SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the fiscal year ended December 31, 1995
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the transition period from _______________ to
_____________
Commission file no. 1-5354
SWANK, INC.
(Exact name of Registrant as specified in its charter)
Delaware 04-1886990
- ------------------------------ ----------------------------------
(State or other jurisdiction of
incorporation or organization) (I.R.S. Employer Identification No.)
6 Hazel Street, Attleboro, Massachusetts 02703
- ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (508) 222-3400
--------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10
par value
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 tosuch filing
requirements for the past 90 days. Yes . No X.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant on May 20, 1996 was $4,171,190. Such
aggregate market value is computed by reference to the last sale price of the
Common Stock on such date.
The number of shares outstanding of each of the Registrant's classes of common
stock, as of the latest practicable date: 16,509,532 shares of Common Stock as
of the close of business on May 20, 1996.
<PAGE>
PART I
Item 1. Business.
Swank, Inc. (the "Company") was incorporated on April 17, 1936.
The Company is engaged in the manufacture, sale and distribution of men's and
women's fashion accessories under the names "Swank", "L'Aiglon", "Pierre
Cardin", "Anne Klein", "Anne Klein II", "Guess?" and "Colours by Alexander
Julian", among others.
Products
The Company's principal product categories are described below:
Men's jewelry consists principally of cuff links, tie klips,
chains and tacs, bracelets, neck chains, vest chains, collar pins, key rings,
money klips and watches distributed under the names "Swank", "Guess?", "Pierre
Cardin", "Colours by Alexander Julian" and "L'Aiglon". Women's jewelry consists
principally of necklaces, earrings, pendants, chokers, bracelets, hair ornaments
and scarf clips distributed under the names "Pierre Cardin", "Anne Klein" and
"Anne Klein II", and "Guess?". The Company also manufactures women's jewelry
(principally necklaces, brooches, hair accessories and earrings) for private
label distribution.
Leather accessories consist primarily of belts, billfolds,
wallets, key cases, card holders and suspenders distributed under the names
"Swank", "Guess?", "L'Aiglon", "Pierre Cardin" and "Colours by Alexander
Julian". The Company also manufactures leather items for private label
distribution.
As is customary in the fashion accessories industry, substantial
percentages of the Company's sales and earnings occur in the months of
September, October and November, during which the Company makes significant
shipments of its products to retailers for sale during the holiday season. The
Company's short-term bank borrowings are at a peak during the months of August,
September, October and November to enable the Company to (a) carry significant
amounts of inventory and (b) provide more favorable payment terms to its
customers during this season.
The relative contributions to total net sales and gross profit
from the Company's principal product categories for the last three fiscal years
and the relative year-to-year changes in such contributions during such period
are shown in the following table:
<PAGE>
<TABLE>
<CAPTION>
Percentage of Total
Fiscal Year Percentage Year-
Ended December 31 to-Year Changes
1995- 1994-
1995 1994 1993 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
CONTRIBUTION TO TOTAL
NET SALES
42% 44% 45% Men's & Women's Jewelry (6%) 12%
4% 8% 10% Gifts* (48%) (11%)
54% 48% 45% Men's Leather Accessories 9% 20%
---- ---- ---- ---- ----
100% 100% 100% Total Net Sales (2%) 13%
==== ==== ==== ==== ====
CONTRIBUTION TO TOTAL
GROSS PROFIT
47% 49% 50% Men's and Women's Jewelry (20%) 9%
3% 7% 9% Gifts* (63%) (11%)
50% 44% 41% Men's Leather Accessories 3% 20%
---- ---- ---- ---- ----
100% 100% 100% Total Gross Profit (16%) (11%)
==== ==== ==== ==== ====
</TABLE>
- -------------------------
* The Company's gift lines were discontinued during the fourth quarter of fiscal
1995.
Sales and Distribution
The Company's customers are primarily major retailers within
the United States. The Company does not believe it is dependent upon any single
customer. In 1995, sales to the Company's two largest customers accounted for
18.7% and 11.8%, respectively, of consolidated net sales. Sales to one customer
amounted to 10.6% and 10.8% of consolidated net sales during 1994 and 1993,
respectively. No other customer accounted for more than 10% of consolidated net
sales during such fiscal years. Exports to foreign countries accounted for 7%,
5% and 5% of consolidated net sales in each of the Company's fiscal years ended
December 31, 1995, 1994 and 1993.
Approximately 110 salespeople and district managers are
engaged in the sale of products of the Company, working out of sales offices
located in five major cities throughout the United States. The Company has
established separate sales forces to handle the distribution to retailers of (a)
women's jewelry and (b) the remaining products of the Company. In certain
foreign countries, the Company has licensed or sub-licensed the production and
sale of certain of its lines under royalty arrangements.
In addition to the sale of the Company's products through
wholesale channels, the Company sells certain of its products at retail in 38
Company-operated factory outlet stores and one kiosk located in 24 states.
<PAGE>
Manufacturing
Items manufactured by the Company accounted for approximately
65% of total sales in 1995.
Substantially all jewelry products are manufactured and/or
assembled at the Company's plant in Attleboro, Massachusetts. Leather goods are
manufactured at the Company's plant in Norwalk, Connecticut. Raw materials are
purchased in the open market from a number of suppliers and are readily
available.
Items not manufactured by the Company include certain jewelry
and leather items, watches, wallets and other accessories which are purchased
domestically or imported from countries in Europe, South America and the Far
East.
Advertising Media and Promotion
Substantial expenditures on advertising and promotions are an
integral part of the Company's business. Approximately 8% of net sales was
expended on promotions in 1995, of which approximately 1% was for advertising
media, principally in national consumer magazines, trade publications,
newspapers, radio and television, and approximately 7% was for fixtures,
displays, point-of-sale materials, cooperative advertising and other in-store
promotions.
Competition
The businesses in which the Company is engaged are highly
competitive. The Company competes with, among others, David Donahue in men's
jewelry; Rolfs, Mundy and retail private label programs in small leather goods;
Salant, Humphrey, Textan and private label programs in men's belts; and Crystal
Brands, Napier and Victoria Creations in women's jewelry. The ability of the
Company to continue to compete will depend largely upon its ability to create
new designs and products, to make improvements on its present products and to
offer the public high quality merchandise at popular prices.
<PAGE>
Patents, Trademarks and Licenses
The Company owns the rights to various patents, trademarks,
trade names and copyrights and has exclusive licenses in the United States for,
among other things, (i) men's and women's leather accessories and costume
jewelry under the name "Pierre Cardin", (ii) leather accessories under the name
"L'Aiglon", (iii) women's jewelry under the names "Anne Klein" and "Anne Klein
II", and (iv) men's jewelry and leather accessories under the name "Colours by
Alexander Julian" and (v) leather accessories and men's and women's jewelry
under the name "Guess?". The Company's "Pierre Cardin", "Anne Klein", "Anne
Klein II" and "Guess?" licenses may be considered material to the Company's
business. The "Pierre Cardin" and "Anne Klein" licenses provide for royalty
payments not exceeding 5% of sales. The "Anne Klein II" license provides for
royalty payments not exceeding 6% of sales. The "Guess?" license provides for
royalty payments not exceeding 7% of sales. The Company's licenses to distribute
"Pierre Cardin" jewelry and leather accessories expire December 31, 2000. The
Company's "Anne Klein" and "Anne Klein II" licenses expire December 31, 1996.
The Company is currently negotiating an extension to these licenses and
presently expects to continue its relationship beyond December 31, 1996. The
Company's "Guess?" license expires June 30, 1997.
Employees
The Company has approximately 1,500 employees, of whom
approximately 1,000 are production employees. None of the Company's employees
are represented by labor unions and management believes its relationship with
its employees to be satisfactory.
Recent Developments
During the fourth quarter of 1995, the Company discontinued
its gift lines, which consisted primarily of accessories such as mugs, tie
racks, sunglasses, travel kits and clothes and hair brushes distributed under
the names "Swank" and "Pierre Cardin". The Company has determined to streamline
operations and reduce operating costs. In that connection, the Company noted
that these lines, while providing incremental revenues, involved the maintenance
of significant inventory levels that, in a volatile and competitive retail
environment with quickly shifting consumer preferences, would not be the best
use of the Company's resources. Accordingly, the Company discontinued the
manufacture and sale of its gift lines.
On May 24, 1996 the Company obtained new working capital
financing from IBJ Schroder Bank & Trust Company, as agent, for the lenders
thereunder (the "New Lenders"), for up to $25,000,000 with a sublimit of
$3,000,000 in letters of credit (the "New Agreement"). The proceeds of the New
Agreement were used, in part, to repay all but $4 million of the outstanding
balance under the previous facility.
The New Agreement is available through April 1999 and is
collateralized by all of the Company's assets. The New Lenders have a senior
lien position on all assets other than real property, improvements and certain
fixtures, in which the Company's other institutional lenders maintain a senior
position to collateralize a $4,000,000 term loan, as described below, and in
which the New Lenders have a subordinate lien. The New Agreement permits the
Company to borrow against a percentage of eligible accounts receivable and
inventory and its loans bear an interest rate of 1.5% over the New Lenders'
prime lending rate. The New Agreement also contains a facility fee of 1/2% per
annum on the unused portion of the revolving credit facility.
<PAGE>
The terms of the New Agreement include covenants requiring
the Company to maintain certain financial ratios including interest coverage,
leverage and quarterly inventory turnovers. The New Agreement also includes
covenants pertaining to profitability, limiting capital expenditures and
additional indebtedness. The Company believes the inventory turnover covenant to
be the most restrictive, requiring minimum inventory turnover, as defined, up to
2.25 times annually. The New Agreement also prohibits the payment of dividends.
Management believes this credit facility will meet its working capital needs
until April 1999.
In connection with the refinancing, The Chase Manhattan Bank,
N.A. and Fleet National Bank (the "Banks") amended and restated the existing
credit facility (the "Agreement") to provide the Company with a $4,000,000 term
loan (the "Term Loan") in lieu of a like amount of revolving credit debt. The
Term Loan will be repaid in $200,000 quarterly increments starting in June 1997
with a final payment of $2,600,000 due May 1999. The Term Loan bears interest at
2.5% over the Banks' prime lending rate and is collaterialized by a senior lien
on real property, improvements and certain fixtures, and a subordinate lien on
all other assets. The Term Loan also contains an annual facility fee of 2% of
the term loan and a maximum success fee of $450,000 payable as follows; $225,000
on final maturity with the balance payable subsequently in six equal monthly
installments of $37,500.
Item 2. Properties.
The Company's main administrative office is located in a
three-story building, containing approximately 193,000 square feet, on a
seven-acre site owned by the Company in Attleboro, Massachusetts. The
Company's jewelry products are manufactured and/or assembled at this facility.
The Company's executive, national and international sales
offices are located in leased premises at 90 Park Avenue, New York City. The
leases of such premises expire in 2000. Branch offices are also located in
leased premises in New York, Beverly Hills, Chicago, Atlanta and Dallas; the
leases for such premises expire from 1996 to 2000.
The Company leases a warehouse in Taunton, Massachusetts which
is used for the distribution of men's and women's jewelry, leather goods and
other accessories and consists of 242,000 square feet. The lease for these
premises expires in 2001.
<PAGE>
Men's belts and other leather accessories are manufactured in
premises consisting of a manufacturing plant and office space in a 126,500
square foot building, located on approximately seven and one-half acres, owned
by the Company in Norwalk, Connecticut.
The Company's manufacturing and distribution facilities are
equipped with modern machinery and equipment, substantially all of which is
owned by the Company. In management's opinion, the Company's properties,
machinery and equipment are adequate for the conduct of the respective
businesses to which they relate.
During 1995, the Company operated 38 factory outlet stores and
one kiosk at locations other than those described above. These stores have
leases with terms not in excess of five years and contain in the aggregate
approximately 96,000 square feet.
Item 3. Legal Proceedings.
(a) On June 7, 1990, the Company received notice from the
United States Environmental Protection Agency ("EPA") that it, along with
fifteen others, had been identified as a Potentially Responsible Party ("PRP")
in connection with the release of hazardous substances at a Superfund site
located in Massachusetts. The Company, together with six others, has entered
into an Administrative Order on Consent pursuant to which, inter alia, they have
undertaken to conduct a remedial investigation/feasibility study (the "RI/FS")
with respect to the alleged contamination at the site. This notice does not
constitute the commencement of a proceeding against the Company nor necessarily
indicate that a proceeding against the Company is contemplated.
It is the position of the PRPs who have undertaken to perform
the RI/FS at the Massachusetts Superfund site that the remedial investigation
has been substantially completed. Based upon available information, it is
estimated that the feasibility study may be completed in approximately one year;
the most recent estimate of costs for completion of the feasibility study is
approximately $250,000. The estimates are subject to change since the scope of
work is within the discretion of the EPA. The PRP group's accountant's records
reflect group expenses, independent of legal fees, in the amount of $1,910,618
as of December 31, 1995. The Company's share of costs for the RI/FS is being
allocated on an interim basis at 12.5177%.
