfactory to Lender in
its sole discretion from a financial institution acceptable to Lender and Lender
may in its sole discretion not permit certain types of letters of credit,
including standby letters of credit and letters of credit in respect of
inventory delivered or to be delivered outside the continental United States.
Lender may in its sole and exclusive discretion revise from time to time the
requirements for Letters of Credit which may be acceptable to it. Any assistance
or extension of credit by Lender to Borrower for the purpose of opening Letters
of Credit shall be in Lender's sole discretion.
The making of any loan or procuring of any Letter of Credit in excess of the
Advance Receivable Percentage or the Advance Inventory Percentage or any other
limitation shall not be deemed to modify such percentage or create any
obligation to make any further such loan or Letter of Credit. All loans or
Letters of Credit (and all other amounts chargeable to Borrower under this
Agreement or any supplement hereto) shall be charged to a Loan Account in
Borrower's name on Lender's books. Lender shall render to Borrower each month a
statement of the Loan Account (and all credits and charges thereto) which shall
be considered correct and accepted by Borrower and conclusively binding upon
Borrower as an account stated except to the extent that Lender receives a
written notice by registered mail of Borrower's exceptions within 30 days after
such statement has been mailed by ordinary mail to Borrower.
SECTION 3 LENDER'S CHARGES
3.1 Borrower agrees to pay to Lender each month interest in arrears
(computed on the basis of the actual number of days elapsed over a year of 360
days) on the average daily balances in the Loan Account during the preceding
month at a rate equal to the Prime Rate plus two and one half percent (2.5%) per
annum (the "Margin"); provided, however, that no decrease shall reduce the Prime
Rate below 6% per annum. Any change in the effective interest rates due to a
change in the Prime Rate shall take effect on the date of such change in the
Prime Rate.
3.2 Borrower shall pay to Lender a facility fee for the two year period
of this Agreement equal to 2% of the Maximum Amount, payable in six equal
installments commencing on the date of closing and every four months thereafter
until paid. Upon any renewal of this Agreement, Borrower shall pay Lender an
annual facility fee equal to 1% of the Maximum Amount, payable in three equal
installments commencing on the renewal date and thereafter every four months
until paid.
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3.3 Should Lender arrange to open Letters of Credit or issue guaranties
for Borrower's account, Borrower agrees to pay Lender an amount equal to 1/4 of
1% of the face amount of such Letters of Credit or guaranties, plus for the
first six months an additional 1/4 of 1% for each 60 days or portion thereof
that the Letter of Credit (or any resulting acceptance) or guaranty remains open
and unpaid (plus bank charges) and, after the first six months, an additional
1/8 of 1% for each additional 30 days or portion thereof that the Letter of
Credit (or any resulting acceptance) or guaranty remains open and unpaid, plus
bank charges.
3.4 A statement of all of Lender's charges shall accompany each monthly
statement of the Loan Account and such charges shall be payable by Borrower
within 5 days after receipt of such statement. In lieu of the separate payment
of charges, Lender at its option, shall have the right to debit the amount of
such charges to Borrower's Loan Account, which charges shall be deemed to be
first paid by amounts subsequently credited to the Loan Account. As more fully
provided in Section 9.2 hereof, in no event shall the interest charges hereunder
exceed the Maximum Rate.
SECTION 4 SECURITY INTEREST IN COLLATERAL
4.1 As security for the prompt performance, observance and payment in
full of all of the Obligations, Borrower grants to Lender a security interest
in, a continuing lien upon and a right of setoff against, and Borrower hereby
assigns, transfers, pledges and sets over to Lender (collectively, including any
other assets of Borrower in which Lender may be granted a security interest, the
"Collateral"): (i) all Receivables (whether or not Eligible Receivables and
whether or not specifically listed on any schedules, assignments or reports
furnished to Lender), (ii) all of Borrower's property, and the proceeds thereof,
now or hereafter held or received by or in transit to Lender or held by others
for Lender's account, including any and all deposits, balances, sums and credits
of Borrower with, and any and all claims of Borrower against, Lender, at any
time existing, (iii) all credit insurance policies, and all other insurance and
all guarantees relating to the Receivables or other Collateral, (iv) all books,
records and other general intangibles evidencing or relating to Receivables or
other Collateral; all deposits, or other security for the obligation of any
person under or relating to Receivables, all of the Borrower's rights and
remedies of whatever kind or nature it may hold or acquire for the purpose of
securing or enforcing Receivables; all right, title and interest of the Borrower
in and to all goods relating to, or which by sale have resulted in, Receivables,
including goods returned by or reclaimed or repossessed from Account Debtors and
all goods described in copies of invoices delivered by Borrower to Lender; all
rights of stoppage in transit, replevin, repossession and reclamation and all
other rights and remedies of an unpaid vendor or lienor, and all proceeds of any
Letter of Credit naming Borrower as beneficiary and which provides for,
guarantees or assures the payment of any Receivable; (v) all general intangibles
whether or not arising out of the sale of goods or rendition of services, and
including without limitation choses in action, causes of action, tax refunds
(and claims), and reversions from terminated pension plans; and (vi) all
proceeds of such Collateral, in any form, including, without limitation, cash,
non-cash items, checks, notes, drafts and other instruments for the payment of
money. Such security interest in favor of Lender shall continue during the term
of this Agreement and until payment in full of all Obligations, whether or not
this Agreement shall have sooner terminated.
4.2 At Lender's request, Borrower will mark its ledger cards, books of
account and other records relating to Receivables with appropriate notations
satisfactory to Lender disclosing that the Receivables have been assigned to
Lender and will provide Lender with confirmatory assignment schedules in form
satisfactory to Lender, copies of customers' invoices, evidence of shipment or
delivery, and such further information as Lender may require. Borrower will take
any and all steps and observe such formalities as Lender may request from time
to time to create and maintain in Lender's favor a valid and first lien upon,
security interest in and pledge of all of Borrower's Receivables and all other
Collateral, including without limitation by way of filing financing statements
and other notices and amendments and renewals thereof that may be requested by
Lender to maintain such security interest in and pledge of the Collateral.
SECTION 5 CUSTODY AND INSPECTION OF COLLATERAL AND RECORDS;
COLLECTION AND HANDLING OF COLLATERAL
5.1 Until Borrower's authority so to do is terminated at any time by
notice from Lender, Borrower will, at its own expense and on Lender's behalf,
collect as Lender's property and in trust for Lender all payments and
prepayments on Receivables, and shall not commingle such collections with
Borrower's own funds. As to all moneys so collected, including all prepayments
by customers, Borrower shall on the day received remit all such collections to
Lender in the form received. All amounts collected on Receivables when received
by Lender shall be credited to Borrower's Loan Account, adding three Business
Days for collection and clearance of remittances. Such credits shall be
conditional upon final payment to Lender.
5.2 All records, ledger sheets, correspondence, contracts and
documentation relating to or evidencing Receivables shall, until delivered to
Lender or removed by Lender from Borrower's premises, be kept on Borrower's
premises, without cost to Lender, in appropriate containers in safe places,
bearing suitable legends identifying them and all related files, containers,
receptacles and cabinets as being under Lender's dominion and control. Lender
shall at all reasonable times have full access to and the right to
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examine and make copies of Borrower's books and records, to confirm and verify
all Receivables assigned to Lender and to do whatever else Lender deems
necessary to protect its interest. Lender may at any time remove from Borrower's
premises, or require Borrower to deliver any contracts, documentation, files and
records relating to Receivables, or Lender may, without cost or expense to
Lender, use such of Borrower's personnel, supplies and space at Borrower's
places of business as may be reasonably necessary for collection of Receivables.
5.3 Borrower will immediately upon obtaining knowledge thereof report
to Lender all reclaimed, repossessed or returned merchandise, Account Debtor
claims and any other matter affecting the value, enforceability or
collectibility of Receivables. Upon notice from the Lender, any merchandise
reclaimed or repossessed by or returned to Borrower will, at the cost and
expense of Borrower, be set aside marked with the name of Lender and will be
held by Borrower for the account of Lender and subject to Lender's security
interest. All claims and disputes relating to Receivables are to be promptly
adjusted by Borrower with the prior approval of Lender and within a reasonable
time, at its own cost and expense. Lender may, at its option, settle, adjust or
compromise claims and disputes relating to Receivables which are not adjusted by
Borrower within a reasonable time.
5.4 Borrower shall reimburse Lender on demand for all costs of
collection incurred by Lender in efforts to enforce payment of Receivables,
recovery of or realization upon any other Collateral, including reasonable
attorneys' fees and the fees and commissions of collection agencies. All and any
fees (including appraisal fees), costs and expenses, of whatever kind and
nature, including taxes of any kind, which Lender may incur in filing public
notices, and the reasonable charges of any attorney whom Lender may engage in
preparing and filing documents, making title or lien examinations and rendering
opinion letters, as well as expenses incurred by Lender (including all
reasonable attorneys' fees), in protecting, maintaining, preserving, enforcing
or foreclosing the pledge, lien and security interest granted to Lender
hereunder, whether through judicial proceedings or otherwise, or enforcing or
collecting the Receivables, or recovery of or realization upon any other
Collateral, or in defending or prosecuting any actions or proceedings arising
out of or related to its transactions with Borrower, including actions or
proceedings which may involve any person asserting a priority or claim with
respect to the Collateral, shall be borne and paid for by Borrower on demand,
shall constitute part of the Obligations and may at Lender's option be charged
to Borrower's Loan Account.
SECTION 6 REPRESENTATIONS, COVENANTS AND WARRANTIES
As an inducement to Lender to enter into this Agreement, Borrower
represents, covenants and warrants (which shall survive the execution and
delivery of this Agreement) that:
6.1 Borrower is a corporation duly organized and presently existing in
good standing under the laws of the State of New York and is duly qualified and
existing in good standing in every other state in which the nature of Borrower's
business requires it to be qualified.
6.2 The execution, delivery and performance of this Agreement are
within the corporate powers of Borrower, have been duly authorized by
appropriate corporate action and are not in contravention of the terms of
Borrower's charter or by-laws or of any indenture, agreement or undertaking to
which Borrower is a party or by which it may be bound. Borrower warrants that it
is and covenants that it shall remain solvent at all times while this Agreement
is in effect.
6.3 Borrower is and shall be, with respect to all inventory now
existing or hereafter acquired, the owner of such inventory free from any lien,
security interest or encumbrance of any kind, except in favor of Lender. With
respect to all Receivables no such Receivable or any other Collateral has been
or shall hereafter be assigned, pledged or transferred to any person other than
Lender or in any way encumbered or subject to a security interest except to
Lender and Borrower shall defend the same against the claims of all persons.
6.4 Borrower's books and records relating to the Receivables are
maintained at the office referred to below. Except as otherwise stated below,
the principal executive office of Borrower is located at such address and has
been so located on a continuous basis for not less than six months. Borrower
shall not change such location without Lender's prior written consent, and, upon
making any such change, Borrower agrees to execute any additional financing
statements or other documents or notices which Lender may require.
6.5 All loans and advances requested by Borrower under this Agreement
shall be used for the general corporate and business purposes of Borrower and
shall in no event be requested or used by Borrower for the specific purpose of
paying wages of the employees of Borrower.
6.6 Borrower shall maintain its shipping forms, invoices and other
related documents in a form satisfactory to Lender and shall maintain its books,
records and accounts in accordance with sound accounting practice. Borrower
agrees to furnish Lender
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with balance sheets, statements of profit and loss, interim financial statements
and such other information regarding the business affairs and financial
condition of Borrower as Lender may from time to time reasonably request,
including, audited statements within 90 days after the end of each fiscal year
of Borrower in such detail and scope as Lender may require, prepared and
certified by independent Certified Public Accountants acceptable to Lender and
within 45 days after the close of each of the first three quarters of each
fiscal year of the Borrower, an unaudited financial statement of the Borrower
all in reasonable detail and certified by the president or the chief financial
officer of the Borrower. All such statements and information shall fairly
present the financial condition of Borrower as of the dates, and the results of
its operations for the periods, for which the same are furnished.