The Massachusetts Superfund site is adjacent to a municipal
landfill that is in the process of being closed under Massachusetts law. Due to
the proximity of the municipal landfill to the site and the composition of waste
at this site, the issues are under discussion regarding the site among state and
federal agencies and the United States Department of Energy.
In September 1988, the Company received notice from the
Department of Pollution Control and Ecology of the State of Arkansas that the
Company, together with numerous other companies, had been identified as a PRP in
connection with the release or threatened release of hazardous substances from
the Diaz Refinery, Incorporated site in Diaz, Arkansas. The Company has advised
the State of Arkansas that it intends to participate in negotiations with the
Department of Pollution Control and Ecology through the committees formed by the
PRPs.The Company has not received further communications regarding the Diaz
site.
<PAGE>
-7-
In September 1991, the Company entered into a judicial consent
decree relating to the Western Sand and Gravel site located in Burrillville and
North Smithfield, Rhode Island. The consent decree was entered on August 28,
1992 by the United States District Court for the District of Rhode Island. Cost
estimates for remediation of the ground water at the site range from
approximately $2.8 million to approximately $7.8 million. Based on current
participation, the Company's share is 7.98% of approximately 75% of the costs.
The Company and certain other participants have commenced litigation against
non-settling PRPs to seek to obtain reimbursement for their respective shares of
the remediation costs.
(b) No material pending legal proceedings were terminated
during the three-month period ended December 31, 1995.
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Company's Common Stock is traded in the over-the-counter
market under the Nasdaq symbol SNKI. The following table sets forth the range of
high bid prices and low bid prices of the Company's Common Stock as reported by
the National Quotation Bureau Incorporated for the fiscal quarters indicated.
These quotations represent prices between dealers without adjustment for retail
mark-ups, mark-downs, or commissions and may not necessarily represent actual
transactions.
1995 1994
------------ ------------
Quarter High Low High Low
------------ ------------
First................................. $1.69 $1.06 $1.22 $1.00
Second................................ 1.56 1.06 1.06 .94
Third................................. 1.38 1.00 1.19 .94
Fourth................................ 1.06 .75 1.38 1.00
For the Year.......................... $1.69 $ .75 $1.38 $ .94
At May 20, 1996 there were 1,898 holders of record of the
Company's Common Stock.
The New Agreement and the Agreement each prohibit the payment
of cash dividends on the Company's Common Stock (see "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this Report).
Item 6. Selected Financial Data.
The following selected financial data should be read in
conjunction with the Company's consolidated financial statements, the
accompanying notes thereto and "Management's Discussion and Analysis of
Financial Condition and Results of Operation" included elsewhere in this Report.
<PAGE>
Financial Highlights
For each of the Five Years Ended
December 31
<TABLE>
<CAPTION>
(In thousands, except share data) 1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data:
- ---------------------------------------------------------------------------------------------------------------------------
Net sales............................................ $ 140,102 $ 143,496 $ 126,770 $ 127,062 $ 126,421
Cost of goods sold................................... 85,774 79,122 69,002 68,469 69,997
- ---------------------------------------------------------------------------------------------------------------------------
Gross profit......................................... 54,328 64,374 57,768 58,593 56,424
Selling and administrative expenses.................. 60,168 58,127 53,120 52,015 51,188
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income from operations........................ (5,840) 6,247 4,648 6,578 5,236
- ---------------------------------------------------------------------------------------------------------------------------
Gain on sale of product line......................... 1,775
Interest charges..................................... 2,110 1,717 1,599 2,387 3,190
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes and cumulative
effect of a change in accounting for income taxes. (7,950) 4,530 3,049 5,966 2,046
Provision (benefit) for income taxes................. 994 (1,042) 256 1,840 820
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income before cumulative effect of a change in
accounting for income taxes....................... (8,944) 5,572 2,793 4,126 1,226
Cumulative effect of a change in accounting
for income taxes.................................. 477
- ---------------------------------------------------------------------------------------------------------------------------
Net (loss) income.................................... $ (8,944) $ 5,572 $ 3,270 $ 4,126 $ 1,226
- ---------------------------------------------------------------------------------------------------------------------------
Share and per share information:
Weighted average common shares
and common share equivalents
outstanding..................................... 16,135,368 16,206,683 17,258,928 16,874,482 16,327,374
(Loss) income before cumulative effect of a
change in accounting for income taxes........... $ (.55) $ .34 $ .16 $ .24 $.08
Cumulative effect of a change in accounting
for income taxes................................ .03
- ---------------------------------------------------------------------------------------------------------------------------
Net (loss) income ................................ $ (.55) $ .34 $ .19 $ .24 $.08
- ---------------------------------------------------------------------------------------------------------------------------
Additions to property, plant and
equipment, net.................................. $663 $ 1,000 $1,439 $669 $673
Depreciation......................................... $1,136 $ 1,108 $ 955 $876 $922
- ---------------------------------------------------------------------------------------------------------------------------
Financial Position (In thousands, except share data)
- ---------------------------------------------------------------------------------------------------------------------------
Current assets....................................... $45,768 $47,258 $43,273 $36,464 $37,281
Current liabilities.................................. 31,009 22,933 20,737 14,772 17,952
Net working capital.................................. 14,759 24,325 22,536 21,692 19,329
Property, plant and equipment, net................... 7,457 6,587 6,695 6,211 6,418
Total assets......................................... 57,324 57,458 52,123 45,010 46,836
Long-term obligations................................ 5,782 4,308 6,774 8,952 11,724
Stockholders' equity................................. 20,533 30,217 24,612 21,286 17,160
Per share....................................... $ 1.27 $ 1.86 $ 1.43 $ 1.26 $ 1.05
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
<TABLE>
<CAPTION>
Expressed as a Percentage
of the Total Percentage Changes
- -----------------------------------------------------------------------------------------------------
1995 1994 1993 1995-94 1994-93
- -----------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C>
Contribution to Net Sales
42% 44% 45% Men's and Women's Jewelry (6%) 12%
4% 8% 10% Gifts * (48%) (11%)
54% 48% 45% Men's Leather Accessories 9% 20%
- -----------------------------------------------------------------------------------------------------
100% 100% 100% Total Net Sales (2%) 13%
- -----------------------------------------------------------------------------------------------------
Contribution to Gross Profit
47% 49% 50% Men's and Women's Jewelry (20%) 9%
3% 7% 9% Gifts * (63%) (11%)
50% 44% 41% Men's Leather Accessories (3%) 20%
- -----------------------------------------------------------------------------------------------------
100% 100% 100% Total Gross Profit (16%) (11%)
- -----------------------------------------------------------------------------------------------------
</TABLE>
* The Company's gift lines were discontinued during the fourth quarter of fiscal
1995.
The table above indicates the contribution to total net sales and total gross
profit by major product categories for each of the three years ended December
31. The components of net sales are gross sales and royalty income less cash
discounts and customer returns.
Results of Operations
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the consolidated financial statements and
notes thereto.
1995 vs. 1994
The Company's net sales decreased $3,394,000 or 2% in 1995 compared to the
prior year.
Net sales decreased in Men's and Women's Jewelry $3,813,000 or 6% and Gift
lines $5,603,000 or 48%. The decreased net sales in Men's and Women's Jewelry
were primarily attributable to a lackluster retail environment combined with a
change in the sales mix. The change in sales mix was caused by a shift in
emphasis on women's jewelry from higher margin fashion products to more
competitively priced career oriented products. This resulted in heavier than
anticipated returns due to the necessity of changing the merchandise
presentation at the store level. The higher than anticipated returns in 1995
compared to lower than anticipated returns in 1994 combined for a decrease in
net sales of $4,263,000. The Men's and Women's Jewelry decrease accounted for
$3,477,000 of the total with the balance being comprised of Men's Leather
Accessories $370,000, and Gift lines $416,000. The Company anticipates fewer
returns in 1996 and has reduced its reserve accordingly. The decreased net sales
in the Gift lines resulted from the Company's decision to discontinue the sale
and distribution of those lines at the end of 1995. The Company noted that these
lines, while providing incremental revenues, involved the maintenance of
significant inventory levels that, in a volatile and competitive retail
environment with quickly shifting consumer preferences, would not be the best
use of the Company's resources These decreases were offset, in part, by
increased net sales from Men's Leather Accessories $6,022,000 or 9%. The
increased net sales in Men's Leather Accessories were attributable to an
expanded customer base for the Company's special market lines and private label
belt programs along with the continued success of Guess? Leather Accessories.
<PAGE>
Included in the net sales figures noted above were sales from the Company's
factory outlets, which declined 20% from 1994. Sales declines of 12% and 9% were
experienced in same store sales and closed store sales, offset in part by a 1%
increase in new store sales. The Company continues to monitor this declining
trend and is assessing the profitability of each store location.
Gross profit decreased $10,046,000 or 16% compared to the prior year. Gross
profit expressed as a percentage of net sales declined 6.1 percentage points
from 44.9% to 38.8%. The erosion of the Company's margins was caused principally
by higher inventory markdowns needed to dispose of excess inventory, higher
production costs and an unfavorable product mix.
The decreased gross profit was attributable to Men's and Women's Jewelry
$6,354,000 or 20%, Men's Leather Accessories $827,000 or 3%, and Gifts line
$2,865,000 or 63%. The decreased gross profit in Men's and Women's Jewelry was
attributable to lower sales volume, higher production costs and the shift in
emphasis on women's jewelry from higher margin fashion products to more
competitively priced career oriented products. As discussed above, this change
caused heavier than anticipated returns due to the necessity of changing
merchandise at the store level. The higher than anticipated returns in 1995
compared to lower than anticipated returns in 1994 combined for a decrease in
total gross profit of $2,553,000. The Men's and Women's Jewelry decrease
accounted for $2,126,000 of the total with the balance being comprised of Men's
Leather Accessories $231,000, and Gift lines $196,000. The higher returns of
women's jewelry also contributed to excess inventory balances which resulted in
higher markdown expense. The decreased gross profit in Men's Leather Accessories
was primarily the result of higher production costs and lower margins on current
line items offset in part by increased volume. The decreased gross profit in the
Gift lines resulted principally from the Company's decision to discontinue the
sale and distribution of those lines.
Inventory levels increased $3,021,000 or 12% primarily as a result of holiday
sales being less than expected. The increased inventory levels, corresponding
carrying costs and loss from operations strained the Company's working capital.
In order to fund projected working capital requirements in July 1995 the Company
amended its revolving credit facility from $21 million to $32 million. The lower
holiday sales also contributed to the Company's inability to reduce its
revolving credit facility to the required levels stated in the agreement (see
note C).
Selling and administrative expenses increased $2,041,000 or 4%. When
expressed as a percentage of net sales the rate increased from 41% to 43%.
<PAGE>
The increased selling and administrative expenses were attributable
principally to increased costs for advertising, promotion and sample lines and
provision for bad debts. These costs were offset in part by decreased
compensation and related fringe benefits. Advertising and promotion increased
$1,041,000 primarily from display and refixturing costs needed to adjust to the
change of merchandise from fashion to competitively priced products at the store
level as well as the Company's efforts to penetrate new markets and expand
market share. Also contributing were increased in-store markdowns given to
retailers demanding more promotional activity in the sluggish retail environment
in the apparel and accessories sector. The provision for bad debts increased
$592,000 primarily from recognizing the exposure that arose from one of the
Company's customers filing reorganization proceedings in January 1996.
Expenditures relating to sample charges increased $309,000 in order to change
the style of merchandise from fashion to career oriented, as mentioned
previously. Compensation and related fringe benefits decreased $1,424,000 as a
result of staff reductions, the elimination of estimated bonuses and the
reduction of the contribution to the Company's retirement plan during fiscal
1995, offset by increased expenses associated with workman's compensation, group
insurance and severance benefits.
Interest charges increased $393,000 or 23% primarily from increased short
term borrowing combined with a higher monthly average interest rate, offset in
part by reduced long term bank debt.
The Company recognized a provision of $994,000 for income taxes, principally
as a result of reestablishing a valuation allowance eliminated in 1994. A
valuation allowance is provided to reduce the deferred tax assets to a level
which management believes more likely than not will be realized. The net effect
of establishing this valuation allowance was to decrease net income
approximately $4,764,000 in the fourth quarter.
1994 vs. 1993
The Company's net sales increased $16,726,000 or 13% in 1994 compared to the
prior year.