6.7 Borrower shall duly pay and discharge all taxes, assessments,
contributions and governmental charges upon or against it or its properties or
assets prior to the date on which penalties attach thereto. Borrower shall be
liable for any tax (excluding a tax imposed on the overall net income of Lender)
imposed upon any transaction under this Agreement or giving rise to the
Receivables or which Lender may be required to withhold or pay for any reason
and Borrower agrees to indemnify and hold Lender harmless with respect thereto,
and to repay Lender on demand the amount thereof, and until paid by Borrower
shall be added to the Obligations secured hereunder, and may at Lender's option
be charged to Borrower's Loan Account.
6.8 With respect to each Receivable, Borrower hereby represents and
warrants to the best of its knowledge that: each Receivable represents a valid
and legally enforceable indebtedness based upon an actual and bona fide sale and
delivery of property or rendition of services in the ordinary course of
Borrower's business which has been finally accepted by the Account Debtor and
for which the Account Debtor is unconditionally liable to make payment of the
amount stated in each invoice, document or instrument evidencing the Receivable
in accordance with the terms thereof, without offset, defense or counterclaim;
each Receivable will be paid in full at maturity; all statements made and all
unpaid balances appearing in any invoices, documents, instruments and statements
of account describing or evidencing the Receivables are true and correct and are
in all respects what they purport to be and all signatures and endorsements that
appear thereon are genuine and all signatories and endorsers have full capacity
to contract; the Account Debtor owing the Receivable and each guarantor,
endorser or surety of such Receivable is solvent and financially able to pay in
full the Receivable when it matures; and all recording, filing and other
requirements of giving public notice under any applicable law have been duly
complied with.
SECTION 7 SPECIFIC POWERS OF LENDER
7.1 Borrower hereby constitutes Lender or its agent, or any other
person whom Lender may designate, as Borrower's attorney, at Borrower's own cost
and expense to exercise at any time all or any of the following powers which,
being coupled with an interest, shall be irrevocable until all Obligations have
been paid in full: (a) to receive, take, endorse, assign, deliver, accept and
deposit, in Lender's or Borrower's name, any and all checks, notes, drafts,
remittances and other instruments and documents relating to Receivables and
proceeds thereof; (b) to receive, open and dispose of all mail addressed to
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Lender may designate; (c) to transmit to Account
Debtors indebted on Receivables notice of Lender's interest therein and to
request from such Account Debtors at any time, in Borrower's name or in Lender's
or that of Lender's designee, information concerning the Receivables and the
amounts owing thereon; (d) to notify Account Debtors to make payment directly to
Lender; (e) to take or bring, in Borrower's name or Lender's, all steps,
actions, suits or proceedings deemed by Lender necessary or desirable to effect
collection of the Receivables; and (f) to sign on behalf of the Borrower one or
more financing statements (or amendments to financing statements) under the
Uniform Commercial Code. In addition, to the extent permitted by law, Lender may
file one or more financing statements signed only by Lender, naming Borrower as
debtor and Lender as secured party and indicating therein the types or
describing the items of collateral covered by this Agreement. Without limitation
of any of the powers enumerated above, Lender is hereby authorized to accept and
to deposit all collections in any form, relating to Receivables, received from
or for the account of Account Debtors (whether such collections are remitted
directly to Lender by Account Debtors or are forwarded to Lender by Borrower),
including remittances which may reflect deductions taken by Account Debtors,
regardless of amount, the Loan Account of Borrower to be credited only with
amounts actually collected on Receivables in accordance with Section . Borrower
hereby releases (i) any bank, trust company or other firm receiving or accepting
such collections in any form, and (ii) Lender and its officers, employees and
designees, from any liability arising from any act or acts hereunder or in
furtherance hereof, whether of omission or commission, and whether based upon
any error of judgment or mistake of law or fact, other than any liability
arising from Lender's fraud, gross negligence or willful misconduct.
SECTION 8 LENDER'S REMEDIES UPON BORROWER'S DEFAULT
8.1 Borrower agrees that all of the loans and advances made by Lender
under the terms of this Agreement, together with all Obligations of Borrower as
defined herein (unless otherwise provided in any instrument evidencing the same
or agreement relating thereto), shall be payable by Borrower at Lender's demand
at the office of Lender in New York, New York. In addition, all Obligations
shall be, at Lender's option, due and payable without notice or demand upon
termination of this Agreement or upon the occurrence
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of any one or more of the following events of default ("Default"): (a) if
Borrower shall fail to pay to Lender when due any amounts owing to Lender under
any Obligation, or shall breach any of the terms, covenants, conditions or
provisions of this Agreement or any other agreement between the parties; (b) if
any guarantor, endorser or other person liable on the Obligations shall breach
any of the terms, covenants, conditions or provisions of any guarantee,
endorsement or other agreement of such person with, or in favor of, Lender; (c)
if any representation, warranty, or statement of fact made to Lender at any time
by or on behalf of Borrower is false or misleading in any material respect; (d)
if Borrower shall become insolvent, is generally unable to pay its debts as they
mature, files or has filed against it a petition in bankruptcy, liquidation or
reorganization; or (e) if a judgment in excess of $100,000 against Borrower
remains unpaid, unstayed or undismissed for a period of more than five days, or
if Borrower discontinues doing business for any reason, or if a custodian,
receiver or trustee of any kind is appointed for it or any of its property; or
(f) if an event of default shall occur under the Indenture dated as of October
1, 1986, between Sanmark-Stardust Inc. and Bank of Montreal Trust Company, as
Trustee or any of the documents contemplated thereby or under any agreement
refinancing the amounts due and owing under such Indenture; or (f) if at any
time Lender shall, in its sole discretion, reasonably exercised, consider the
Obligations insecure or any part of the Receivables, Eligible Inventory or
Eligible Letter of Credit Inventory unsafe, insecure or insufficient and
Borrower shall not on demand furnish other collateral or make payment on
account, satisfactory to Lender. Upon the occurrence of any Default, (i)
Borrower shall pay to Lender, as liquidated damages and as part of the
Obligations, a charge at the rate set forth above under Section 3.1 plus three
percent per annum upon the unpaid balance of the Obligations from the date of
Default until the date of full payment of the Obligations, which charge shall be
in lieu of compensation payable under Section from such date; provided, that in
no event shall such rate exceed the Maximum Rate, (ii) Borrower shall pay to
Lender all costs, disbursements, charges and expenses for the collection and
enforcement of the Obligations, and for the protection and enforcement of
Lender's security interest, including reasonable attorneys' fees at the time
counsel is retained by Lender, all of which shall be added to and deemed part of
the Obligations, and (iii) Lender shall have the right (in addition to any other
rights Lender may have under this Agreement or otherwise) without further notice
to Borrower, to enforce payment of any Receivables, to settle, compromise, or
release in whole or in part, any amounts owing on Receivables, to prosecute any
action, suit or proceeding with respect to Receivables, to extend the time of
payment of any and all Receivables, to make allowances and adjustments with
respect thereto, to issue credits in Lender's name or Borrower's, to sell,
assign and deliver the Receivables (or any part thereof) and any returned,
reclaimed or repossessed merchandise or other property held by Lender or by
Borrower for Lender's account, at public or private sale, at broker's board, for
cash, upon credit or otherwise, at Lender's sole option and discretion, and
Lender may bid or become purchaser at any such sale if public, free from any
right of redemption which is hereby expressly waived. Borrower agrees that the
giving of five days' notice by Lender, sent by ordinary mail, postage prepaid,
to the mailing address of Borrower set forth in this Agreement, designating the
place and time of any public sale or the time after which any private sale or
other intended disposition of the Receivables or any other security held by
Lender is to be made, shall be deemed to be reasonable notice thereof and
Borrower waives any other notice with respect thereto. The net cash proceeds
resulting from the exercise of any of the foregoing rights or remedies shall be
applied by Lender to the payment of the Obligations in such order as Lender may
elect, and Borrower shall remain liable to Lender for any deficiency.
8.2 The enumeration of the foregoing rights and remedies is not
intended to be exhaustive, and such rights and remedies are in addition to and
not by way of limitation of any other rights or remedies Lender may have under
the New York Uniform Commercial Code or other applicable law. Lender shall have
the right, in its sole discretion, to determine which rights and remedies, and
in which order any of the same, are to be exercised, and to determine which
Receivables are to be proceeded against and in which order, and the exercise of
any right or remedy shall not preclude the exercise of any others, all of which
shall be cumulative. No act, failure or delay by Lender shall constitute a
waiver of any of its rights and remedies. No single or partial waiver by Lender
of any provision of this Agreement, or breach or default thereunder, or of any
right or remedy which Lender may have shall operate as a waiver of any other
provision, breach, default, right or remedy or of the same provision, breach,
default, right or remedy on a future occasion. Borrower waives presentment,
notice of dishonor, protest and notice of protest of all instruments included in
or evidencing any of the Obligations or the Receivables and any and all notices
or demands whatsoever (except as expressly provided herein). Lender may, at all
times, proceed directly against Borrower to enforce payment of the Obligations
and shall not be required to first enforce its rights in the Receivables or any
other security granted to it. Lender shall not be required to take any action of
any kind to preserve, collect or protect its or Borrower's rights in the
Receivables or any other security granted to it.
8.3 BORROWER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT
OF ANY LITIGATION WITH RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT, THE
OBLIGATIONS, THE RECEIVABLES, OR ANY OTHER TRANSACTION BETWEEN THE PARTIES AND
BORROWER HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE IN CONNECTION
WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR
THE OBLIGATIONS. IN ANY SUCH LITIGATION BORROWER WAIVES PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE
BY CERTIFIED OR REGISTERED MAIL DIRECTED TO BORROWER AT ITS PLACE OF BUSINESS
SET FORTH ABOVE. WITHIN 30 DAYS AFTER SUCH MAILING, BORROWER SHALL APPEAR IN
ANSWER TO SUCH SUMMONS, COMPLAINT OR OTHER PROCESS, FAILING WHICH BORROWER SHALL
BE DEEMED IN DEFAULT AND JUDGMENT MAY BE
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ENTERED BY LENDER AGAINST BORROWER FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF
REQUESTED THEREIN.
SECTION 9 EFFECTIVE DATE, CONTROLLING LAW AND TERMINATION
9.1 This Agreement shall become effective upon acceptance by Lender at
its office in the State of New York, and shall continue in full force and effect
until April 30, 1998 (the "Renewal Date") and from year to year thereafter,
unless sooner terminated as herein provided. Borrower may terminate this
Agreement on the Renewal Date or on the anniversary of the Renewal Date in any
year by giving Lender at least sixty (60) days' prior written notice by
registered or certified mail, return receipt requested, and in addition to its
other rights hereunder, Lender shall have the right to terminate this Agreement
at any time by giving Borrower thirty (30) days' prior written notice. In
addition to the charges under Section 3 hereof, as minimum compensation to
Lender for its agreement to make loans under the terms of this Agreement, and
for its services hereunder, Lender shall receive and Borrower agrees to pay
minimum charges for interest and Letter of Credit charges in the aggregate
amount of $ 250,000 per annum that this Agreement is in effect, which minimum
compensation shall be payable after deducting the charges paid by Borrower
during such period under Section 3.1. If an event of default hereunder has not
been declared by Lender, and Borrower terminates this Agreement, Borrower shall
pay to Lender as liquidated damages and as part of the Obligations an early
termination fee ("Early Termination Fee") in an amount equal to (i) for a
termination prior to the first anniversary of this Agreement, $300,000, and (ii)
after the first anniversary and prior to the end of any renewal period
thereafter, an amount equal to $150,000; provided, however, that if Borrower
terminates early and pays the Early Termination Fee, Borrower will no longer be
obligated to pay the minimum charges required to be paid pursuant to the
immediately preceding sentence for the related annual period. No termination of
this Agreement, however, shall relieve or discharge Borrower of its duties,
obligations and covenants hereunder until such time as all Obligations have been
paid in full, and the continuing security interest in Receivables and other
Collateral granted to Lender hereunder or under any other agreement shall remain
in effect until such Obligations have been fully discharged. The Early
Termination Fee is in addition to all other Obligations of the Borrower
hereunder. No provision hereof shall be modified or amended orally or by course
of conduct but only by a written instrument expressly referring hereto signed by
both parties.