Net sales increased primarily from the Company's Men's Leather Accessories
lines, $11,558,000 or 20%, and Men's and Women's Jewelry lines, $6,590,000 or
12%. These increases are attributable to overall growth in the Company's
established product lines and the successful introduction of the Guess? label in
the fall of 1994. Belt sales increased $8,411,000 or 22% due primarily to
expanding the Company's lines to incorporate the growing trend towards more
"corporate casual wear" while maintaining traditional lines and aggressively
servicing the marketplace. Leather goods contributed sales gains of $2,534,000
or 17% due primarily to the improved quality and consistency of the product
coupled with our ability to ship goods in a more timely fashion. The Company's
Anne Klein and Anne Klein II lines for women's jewelry continue to be successful
with increased sales of approximately $2,570,000 or 6%. These increases were
offset in part, by sales declines in the Company's gift lines of $1,422,000 or
11%. This decrease resulted from the Company taking a more conservative approach
towards this business and placing more emphasis on inventory management.
<PAGE>
Included in the net sales figures noted above were sales from the Company's
factory outlets which declined 13% from 1993. Sales declines of 13% and 7% were
experienced in same store sales and closed store sales, offset in part by a 7%
increase in new store sales. The Company continues to monitor this declining
trend and is assessing the profitability of each store location as its lease
term expires. Management continues to believe, however, that the factory outlets
play a significant role in the Company's overall cash and inventory management
strategies.
Gross profit increased $6,606,000 or 11% primarily as a result of increased
sales volume. Gross profit expressed as a percentage of net sales declined less
than 1% from 45.6% to 44.9%. The decrease in margins was caused principally from
an unfavorable product mix within women's jewelry and gifts. The increase in
gross profit was attributable to Men's and Women's Jewelry, $2,514,000 or 9%,
and Men's Leather Accessories, $4,670,000 or 20%, offset in part, by declines in
the Company's Gift lines of $578,000 or 11%.
Inventory levels increased $1,132,000 or 5% primarily as a result of adding
the new Guess? lines in Men's and Women's Jewelry and Men's Leather Accessories.
This increase combined with an effort by the Company to change the timing of
production, principally in men's leather accessories, to improve the response to
our customer needs, contributed to increased working capital needs during the
year. The Company temporarily increased its revolving credit facility by $3
million in September. Cash provided by operations enabled the Company to repay
all of its short term borrowings by January 18, 1995. The Company continues to
balance the strategy of better responding to our customer needs while
maintaining appropriate inventory levels.
Selling and administrative expenses increased $5,007,000 or 9%, however,
when expressed as a percentage of net sales the rate declined from 42% to 41%.
This was principally the result of increases in in-store markdowns and
compensation costs. Increases in in-store markdown expense of $2,380,000 or 71%
reflect the intense competition being exhibited at the retail level. In
addition, 1993 benefited from favorable adjustments to customer allowances for
in-store markdowns of $700,000 as a result of actual activity being lower than
anticipated at December 31, 1992. Compensation costs and related fringe benefits
contributed an increase of $1,916,000 or 6% relating primarily to higher
commission costs associated with the growth in sales, additional personnel
required for the new Guess? lines, and general wage increases.
Interest charges increased $118,000 or 7% primarily as a result of
increased short term borrowings combined with a higher monthly average interest
rate, offset in part, by reduced long term debt.
The Company recognized a net benefit of $1,042,000 for income taxes,
principally as a result of eliminating the valuation allowance established in
1993 when adopting Statement of Financial Accounting Standards (SFAS) No. 109
"Accounting for Income Taxes". Based on the earnings exhibited in 1994 and in
recent years, management believed a valuation allowance against its net deferred
tax asset was no longer warranted. The Company has eliminated its valuation
allowance and recognized the benefit against 1994's tax provision. The net
effect of this was to increase net income approximately $2,453,000 in the fourth
quarter.
<PAGE>
Promotional Expenses
Substantial expenditures for advertising and promotion are considered
necessary to enhance the Company's business. The table below indicates the
various promotional expenses incurred by the Company during its last three
fiscal years. Advertising and promotion increased $1,041,000 primarily from
display and refixturing costs needed to adjust to the change of merchandise from
fashion to competitively priced products at the store level as well as the
Company's efforts to penetrate new markets and expand market share. Also
contributing were increased in-store markdowns given to retailers demanding more
promotional activity in the sluggish retail environment in the apparel and
accessories sector.
- --------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------
In-store markdowns........ $6,121 $5,741 $3,361
Co-op advertising........... 1,227 1,314 1,002
Displays.......................... 1,966 1,124 1,246
National advertising & other 1,755 1,849 1,485
- --------------------------------------------------------------------------
$11,069 $10,028 $7,094
Percentage of net sales... 7.9% 7.0% 5.6%
- --------------------------------------------------------------------------
Interest Charges
The average monthly amount of short-term borrowings and related weighted
average interest rates were $18,266,000 and 10.32% in 1995, $12,971,000 and
9.43% in 1994 and $6,214,000 and 8.00% in 1993.
The increased short term borrowings were a result of less cash generated
from operations due to reduced margins and lower sales combined with the need to
fund higher inventory balances.
Liquidity and Capital Resources
Working capital decreased by $9,566,000 in 1995.
As is customary in the fashion accessories industry, substantial
percentages of the Company's sales and earnings occur in the months of
September, October and November, during which the Company makes significant
shipments of its products to retailers for sale during the holiday season. As a
result, receivables increase during the year and peak during the fourth quarter.
The Company builds its inventory during the first three quarters of the year to
respond to the holiday season. Cash required is provided by a revolving credit
facility. Historically, cash generated from operations has been used to pay down
the credit facility during the months of December and January.
Cash used in operations totaled $6,509,000 caused primarily by a
$8,944,000 net loss, increased inventory balances of $3,021,000 and increases in
prepaid and other assets of $2,826,000, which includes refundable income taxes
of $1,665,000, offset in part by decreased accounts receivable of $3,557,000 and
related reserves of $387,000, increased accounts payable and accrued other of
$996,000, as well as recognizing a valuation allowance against deferred taxes of
$4,764,000. Cash provided from financing totaled $6,140,000, consisting
primarily of a net increase in short-term borrowings of $9,800,000, offset in
part by payments of long term debt of $2,920,000. Cash used in investing
activities was $663,000 for replacement of used machinery and equipment.
<PAGE>
Accounts receivable decreased primarily as a result of decreased sales
in the fourth quarter offset in part by decreased allowances. The decreased
allowances primarily reflect decreased sales volume, write-offs of disputed
customer claims, and fewer returns anticipated in 1996.
On July 20, 1995 the Company modified and extended the Agreement with
The Chase Manhattan Bank, N.A. and Fleet National Bank (the "Banks"). The
Agreement provided for loans and letters of credit in an amount up to
$32,000,000, with a sublimit of $7,000,000 for letters of credit (see Note C).
Loans under the Agreement had been amended to bear interest at the prime plus
2.5%. These loans and letters of credit were collateralized by all of the
Company's assets. The terms of the Agreement required the Company to maintain
certain financial ratios, limited capital expenditures, prohibited additional
indebtedness over a specified amount and contained other covenants normally
associated with such agreements.
Pursuant to the Agreement, certain financial ratios were required to be
met. These included a leverage ratio not to exceed 1.0 to 1 and a current ratio
of at least 1.0 to 1. As of December 31, 1995 the actual leverage and debt
ratios were 1.8 to 1 and 1.5 to 1, respectively. The Company was not in
compliance with the leverage ratio at December 31, 1995. The Company was not in
compliance with certain other covenants under the Agreement including a $800,000
limit on indebtedness to other lenders (including capital leases). The Company
exceeded this limit by $543,000. The Company was also not in compliance with a
covenant for interest coverage wherein earnings before interest and taxes
("EBIT") equal or exceed 200% of interest expense and an institutional debt
ratio of a rolling four quarter average of EBIT to total institutional
indebtedness equal or exceed 5.5 to 1. The loss before interest and taxes of
$5,840,000 placed the Company in default of these covenants. The Company was
unable to reduce the outstanding balance as required under the Agreement to $2
million for a 30 day period within the first six months of 1996.
Due primarily to the Company's net loss in fiscal 1995 and the
resulting failure of the Company to meet the financial ratios required by the
Agreement, the Banks requested that the Company investigate alternative sources
of working capital. The Company obtained revolving credit financing on May 24,
1996 from IBJ Schroder Bank & Trust Company, as agent for the lenders thereunder
(the "New Lenders") for up to $25,000,000 with a sublimit of $3,000,000 in
letters of credit (the "New Agreement"). The proceeds of the New Agreement were
used, in part, to repay all but $4 million of the outstanding balance under the
Agreement.
<PAGE>
The New Agreement is available through April 1999 and is collateralized
by all of the Company's assets. The New Lenders have senior lien position on all
assets other than real property, improvements and certain fixtures, in which the
Company's other institutional lenders maintain a senior position to
collateralize a $4,000,000 term loan, as described below, and in which the New
Lenders have a subordinate lien. The New Agreement permits the Company to borrow
against a percentage of eligible accounts receivable and inventory and its loans
bear an interest rate of 1.5% over the New Lenders' prime lending rate. The New
Agreement also contains a facility fee of 1/2% per annum on the unused portion
of the revolving credit facility.
.
The terms of the New Agreement include covenants requiring the Company
to maintain certain financial ratios including interest coverage, leverage and
quarterly inventory turnovers. The New Agreement also includes covenants
pertaining to profitability, limiting capital expenditures and additional
indebtedness. The Company believes the inventory turnover covenant to be the
most restrictive, requiring minimum inventory turnover, as defined, up to 2.25
times annually. The New Agreement also prohibits the payment of dividends.
Management believes this credit facility will meet its working capital needs
until May 1999.
In connection with the refinancing, the Banks amended and restated the
Agreement to provide the Company with a $4,000,000 term loan (the "Term Loan")
in lieu of a like amount of revolving credit debt. The Term Loan will be repaid
in $200,000 quarterly increments starting in June 1997 with a final payment of
$2,600,000 due May 1999. The Term Loan bears interest at 2.5% over the Banks
prime lending rate and is collaterialized by a senior lien on real property and
certain improvements and a subordinate lien. The Term Loan also contains an
annual facility fee of 2% of the term loan and a maximum success fee of $450,000
payable as follows; $225,000 on final maturity with the balance payable
subsequently in six equal monthly installments of $37,500. The Term Loan
covenants are the same as those in the New Agreement.
The financing agreements include provisions specifying that a material
adverse effect, as determined by the lenders, in the financial position or
results of operations of the Company is an event of default. As such, the Term
Loan, which would otherwise be classified as long-term, has been classified as
current on the balance sheet at December 31, 1995.
Based upon present information and the Company's operating plans for
fiscal 1996, the Company expects that it will meet the financial covenants
contained in the New Agreement and that eligible assets will provide a
sufficient borrowing base to meet the Company's seasonal working capital needs.
However, should the Company fail to meet those covenants, or the borrowing base
should prove insufficient to support required borrowings, the Company would be
required to obtain a waiver or amendment to the New Agreement or, in the
alternative, secure other financing. There can be no assurance that the Company
would be able to obtain a waiver or amendment or that alternative financing
would be available. In such circumstances, liquidity would be adversely
affected.
<PAGE>
The preceding paragraph contains "forward looking statements" under the
securities laws of the United States. Actual results may vary from anticipated
as a result of various risks and uncertainties, including sales patterns,
overall economic conditions, competition, pricing, consumer buying trends and
other factors.
Environmental Matters
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable, and the costs
can be reasonably estimated. Generally, the timing of these accruals coincides
with the completion of a feasibility study or the Company's commitment to a
formal plan of action. The liabilities for costs associated with environmental
sites (described in footnote I) recorded in Other Liabilities at December 31,
1995 and 1994 were $1,286,000 and $991,000 respectively.
Capital Expenditures
The Company is continuing the policy of replacing aging machinery and
equipment to maintain operating efficiencies. Internally generated working
capital is anticipated to provide the funding required. The Company has entered
into a capital lease obligation for computer hardware and software. The Company
believes it will enhance its information gathering process significantly as a
result of this investment and will enjoy cost savings from operating
efficiencies in future years.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
The following financial statements are annexed to this Report:
* Report of Independent Accountants on the Financial Statements and
Financial Schedule
* Consolidated Balance Sheets as of December 31, 1995 and 1994.
* Consolidated Statements of Operations for each of the three years
ended December 31, 1995, 1994 and 1993.
* Consolidated Statements of Changes in Stockholders'Equity for
each of the three years ended December 31,1995, 1994 and 1993.
* Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1995, 1994 and 1993.
* Notes to Consolidated Financial Statements.
Supplementary financial information is incorporated herein by
reference to Note L of the Notes to Consolidated Financial
Statements contained in this Report.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
Not Applicable.
<PAGE>
Executive Officers of the Registrant
- ------------------------------------
Name Age Title
- --------------- --- ------------------------------------
Marshall Tulin 78 Chairman of the Board and Director
John A. Tulin 49 President and Director
Richard S. Blum 60 Senior Vice President - International Sales
Andrew C. Corsini 60 Senior Vice President, Chief Financial
Officer, Treasurer and Secretary
Melvin Goldfeder 59 Senior Vice President - Special Markets
Division
James E. Tulin 45 Senior Vice President - Merchandising and
Director
Lewis Valenti 56 Senior Vice President - Women's Division
Eric P. Luft 40 Senior Vice President - Men's Division
Paul Duckett 55 Senior Vice President - Distribution and Retail
Store Operations
Richard V. Byrnes, Jr. 36 Senior Vice President - Operations
William B, MacLeod 83 Direstor
Mark Abramowitz 60 Direstor
John J. Macht 83 Direstor
Raymond Vise 60 Direstor
There are no family relationships among any of the persons listed above or
among such persons and the directors of the Company except that John A. Tulin
and James E. Tulin are the sons of Marshall Tulin.
<PAGE>
Marshall Tulin has served as Chairman of the Board since October 1995. He
joined the Company in 1940, was elected a Vice President in 1954 and President
in 1957. Mr. Tulin has served as a director of the Company since 1956.
John A. Tulin has served as President and Chief Executive Officer of the
Company since October 1995. Mr. Tulin joined the Company in 1971, was elected a
Vice President in 1974, Senior Vice President in 1979 and Executive Vice
President in 1982. He has served as a director since 1975.
Richard S. Blum has been Senior Vice President-International Sales since
October 1995. For more than five years prior to October 1985, Mr. Blum served as
a Senior Vice President of the Company.
Andrew C. Corsini has been Senior Vice President, Chief Financial Officer,
Treasurer and Secretary for more than the past five years.
Melvin Goldfeder has been Senior Vice President-Special Markets Division
since October 1995. For more than five years prior to October 1995, Mr.
Goldfeder served as a Senior Vice President of the Company.
James E. Tulin has been Senior Vice President-Merchandising since October
1995. For more than five years prior to October 1995, Mr. Tulin served as a
Senior Vice President of the Company. Mr. Tulin has been a director of the
Company since 1985.
Lewis Valenti has been Senior Vice President-Women's Division since October
1995. For more than five years prior to October 1995, Mr. Valenti served as a
Senior Vice President of the Company.
Eric P. Luft has been Senior Vice President-Men's Division since October
1995. Mr. Luft served as a Divisional Vice President of the Men's Products
Division from June 1989 until January 1993, when he was elected a Senior Vice
President of the Company.
Paul Duckett has been Senior Vice President-Distribution and Retail Store
Operations since October 1995. For more than five years prior to October 1995,
Mr. Duckett served as a Senior Vice President of the Company.
Richard V. Byrnes, Jr. has been Senior Vice President-Operations since
October 1995. Mr. Byrnes joined the Company in December 1991 as a Divisional
Vice President of the Crestline Division and was elected a Vice President in
April 1994. Prior to joining the Company, Mr. Byrnes was a consultant with the
accounting firm of Coopers & Lybrand L.L.P.
<PAGE>
William B. MacLeod has been a director of the Company since 1967. Mr.
MacLeod served as Executive Vice President and Chief Financial Officer or as a
Senior Vice President of the Company prior to his retirement in 1982.
Mark Abramowitz has been a director of the Company since 1987. Mr.
Abramowitz has been a partner in the law firm of Parker Chapin Flattau & Klimpl,
LLP for more than the past five years.
John J. Macht was appointed as a director of the Company in December 1995.
Since July 1992, Mr. Macht has been President of The Macht Group, a marketing
and retail consulting firm. From April 1991 until July 1992, Mr. Macht served as
Senior Vice President of Jordan Marsh department stores, a division of Federated
Department Stores.
Raymond Vise has been a director of the Company since 1963. Mr. Vise served
as Senior Vice President of the Company for more than five years prior to his
retirement in 1987.
The Company's Board of Directors presently consists of seven directors
divided into three classes. William B. MacLeod and James Tulin serve as Class I
directors, Mark Abramowitz, John J. Macht and John Tulin serve as Class II
directors and Marshall Tulin and Raymond Vise serve as Class III directors. The
term of office of Class I directors continues until the Company's 1996 Annual
Meeting of Stockholders, the term of office of Class II directors continues
until the 1997 annual meeting of stockholders and the term of office of Class
III directors continues until the 1998 annual meeting of stockholders and, in
each case, until their respective successors are elected and qualified.
Directors are elected at each annual meeting to succeed those in the class whose
term expires at that meeting.
Each officer of the Company serves, at the pleasure of the Board of
Directors, for a term of one year and until his successor is elected and
qualified.
<PAGE>
Item 11. Executive Compensation.
Summary Compensation Table.
<TABLE>
The following table sets forth certain summary information concerning
compensation during the fiscal year ended December 31, 1995 with respect to each
person who served as the Company's Chief Executive Officer and each of the other
4 most highly compensated executive officers of the Company:
<CAPTION>
- --------------------------------------------------------------------------------
I. Summary Compensation Table
- --------------------------------------------------------------------------------
ANNUAL
COMPENSATION
----------------------------------
OTHER ALL
NAME AND ANNUAL OTHER
PRINCIPAL COMPEN- COMPEN-
POSITION YEAR SALARY BONUS SATION SATION (8)
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Marshall Tulin (1) 1995 $360,000 $ -0- $ 462
Chairman of 1994 360,000 250,000 18,489
the Board 1993 360,000 243,000 18,908
John Tulin (2) 1995 220,000 -0-$36,188(7) 462
President 1994 220,000 185,000 18,189
1993 215,000 150,000 18,408
Lewis Valenti (3) 1995 125,000 194,676 2,262
Senior Vice 1994 80,000 294,110 17,789
President 1993 80,000 263,479 16,908
Melvin Goldfeder(4)1995 95,000 130,661 2,262
Senior Vice 1994 95,000 124,856 12,689
President 1993 135,000 94,990 13,808
Richard S. Blum (5)1995 110,000 99,279 2,262
Senior Vice 1994 110,000 78,240 11,689
President 1993 107,500 68,420 8,779
Eric P. Luft (6) 1995 135,000 110,352 2,262
Senior Vice 1994 135,000 172,527 16,089
President 1993 132,500 114,135 10,490
- --------------------------------------------------------------------------------
</TABLE>
(1) Marshall Tulin served as President and Chief Executive Officer until October
25, 1995, when he was elected Chairman of the Board. Mr. Tulin has an employment
agreement with the Company which terminates on June 30, 1998 providing for a
salary at the rate of $360,000 per annum.
(2) John Tulin served as Executive Vice President of the Company until October
25, 1995, when he was elected President and Chief Executive Officer. Mr. Tulin
has an employment agreement with the Company which terminates on December 31,
1998 providing for a salary at the rate of $220,000 per annum.
(3) The bonus amounts shown for Lewis Valenti include sales commissions in the
amounts of $139,214, $234,110 and $213,479 for the years 1995, 1994 and 1993,
respectively.
<PAGE>
(4) The bonus amounts shown for Melvin Goldfeder include sales commissions in
the amounts of $130,661, $109,856 and $94,990 for the years 1995, 1994 and 1993,
respectively.
(5) The bonus amounts shown for Richard S. Blum include sales commissions in the
amounts of $99,279, $68,240 and $58,420 for the years 1995, 1994 and 1993,
respectively.
(6) The bonus amounts shown for Eric P. Luft include sales commissions in the
amounts of $110,352, $107,527 and $74,135 for the years 1995, 1994 and 1993,
respectively.
(7) This amount includes automobile lease payments of $18,929 and a travel
allowance of $9,450. Except as set forth for John Tulin for fiscal 1995,
perquisites and other personal benefits did not exceed the lessor of $50,000 or
10% of reported annual salary and bonus for any of the executive officers named
in the Summary Compensation Table.
(8) The amounts set forth for 1995, 1994 and 1993 represent allocations under
certain benefit plans of the Company as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
DEFERRED
RETIREMENT PLAN COMPEN-
ESOP I ESOP II 401(k) SATION
ACCOUNTS ACCOUNTS ACCOUNTS PLAN TOTAL
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
- ----
Marshall Tulin $ 359 $ 53 $ 50 $ 462
John Tulin 359 53 50 462
Lewis Valenti 359 53 50 $ 1,800 2,262
Melvin
Goldfeder 359 53 50 1,800 2,262
Richard S. Blum 359 53 50 1,800 2,262
Eric P. Luft 359 53 50 1,800 2,262
1994
- ----
Marshall Tulin 4,836 153 13,500 18,489
John Tulin 4,836 153 13,200 18,189
Lewis Valenti 4,836 153 1,800 11,000 17,789
Melvin
Goldfeder 4,836 153 1,800 5,900 12,689
Richard S. Blum 4,836 153 1,800 4,900 11,689
Eric P. Luft 4,836 153 1,800 9,300 16,089
1993
- ----
Marshall Tulin 3,865 258 1,285 13,500 18,908
John Tulin 3,865 258 1,285 13,000 18,408
Lewis Valenti 3,865 258 1,285 11,500 16,908
Melvin
Goldfeder 3,865 258 1,285 8,400 13,808
Richard S. Blum 2,713 181 1,285 4,600 8,779
Eric P. Luft 2,817 188 1,285 6,200 10,490
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
In 1983, the Company terminated its pension plans covering
salaried employees and salesmen and purchased annuities from the assets of those
plans to provide for the payment (commencing at age 62) of accrued benefits of
those employees who were not entitled to or did not elect to receive lump sum
payments. The accrued annual benefits for Messrs. John Tulin, Lewis Valenti,
Melvin Goldfeder, and Richard S. Blum are $13,116, $12,731, $10,991, and
$13,208, respectively. Marshall Tulin has heretofore received amounts to which
he has to date been entitled in respect of such pension plans. Eric P. Luft was
not employed by the Company at the time of termination of such pension plans and
is not entitled to receive amounts in respect thereof.
Remuneration of Directors.
Each director who is not also an employee of, or counsel or a
consultant to, the Company, receives a fee of $2,000 per meeting of the Board
and of committees of the Board attended by him. In addition, pursuant to the
terms of the 1994 Plan, each director who is not also an employee of the Company
or any subsidiary of the Company in office immediately following each annual
meeting of stockholders at which directors are elected will, effective on the
date such annual meeting is held, automatically be granted an option to purchase
5,000 shares of Common Stock. During the fiscal year ended December 31, 1995,
Messrs. Abramowitz, MacLeod and Vise were each granted an option to purchase
5,000 shares of Common Stock at an exercise price per share of $1.28125, the
fair market value per share of Common Stock on the date of the grant.
John Macht was granted an option to purchase 5,000 shares of
Common Stock on December 12, 1995, the date he was elected a director, at an
exercise price per share of $.804675, the fair market value per share of Common
Stock on that date.
Termination Agreements.
The Company has entered into termination agreements with
Messrs. Marshall Tulin, John Tulin, Lewis Valenti, Melvin Goldfeder, Richard S.
Blum and Eric P. Luft which expire on December 31, 1998. In the event of a
change of control (as defined in such agreements) of the Company during the term
of such agreements followed by a significant change in the duties, powers or
conditions of employment of any such officer, the officer may within two years
thereafter terminate his employment and receive a lump sum payment equal to 2.99
times such officer's "base amount" (as defined in Section 280G(b)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")).
<PAGE>
Stock Options.
<TABLE>
During the Company's fiscal year ended December 31, 1995, no
stock options were granted to any of the executive officers named in the Summary
Compensation Table. The following table sets forth certain information with
respect to the exercise of stock options by such executive officers and the
number and value of unexercised options held by them as of December 31, 1995:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
(#) Unexercised In-the-Money
Shares Options at Options at
Acquired ($) FY-End (#) FY-End ($)
On Value Exercisable/ Exercisable/
Name Exercise RealizedUnexercisable Unexercisable
- ------- --------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Marshall Tulin 211,209 / 0 0 / 0
John Tulin 19,000 $12,482 192,209 / 0 0 / 0
Lewis Valenti 171,825 / 0 0 / 0
Melvin
Goldfeder 184,325 / 0 0 / 0
Richard S. Blum 169,325 / 0 0 / 0
Eric P. Luft 15,000 / 0 0 / 0
</TABLE>
Compensation Committee Interlocks and Insider Participation
The Company's Executive Compensation Committee consists of
William B. MacLeod, a former Executive Vice President and Chief Financial
Officer of the Company, Raymond Vise, a former Senior Vice President of the
Company, and Mark Abramowitz. The members of the Company's Stock Option
Committee and the Company's Incentive Share Committee are Mr. MacLeod and Mr.