9.2 ALL LOANS SHALL BE DISBURSED BY LENDER FROM ITS OFFICE IN THE STATE
OF NEW YORK, SHALL BE PAYABLE BY BORROWER AT SUCH OFFICE, AND THIS AGREEMENT AND
ALL TRANSACTIONS THEREUNDER SHALL BE DEEMED TO BE CONSUMMATED IN SUCH STATE AND
SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THAT STATE.
If any part or provision of this Agreement is invalid or in contravention of the
applicable laws or regulations of any controlling jurisdiction, such part or
provision shall be severable without affecting the validity of any other part or
provision of this Agreement. Notwithstanding any provision herein or in any
related document, Lender shall never be entitled to receive, collect, or apply,
as interest on the Loan Account, any amount in excess of the maximum rate of
interest ("Maximum Rate") permitted to be charged from time to time by
applicable law (if such law imposes any maximum rate), and in the event Lender
ever receives, collects, or applies as interest, any amount in excess of the
Maximum Rate, such amount shall bc deemed and treated as a partial prepayment of
the principal of the Loan Account; and, if the principal of the Loan Account and
all other of Lender's charges other than interest are paid in full, any
remaining excess shall be paid to Borrower.
7
<PAGE> 8
IN WITNESS WHEREOF, Lender and Borrower have caused this Agreement to
be executed by their respective corporate officers thereto duly authorized as of
the day and year first above written.
MOVIE STAR, INC.
By:/S/ MARK M. DAVID
---------------------------------
Title: CHAIRMAN
Attest:
/S/ SAUL POMERANTZ
- ---------------------
Secretary
Accepted:
ROSENTHAL & ROSENTHAL, INC.
By:/S/ JERRY SANDAK
---------------------------------
Title: EXECUTIVE VICE PRESIDENT
8
<PAGE> 9
Location of Borrower's Chief Executive Office
Books and Records: of Borrower:
136 Madison Avenue, New York, NY 10016 136 Madison Avenue, New York, NY 10016
Mailing Address of Borrower: Other Places of Business
136 Madison Avenue, New York, NY 10016 of Borrower:
c/o Movie Star of Poplarville, 100
Highway 11 North, Poplarville, MS 39470
c/o Russell Mfg., Haber Drive, Lebanon,
VA 24266
c/o Honaker, Route 2 Box 19, Honaker VA
24266
c/o Petersburg Mfg., Rt 305, Petersburg,
PA 16669
9
<PAGE> 1
New York, New York
April 24, 1996
Rosenthal & Rosenthal, Inc.
1370 Broadway
New York, New York 10018
Gentlemen:
We hereby agree that the Financing Agreement between us dated April 24,
1996 be and the same is hereby amended by:
1. adding thereto a new paragraph 6.9 as follows:
Affirmative Financial Covenants. Borrower shall until payment in full
of all Obligations to Lender and termination of this Agreement (a) cause to be
maintained at the end of each fiscal quarter (i.e., December, March, June and
September), Tangible Net Worth in an amount not less than $2,500,000; and (b)
cause to be maintained at the end of each fiscal quarter, Working Capital of not
less than $12,800,000.
For purposes hereof the following terms shall have the following
definitions:
"Current Assets" at a particular date, shall mean all cash,
accounts and inventory of Borrower, provided, however, that such amounts shall
not include any amounts for any Indebtedness owing by any affiliate to Borrower.
"Current Liabilities" at a particular date, shall mean all
amounts which would, in conformity with GAAP, be included under current
liabilities on a balance sheet of Borrower, as at such date, but in any event
including, without limitation or duplication, the amounts of (a) all
indebtedness payable on demand, or, at the option of the person or entity to
whom such indebtedness is owed, not more than twelve (12) months after such
date, (b) any payments in respect of any indebtedness (whether installment,
serial maturity, sinking fund payment or otherwise) required to be made not more
than twelve (12) months after such date, (c) all reserves in respect of
liabilities or indebtedness payable on demand or, at the option of the person or
entity to whom such Indebtedness is owed, not more than twelve (12) months after
such date, the validity of which is not contested at such date, (d) all accruals
for federal or other taxes measured by income payable within twelve (12) months
of such date and (e) all outstanding indebtedness to Lender.
1
<PAGE> 2
"GAAP" shall mean generally accepted accounting principles in
the United States of America in effect on the date hereof.
"Tangible Net Worth" shall mean, at a particular date, (a) the
aggregate amount of all assets of Borrower as may be properly classified as such
in accordance with GAAP consistently applied excluding such other assets as are
properly classified as intangible assets under GAAP, less (b) the aggregate
amount of all liabilities of Borrower determined in accordance with GAAP.
"Working Capital" shall mean the excess, if any, of Current
Assets over Current Liabilities.
2. adding thereto a new paragraph 6.10 as follows:
Negative Covenants. Borrower shall not, until payment in full of all
Obligations to Lender and termination of this Agreement (a) declare or make any
Dividend Payment; (b) create, assume, incur or suffer to exist, and will not
permit any Subsidiary to create, assume, incur or suffer to exist, any Lien of
any kind (other than a Lien created on any equipment at the time of purchase
thereof by the Borrower solely as security for the payment of the purchase price
thereof which has been consented to by Lender, such consent not to be
unreasonably withheld) upon any assets of Borrower or any such Subsidiary (other
then the Lien of Lender hereunder), unless Borrower will make or cause the
Obligations then outstanding to be directly secured by such Lien equally and
ratably with any and all other obligations and Indebtedness thereby secured; and
(c) create, incur or suffer to exist, and it will not permit any Subsidiary to
create, incur or suffer to exist, any Indebtedness, except Indebtedness to
Lender hereunder, Indebtedness outstanding as of the date hereof and listed in
Schedule I hereto and Subordinated Indebtedness.
For purposes hereof the following terms shall have the following
definitions:
"Capital Lease Obligations" shall mean any obligations to pay
rent or other amounts under a lease of (or other agreement conveying the right
to use) real and/or personal property which obligations are required to be
classified and accounted for as a capital lease on a balance sheet of Borrower
under GAAP (including Statement of Financial Accounting Standards No. 13 of the
Financial Accounting Standards Board) and, for purposes of this Agreement, the
amount of such obligations shall be the capitalized amount thereof, determined
in accordance with GAAP (including such Statement No. 13).
"Dividend Payment" shall mean dividends (in cash, property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, the purchase,
redemption, retirement or other acquisition of, any shares of any class of stock
of Borrower, but excluding dividends payable solely in shares of common stock of
Borrower.
"Guarantee" shall mean a guarantee, an endorsement, a
contingent agreement to purchase or to furnish funds for the payment or
maintenance of, or otherwise to be or become
2
<PAGE> 3
contingently liable under or with respect to, the Indebtedness, other
obligations, net worth, working capital or earnings of any Person, or a
guarantee of the payment of dividends or other distributions upon the stock of
any corporation, or an agreement to purchase, sell or lease (as lessee or
lessor) property, products, materials, supplies or services primarily for the
purpose of enabling a debtor to make payment of his, her or its obligations or
an agreement to assure a creditor against loss, and including without
limitation, causing a bank to open a letter of credit for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
have a correlative meaning.
"Indebtedness" shall mean, as to any Person: (a) indebtedness
created, issued or incurred by such Person for borrowed money (whether by loan
or the issuance and sale of debt securities); (b) obligations of such Person to
pay the deferred purchase or acquisition price of property or services, other
than trade accounts payable (other than for borrowed money) arising, and accrued
expenses incurred, in the ordinary course of business so long as such trade
accounts payable are payable within 120 days of the date the respective goods
are delivered or respective services rendered; (c) Indebtedness of others
secured by a Lien on the property of such Person, whether or not the respective
indebtedness so secured has been assumed by such Person; (d) obligations of such
Person in respect of letters of credit or similar instruments issued or accepted
by banks and other financial institutions for the account of such Person; (e)
Capital Lease Obligations of such Person; and (f) Indebtedness of others
Guaranteed by such Person.
"Lien" shall mean, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect of
such asset. For purposes of this Agreement, Borrower shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, limited liability company, joint venture,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Subordinated Indebtedness" shall mean Indebtedness for which
Borrower is directly and primarily liable, and which is subordinated to the
Obligations of Borrower hereunder on terms, and which contains other terms
(including interest, amortization and financial and other covenants), in form
and substance satisfactory to Lender, including without limitation the
Indebtedness of Borrower under the Indenture dated as of October 1, 1986 (the
"Indenture"), between Sanmark-Stardust Inc. and Bank of Montreal Trust Company,
as Trustee.
"Subsidiary" shall mean any corporation of which at least a
majority of the outstanding shares of stock having by the terms thereof ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether or not at the time stock of any other class or classes
of such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time directly or indirectly owned or
controlled by Borrower.
3. adding thereto a new paragraph 6.11 as follows:
3
<PAGE> 4
Other Covenants. Borrower hereby agrees that, until payment in full of
all Obligations to Lender and termination of this Agreement, all covenants
contained in the Indenture (as of the date hereof and as may be amended from
time to time) and in any agreements refinancing all or a portion of the
obligations under such Indenture shall be for the benefit of Lender and hereby
repeats and makes such covenants to Lender for its benefit. Such covenants are
hereby incorporated by reference herein as if fully set forth in this place.
Borrower hereby represents and covenants to Lender that the indebtedness
evidenced by the Indenture and notes issued thereunder are and will continue to
be subordinate to the Obligations hereunder. Borrower may, with the consent of
Lender (which consent shall not be unreasonably withheld), sell or dispose of
aging equipment or assets no longer necessary for Borrower's business through
arm's length transactions, so long as the proceeds of any such sales are used to
reduce the amount of Obligations then outstanding.
IN WITNESS WHEREOF Lender and Borrower have caused this amendment to be
executed by their respective corporate officers thereto duly authorized as of
April 24, 1996.
MOVIE STAR, INC.
By: /S/ MARK M. DAVID
-------------------------------
Name: MARK M. DAVID
Title: CHAIRMAN
ROSENTHAL & ROSENTHAL, INC.
By: /S/ JERRY SANDAK
-------------------------------
Name: JERRY SANDAK
Title: EXECUTIVE VICE PRESIDENT
SCHEDULES OMITTED
4
<PAGE> 1
SECURITY AGREEMENT
AGREEMENT made between MOVIE STAR, INC., a corporation organized under
the laws of the State of New York, having its chief place of business at 136
Madison Avenue, New York, NY 10016 (hereinafter referred to as the "Debtor"),
and ROSENTHAL & ROSENTHAL, INC., a corporation organized under the laws of the
State of New York, with its chief place of business at 1370 Broadway, New York,
New York 10018 (hereinafter referred to as the "Secured Party"), as follows:
1. In consideration of one or more loans, advances, or other financial
accommodations at any time made or extended by Secured Party to Debtor as
principal, guarantor or otherwise, at the sole discretion of Secured Party in
each instance, Debtor hereby grants to Secured Party a security interest in the
machinery, equipment, furniture and fixtures (if any) described on Schedule "A"
annexed hereto as part hereof and on any separate schedule at any time furnished
by Debtor to Secured Party, and in all other machinery, equipment, furniture and
fixtures (if any), now or hereafter owned or acquired by Debtor, wherever
located, including any and all parts, replacements, substitutions, improvements,
accessories, attachments and additions thereto and therefor, and all proceeds,
if any (all of the foregoing being hereinafter referred to as the "Collateral").
2. The security interest in the Collateral, as granted herein, shall
secure the payment, performance and observance of all indebtedness, obligations
and liabilities of any kind of Debtor, as principal, endorser, guarantor, surety
or otherwise, to Secured Party, now existing or hereafter arising, direct or
indirect (including without limitation, participations or interests of Secured
Party in obligations of Debtor to others), acquired outright, by assignment,
conditionally, or as collateral security from another, absolute or contingent,
joint or several, secured or unsecured, due or not due, liquidated or
unliquidated, arising by operation of law or otherwise, all instruments executed
and delivered as evidence thereof, and all amendments, extensions and renewals
of any of the foregoing (all of the said indebtedness, obligations and
liabilities, and all instruments evidencing the same, are hereinafter jointly
and severally referred to as the "Obligations"). Except as otherwise
specifically provided in any note executed and delivered by Debtor and accepted
by Secured Party or in any agreement executed by Debtor and Secured Party, all
of the Obligations shall be payable upon demand.
3. Debtor represents, warrants and covenants that: (a) the Collateral
is and will be located at the addresses set forth on Schedule "A" (upon which is
also set forth the name of the record owner(s) of all real estate upon which is
located any of the Collateral and a description of such real estate), and
without prior written notice to and written consent by Secured Party, none of
the Collateral will be moved from its present location or from any other
location to which any of the Collateral is moved with the written consent of
Secured Party; (b) the Collateral is and will be used in Debtor's business and
not for personal, family, household or farming use, and none of the loans or
advances made to or for the account of Debtor by Secured Party were or are to be
for the specific purpose of paying wages of employees of Debtor; (c) the
Collateral is and will be owned by Debtor free and clear of all liens, security
interests and encumbrances except as granted herein and as may be set forth in
the affidavit of title, liens and security interests subjoined hereto; (d)
Debtor will not assign, sell, mortgage, lease, transfer, pledge, grant a
security interest in, encumber or otherwise dispose of or abandon any or all of
the Collateral without the prior written consent of Secured Party; (e) Debtor
will, at its own expense, keep the Collateral in first class repair, running and
marketable condition, and without the prior written consent of Secured Party,
Debtor will not alter or remove any identifying symbol or number upon the
Collateral; (f) Debtor will use the Collateral with all reasonable care and
caution, and in conformity with all applicable laws, ordinances and regulations;
(g) Debtor will make payment or deposit when due of all taxes, assessments or
contributions required by law (including without limitation any taxes required
to be deducted and withheld from wages of employees of Debtor) which may be
levied or assessed against Debtor or with respect to any of the Collateral or
the Obligations; (h) Secured Party shall at all times have access to and right
of inspection of the Collateral and any papers, instruments and records
pertaining thereto (and the right to make extracts therefrom and to receive
originals or true copies thereof); (i) Debtor will not permit any of the
Collateral to be or become a part of or affixed to real property without prior
notice to Secured Party, and without first making all arrangements and
delivering to Secured Party all instruments and documents requested by Secured
Party (including without limitation, instruments of waiver or subordination by
landlords and real property mortgagees of statutory and non-statutory liens and
rights of distraint) for the purpose of perfecting, preserving and protecting
the security interest granted herein against all persons; (j) Debtor assumes all
responsibility and liability arising from the use of the Collateral and Debtor,
at its own expense, will insure the Collateral in the name of and with loss or
damage payable to Secured Party, against loss or damage by fire (with extended
coverage), theft, burglary, bodily injury and such other risks, with such
companies and in such amounts as is required by Secured Party at any time;
Debtor will maintain such insurance in effect and pay all premiums thereon, and
Debtor shall deliver the original policies to Secured Party together with any
certificates or other
<PAGE> 2
evidence satisfactory to Secured Party of compliance with these provisions; (k)
Debtor will promptly notify Secured Party of any loss or damage to any of the
Collateral or arising from its use and Debtor hereby irrevocably appoints
Secured Party as Debtor's lawful attorney-in-fact to institute any action or
proceeding necessary for the recovery and collection of any moneys that may be
due under the said policies of insurance, to discharge, compound or release any
claims, to execute, acknowledge and deliver any instruments under said policies,
to endorse Debtor's name to any check, draft or other instrument given in
payment or liquidation of any claim under the said policies and to perform every
other act and thing thereunder, such power of attorney being coupled with an
interest; at its option, Secured Party may apply any insurance moneys received
at any time to the cost of repairs to the Collateral and/or to payment of any of
the Obligations, whether or not due, in any order Secured Party may direct, any
surplus to be remitted to Debtor; (l) upon request of Secured Party, at any time
and from time to time, Debtor shall, at its sole expense, execute and deliver to
Secured Party one or more financing or other statements pursuant to the Uniform
Commercial Code (hereinafter referred to as the "UCC") and any other papers,
documents or instruments requested by Secured Party in connection with this
Security Agreement, and, to the extent permitted by applicable law, Debtor
hereby authorizes Secured Party to execute and file at any time or times one or
more financing or other statements under the UCC with respect to all or any part
of the Collateral signed only by Secured Party; (m) Debtor will, at its own
expense, perform all acts, execute all documents, and furnish all information
requested by Secured Party at any time with respect to any matters referred to
herein or to evidence, perfect, maintain and enforce Secured Party's security in
the Collateral, and Secured Party may in its discretion, for the account and
expense of Debtor, pay any amount or do any act required of Debtor hereunder or
requested by Secured Party to preserve, protect, maintain and enforce the
Obligations or the primary security interest granted herein and which Debtor
fails to do or pay, including without limitation the payment of any judgment or
judgments against Debtor and any premiums on insurance policies, and all such
amounts so paid by Secured Party for the account of Debtor shall be added to the
Obligations and shall be repayable upon demand; (n) Secured Party may in its
sole discretion, extend the time of payment, arrange for payment in installments
or otherwise modify the terms of, or release, any of the Obligations (as defined
in the Financing Agreement dated the date hereof between the parties hereto)
and/or the Collateral, or any guarantor of the Obligations and/or any collateral
securing same, without discharging or otherwise affecting the Obligations or the
security interest granted herein; (o) Debtor will promptly pay Secured Party any
and all sums, costs and expenses which Secured Party may pay or incur in
defending, protecting or enforcing the security interest granted herein or in
enforcing payment of the Obligations or otherwise in connection with the
provisions hereof, including, but not limited to all filing and recording fees
and taxes and attorney's fees at the time the Secured Party retains counsel to
collect any of the Obligations or to protect or enforce its security interest in
the Collateral (which attorney's fees are hereby acknowledged by Debtor to be
reasonable in amount), and all fees and all expenses for the service and filing
of papers, premiums on bonds and undertakings, fees of marshals, sheriffs,
custodians, auctioneers and others, and all other court costs and collection
charges, all of which shall be part of the Obligations and shall be payable on
demand; (p) at any time Secured Party may sell, pledge, negotiate, assign and
deliver or otherwise dispose of any of the Obligations alone or together with
any or all of the Collateral, whereupon Secured Party shall be fully discharged
from all responsibility and the transferee shall be vested with full powers and
rights of Secured Party with respect thereto, but Secured Party shall retain all
rights and powers with respect to any Collateral not assigned, transferred,
sold, or otherwise disposed of.
4. The occurrence of any one or more of the following events shall
constitute an event of default ("Default") by Debtor under this Security
Agreement: If Debtor or any endorser, guarantor or surety of or for any of the
Obligations (the Debtor and all such endorsers, guarantors, and sureties, if
any, are jointly and severally referred to herein as "Obligors") shall fail to
pay any of the Obligations when due; if Debtor shall fail to observe or perform
any of the terms and conditions of this Security Agreement or any other
agreement between Debtor and Secured Party; if any warranty, representation or
statement of fact made to Secured Party at any time by or on behalf of Debtor is
false or misleading in any material respect when made; if there shall occur any
loss, theft, substantial damage to or destruction of any of the Collateral, or
the making of any levy upon, seizure or attachment of any of the Collateral; if
dispossession proceedings are commenced against Debtor; if any action or
proceeding is brought or any judgment obtained against any of the Obligors in
any court; if any proceeding, procedure or remedy supplementary to or in
enforcement of judgment shall be commenced against, or with respect to any
property of any of the Obligors; if any of the Obligors (being a natural person
or any general partner of an Obligor which is a partnership) shall die or (being
a partnership or corporation) shall be dissolved; if the usual business of any
of the Obligors shall be terminated or suspended; or if any of the Obligors
shall become insolvent (however defined or evidenced) or commit an act of
bankruptcy, or make an assignment for the benefit of creditors or appoint a
committee of creditors, or make or send notice of an intended bulk transfer, or
if there shall be convened a meeting of the creditors or principal creditors of
any of the Obligors; or if there shall be filed by or against any of the
Obligors any petition for any relief under the bankruptcy laws of the United
States now or hereafter in effect or under any insolvency, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at law or in equity); or if any petition or application to
any court or tribunal, at law
2
<PAGE> 3
or in equity be filed by or against any of the Obligors for the appointment of
any receiver or trustee for any of the Obligors or any part of the property of
any of them or if any such receiver or trustee be appointed; or if at any time
Secured Party shall, in its sole discretion, consider the Obligations insecure
or any part of the Collateral unsatisfactory or insufficient. Upon the
occurrence of any Default and at any time thereafter, Secured Party may, without
notice to (except as herein set forth) or demand upon Debtor, declare any part
or all of the Obligations immediately due and payable and Secured Party shall
have the following rights and remedies in addition to all other rights and
remedies of a secured party under the UCC, all such rights and remedies being
cumulative and enforceable alternatively, successively, or concurrently: Secured
Party may, at any time or times, with or without judicial process and the
assistance of others, enter upon any premises on which any of the Collateral may
be located and, without interference by Debtor, take possession of the
Collateral and/or dispose of any part or all of the Collateral on any premises
of Debtor; and/or require Debtor, at Debtor's expense, to assemble and make
available to Secured Party any part or all of the Collateral at any place and
time designated by Secured Party and reasonably convenient to both parties;
and/or remove any or all of the Collateral from any premises on which the same
may be located for the purpose of effecting sale or other disposition thereof or
for any other purpose (and if any of the Collateral consists of motor vehicles,
Secured Party may use Debtor's license plates); and/or sell, resell, lease,
assign and deliver, grant options for or otherwise dispose of any or all of the
Collateral in its then condition or following any commercially reasonable
preparation or processing, at public or private sale or proceedings, by one or
more contracts, in one or more parcels, at the same or different times, at any
places, with or without leaving the Collateral at the place of sale or other
disposition, for cash and/or credit, upon any terms, and to such persons, firms
or corporations as Secured Party deems best, all without demand for performance
or any notice or advertisement whatsoever except that where an applicable
statute requires reasonable notice of sale or other disposition Debtor hereby
agrees that the sending of five days' notice, by ordinary mail, postage prepaid,
to any address of Debtor set forth in this Security Agreement, of the place and
time of any public sale or of the time after which any private sale or other
intended disposition is to be made shall be deemed reasonable notice thereof. If
any of the Collateral is sold by Secured Party upon credit or for future
delivery, Secured Party shall not be liable for the failure of the purchaser to
pay for same and in such event Secured Party may resell or otherwise dispose of
such Collateral. Secured Party may apply the cash proceeds actually received
from any sale or other disposition to the costs and expenses in connection
therewith, including the expenses of retaking, holding, preparing for sale,
selling or otherwise disposing of the Collateral, to attorney's fees, to legal
and travel expenses, premiums on bonds, custodian's fees, sheriff's, marshal's
and auctioneer's fees (including advertising and labor), and all other expenses
which may be incurred by Secured Party in attempting to collect the Obligations,
proceed against the Collateral or otherwise enforce this Security Agreement, or
in the prosecution or defense of any action or proceeding related to the
Obligations or this Security Agreement; and the balance of such cash proceeds
actually received shall be applied to the Obligations in such order and as to
principal and interest as Secured Party may desire; and Debtor shall remain
liable and will pay Secured Party on demand any deficiency remaining, together
with any charges specified herein or in any instruments evidencing any of the
Obligations and the balance of any expenses unpaid, with any surplus to be paid
to Debtor subject to any duty of Secured Party imposed by law in favor of the
holder of any subordinate security interest in the Collateral known to Secured
Party.