Vise. Ronald Vise (who is the son of Raymond Vise) was employed by the Company
during 1995 as a commissioned salesman. Aggregate compensation paid to Ronald
Vise for services rendered during 1995 amounted to $183,419. Mark Abramowitz is
a partner in the law firm of Parker Chapin Flattau & Klimpl, LLP, which is
retained by the Company to provide legal services.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth information as of May 20, 1996
with respect to each person (including any "group" of persons as that term is
used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) who
is known to the Company to be the beneficial owner of more than 5% of the Common
Stock:
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Name and Amount and
Address of Nature of Percent
Title of Beneficial Beneficial of
Class Owner Ownership Class
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock The New Swank, Inc. 10,476,542(1)(2) 63.5%
Retirement Plan
90 Park Avenue
New York, NY 10016
Common Stock Marshall Tulin 5,681,207(3)(4) 33.9%
90 Park Avenue
New York, NY 10016
Common Stock John Tulin 5,216,670(3)(5) 31.2%
90 Park Avenue
New York, NY 10016
Common Stock Raymond Vise 4,833,316(3)(6) 29.3%
8 El Paseo
Irvine, CA 92715
- --------------------------------------------------------------------------------
</TABLE>
(1) The Company has merged its Employee Stock Ownership Plan No. 1 ("ESOP I"),
Employee Stock Ownership Plan No. 2 ("ESOP II") and Savings Plan into one plan,
The New Swank, Inc. Retirement Plan (the "Retirement Plan"). This amount
includes (a) 5,659,632 shares of Common Stock allocated to participants' ESOP I
accounts in the Retirement Plan and as to which such participants may direct the
trustees of the Retirement Plan as to voting on all matters, (b) an additional
193,014 shares of Common Stock allocated to participants' ESOP I accounts in the
Retirement Plan as to which such participants may direct the trustees, as
described below, as to voting on certain significant corporate events such as
mergers, consolidations, recapitalizations, reclassifications, liquidations,
dissolutions or sales of substantially all of a trade or business of the Company
(collectively, "Significant Corporate Events"), (c) an additional 67,403 of such
shares allocated to the accounts of former employees, subject to forfeiture, and
able to be voted by the trustees on all matters on which stockholders may vote
and (d) 1,126,881 shares of Common Stock not allocated to participants in ESOP
I, which the trustees may vote in their sole discretion on all matters on which
stockholders may vote, except that, in the case of voting on Significant
Corporate Events, the trustees will vote such shares in the same proportion as
shares as to which voting instructions are received.
(2) This amount also includes 2,764,891 shares of Common Stock allocated to
participants' ESOP II accounts in the Retirement Plan as to which participants
may direct the trustees as to voting only on Significant Corporate Events and as
to which the trustees may vote on all other matters in their discretion. Shares
allocated to ESOP II accounts as to which no voting instructions are received
are required to be voted in the same proportion as shares allocated to ESOP II
accounts as to which voting instructions are received. This amount also includes
664,721 shares held in the 401(k) accounts under the Retirement Plan, as to
which participants may direct the trustees as to voting on all matters and may
be disposed of in the discretion of the trustees.
<PAGE>
(3) The trustees of the Retirement Plan are Marshall Tulin, Chairman of the
Board and a director of the Company, John A. Tulin, President and a director of
the Company and Raymond Vise, a director of the Company. This amount includes
(a) 1,126,881 shares of Common Stock not allocated to participants in ESOP I,
(b) 193,014 allocated shares held in ESOP I accounts as to which the trustees
have sole voting power (see footnote 1 above), (c) 67,403 shares of Common Stock
allocated to the accounts of former employees but voted by the trustees (see
footnote 1 above), (d) 2,764,891 shares held in ESOP II accounts as to which the
trustees have sole voting power (see footnote 2 above) and (e) 664,721 shares
held in the 401(k) accounts (see footnote 2 above).
(4) This amount includes 343,022 shares owned by Mr. Tulin's wife. Mr. Tulin
disclaims beneficial ownership of these shares. This amount also includes
211,209 shares which Mr. Tulin has the right to acquire within 60 days through
the exercise of stock options granted under the Company's 1981 Stock Option Plan
(the "1981 Plan") and its 1987 Incentive Stock Option Plan (the "1987 Plan")
(collectively, the "Plans").
(5) This amount includes 3,180 shares owned by Mr. Tulin's wife. Mr. Tulin
disclaims beneficial ownership of these shares. This amount also includes
192,209 shares which Mr. Tulin has the right to acquire within 60 days through
the exercise of stock options granted under the Plans.
(6) This amount includes 10,000 shares which Mr. Vise has the right to acquire
within 60 days through the exercise of stock options granted under 1994
Non-Employee Director Stock Option Plan (the "1994 Plan").
<TABLE>
The following table sets forth information at May 20, 1996
with respect to the beneficial ownership of the Company's Common Stock by (a)
each director and each nominee for election as a director of the Company, (b)
each executive officer named in the Summary Compensation Table and (c) all
directors and executive officers of the Company as a group (14 persons). Unless
otherwise indicated, each person named below and each person in the group named
below has sole voting and investment power with respect to the shares of Common
Stock indicated as beneficially owned by such person or such group.
<CAPTION>
- --------------------------------------------------------------------------------
Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- --------------------------------------------------------------------------------
<S> <C> <C>
Mark Abramowitz 12,600 (1) Less than 1%
John J. Macht 5,000 (1) Less than 1%
William B. MacLeod 10,100 (1) Less than 1%
James Tulin 244,430 (2) 1.5%
John Tulin 5,216,670 (3) 31.2%
Marshall Tulin 5,681,207 (4) 33.9%
Raymond Vise 4,833,316 (5) 29.3%
Lewis Valenti 224,839 (6) 1.3%
Melvin Goldfeder 278,771 (7) 1.7%
Richard S. Blum 211,867 (8) 1.3%
Eric P. Luft 58,414 (9) Less than 1%
All directors and executive
officers as a group(14 persons)7,559,135(10) 42.2%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
(1) Includes 10,000, 5,000, and 10,000 shares which Messrs. Abramowitz, Macht
and MacLeod, respectively, have the right to acquire within 60 days through the
exercise of stock options granted under the 1994 Plan.
(2) Includes 184,325 shares which Mr. Tulin has the right to acquire within 60
days through the exercise of stock options granted under the Plans and 60,105
shares of Common Stock allocated to his ESOP I account and 401(k) account under
the Retirement Plan.
(3) This amount includes the shares referred to in footnotes 3 and 5 to the
first table above in this Item 12.
(4) This amount includes the shares referred to in footnotes 3 and 4 to the
first table above in this Item 12.
(5) This amount includes the shares referred to in footnotes 3 and 6 to the
first table above in this Item 12.
(6) This amount includes 171,825 shares which Mr. Valenti has the right to
acquire within 60 days through the exercise of stock options granted under the
Plans and 53,014 shares of Common Stock allocated to his ESOP I account and
401(k) account under the Retirement Plan.
(7) This amount includes 184,325 shares which Mr. Goldfeder has the right to
acquire within 60 days through the exercise of stock options granted under the
Plans and 47,250 shares of Common Stock allocated to his ESOP I account and
401(k) account under the Retirement Plan.
<PAGE>
(8) This amount includes 169,325 shares which Mr. Blum has the right to acquire
within 60 days through the exercise of stock options granted under the Plans and
42,542 shares of Common Stock allocated to his ESOP I account and 401(k) account
under the Retirement Plan.
(9) This amount includes 15,000 shares which Mr. Luft has the right to acquire
within 60 days through the exercise of stock options granted under the Plans and
43,414 shares of Common Stock allocated to his ESOP I account and 401(k) account
under the Retirement Plan.
(10) This amount includes the shares referred to in footnote 3 to the first
table above under "Ownership of Voting Securities." This amount also includes
1,414,725 shares of Common Stock which directors and executive officers as a
group have the right to acquire within 60 days through the exercise of stock
options granted under the plans and the 1994 Plan.
Pursuant to Section 16 of the Securities Exchange Act of 1934,
as amended, officers, directors and holders of more than 10% of the outstanding
shares of Common Stock are required to file periodic reports of their ownership
of, and transactions involving, the Common Stock with the Securities and
Exchange Commission. Based solely on its review of copies of such reports
received by the Company or written representations from certain reporting
persons that no Form 5 was required for those person, the Company believes that
its reporting persons have complied with all Section 16 filing requirements
applicable to them with respect to the Company's fiscal year ended December 31,
1995. The Company is not aware of any filing delinquencies from prior fiscal
years.
Item 13. Certain Relationships and Related Transactions.
Robert Tulin (who is the brother of Marshall Tulin and an
uncle of John Tulin and James Tulin) was employed by the Company during 1995.
Robert Tulin is the director of advertising and is responsible for coordinating
the production of the Company's merchandise catalogs. Aggregate compensation
paid Robert Tulin by the Company for services rendered during 1995 amounted to
$90,000.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) Financial Statements and Schedules
1. The financial statements listed under Item 8 of this
Annual Report on Form 10-K are filed as part of this Annual
Report.
2. Financial Statement Schedules filed as part of this Report:
The following financial statement schedule is submitted
herewith in response to Item 14(d) of Part IV of this
Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Page
----
Financial Statement Schedule for years ended December 31, 1995, 1994 and 1993:
<S> <C>
II. Valuation and Qualifying Accounts 38
(b) Current Reports on Form 8-K during the quarter endedDecember 31, 1995
</TABLE>
No reports on Form 8-K were filed by the Company during the
last fiscal quarter of the period covered by this Report.
<TABLE>
<CAPTION>
<PAGE>
(c) Exhibits
<S> <C>
Exhibit Description
3.01 Restated Certificate of Incorporation of the Company
dated May 1, 1987, as amended to date. (The first
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1-5354,
is incorporated herein by reference).
3.02 By-Laws of the Company, as amended to date.*
4.01 Form of Certificate of Designation of the Series A
Participating Preferred Stock and Series B
Participating Preferred Stock.(Exhibit A to Annex 1
to the Proxy Statement/Prospectus contained in the
Company's Registration Statement, File No.33-19501, filed
on January 4, 1988, is incorporated herein by reference).
4.02 Second Amended and Restated Credit Agreement dated as of
May 24, 1996 ("Credit Agreement") between the Company,
each of the banks which is a signatory thereto and The
Chase Manhattan Bank (National Associations),as Agent
(in such capacity, the "Agent").*
4.03 Amended and Resated Security Agreement dated as of
May 24, 1996 between the Company and the Agent.*
4.04 Amended and Restate Security Agreement dated as of
May 24, 1996 between Swank Sales International (V.I.),
Inc. and the Agent.*
4.05 Open End Indenture of Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing (Connecticut)
dated as of December 22, 1992 ("Connecticut Mortgage")
between the Company and the Agent. (Exhibit 4.06 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, File No. 1-5354, is incorporated
herein by reference).
<PAGE>
4.05.1 Modification and Confirmation of the Connecticut
Mortgage dated as of July 20, 1995. (The fourth
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995, File No. 1-5354,
is incorporated herein by reference).
4.05.2 Second Modification and Confirmation of the Connecticut
Mortgage dated as of May 24, 1996.*
4.06 Open End Indenture of Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing (Massachusetts)
dated as of December 22, 1992 ("Massachusetts Mortgage")
between the Company and the Agent. (Exhibit 4.07 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992, File No. 1-5354, is incorporated
herein by reference).
4.06.1 Modification and Confirmation of the Massachusetts
Mortgage dated as of July 20, 1995. (The fifth exhibit
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, File No. 1-5354, is
incorporated herein by reference).
4.06.2 Second Modification and Confirmation of the Massachusetts
Mortgage dated as of May 24, 1996.*
4.07 Revolving Credit and Security Agreement dated as of
May 24, 1996 ("New Agreement") between the Company, each
of the lenders which is a signatory thereto and IBJ Schroder
Bank & Trust Company, as Lender, ACM Agent and Co-Agent. *
4.08.1 Mortgage and Security Agreement (Massachusetts), dated
as of May 24, 1996, in the maximum principal amount of
$25,000,000, made by Swank, Inc to IBJ Schroder Bank &
Trust Company, as ACM Agent for itself and as agent for
ratable benefit of the Lenders.*
<PAGE>
4.08.2 Open End Mortgage, Assignment of Rents and Security
Agreement (Connecticut), dated as of May 24, 1996, in
the maximum principal amount of $25,000,000, made by Swank,
Inc to IBJ Schroder Bank & Trust Company, as ACM Agent
for itself and as agent for ratable benefit of the Lenders.*
4.08.3 FSC Security Agreement dated May 24, 1996 between Swank
International (V.I.),Inc. and IBJ Schroder Bank and Trust
Company, as Agent.*
4.08.4 Pledge and Security Agreement dated as of May 24, 1996
between the Company and IBJ Schroder Bank and Trust Company,
as ACM Agent.*
10.01 Employment Agreement dated June 20, 1991 between the
Company and Marshall Tulin. (Exhibit 10.01 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31,1991, File No. 1-5354, is incorporated
herein by reference).+
10.01.1 Amendment dated as of September 1, 1993 to Employment
Agreement between the Company and Marshall Tulin.