5. As collateral security for the Obligations, Debtor also hereby
grants to Secured Party a continuing lien upon and security interest in any and
all moneys, securities and other property of Debtor and the proceeds thereof,
now or hereafter owned by Debtor and held or received by or in transit to,
Secured Party, from or for Debtor, whether for custody, pledge, transmission,
collection or otherwise, and any and all deposits and credits of Debtor with,
and any and all claims of Debtor against, Secured Party, at any time existing.
Upon the occurrence of any Default, the Secured Party is authorized at any time
and from time to time without notice to Debtor to setoff, appropriate and apply
any or all of such securities, property, deposits, claims and credits, to the
payment of any of the Obligations. Any and all other property, real or personal,
now or hereafter owned by Debtor, in or upon which Secured Party at any time has
a security interest or lien, shall be collateral security for all of the
Obligations.
6. Upon the occurrence of any Default, Debtor shall pay to Secured
Party, as liquidated damages and as part of the Obligations, a charge at the
rate of two per cent per month upon the unpaid balance of the Obligations from
the date of Default until the date of full payment of the Obligations.
7. Secured Party shall not be deemed to assume any responsibility for
or obligation or duty with respect to any part or all of the Collateral, or any
matter or proceedings arising out of or relating thereto, and the same shall be
at Debtor's sole risk at all times. Secured Party shall not be required to take
any action of any kind to collect, preserve, or protect its or Debtor's rights
in the Collateral or against other parties thereto. The grant herein of a
security interest in proceeds of the Collateral shall not be deemed a waiver or
release of the covenant by Debtor not to sell or otherwise dispose of any of the
Collateral without the prior written consent of Secured Party. Debtor hereby
releases Secured Party from any claims, causes of action and demands at any time
arising out of or with
3
<PAGE> 4
respect to this Security Agreement, the Obligations, the use of the Collateral
and/or any actions taken or omitted to be taken by Secured Party with respect
thereto, and Debtor agrees to hold Secured Party harmless from and with respect
to any and all such claims, causes of action and demands. Secured Party's prior
recourse to any part or all of the Collateral shall not constitute a condition
of any demand, suit or proceeding for payment or collection of the Obligations,
nor shall any demand, suit or proceeding for payment or collection of the
Obligations constitute a condition of any recourse by Secured Party to the
Collateral. Any suit or proceeding by Secured Party to recover any of the
Obligations shall not be deemed a waiver of or bar against, subsequent
proceedings by Secured Party with respect to any other Obligations and/or with
respect to the Collateral. No act, failure or delay by Secured Party shall
constitute a waiver of its rights and remedies hereunder or otherwise. No single
or partial waiver by Secured Party of any covenant, warranty, representation,
Default or right or remedy which Secured Party may have shall operate as a
waiver of any other covenant, warranty, representation, Default, right or remedy
or of the same covenant, warranty, representation, Default, right or remedy on a
future occasion. Debtor waives presentment, notice of dishonor, protest and
notice of protest of all instruments included in or evidencing any of the
Obligations or the Collateral, and any and all notices or demands whatsoever
(except as expressly provided herein). In the event of any litigation with
respect to any matter connected with this Security Agreement, the Obligations or
the Collateral, Debtor waives all rights to a trial by jury, and all defenses
(including but not limited to any defense of the statute of limitations), rights
of setoff and counterclaim of any nature. Debtor hereby irrevocably consents to
the jurisdiction of the Courts of the State of New York and of any Federal Court
located in such State in connection with any action or proceeding arising out of
or relating to any or all of the Obligations and/or this Security Agreement. In
any such litigation Debtor waives personal service of any summons, complaint or
other process, and agrees that the service thereof may be made by certified or
registered mail directed to Debtor at its chief place of business set forth in
this Agreement. Within thirty days after such mailing, the Debtor so served
shall appear and answer to such summons, complaint or other process. Should the
Debtor so served fail to appear or answer within said thirty day period, the
Debtor shall be deemed in default and judgment may be entered by Secured Party
against the Debtor for the amount or other relief as demanded in any summons,
complaint or other process so served. No provision of this Security Agreement or
the Obligations shall be modified, altered, limited, waived, released or
terminated by any act or omission to act or any course of dealing or usage of
trade or otherwise, except by a written instrument expressly referring thereto
and executed by the party to be charged. The execution and delivery of this
Security Agreement has been authorized by the Board of Directors of Debtor (if a
corporation) and by any necessary vote or consent of stockholders of Debtor.
This Security Agreement and all Obligations shall he binding upon the heirs,
executors, administrators, successors, and assigns of Debtor, and shall,
together with the rights and remedies of Secured Party hereunder, inure to the
benefit of Secured Party, its successors, endorsees and assigns. Debtor, if more
than one, shall he jointly and severally liable hereunder. This Security
Agreement and the Obligations shall be governed in all respects by the laws of
the State of New York. All terms used herein shall have the meanings as defined
in the New York Uniform Commercial Code. If any term of or schedule to this
Security Agreement shall be held to be incomplete, invalid, illegal or
unenforceable, the validity of all other terms hereof shall in no way be
affected thereby. Secured Party is authorized to annex hereto any schedules
referred to herein. Debtor has received and read a copy of this Security
Agreement.
************************
4
<PAGE> 5
IN WITNESS WHEREOF, the undersigned Debtor has executed this Security Agreement
in the State of New York on April 24, 1996.
MOVIE STAR, INC.
By:/S/ MARK M. DAVID
-------------------------
Chairman of the Board
By:/S/ SAUL POMERANTZ
-------------------------
Secretary
STATE OF NEW YORK
ss.
COUNTY OF NEW YORK
On April 24, 1996 before me personally appeared Mark David and Saul
Pomerantz to me known, who, being by me severally duly sworn, did each for
himself depose and say; that he Mark David resides at New York, New York and
that he Saul Pomerantz resides at 401 East 34th Street, New York, NY 10016; that
they are respectively the Chairman of the Board and Secretary of the corporation
described in and which executed the foregoing instrument; that they know the
seal of said corporation; that the seal affixed to said instrument is such
corporate seal; that it was so affixed by order of the Board of Directors of
said corporation and that they signed their names thereto by like order.
/S/
- ----------------------------
Notary Public
SCHEDULES OMITTED
5
<PAGE> 6
Schedule A
The following are all of the locations of the Collateral:
136 Madison Avenue, New York, NY 10016
MOVIE STAR, INC.
By:/S/ MARK M. DAVID
-------------------------
Chairman of the Board
By:/S/ SAUL POMERANTZ
-------------------------
Secretary
A-1
<PAGE> 7
CORPORATE AFFIDAVIT
STATE OF NEW YORK
ss.
COUNTY OF NEW YORK
MARK M. DAVID and SAUL POMERANTZ, each for himself being duly sworn, deposes and
says that: they reside respectively at 110 East 57th Street, New York, New York,
10022, and at 401 East 34th Street, New York, NY 10016 and are respectively
Chairman of the Board and Secretary of MOVIE STAR, INC.; they are over
twenty-one years of age; said corporation is the sole owner and in possession of
the Collateral mentioned and described in the foregoing Security Agreement and
has the sole right and lawful authority to grant a security interest therein; to
their knowledge the said Collateral and each and every part thereof is now free
and clear of and from any and all liens, encumbrances and security interests of
whatsoever nature of description except as set forth in Exhibit I annexed hereto
and made a part hereof; the following are the locations of all places of
business of said corporation
136 Madison Avenue, New York, New York, 10016; and all other additional
locations as set forth in Exhibit "A" to the Security Agreement except as set
forth in Exhibit I, there are no judgments against said corporation in any Court
of any State or of the United States; there is no attachment or execution now
outstanding against said corporation; no receiver of said corporation has ever
been appointed or applied for; there are no bankruptcy, arrangement or
reorganization proceedings pending against or with respect to it, nor have any
ever been taken by or against it, nor has it ever been adjudged a bankrupt or
debtor in any such proceedings; no assignment for the benefit of creditors has
been made by it; said corporation is solvent and justly indebted to the Secured
Party within named in the amount set forth in this Security Agreement; the
security interest is for value received and there are no claims, offsets or
defenses against the Obligations or the Collateral; and deponents have read the
foregoing Security Agreement and know the contents thereof and that same is true
and accurate in every respect. Deponents further state that this affidavit is
made for the purpose of inducing the Secured Party in the foregoing Security
Agreement to give to Debtor the credit mentioned in the foregoing Security
Agreement, knowing full well that Secured Party relies upon the truth of said
representations.
/S/ MARK M. DAVID
-------------------
MARK M. DAVID
/S/ SAUL POMERANTZ
-------------------
SAUL POMERANTZ
SWORN TO BEFORE ME
THIS 24TH DAY OF APRIL, 1996
/S/
- -------------------
NOTARY PUBLIC
A-2
<PAGE> 1
New York, New York April 24, 1996
Rosenthal & Rosenthal, Inc.
1370 Broadway
New York, N. Y. 10018
Gentlemen:
We do hereby agree that the Financing Agreement between us dated April 24, 1996,
be and the same hereby is amended and supplemented by adding thereto the
following clauses:
We hereby pledge, assign, consign, transfer and set over to you, and you
shall at all times have a continuing general lien upon, and we hereby grant you
a continuing security interest in, all of our Inventory and the proceeds
thereof. "Inventory" shall be limited to imported finished merchandise and all
wrapping, packing and shipping materials, wheresoever located, now owned or
hereafter acquired, presently existing or hereafter arising, and all additions
and accessions thereto, the resulting product or mass and any documents
representing all or any part thereof. Upon your request, we will at any time and
from time to time, at our expense, deliver such Inventory to you or such person
as you may designate, cause the same to be stored in your name at such place as
you may designate, deliver to you documents of title representing the same or
otherwise evidence your security interest in such manner as you may require.
The aforementioned pledge, assignment, consignment, transfer, lien and
security interest shall secure any and all of our obligations to you, matured or
unmatured, absolute or contingent, now existing or that may hereafter arise, and
howsoever acquired by you, whether arising directly between us or acquired by
you by assignment and whether relating to this agreement or independent hereof,
together with all interest, charges, commissions, expenses, attorneys' fees and
other items chargeable against us in connection with any of said obligations.
We agree, at our expense, to keep all Inventory insured to the full value
thereof against such risks and by policies of insurance issued by such companies
as you may designate or approve, and the policies evidencing such insurance
shall be duly endorsed in your favor with a long form lender's loss payable
rider or such other document as you may designate and said policies shall be
delivered to you. Should we fail for any reason to furnish you with such
insurance, you shall have the right to effect the same and charge any costs in
connection therewith to us. You shall have no risk, liability or responsibility
in connection with payment or nonpayment of any loss, your sole obligation being
to credit our account with the net proceeds of any such insurance payments
received on account of any loss. Any and all assessments, taxes or other charges
that may be assessed upon or payable with respect to the Inventory or any part
thereof shall forthwith be paid by us, and we agree that you, in your
discretion, may effect such payment and charge the amount thereof to us. We
further agree that except for the pledge, assignment, consignment, transfer,
lien and security interest granted to you hereby, we shall not permit said
Inventory to otherwise become liened or encumbered nor shall we grant any
security interest therein to any other party. We shall not, without your written
consent first obtained, remove or dispose of any of such Inventory except to
bona fide purchasers thereof in the ordinary course of our business. All such
sales shall be reported to you promptly and the accounts or other proceeds
thereof shall be subject to the security interests in your favor. You shall have
the right at all times to the immediate possession of all Inventory and its
products and proceeds and we shall make such Inventory and all our records
pertaining thereto available to you for inspection at any time requested by you.