(Exhibit 10.01.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, File
No. 1-5354, is incorporated herein by reference).+
10.02 Employment Agreement dated as of January 1, 1990
between the Company and John Tulin. (Exhibit 10-03 to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, File No. 1-5354, is
incorporated herein by reference).+
10.02.1 Amendments dated as of September 1, 1993 and September
2, 1993, respectively, between the Company and John
Tulin. (Exhibit 10.02.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1993, File No. 1-5354, is incorporated herein by
reference).+
<PAGE>
10.03 Employment Agreement dated as of March 1, 1989 between
the Company and James Tulin. (Exhibit 10.05 to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-5354, is
incorporated herein by reference).+
10.03.1 Amendment dated as of January 4, 1990 to Employment
Agreement between the Company and James Tulin. (Exhibit
10.05 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989, File No.
1-5354, is incorporated herein by reference).+
10.03.2 Amendment dated as of September 1, 1993 to Employment
Agreement between the Company and James Tulin. (Exhibit
10.03.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, File No.
1-5354, is incorporated herein by reference).+
10.04 Amended and Restated 1981 Incentive Stock Option Plan
of the Company. (Exhibit 10.08 to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1987, File No.1-5354, is incorporated herein by
reference).+
10.05 1987 Incentive Stock Option Plan of the Company.
(Annex 3 to the Proxy Statement/ Prospectus contained
in the Company's Registration Statement, File
No.33-19501, filed on January 4, 1988, is incorporated
herein by reference).+
10.06 1987 Incentive Share Plan of the Company. (Annex 2 to
the Proxy Statement/Prospectus contained in the
Company's Registration Statement, File No.33-19501,
filed on January 4, 1988, is incorporated herein by
reference).+
<PAGE>
10.07 Form of Termination Agreement effective January 1, 1996
between the Company and each of the Company's officers
listed on Schedule A thereto.*+
10.09 Deferred Compensation Plan of the Company dated as of
January 1, 1987. (Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1988, File No. 1-5354, is incorporated herein by
reference).+
10.10 Employment Agreement dated as of January 15, 1992, as
amended, between the Company and Richard Byrnes.
(Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, File
No. 1-5354, is incorporated herein by reference).+
10.11 Agreement dated as of July 14, 1981 between the Company
and Marshall Tulin, John Tulin and Raymond Vise as
investment managers of the Company's pension plans.
(Exhibit 10.12(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1981,
File No. 1-5354, is incorporated herein by reference).
10.12 The New Swank, Inc. Retirement Plan Trust Agreement
dated as of January 1, 1994 among the Company and
Marshall Tulin, John Tulin and Raymond Vise, as
co-trustees. (Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994, File No. 1-5354, is incorporated herein by
reference).
10.13 Plan of Recapitalization of the Company dated as of
September 28, 1987, as amended (Exhibit 2.01 to
Post-Effective Amendment No.1 to the Company's S-4
Registration Statement, File No.33-19501, filed on
February 9, 1988, is incorporated herein by reference).
<PAGE>
10.14 Key Employee Deferred Compensation Plan. (Exhibit
10.17 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, File No.
1-5354, is incorporated herein by reference).+
10.15 1994 Non-Employee Director Stock Option Plan. (Exhibit
10.15 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, File No.
1-5354, is incorporated herein by reference).
10.15.1 Stock Option Contracts dated as of December 31, 1994
between the Company and each of Mark Abramowitz,
William B. MacLeod and Raymond Vise. (Exhibit 10.15.1
to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, File No. 1- 5354,
is incorporated herein by reference).+
10.15.2 Stock Option Contract dated as of April 20, 1995
between the Company and Raymond Vise. (The third
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1-5354,
is incorporated herein by reference).+
10.15.3 Stock Option Contract dated as of April 20, 1995
between the Company and William B. MacLeod. (The fourth
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1-5354,
is incorporated herein by reference).+
10.15.4 Stock Option Contract dated as of April 20, 1995
between the Company and Mark Abramowitz. (The fifth
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1-5354,
is incorporated herein by reference).+
10.15.5 Stock Option Contract between the Company and John
J. Macht.*+
<PAGE>
11.01 Statement Re Computation of Earnings Per Share.*
21.01 Subsidiaries of the Company. (Exhibit 22.01 to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, File No. 1-5354, is
incorporated herein by reference).
23.01 Consent of independent accountants.*
27 Financial Data Schedule.*
- ---------------------------
*Filed herewith.
+Management contract or compensatory plan or arrangement.
</TABLE>
-36-
<PAGE>
Report of Independent Accountants
To the Stockholders of Swank, Inc.
Attleboro, Massachusetts
We have audited the accompanying consolidated balance sheets of Swank,
Inc. as of December 31, 1995 and 1994, and related consolidated statements of
operations, changes in stockholders' equity, and cash flows for each of the
three years in the period then ended December 31, 1995. We also audited the
financial statement schedule listed in the index on page 30 of this Form 10-K. .
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule based on
our audits.
We conduct our audits in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Swank, Inc. as of
December 31, 1995 and 1994, and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31, 1995
in conformity with generally accepted accounting principles. In addition, in our
opinion, the financial statement schedule referred to above, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information required to be included therein.
Boston, Massachusetts
February 22, 1996 (except as to the information presented
in Note C for which the date is May 24, 1996) Coopers & Lybrand L.L.P.
<PAGE>
II. Valuation and Qualifying Accounts
---------------------------------
SWANK, INC.
SCHEDULE VII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
BALANCE AT ADDITONS BALANCE AT
BEGINNING CHARGED END OF
DESCRIPTION OF PERIOD TO EXPENSE DEDUCTIONS PERIOD
========== ========== ========== ==========
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995
ALLOWANCE FOR DOUBTFUL ACCOUNTS 1,100,000 805,000 (G) 855,000 (A) 1,050,000
ALLOWANCE FOR CASH DISCOUNTS 500,000 1,517,000 (H) 1,926,000 (B) 91,000
ALLOWANCE FOR CUSTOMER RETURNS 4,661,000 9,255,000 (F) 9,412,000 (C) 4,504,000
ALLOWANCE FOR COOPERATIVE ADV. 703,000 1,227,000 (G) 1,278,000 (D) 652,000
ALLOWANCE FOR IN-STORE MARKDOWNS 2,520,000 6,121,000 (G) 5,841,000 (E) 2,800,000
--------- ---------- ---------- ---------
9,484,000 18,925,000 19,312,000 9,097,000
========= ========== ========== =========
FOR THE YEAR ENDED DECEMBER 31, 1994
ALLOWANCE FOR DOUBTFUL ACCOUNTS 900,000 213,000 (G) 13,000 (A) 1,100,000
ALLOWANCE FOR CASH DISCOUNTS 470,000 1,409,000 (H) 1,379,000 (B) 500,000
ALLOWANCE FOR CUSTOMER RETURNS 4,959,000 7,436,000 (F) 7,734,000 (C) 4,661,000
ALLOWANCE FOR COOPERATIVE ADV. 505,000 1,314,000 (G) 1,116,000 (D) 703,000
ALLOWANCE FOR IN-STORE MARKDOWNS 1,785,000 5,741,000 (G) 5,006,000 (E) 2,520,000
--------- ---------- ---------- ---------
8,619,000 16,113,000 15,248,000 9,484,000
========= ========== ========== =========
FOR THE YEAR ENDED DECEMBER 31, 1993
ALLOWANCE FOR DOUBTFUL ACCOUNTS 850,000 510,000 (G) 460,000 (A) 900,000
ALLOWANCE FOR CASH DISCOUNTS 410,000 1,563,000 (H) 1,503,000 (B) 470,000
ALLOWANCE FOR CUSTOMER RETURNS 5,885,000 9,165,000 (F) 10,091,000 (C)4,959,000
ALLOWANCE FOR COOPERATIVE ADV. 700,000 1,002,000 (G) 1,197,000 (D) 505,000
ALLOWANCE FOR IN-STORE MARKDOWNS 3,046,000 3,361,000 (G) 4,622,000 (E)1,785,000
---------- ---------- ---------- ---------
10,891,000 15,601,000 17,873,000 8,619,000
========== ========== ========== ==========
</TABLE>
(A) BAD DEBTS CHARGED OFF AS UNCOLLECTIBLE, NET OF RECOVERIES
(B) CASH DISCOUNTS TAKEN BY CUSTOMERS
(C) CUSTOMER RETURNS
(D) CREDITS ISSUED TO CUSTOMERS FOR COOPERATIVE ADVERTISING
(E) CREDITS ISSUED TO CUSTOMERS FOR IN-STORE MARKDOWNS
(F) LOCATED IN COST OF SALES
(G) LOCATED IN SELLING AND ADMINISTRATIVE
(H) LOCATED IN NET SALES
<PAGE>
Consolidated Balance Sheets as of December 31
(Dollars in thousands)
<TABLE>
<CAPTION>
Assets 1995 1994
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Current:
Cash and cash equivalents........................................ $ 1,121 $ 2,153
Accounts receivable, less allowances of $9,097 and $9,484........ 10,704 13,874
Inventories:
Raw materials.................................................. 5,092 4,295
Work in process................................................ 6,476 7,987
Finished goods................................................. 17,602 13,867
- -----------------------------------------------------------------------------------------
29,170 26,149
Deferred income taxes............................................ 1,890 4,105
Recoverable income taxes......................................... 1,665
Prepaid and other................................................ 1,218 977
- -----------------------------------------------------------------------------------------
Total current assets........................................... 45,768 47,258
- -----------------------------------------------------------------------------------------
Property, plant and equipment, at cost:
Land and buildings................................................ 7,302 7,269
Machinery and equipment........................................... 14,328 13,833
Improvements to leased premises...................................... 842 839
Obligations under capital leases.................................. 1,466 123
- -----------------------------------------------------------------------------------------
23,938 22,064
Less accumulated depreciation and amortization.................... 16,481 15,477
- -----------------------------------------------------------------------------------------
7,457 6,587
- -----------------------------------------------------------------------------------------
Deferred income taxes................................................. 399 834
Other assets.......................................................... 3,700 2,779
- -----------------------------------------------------------------------------------------
Total Assets.......................................................... $57,324 $57,458
- -----------------------------------------------------------------------------------------
Liabilities
- -----------------------------------------------------------------------------------------
Current:
Notes payable to banks.............................................. $14,800 $ 5,000
Current portion of long-term debt................................... 235 2,920
Accounts payable.................................................... 5,870 3,665
Accrued employee compensation ...................................... 1,408 3,010
Income taxes payable................................................ 1,826
Other liabilities................................................... 8,696 6,512
- -----------------------------------------------------------------------------------------
Total current liabilities......................................... 31,009 22,933
Long-term obligations.................................................. 5,782 4,308
- -----------------------------------------------------------------------------------------
Total Liabilities...................................................... $36,791 $27,241
- -----------------------------------------------------------------------------------------
Commitments and contingencies (Note I)
Stockholders' Equity
- ----------------------------------------------------------------------------------------
Preferred stock, par value $1.00:
Authorized 1,000,000 shares Common stock, par value $.10:
Authorized 43,000,000 and 66,000,000 shares:
issued 16,843,042 and 16,804,155 shares............................ 1,684 1,680
Capital in excess of par value.......................................... 852 825
Retained earnings....................................................... 19,477 28,421
- ----------------------------------------------------------------------------------------
22,013 30,926
Less:
Deferred employees' benefits......................................... 771
Treasury stock at cost, 333,519 shares............................... 709 709
- ----------------------------------------------------------------------------------------
Total stockholders' equity......................................... 20,533 30,217
- ----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity..............................$57,324 $57,458
- ----------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Consolidated Statements of Operations
For Each of the Three Years Ended
December 31
<TABLE>
<CAPTION>
(In thousands, except share data) 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales.............................................................. $140,102 $143,496 $126,770
Cost of goods sold..................................................... 85,774 79,122 69,002
- ---------------------------------------------------------------------------------------------------------------------------
Gross profit........................................................... 54,328 64,374 57,768
Selling and administrative expenses.................................... 60,168 58,127 53,120
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income from operations.......................................... (5,840) 6,247 4,648
- ---------------------------------------------------------------------------------------------------------------------------
Interest charges....................................................... 2,110 1,717 1,599
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income before income taxes and cumulative effect of a
change in accounting for income taxes............................... (7,950) 4,530 3,049
Provision (benefit) for income taxes................................... 994 (1,042) 256
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income before cumulative effect of a change in
accounting for income taxes......................................... (8,944) 5,572 2,793
Cumulative effect of a change in accounting
for income taxes.................................................... 477
- ---------------------------------------------------------------------------------------------------------------------------
Net (loss) income ..................................................... $ (8,944) $5,572 $3,270
- ---------------------------------------------------------------------------------------------------------------------------
(Loss) income per share before cumulative effect of a change in
accounting for income taxes......................................... $ (.55) $.34 $.16
Cumulative effect per share of a change in accounting
for income taxes.................................................... .03
- ---------------------------------------------------------------------------------------------------------------------------
Net (loss) income per share............................................ $ (.55) $.34 $.19
- ---------------------------------------------------------------------------------------------------------------------------