You shall have the right, in your discretion, to pay any liens or claims upon
said Inventory, including, but not limited to, warehouse charges, dyeing,
finishing and processing charges, landlords' claims, etc. and the amount of any
such payment shall be charged to our account and secured hereby. You shall not
be liable for the safekeeping of any of the Inventory or for any loss, damage or
diminution in the value thereof or for any act or default of any warehouseman,
carrier or other person dealing in and with said Inventory, whether as your
agent or otherwise, or for the collection of any proceeds thereof but the same
shall at all times be at our sole risk.
Prior to its sale to a bona fide purchaser in the ordinary course of
business, Inventory shall at all times remain at our address specified below or
at c/o Movie Star of Poplarville, 100 Highway 11 North, Poplarville, MS 39470,
c/o Russell Mfg, Haber Drive, Lebanon, VA 24266, c/o Honaker, Route 2 Box 19,
Honaker, VA 24266, c/o Petersburg Mfg., Rt. 305, Petersburg, PA 16669 and shall
not be removed therefrom without your prior written consent.
Upon our default in the payment, performance or discharge of any of our
obligations and liabilities to you as and when the same become due, or in the
event of our insolvency, or if a receiver or trustee is appointed for our assets
or affairs, or if we discontinue doing business, or if a petition in bankruptcy
or for arrangement or reorganization is filed by or against us, or if we make an
assignment for the benefit of our creditors, or suspend the operation of our
business or commence the liquidation thereof, or make any offer of settlement,
extension or composition with our creditors, or upon the appointment of a
committee of our creditors or a liquidating agent for us, or the issuance of any
attachment or execution against us, or the filing of a judgment or other lien
against us, or upon our any default hereunder or under any other agreement
between us, you shall have the right, upon reasonable notice to us, to sell all
or any part of our Inventory, at public or private sale, or make other
disposition thereof, at which sale or disposition you may be a purchaser. We
agree
<PAGE> 2
that written notice sent to us by postpaid mail, at least five days before the
date of any intended public sale or the date after which any private sale or
other intended disposition of the Inventory is to be made, shall be deemed to be
reasonable notice thereof. We do hereby waive all notice of any such sale or
other intended disposition if said Inventory is perishable or threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. Upon the occurrence of any of the events referred to in the first
sentence of this paragraph, you may require us to assemble all or any part of
the Inventory and make it available to you at a place to be designated by you,
which is reasonably convenient to both parties. In addition, you may peaceably,
by your own means or with judicial assistance, enter our or any other premises
and take possession of the Inventory and remove or dispose of it and we agree
that we will not resist or interfere with any such action. We hereby expressly
waive demand, notice of sale (except as herein provided), advertisement of sale
and redemption before sale. The net proceeds of any such public or private sale
or other disposition as far as needed shall be applied toward the payment and
discharge of any and all of our obligations to you, together with all interest
thereon and all reasonable costs, charges, expenses and disbursements in
connection therewith, including the reasonable fees of your attorneys, rendering
any surplus remaining to us, we, of course, to continue liable should there be
any deficiency.
This agreement is deemed made in the State of New York and is to be
governed, interpreted and construed in accordance with the laws of the State of
New York. No modification, waiver or discharge of this agreement shall be
binding upon you unless in writing, signed and subscribed by you. If you should
at any time fail to exercise any right or privilege hereunder, the same shall
not constitute a waiver on your part of exercising any right or privilege at any
subsequent time. If any taxes are imposed or if you shall be required to
withhold or pay any tax because of any transactions between us, we agree to
indemnify you and hold you harmless in respect thereof. It is agreed between us
that trial by jury is hereby waived in any action, proceeding or counterclaim
brought by either of us against the other on any matters whatsoever arising out
of or in any way connected with this agreement or our relationship created
hereby and we hereby consent to the jurisdiction of the Supreme Court of the
State of New York for a determination of any dispute as to any such matters and
authorize the service of process on us by registered mail sent to us at our
address hereinbelow set forth.
This agreement shall constitute a security agreement pursuant to the
Uniform Commercial Code and, in addition to any and all of your other rights
hereunder, you shall have all of the rights of a secured party pursuant to the
provisions of the Uniform Commercial Code. We agree to execute a financing
statement and any and all other instruments and documents that may now or
hereafter be provided for by the Uniform Commercial Code or other law applicable
thereto, reflecting the security interests granted to you hereunder. We do
hereby authorize you to file a financing statement without our signature, signed
only by you as secured party, to reflect the security interests granted to you
hereunder.
Very Truly Yours,
MOVIE STAR, INC.
By:/S/ MARK M. DAVID, CHAIRMAN
---------------------------------------
136 Madison Avenue, New York, NY 10016
2
<PAGE> 1
SECURITY AGREEMENT AND MORTGAGE - TRADEMARKS
AGREEMENT made this 24th day of April, 1996 between MOVIE STAR, INC., a
New York corporation, ("Debtor") having an office at 136 Madison Avenue, New
York, New York 10016, and ROSENTHAL & ROSENTHAL INC., a New York corporation
(the "Secured Party") having an office at 1370 Broadway, New York, New York
10018.
WHEREAS, Debtor has adopted the terms and designs described in Schedule
A annexed hereto and made a part hereof;
WHEREAS, as a condition to the Secured Party making any loans or
advances to Debtor pursuant to the Financing Agreement dated as of the date
hereof (as amended, supplemented or restated from time to time, the "Loan
Agreement") between Debtor and the Secured Party, the Secured Party has required
the execution and delivery hereof by Debtor;
NOW, THEREFORE, IT IS AGREED that, for and in consideration of the
loans and advances to be made under the Loan Agreement, and other good and
valuable consideration, the receipt of which is hereby acknowledged, and as
collateral security for the full and prompt payment and performance of all
Obligations, as hereinafter defined, Debtor does hereby mortgage to and pledge
with the Secured Party, and grant to the Secured Party a security interest in,
all of its right, title and interest in and to (i) each of the Trademarks (as
hereinafter defined), and the goodwill of the business symbolized by each of the
Trademarks, all customer lists and other records of Debtor relating to the
distribution of products bearing the Trademarks and each of the registrations
described in Schedule A; and (ii) any and all proceeds of the foregoing,
including, without limitation, any claims by Debtor against third parties for
infringement of the Trademarks (collectively, the "Collateral").
1. Terms defined in the Loan Agreement and not otherwise defined
herein, shall have the meaning set forth in the Loan Agreement. As used in this
Agreement, unless the context otherwise requires:
"OBLIGATIONS" shall mean the "Obligations" as defined in the Loan
Agreement, together with all indebtedness, obligations, liabilities and
agreements of any kind of Debtor to Secured Party, incurred on the date hereof
or hereafter arising, under or in connection with the Financing Documents.
"TRADEMARKS" shall mean (i) all trademarks, trade names, trade styles,
service marks, prints and labels on which said trademarks, trade names, trade
styles and service marks have appeared or appear, designs and general
intangibles of like nature, now existing or hereafter adopted or acquired, all
right, title and interest therein and thereto, and all 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, all whether now owned or hereafter
acquired by Debtor, including, but not limited to, those described in Schedule A
annexed hereto and made a part hereof, and (ii) all reissues, extensions or
renewals thereof and all licenses thereof.
2. Debtor hereby represents, warrants, covenants and agrees as follows:
(a) To the best of its knowledge, Debtor has the sole, full and clear
title to the Trademarks in the United States for the goods and services covered
by the registrations thereof and such registrations are valid and subsisting and
in full force and effect.
(b) Debtor will perform all acts and execute all documents, including,
without limitation, assignments for security in form suitable for filing with
the United States Patent and Trademark Office, substantially in the forms of
Exhibit 1 hereof, requested by the Secured Party at any time to evidence,
perfect, maintain, record and enforce the Secured Party's interest in the
Collateral or otherwise in furtherance of the provisions of this Agreement, and
Debtor hereby authorizes the Secured Party to execute and file one or more
<PAGE> 2
financing statements (and similar documents) or copies thereof or of this
Agreement with respect to the Collateral signed only by the Secured Party.
(c) Except to the extent that the Secured Party, upon prior written
notice of Debtor, shall consent, Debtor (either itself or through licensees)
will continue to use the Trademarks on each and every trademark class of goods
applicable to its current line as reflected in its current catalogs, brochures
and price lists in order to maintain the Trademarks in full force free from any
claim of abandonment for nonuse and Debtor will not (and will not permit any
licensee thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated.
(d) Debtor will promptly pay the Secured Party for any and all
reasonable sums, costs, and expenses which the Secured Party may pay or incur
pursuant to the provisions of this Agreement or in enforcing the Obligations,
the Collateral or the security interest granted hereunder, including, but not
limited to, all reasonable filing or recording fees, court costs, collection
charges, travel, and reasonable attorneys' fees, all of which together with
interest at the highest rate then payable on the Obligations shall be part of
the Obligations and be payable on demand.
(e) In no event shall Debtor, either itself or through any agent,
employee, licensee or designee file (i) an application for the registration of
any Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof or
(ii) any assignment of any patent or trademark, which Debtor may acquire from a
third party, with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof,
unless Debtor shall, on or prior to the date of such filing, notify the Secured
Party thereof, and, upon request of the Secured Party, execute and deliver any
and all assignments, agreements, instruments, documents and papers as the
Secured Party may request to evidence the Secured Party's interest in such
Trademark and the goodwill and general intangibles of Debtor relating thereto or
represented thereby, and Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed; such
power being coupled with an interest is irrevocable until the Obligations are
paid in full.
(f) Debtor has the right and power to make the assignment and to grant
the security interest herein granted; and the Collateral is not now, and at all
times hereafter will not be, subject to any liens, mortgages, assignments,
security interests or encumbrances of any nature whatsoever, except in favor of
the Secured Party, and none of the Collateral is subject to any other claim.
(g) Except to the extent that Secured Party, upon prior written notice
from Debtor, shall consent, Debtor will not assign, sell, mortgage, lease,
transfer, pledge, hypothecate, grant a security interest in or lien upon,
encumber, grant an exclusive or non-exclusive license, or otherwise dispose of
any of the Collateral, and nothing in this Agreement shall be deemed a consent
by the Secured Party to any such action except as expressly permitted herein.
(h) As of the date hereof neither Debtor nor any affiliate or
subsidiary thereof owns any Trademarks or has any Trademarks registered in, or
the subject of pending applications in, the United States Patent and Trademark
Office or any similar office or agency in any other country or any political
subdivision thereof, other than those described in Schedule A.
(i) Debtor will take all necessary steps in any proceeding before the
United States Patent and Trademark Office or any similar office or agency in any
other country or any political subdivision thereof, to maintain each application
and registration of the Trademarks, including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
interference and cancellation proceedings (except to the extent that dedication,
abandonment or invalidation is permitted under paragraph 2(c) hereof).
2
<PAGE> 3
(j) Debtor assumes all responsibility and liability arising from the
use of the Trademarks and Debtor hereby indemnifies and holds Secured Party
harmless from and against any claim, suit, loss, damage or expense (including
reasonable attorneys' fees) arising out of any alleged defect in any product
manufactured, promoted or sold by Debtor (or any affiliate or subsidiary
thereof) in connection with any Trademark or out of the manufacture, promotion,
labelling, sale or advertisement of any such product by Debtor (or any affiliate
or subsidiary thereof). Debtor agrees that Secured Party does not assume, and
shall have no responsibility for, the payment of any sums due or to become due
under any agreement or contract included in the Collateral or the performance of
any obligations to be performed under or with respect to any such agreement or
contract by Debtor and Debtor hereby agrees to indemnify and hold the Secured
Party harmless with respect to any and all claims by any person relating
thereto.