Weighted average common shares and common share
equivalents outstanding........................................... 16,135,368 16,206,683 17,258,928
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
For Each of the Three Years Deferred Employee
Ended December 31, Common Capital in Benefits Treasury Stock
1995, 1994 and 1993 Stock, Par Excess of Retained Number Number
(Dollars in thousands) Value $.10 Par Value Earnings of Shares Amount of Shares Amount
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $1,671 $745 $19,579 333,519 $709
Exercise of employees'
stock options 6 50
Net income 3,270
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 1,677 795 22,849 333,519 709
Exercise of employees'
stock options 3 30
Net income 5,572
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 1,680 825 28,421 333,519 709
Exercise of employees'
stock options 4 27
Advance to retirement plan 664,461 $771
Net loss (8,944)
- ---------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $1,684 $852 $19,477 664,461 $771 333,519 $709
- ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For Each of the Three Years Ended December 31 (In thousands) 1995 1994 1993
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flow from operating activities:
Net (loss) income .................................................... $ (8,944) $5,572 $3,270
Adjustments to reconcile net income to net cash
provided by (used in) operations:
Cumulative effect of an accounting change........................ (477)
Depreciation and amortization.................................... 1,136 1,108 955
Loan forgiveness in lieu of contribution to employees'
stock ownership trust.......................................... 519 469
(Decrease) increase in accounts receivable allowances........... (387) 865 (2,273)
Decrease (increase) in deferred taxes............................ 2,649 (2,891) (337)
Increase in postretirement benefits.............................. 331 260 436
Change in assets and liabilities:
Decrease (increase) in accounts receivable..................... 3,557 (2,808) (3,217)
(Increase) in inventory........................................ (3,021) (1,132) (3,033)
(Increase) decrease in prepaid and other....................... (2,826) (778) 192
Increase (decrease) in accounts payable and accrued other...... 996 927 2,851
- ----------------------------------------------------------------------------------------------------
Net cash (used in) provided by operations................... (6,509) 1,642 (1,164)
- ----------------------------------------------------------------------------------------------------
Cash flow from investing activities:
Net capital expenditures........................................... (663) (877) (1,439)
- ----------------------------------------------------------------------------------------------------
Net cash (used in) investing activities...................... (663) (877) (1,439)
- ----------------------------------------------------------------------------------------------------
Cash flow from financing activities:
Borrowings under revolving credit agreements....................... 37,550 34,850 25,400
Payments of revolving credit agreements............................ (27,750) (33,350) (21,900)
Principal payments on long-term obligations........................ (2,920) (3,080) (3,000)
Advance to retirement plans........................................ (771)
Proceeds from exercise of employees' stock options................. 31 33 56
- ----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities......... 6,140 (1,547) 556
- ----------------------------------------------------------------------------------------------------
Net decrease in cash and equivalents.................................. (1,032) (782) (2,047)
Cash and cash equivalents at beginning of year........................ 2,153 2,935 4,982
- ----------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year.............................. $1,121 $2,153 $2,935
- ----------------------------------------------------------------------------------------------------
Cash paid during the year for:
- ----------------------------------------------------------------------------------------------------
Interest......................................................... $2,102 $1,714 $1,599
Income taxes..................................................... $1,794 $765 $1,765
Noncash transactions incurred:
Capital lease obligation incurred................................ $1,343 $123
- ----------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
<PAGE>
Swank, Inc.
Notes to Consolidated Financial Statements
A. The Company
The Company is engaged in the manufacture, sale and distribution of
men's jewelry, belts, leather accessories, suspenders and women's jewelry. Its
products are sold both domestically and internationally through department and
specialty stores as well as mass merchandisers. The Company also operates a
number of factory outlet stores primarily to distribute excess and out of line
merchandise.
B. Summary of Significant Accounting Policies
Basis of Presentation
The Consolidated Financial Statements include the accounts of Swank and
a wholly owned foreign sales corporation. All significant intercompany accounts
and profits have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
Revenue Recognition
Net sales are comprised of gross sales and royalty income less cash
discounts and customer returns. Sales are recorded upon shipment and royalty
income is accrued based on contract minimums. Cash discounts and returns are
accrued based upon experience.
Allowances for Accounts Receivable
The Company's allowances for receivables are comprised of cash
discounts, doubtful accounts, in-store markdowns, cooperative advertising and
customer returns. Cash discounts are reflected as a reduction of sales.
Provisions for doubtful accounts, in-store markdowns and cooperative advertising
are reflected in selling and administrative expenses. The reserve for customer
returns results from the reversal of sales for estimated returns and associated
costs. These reserve balances are at their highest level on December 31.
Reductions of these reserves occur principally in the first and second quarters
when the reserve balances are adjusted to reflect actual charges as processed.
These reserves are based on estimates made by management and may differ from
actual results. The provision for bad debts for 1995, 1994 and 1993 were
$805,000, $213,000 and $510,000, respectively.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company
considers all highly liquid instruments purchased with original maturities of
three months or less to be cash equivalents.
Inventories
Inventories are stated at the lower of cost (principally average cost
which approximates FIFO) or market. The Company's inventory is considered
fashion oriented and as a result is subject to risk of rapid obsolescence. At
December 31, 1995 a portion of the Company's inventory is in excess of its
current requirements based on recent sales. Management is developing programs
emphasizing asset management and believes that inventory has been adequately
marked down, where appropriate, and that no material loss will be incurred upon
disposition of excess quantities. Management believes it has adequate channels
to dispose of excess and obsolete inventory.
In connection with the purchase of gold for manufacturing requirements,
the Company enters into commodity forward contracts to reduce the risk of future
price fluctuations. These contracts are accounted for as hedges and,
accordingly, gains and losses are deferred and recognized in cost of sales as
part of the product cost. At December 31, 1995, the Company had no outstanding
gold contracts.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. The Company provides
for depreciation of plant and equipment by charges against income which are
sufficient to write off the cost of the assets on a straight-line or double
declining-balance basis over estimated useful lives of 10-45 years for building
and improvements and 3-12 years for machinery and equipment.
Improvements to leased premises are amortized on a straight-line basis
over the shorter of the useful life of the improvement or the term of the lease.
The Company has capitalized lease obligations for computer hardware and
software and for water treatment equipment. The cost of equipment held under
capital leases is equal to the lesser of the present value of the minimum lease
payments or the fair market value of the leased equipment at the inception of
the leases. The cost of the leased assets is amortized on a straight line basis
over the lesser of the term of the lease obligation or the life of the asset.
Expenditures for maintenance and repairs and minor renewals are charged
to expense; betterments and major renewals are capitalized. Upon disposition,
cost and related accumulated depreciation are removed from the accounts with any
related gain or loss reflected in results of operations.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
Income Taxes
The Company utilizes the liability method of accounting for income
taxes as set forth in FAS 109, Accounting for Income Taxes. Under the liability
method, deferred taxes are determined based on the difference between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect in the years in which the differences are expected to reverse.
Deferred tax assets are recorded when it is more likely than not that such tax
benefits will be realized.
Environmental Costs
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate to an existing
condition caused by past operations, and which do not contribute to current or
future revenue generation, are expensed. Liabilities are recorded when
environmental assessments and/or remedial efforts are probable and the costs can
be reasonably estimated. Generally, the timing of these accruals coincides with
the completion of a feasibility study or the Company's commitment to a formal
plan of action.
Long-Term Assets
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121 ("FAS 121"), "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." FAS 121 requires that long-lived assets be reviewed for impairment by
comparing the fair value of the assets with their carrying amount. Any
write-downs are to be treated as permanent reductions in the carrying amount of
the assets. The Company was not required to adopt FAS 121 during fiscal 1995 and
has not determined the impact on its financial statements.
Fair Value of Financial Instruments
In 1995 the Company adopted Statement of Financial Accounting Standards
No. 107, "Disclosures about Fair Value of Financial Instruments." The carrying
value of notes payable to banks approximates fair value because these financial
instruments have variable interest rates.
Concentrations of Credit Risk
The Company sells products primarily to major retailers within the
United States. The Company performs ongoing credit evaluations of its customers
and maintains reserves for potential credit losses. Any such losses have been
within management's expectations.
The Company does not believe that it is dependent upon any single
customer. In 1995, sales to the Company's two largest customers accounted for
18.7% and 11.8%, respectively, of consolidated net sales and 22.4% and 15.3%,
respectively, of consolidated trade receivables. Sales to one customer amounted
to 10.6% and 10.8% of consolidated net sales during 1994 and 1993, respectively.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
C. Short-Term Borrowings
Data on short-term borrowing arrangements are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
in thousands 1995 1994 1993
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
At December 31:
Total lines.............. $32,000 $21,000 $21,000
Weighted average
interest rate.......... 11.00% 10.50% 8.00%
For the year:
Monthly average borrowing
outstanding............ $18,266 $12,971 $6,214
Maximum borrowing outstanding
at any month end....... $28,800 $22,250 $12,500
Monthly interest rate
(weighted average)... 10.32% 9.43% 8.00%
Balance at December 31..... $10,800 $5,000 $3,500
- ------------------------------------------------------------------------------
</TABLE>
The average amounts outstanding and weighted average interest rates
during each year are based on average monthly balances outstanding. On July 20,
1995 the Company modified and extended its revolving Credit Agreement (the "
Agreement") with The Chase Manhattan Bank, N.A. and Fleet National Bank (the
"Banks"). The Agreement provided for loans and letters of credit in an amount up
to $32,000,000, with a sublimit of $7,000,000 for letters of credit, available
through June 30, 1998. Loans under the Agreement bore interest at the Banks'
prime rate plus 2.5%. The maximum amount available is determined under a formula
based on eligible accounts receivable and inventory. Borrowings under the
Agreement were collateralized by all of the Company's assets.
Pursuant to the Agreement, certain financial ratios were required to be
met. These included a leverage ratio not to exceed 1.0 to 1 and a current ratio
of at least 1.0 to 1. As of December 31, 1995 the actual leverage and debt
ratios were 1.8 to 1 and 1.5 to 1, respectively. The Company was not in
compliance with the leverage ratio at December 31, 1995. The Company was not in
compliance with certain other covenants under the Agreement including a $800,000
limit on indebtedness to other lenders (including capital leases). The Company
exceeded this limit by $543,000. The Company was also not in compliance with a
covenant for interest coverage wherein earnings before interest and taxes
("EBIT") equal or exceed 200% of interest expense and an institutional debt
ratio of a rolling four quarter average of EBIT to total institutional
indebtedness equal or exceed 5.5 to 1. The loss before interest and taxes of
$5,840,000 placed the Company in default of these covenants. The Company was
unable to reduce the outstanding balance as required under the Agreement to $2
million for a 30 day period within the first six months of the calendar year.
Due primarily to the Company's net loss in fiscal 1995 and the
resulting failure of the Company to meet the financial ratios required by the
Agreement, the Banks requested that the Company investigate alternative sources
of working capital. The Company obtained revolving credit financing on May 24,
1996 from IBJ Schroder Bank & Trust Company, as agent (the "Lenders") for up to
$25,000,000 with a sublimit of $3,000,000 in letters of credit (the "New
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
Agreement"). The proceeds of the New Agreement were used, in part, to repay
all but $4 million the outstanding balance under the Agreement.
The New Agreement is available through April 1999 and is collateralized
by all of the Company's assets. The New Lenders have senior lien position on all
assets other than real property, improvements and certain fixtures, in which the
Company's other institutional lenders maintain a senior position to
collateralize a $4,000,000 term loan, as described below, and in which the New
Lenders have a subordinate lien. The New Agreement permits the Company to borrow
against a percentage of eligible accounts receivable and inventory and its loans
bear an interest rate of 1.5% over the New Lenders' prime lending rate. The New
Agreement also contains a facility fee of 1/2% per annum on the unused portion
of the revolving credit facility and a closing fee of $500,000 payable at the
closing date.