(k) Secured Party may, in its sole discretion, pay any amount or do any
act required of Debtor hereunder or requested by Secured Party to preserve,
defend, protect, maintain, record or enforce Debtor's obligations contained
herein, the Obligations, the Collateral, or the right, title and interest
granted Secured Party herein, and which Debtor fails to do or pay, and any such
payment shall be deemed an advance by Secured Party to Debtor and shall be
payable on demand together with interest at the highest rate then payable on the
Obligations.
(l) Debtor agrees that if it, or any affiliate or subsidiary thereof,
learns of any use by any person of any term or design likely to cause confusion
with any Trademark, it shall promptly notify Secured Party of such use and, if
requested by Secured Party, shall join with Secured Party, at the Debtor's
expense, in such action as Secured Party, in its reasonable discretion, may deem
advisable for the protection of Secured Party's interest in and to the
Trademarks.
(m) All licenses of its Trademarks which Debtor has granted to third
parties are set forth in Schedule B hereto.
3. Upon notice of the occurrence of a Default (as defined in the Loan
Agreement) or an Event of Default (as defined in any of the Financing Documents
referred to in the Loan Agreement) (whenever used herein, the term "Event of
Default" having such meaning) and during the continuation thereof, in addition
to all other rights and remedies of the Secured Party, whether under law, the
Loan Agreement or otherwise, all such rights and remedies being cumulative, not
exclusive and enforceable alternatively, successively or concurrently, without
(except as provided herein) notice to, or consent by, Debtor, the Secured Party
shall have the following rights and remedies: (a) Debtor shall not make any
further use of the Trademarks or any mark similar thereto for any purpose; (b)
the Secured Party may, at any time and from time to time, upon 10 days' prior
notice to Debtor, license, whether general, special or otherwise, and whether on
an exclusive or nonexclusive basis, any of the Trademarks, throughout the world
for such term or terms, on such conditions, and in such manner, as the Secured
Party shall in its sole discretion determine; (c) the Secured Party may (without
assuming any obligations or liability thereunder), at any time, enforce (and
shall have the exclusive right to enforce) against any licensee or sublicensee
all rights and remedies of Debtor in, to and under any one or more license
agreements with respect to the Collateral, and take or refrain from taking any
action under any thereof, and Debtor hereby releases the Secured Party from, and
agrees to hold the Secured Party free and harmless from and against any claims
arising out of, any action taken or omitted to be taken with respect to any such
license agreement; (d) the Secured Party may, at any time and from time to time,
upon ten (10) days' prior notice to Debtor, assign, sell, or otherwise dispose
of, the Collateral or any of it, either with or without special or other
conditions or stipulations, with power to buy the Collateral or any part of it,
and with power also to execute assurances, and do all other acts and things for
completing the assignment, sale or disposition which the Secured Party shall, in
its sole discretion, deem appropriate or proper; and (e) in addition to the
foregoing, in order to implement the assignment, sale or other disposal of any
of the Collateral pursuant to subparagraph 3(d) hereof, the Secured Party may,
at any time, pursuant to the authority granted in the Powers of Attorney
described in paragraph 4 hereof, execute and deliver on behalf of Debtor, one or
more instruments of assignment of the Trademarks (or any application or
registration thereof), in form suitable for filing, recording or registration in
any country. Debtor agrees to pay when due all reasonable costs incurred in any
such transfer of the
3
<PAGE> 4
Trademarks, including any taxes, fees and reasonable attorneys' fees, and all
such costs shall be added to the Obligations. The Secured Party may apply the
proceeds actually received from any such license, assignment, sale or other
disposition to the reasonable costs and expenses thereof, including, without
limitation, reasonable attorneys' fees and all legal, travel and other expenses
which may be incurred by the Secured Party, and then to the Obligations, in such
order as to principal or interest as the Secured Party may desire; and Debtor
shall remain liable and will pay the Secured Party on demand any deficiency
remaining, together with interest thereon at a rate equal to the highest rate
then payable on the Obligations and the balance of any expenses unpaid. Nothing
herein contained shall be construed as requiring the Secured Party to take any
such action at any time, including no obligation on the part of the Secured
Party to take any actions to defend the Trademarks. In the event of any such
license, assignment, sale or other disposition of the Collateral, or any of it,
after the occurrence or continuation as hereinabove provided of an Event of
Default, Debtor shall supply its know-how and expertise relating to the
manufacture and sale of the products bearing or in connection with the
Trademarks, and its customer lists and other records relating to the Trademarks
and to the distribution of said products, to the Secured Party or its designee.
4. Concurrently with the execution and delivery hereof, Debtor is
executing and delivering to the Secured Party, in the form of Exhibit 2 hereto,
five originals of a Power of Attorney for the implementation of the assignment,
sale or other disposal of the Trademarks pursuant to paragraphs 3(d) and (e)
hereof and Debtor hereby releases the Secured Party 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 Secured Party under the powers of attorney
granted herein.
5. No provision hereof shall be modified, altered or limited except by
a written instrument expressly referring to this Agreement and executed by the
party to be charged. The execution and delivery of this Agreement has been
authorized by the Board of Directors of Debtor and by any necessary vote or
consent of stockholders thereof. This Agreement shall be binding upon the
successors, assigns or other legal representatives of Debtor, and shall,
together with the rights and remedies of the Secured Party hereunder, inure to
the benefit of the Secured Party, its successors, assigns or other legal
representatives. This Agreement, the Obligations and the Collateral shall be
governed in all respects by the laws of the United States and the laws of the
State of New York. Debtor hereby submits to the nonexclusive jurisdiction of the
Supreme Court of the State of New York and the federal courts of the United
States of America located in such State in any action or proceeding arising
under this Agreement. If any term of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity of all other terms hereof shall in no way
be affected thereby.
6. Upon payment in full of all Obligations and the termination of the
Loan Agreement, the Secured Party will take whatever actions Debtor deems
reasonably necessary to release or reconvey (without representation or warranty)
to Debtor the Power of Attorney and all right, title and interest of Debtor in
and to the Collateral, except any portion of the Collateral which has been sold,
assigned or otherwise disposed of pursuant to the terms of the Loan Agreement
and/or this Agreement.
* * * * * * * * * * * * * *
4
<PAGE> 5
IN WITNESS WHEREOF, Debtor and the Secured Party have caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the day and year first above written.
MOVIE STAR,INC.
By /S/ MARK M. DAVID
--------------------
Name: MARK M. DAVID
-------------------
Title: CHAIRMAN
------------------
ROSENTHAL & ROSENTHAL, INC.
By /S/ JERRY SANDAK
--------------------
Name: JERRY SANDAK
-------------------
Title: EXECUTIVE VICE PRESIDENT
------------------------
SCHEDULES AND EXHIBITS OMITTED
5
<PAGE> 1
New York, New York April 24, 1996
Rosenthal & Rosenthal, Inc.
1370 Broadway
New York, New York 10018
Gentlemen:
We do hereby agree that the Financing Agreement between us dated April
24, 1996, as amended from time to time (the "Agreement"), be and the same hereby
is amended and supplemented by adding thereto the following clauses:
Borrower hereby agrees that it shall not, until payment in full of all
Obligations to Lender and termination of the Agreement, create, assume, incur or
suffer to exist, and will not permit any Subsidiary to create, assume, incur or
suffer to exist, any Lien of any kind upon any of the real property owned or
leased by Borrower, or any such Subsidiary (other than the Lien of Lender
hereunder) (the "Real Property"). The Real Property is described in Exhibit A
attached hereto.
All capitalized undefined terms shall have the meanings ascribed
thereto in the Agreement.
Very Truly Yours,
MOVIE STAR, INC.
By:/S/ MARK M. DAVID, CHAIRMAN
-----------------------------------
136 Madison Avenue, New York, NY 10016
SCHEDULES OMITTED
<PAGE> 1
Prepared by, and when recorded, return to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, New York 10036
Attn: James M. Waddington, Esq.
ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS
THIS ASSIGNMENT OF LEASES, RENTS AND SECURITY DEPOSITS (this "Assignment"), made
as of the 24th day of April, 1996, by and between MOVIE STAR, INC. (formerly
known as Sanmark-Stardust, Inc.) as assignor ("Assignor"), and ROSENTHAL &
ROSENTHAL, INC., as assignee ("Assignee").
All capitalized terms not otherwise defined herein shall have the
respective meanings ascribed thereto in the Financing Agreement dated the date
hereof between Assignee and Assignor (as same may hereafter be extended,
modified or amended, and any other documents executed in connection therewith,
the "Financing Agreement"), or if not defined in the Financing Agreement, in the
three Security Agreements dated the date hereof from Assignor, as trustor, in
favor and for the benefit of Assignee as security for the Obligations (as
hereinafter defined) and this Assignment (as same may hereafter be amended,
modified or supplemented, the "Security Documents"). As used herein, the
following terms shall have the following meanings:
"Event of Default" shall mean any one of the following:
(i) if Assignor shall continue to be in default under any of
the terms, covenants or conditions of this Assignment for three (3)
days, in the case of any default which can be cured by the payment of a
sum of money, or for thirty (30) days, in the case of any other
default; and
(ii) the occurrence of a Default (as defined in the
Financing Agreement).
"Obligations" shall have the meaning assigned to it in the
Financing Agreement and shall include (i) the payment of principal and
interest and all other sums and indebtedness now or hereafter due and
payable in connection with the Financing Agreement; (ii) payment of all
sums with interest thereon becoming due and payable to Assignee under
this Assignment, the Financing Agreement, the Security Documents or
other loan documents; and (iii) the performance and discharge of each
and every obligation, covenant and agreement of Assignor under this
Assignment, the Financing Agreement, the Security Documents and any
other loan document.
Assignor, in consideration of TEN DOLLARS ($10.00), and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, does hereby absolutely, unconditionally and presently assign,
transfer and set over unto Assignee, subject to the terms hereof, all of the
right, title and interest of Assignor in and to any and all leases now
<PAGE> 2
or hereafter affecting all or a portion of the real property more particularly
described in Exhibit A hereto (the "Real Property") together with (i) all rents,
income and profits arising from said leases, (ii) the rights to sue for, collect
and receive such rents, income and profits, (iii) all modifications, renewals
and extensions thereof now existing or hereafter made, (iv) the right to modify,
supplement, extend, renew or cancel such leases, (v) any and all guarantees of
the lessee's obligations under said leases, (vi) the rights of Assignor to
receive, hold and apply all bonds and security in all of said leases provided to
be furnished to Assignor thereunder and (vii) the rights of Assignor to enforce
any and all of the agreements, terms, covenants and conditions in all of said
leases and to give notices thereunder (each of said leases and all such rights,
guarantees, modifications, renewals and extensions relating thereto being
individually referred to as a "Lease" and collectively referred to as the
"Leases"); and, further, together with all property income.
THIS ASSIGNMENT is a present and irrevocable assignment.
Assignor hereby covenants and warrants to Assignee that Assignor
has not executed any prior assignment of the Leases or the income from the
property (the "Property Income") or if such an assignment has been executed, it
has been, or is simultaneously with the execution hereof, being terminated or
assigned from the assignee thereunder to Assignee, nor has Assignor performed
any act or executed any other instrument which might prevent Assignee from
exercising or enforcing any of the terms and conditions of this Assignment or
which would limit Assignee in such exercise or enforcement; and Assignor further
covenants and warrants to Assignee that the Leases are in full force and effect,
and that to the best of Assignor's knowledge, there are no defaults now existing
under any of the Leases. Assignee shall have the right, but shall not have the
obligation, at Assignor's expense, to cure any default by Assignor under any of
the Leases upon at least three (3) days prior written notice to Assignor.
Assignor further covenants with Assignee (1) to observe and
perform all the material obligations imposed upon the lessor under the Leases
and not to do or permit to be done anything to impair the security thereof; (2)
not to collect any of the Property Income in the ordinary course of Assignor's
business, more than thirty (30) days in advance of the time when the same shall
become due, not to execute any other assignment of lessor's interest in the
Leases or assignment of rents arising or accruing from the Leases or otherwise
with respect to the Real Property; none of the foregoing shall be done or
suffered to be done without in each instance obtaining the prior written consent
of Assignee and any of such acts done without the prior written consent of
Assignee shall be null and void; (3) at Assignee's request, to execute a
confirmation agreement, confirming the assignment and transfer to Assignee of
any and all Leases entered into after the date hereof; (4) not to alter or amend
any of the Leases; and (5) to execute and deliver, at the request of Assignee,
all such further assurances and assignments with respect to the Real Property as
Assignee shall from time to time reasonably require to implement the terms of
this Assignment; provided, however, that no such further assurances and
assignments shall increase Assignor's obligations under this Assignment.
THIS ASSIGNMENT is made on the following terms, covenants and
conditions:
2
<PAGE> 3
1. At anytime during which a Default does not exist, Assignor
shall have the right to collect, in accordance with the terms of the Financing
Agreement, all property income and to retain, use and enjoy the same; provided,
however, that such right to collect or continue collecting as aforesaid by
Assignor shall not operate to permit a collection by Assignor of any installment
of rent more than one month in advance thereof without the written consent of
Assignee in the ordinary course of Assignor's business. Assignor covenants that
at the time of the execution and delivery of this Assignment there has been no
prepayment of any rents by any tenant occupying the Real Property or any portion
thereof for more than one month in advance (except for the Lease payments for
the period from June 15, 1993 through June 30, 1996 as provided in the Lease).
Furthermore, Assignor, without the prior consent of Assignee, will not cause or
permit the leasehold estate under any Lease to merge with Assignor's
reversionary interest.
2. Following the occurrence and during the continuance of a
Default, Assignee, without in any way waiving such Default, at its option, upon
notice and without regard to the adequacy of the security for the Obligations,
either in person or by agent, upon bringing an action or proceeding, or by a
receiver appointed by a court, may take possession of all or any portion of the
Real Property and have, hold, manage, lease and operate the same on such terms
and for such period of time as Assignee may deem proper. Assignor hereby
consents to the appointment of a receiver after the occurrence and during the
continuance of a Default if Assignee believes it is necessary or desirable to
enforce Assignee's rights under this Assignment. Assignee, either with or
without taking possession of said Real Property in its own name, may demand, sue
for or otherwise collect and receive all Property Income, including any Property
Income past due and unpaid, and shall have the right to apply such property
income to the payment of: (a) all expenses of managing the Real Property,
including, without limitation, the salaries, fees and wages of any managing
agent and such other employees as Assignee may deem necessary and all expenses
of operating and maintaining the Real Property, including, without limitation,
all taxes, charges, claims, assessments, water rents, sewer rents and any other
liens, and premiums for all insurance which are due and payable and the cost of
all alterations, renovations, repairs or replacements, and all expenses incident
to taking and retaining possession of the Real Property; and (b) the
Obligations, together with all costs and attorneys' fees, in such order or
priority as Assignee may elect. The exercise by Assignee of the option granted
it in this Paragraph 2 and the collection of the Property Income and the
application thereof as herein provided shall not be considered a waiver of any
Default under the Financing Agreement, the Security Documents, the loan
documents or under the Leases or this Assignment. Assignor agrees that the
exercise by Assignee of one or more of its rights and remedies hereunder shall
in no way be deemed or construed to make Assignee a creditor in possession
unless and until such time as Assignee takes actual possession of the Real
Property.
3. All security deposits of tenants, whether held in cash or any
other form, shall be treated by Assignor as trust funds, shall not be commingled
with any other funds of Assignor and, if cash, shall be deposited by Assignor
into the security deposit account. Any bond or other instrument which Assignor
is permitted to hold in lieu of cash security deposits under applicable legal
requirements shall be maintained in full force and effect unless replaced by
cash
3
<PAGE> 4
deposits as hereinabove described, shall be issued by an entity reasonably
satisfactory to Assignee, shall, if permitted pursuant to applicable legal
requirements, name Assignee as payee or beneficiary thereunder (or at Assignee's
option, be fully assignable to Assignee) and shall, in all respects, comply with
applicable legal requirements and otherwise be reasonably satisfactory to
Assignee. Assignor shall, upon request, provide Assignee with evidence
reasonably satisfactory to Assignee of Assignor's compliance with the foregoing.
Following the occurrence and during the continuance of any Event of Default,
Assignor shall, upon Assignee's request, if permitted by applicable legal
requirements, turn over to Assignee the security deposits (and any interest
earned thereon), to be held by Assignee subject to the terms of the Leases. On
the date hereof, Assignor shall deliver to Assignee a certificate which sets
forth (i) the total amount of security deposits held by Assignor (or its
managing agent) as of the date hereof, (ii) the financial institutions where
such funds are being held and (iii) account names and numbers in which such
funds are deposited.
4. Assignee shall not be liable for any loss sustained by
Assignor resulting from Assignee's failure to let the Real Property or any
portion thereof after the occurrence of a Default or from any other act or
omission of Assignee either in collecting the property income or, if Assignee
shall have taken possession of all or any portion of the Real Property, in
managing all or any portion of the Real Property after any such Default.
Assignee shall not be obligated to perform or discharge, nor does Assignee
hereby undertake to perform or discharge, any obligation, duty or liability
under any Lease or under or by reason of this Assignment, and Assignor shall,
and does hereby agree to, indemnify Assignee for, and to hold Assignee harmless
from, any and all liability, loss or damage which may or might be incurred under
said Leases or under or by reason of this Assignment and from any and all claims
and demands whatsoever which may be asserted against Assignee by reason of any
alleged obligations or undertakings on its part to perform or discharge any of
the terms, covenants or agreements contained in said Leases (collectively, the
"Claims"). Should Assignee incur any such liability under said Leases or under
or by reason of this Assignment or in defense of any such claims or demands,
Assignor shall reimburse Assignee therefor, including, without limitation, its
costs, expenses and reasonable attorneys' fees, within five (5) days after
demand, and upon the failure of Assignor to do so Assignee may, at its option,
exercise Assignee's remedies under the Security Documents. It is further
understood that this Assignment shall not operate to place responsibility for
the control, care, management or repair of all or any portion of the Real
Property upon Assignee, nor for the carrying out of any of the terms and
conditions of any Lease; nor shall it operate to make Assignee responsible or
liable for any waste committed on the Real Property by the tenants or any other
parties, or for any dangerous or defective condition affecting any portion of
the Real Property, or for any negligence in the management, upkeep, repair or
control of the Real Property resulting in loss or injury or death to any tenant,
licensee, employee or stranger.
5. Upon payment in full of the Obligations, this Assignment shall
become and be void and of no effect. The affidavit, certificate, letter or
statement of any officer, agent or attorney of Assignee stating that any part of
said Obligations remains unpaid shall be and constitute conclusive evidence of
the validity, effectiveness and continuing force of this Assignment, and any
person may, and is hereby authorized to, rely thereon. Assignor hereby
4
<PAGE> 5
authorizes and directs the lessees named in the Leases or any other or future
lessee or occupant of any portion of the Real Property, upon receipt from
Assignee of written notice to the effect that Assignee is then the holder of
said Security Documents and that a Default exists thereunder or under any other
loan document, to pay over to Assignee all property income until otherwise
notified by Assignee.
6. Assignee may take or release other security for the payment of
the Obligations, may release any party primarily or secondarily liable therefor
and may apply any other security held by it to the satisfaction of the
Obligations without prejudice to any of its rights under this Assignment.
7. Assignor agrees that it will, upon a Default, at the request
therefor by Assignee, deliver to Assignee an executed counterpart of each and
every Lease then affecting all or any part of the Real Property.
8. Wherever used, the singular (including, without limitation,
the term "Lease") shall include the plural, and the use of any gender shall
apply to all genders.
9. Nothing contained in this Assignment and no act done or
omitted by Assignee pursuant to the powers and rights granted it hereunder shall
be deemed to be a waiver by Assignee of any of Assignee's rights and remedies
under this Assignment, the Financing Agreement, the Security Documents or any
other loan documents. This Assignment is made and accepted without prejudice to
any of such rights and remedies possessed by Assignee to collect the Obligations
and to enforce any security therefor held by it, and said rights and remedies
may be exercised by Assignee either prior to, simultaneously with, or subsequent
to any action taken by it hereunder.
10. Unless expressly provided otherwise in this Assignment, all
notices, consents, approvals and requests required or permitted hereunder shall
be given in accordance with the terms of the Security Documents.
11. The covenants and obligations herein undertaken by Assignor
shall be binding upon the successors and assigns of Assignor and the rights and
benefits herein conferred upon Assignee shall inure to the benefit of its
successors and assigns. No consent by Assignor shall be required for any
assignment or reassignment of the rights of Assignee under this Assignment to
any purchaser of all or any interest or portion of the Obligations, including,
without limitation, participation interests therein.
12. If Assignor consists of more than one Person or party, the
obligations and liabilities of each such Person or party hereunder shall be
joint and several.
5
<PAGE> 6
IN WITNESS WHEREOF, this Assignment has been executed by the
parties hereto as of the day and year first hereinabove written.
MOVIE STAR, INC. (formerly
known as Sanmark-Stardust,
Inc.), as Assignor
BY: /S/ MARK M. DAVID
-----------------------------------
Name: Mark David
Title: Chairman of the Board
WITNESS:
/S/ MARK REINER By:/S/ SAUL POMERANTZ, SR. VP
- ------------------------- ------------------------------------
WITNESS:
/S/ MARK REINER
- -------------------------
ROSENTHAL & ROSENTHAL,
INC., as Assignee
WITNESS:
/S/ LAWRENCE HERMAN By:/S/ JERRY SANDAK
- ------------------------- ------------------------------------
Name: JERRY SANDAK
Title: EXECUTIVE VICE PRESIDENT
WITNESS:
- -------------------------
EXHIBITS AND SCHEDULES OMITTED
6
<PAGE> 7
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 24th day of April, 1996, before me, the undersigned
officer, personally appeared MARK DAVID, residing at __________________________,
personally known and acknowledged himself to me (or proved to me on the basis of
satisfactory evidence) to be the CHAIRMAN of MOVIE STAR, INC., the corporation
described in and which executed the foregoing instrument as the CHAIRMAN of
MOVIE STAR, INC. and that as such officer, being duly authorized to do so
pursuant to its bylaws or a resolution of its board of directors, executed and
acknowledged the foregoing instrument for the purposes therein contained, by
signing the name of the corporation by himself as such officer as his free and
voluntary act and deed and the free and voluntary act and deed of said
corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/S/
---------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
----------------------------------
<PAGE> 8
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this 24th day of April, 1996, before me, the undersigned
officer, personally appeared JERRY SANDAK, residing at WESTFIELD, NJ, personally
known and acknowledged himself to me (or proved to me on the basis of
satisfactory evidence) to be the EXECUTIVE VICE PRESIDENT of ROSENTHAL &
ROSENTHAL, INC., the corporation described in and which executed the foregoing
instrument, and that as such officer, being duly authorized to do so pursuant to
its bylaws or a resolution of its board of directors, executed and acknowledged
the foregoing instrument for the purposes therein contained, by signing the name
of the corporation by himself as such officer as his free and voluntary act and
deed and the free and voluntary act and deed of said corporation.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/S/
---------------------------
Notary Public
NOTARIAL SEAL My Commission Expires:
JULY 31, 1997
----------------------------------
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<ARTICLE> 5
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 1,078
<SECURITIES> 0
<RECEIVABLES> 11,744
<ALLOWANCES> 2,013
<INVENTORY> 15,114
<CURRENT-ASSETS> 30,184
<PP&E> 8,975
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0
0
<COMMON> 160
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<TOTAL-LIABILITY-AND-EQUITY> 37,416
<SALES> 70,056
<TOTAL-REVENUES> 70,056
<CGS> 56,296
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<OTHER-EXPENSES> 13,679
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