The terms of the New Agreement include covenants requiring the Company
to maintain certain financial ratios including interest coverage, leverage and
quarterly inventory turnovers. The New Agreement also includes covenants
pertaining to profitability, limiting capital expenditures and additional
indebtedness. The Company believes the inventory turnover covenant to be the
most restrictive, requiring minimum inventory turnovers, as defined, up to 2.25
times annually. The New Agreement also prohibits the payment of dividends.
Management believes this credit facility will meet its working capital needs
until May 1999.
In connection with the refinancing, the Banks amended and restated the
Agreement to provide the Company with a $4,000,000 term loan (the "Term Loan")
in lieu of a like amount of revolving credit debt. The Term Loan will be repaid
in $200,000 quarterly increments starting in June 1997 with a final payment of
$2,600,000 due May 1999. The Term Loan bears interest at 2.5% over the Banks'
prime lending rate and is collaterialized by a senior lien on real property and
certain improvements and a subordinate lien on all other assets. The Term Loan
also contains an annual facility fee of 2% of the term loan and a maximum
success fee of $450,000 payable as follows; $225,000 on final maturity with the
balance payable subsequently in six equal monthly installments of $37,500. The
Term Loan covenants are the same as those in the New Agreement.
The financing agreements include provisions specifying that a material
adverse effect, as determined by the lenders, in the financial position or
results of operations of the Company is an event of default. As such, the Term
Loan, which would otherwise be classified as long-term, has been classified as
current on the balance sheet at December 31, 1995.
Based upon present information and the Company's operating plans for
fiscal 1996, the Company expects that it will meet the financial covenants
contained in the New Agreement and that eligible assets will provide a
sufficient borrowing base to meet the Company's seasonal working capital needs.
However, should the Company fail to meet those covenants, or the borrowing base
should prove insufficient to support required borrowings, the Company would be
required to obtain a waiver or amendment to the New Agreement or, in the
alternative, secure other financing. There can be no assurance that the Company
would be able to obtain a waiver or amendment or that alternative financing
would be available. In such circumstances, liquidity would be adversely
affected.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
D. Income Taxes
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109") during 1993. In 1993, the
Company recognized a cumulative effect from this adoption of $477,000 and, in
addition, increased net income by $467,000.
<TABLE>
<CAPTION>
(Benefit) provision for income taxes:
- -------------------------------------------------------------------------------
in thousands 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Current (benefit) payable:
Federal...................... ($1,630) $1,494 $457
State........................ (35) 329 114
Foreign sales corporation 9 26 22
- -------------------------------------------------------------------------------
(1,656) 1,849 593
- -------------------------------------------------------------------------------
Deferred:
Federal...................... 2,037 (2,252) (318)
State........................ 613 (639) (19)
- -------------------------------------------------------------------------------
2,650 (2,891) (337)
- -------------------------------------------------------------------------------
$994 $(1,042) $256
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
Provision for deferred taxes:
- -------------------------------------------------------------------------------
in thousands 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts receivable reserves..... $225 $147 $895
Deferred compensation............ (98) 63 (116)
Inventory capitalization
under Sec263A................. (136) (11) 46
Accrual for environmental
costs......................... (116) (37) (98)
Warrant interest................. 70 96 (166)
Postretirement benefits other ... (130) (14) (260)
Inventory reserves............... (21) 687
Workman's compensation........... (201) (157)
Termination costs................ (166) (14)
AMT carryfowards................. (1,010)
State NOL carryforwards.......... (365)
Capital loss..................... 606
Other items...................... (166) (32) (237)
Valuation allowance.............. 4,764 (3,538) (1,088)
- -------------------------------------------------------------------------------
$2,650 $(2,891) $(337)
- -------------------------------------------------------------------------------
Effective income tax rate:
- -------------------------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------
Statutory income tax rate........ (34.0%) 34.0% 34.0%
State income taxes, net of
federal tax benefit........... (3.6) 4.8 2.5
Life insurance................... (5.5) (6.8) (14.5)
Valuation allowance, net of
expired benefits.............. 60.1 (54.2) (16.4)
Other items, net................. (4.5) (.8) 2.8
- -------------------------------------------------------------------------------
12.5% (23.0%) 8.4%
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
The components of the net deferred tax asset at December 31, 1995, 1994 and 1993
were as follows:
- -------------------------------------------------------------------------------
in thousands 1995 1994 1993
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Deferred tax asset
Accounts receivable reserves $2,259 $2,484 $2,631
Deferred compensation....... 1,707 1,380 1,443
Inventory capitalization
under 263A................ 568 481 470
Accrual for environmental costs 506 390 353
Warrant interest............ 0 70 166
Postretirement benefits..... 404 274 260
Inventory reserves.......... 21 0 0
Workman's compensation...... 358 157 0
Termination costs........... 180 14
AMT credit carryforward..... 1,010
State NOL carryforward...... 365
Capital loss carryforward... 0 0 606
Other....................... 345 366 337
--------------------------------------------
Gross deferred asset........ 7,723 5,616 6,266
Valuation allowance............ (4,764) 0 (3,538)
--------------------------------------------
2,959 5,616 2,728
Deferred tax liabilities
Depreciation................ (670) (677) (680)
--------------------------------------------
Net deferred tax asset......... $2,289 $4,939 $2,048
- -------------------------------------------------------------------------------
</TABLE>
A valuation allowance is provided to reduce the deferred tax assets to
a level which management believes more likely than not to be realized.
Realization of approximately $800,000 of the net deferred tax asset is dependent
upon generating sufficient future taxable income. Although realization is not
assured management believes that it is more likely than not that this portion of
the net deferred tax asset will be realized.
The Company has alternative minimum tax credit carryforwards of
approximately $1,010,000 which are available to reduce future regular Federal
income taxes over an indefinite period and net operating loss carryfowards for
state income tax purposes of approximately $365,000 which are available to
offset future state taxable income.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
E. Long-Term Obligations
<TABLE>
<CAPTION>
Long-term obligations, excluding the current portion, at December 31, 1995
and 1994 consisted of the following :
- ----------------------------------------------------------------------
(in thousands) 1995 1994
- ----------------------------------------------------------------------
<S> <C> <C>
1987 deferred compensation plan (1)... $2,669 $2,777
1993 deferred compensation plan (1)... 1,109 835
Long-term portion of capital lease.... 1,214 102
Supplemental death benefits........... 235 264
Postretirement benefits other than
pensions (1)........................ 555 330
- ----------------------------------------------------------------------
$5,782 $4,308
- ----------------------------------------------------------------------
(1) See footnote F
</TABLE>
The Company's lease agreements for computer hardware and software and
for water treatment equipment have been classified as capital leases for
financial reporting purposes. Under these leases, future minimum lease payments
and the present value of the minimum lease payments as of December 31, 1995
were:
<TABLE>
<CAPTION>
- -------------------------------------------------------------
(in thousands)
- -------------------------------------------------------------
<S> <C>
1996............................. $383
1997............................. 500
1998............................. 500
1999............................. 282
2000............................. 182
2001............................. 44
- -------------------------------------------------------------
Subtotal......................... 1,891
Less imputed interest at 11%..... 442
- -------------------------------------------------------------
Present value of minimum lease payments $1,449
- -------------------------------------------------------------
</TABLE>
As of December 31, 1995 $235,000 has been classified in current portion
of long-term debt.
F. Employee Benefits and Bonus Plans
Effective January 1, 1994 the Company amended and restated the Swank,
Inc. Employees' Stock Ownership Plan to be merged with the Swank, Inc.
Employees' Stock Ownership Plan No. 2 and the Swank, Inc. Savings Plan. This
amended and restated plan, called The New Swank, Inc. Retirement Plan,
incorporates the characteristics of the three separate plans and reflects the
Company's continued desire to provide added incentives and enable employees to
acquire shares of the Company's Common Stock. The cost of the Plan has been
borne by the Company through contributions in amounts determined by the Board of
Directors. Shares of Common Stock acquired by the Plan are allocated to each
participating employee and are vested on a prescribed schedule.
As part of The New Swank Inc. Retirement Plan, the Company will
continue to maintain a Savings (401(k)) Plan covering substantially all full
time employees that allows Swank, Inc
Notes to Consolidated Financial Statements (continued)
employer cash contributions of a discretionary nature and employee contributions
resulting from their election to reduce taxable compensation.
<TABLE>
<CAPTION>
The Company has made contributions to its retirement plans as follows:
- --------------------------------------------------------------------------
(in thousands) 1995 1994 1993
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Employee stock ownership plans... $419
Savings Plan..................... 1,008
The New Swank Inc.
Retirement Plan $300 $1,463 0
- --------------------------------------------------------------------------
$300 $1,463 $1,427
- ---------------------------------------------------------------------------
</TABLE>
At December 31, 1995 The New Swank Inc. Retirement Plan held a total of
10,697,003 shares of the Company's outstanding stock. Interest bearing loans (8%
per annum) from the Company to the Plans and predecessor plans were $771,000, $0
and $519,000 in 1995, 1994 and 1993, respectively. These loans are
collateralized by the unallocated shares of the plans. In accordance with
Statement of Position 93-6, "Employers' Accounting for Employees' Stock
Ownership Plans," the loan in 1995 has been classified as deferred employee
benefits and is deducted from stockholders' equity. Prior to 1994, the loan
balances were classified as current assets.
The Company provides postretirement life insurance, supplemental pension and
medical benefits for certain groups of retired employees. The post retirement
medical plan is contributory, with contributions adjusted annually; the death
benefit is noncontributory. In 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions" ("SFAS 106"). SFAS 106 has no effect on cash flow but
changes the method of accounting for other postretirement benefits by requiring
that the cost of these benefits be accrued by the date employees become eligible
for them. In accordance with SFAS 106, the Company has elected to amortize the
transition obligation for all plan participants on a straight-line basis over a
20 year period.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
The following table sets forth the plans' funded status reconciled to the
amount shown in the Company's statement of financial position at December 31:
- ----------------------------------------------------------------------------
(in thousands) 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees............................ ($2,683) ($2,477)
Fully eligible plan participants.... (1,034) (1,085)
Other plan actives.................. (1,674) (1,223)
---------------------------
($5,391) ($4,785)
Plan assets at fair value.............. 0 0
---------------------------
Accumulated postretirement benefit
obligation in excess of plan assets. ($5,391) ($4,785)
Unrecognized net loss from past ex-
perience different from that assumed
and from changes in assumptions..... 1,651 1,216
Prior service cost not yet recognized
in net periodic postretirement
benefit cost........................ 0 0
Unrecognized transition obligation..... 2,713 2,873
---------------------------
Accrued postretirement benefit cost (1) ($1,027) ($696)
- ----------------------------------------------------------------------------
(1) Amounts totaling $472,000 and $366,000 have been included in other current
liabilities as of December 31, 1995 and 1994, respectively. The balance has been
included in long-term obligations.
</TABLE>
<TABLE>
<CAPTION>
Net periodic postretirement benefit cost for 1995 and 1994 included the
following components:
- --------------------------------------------------------------------------
(in thousands) 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Service cost-benefits attributed to
service during the period............ $75 $63
Interest cost on accumulated post-
retirement benefit obligation........ 365 342
Amortization of transition obligation... 160 160
Amortization of actuarial loss.......... 77 64
-- --
Net periodic postretirement benefit cost
included in selling and administrative $677 $629
- --------------------------------------------------------------------------
</TABLE>
For measurement purposes, a 9% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 1995; the rate was assumed to
decrease gradually to 5.5% for 1999 and remain at that level thereafter. The
effect of increasing the assumed health care cost trend rate by one percentage
point in each year would not significantly increase the accumulated
postretirement benefit obligation as of December 31, 1995 or the net periodic
postretirement benefit cost for the year then ended.
Life insurance contracts have been purchased on the lives of certain
employees in order to fund the postretirement death benefits. The net cost
included in selling and administrative expenses was $97,000, $103,000 and
$189,000 in 1995, 1994 and 1993, respectively. The weighted-average discount
rate used in determining the accumulated postretirement obligation was 7.0% and
7.5% on December 31, 1995 and 1994, respectively. Swank, Inc Notes to
Consolidated Financial Statements (continued)
In 1987 the Company adopted a deferred compensation plan for certain key
executives that provides for payments upon retirement, death or other
termination of employment. Amounts payable to participants of this plan
aggregated $3,176,000, $3,275,000 and $3,322,000 at December 31, 1995, 1994 and
1993, respectively, of which $507,000 and $498,000 have been classified in other
current liabilities in 1995 and 1994, respectively. The balance of the liability
has been included in long-term obligations in 1995 and 1994. Life insurance
contracts have been purchased on the lives of the plan participants and certain
other employees in order to fund the benefits.
In 1993 the Company established an additional deferred compensation plan for
certain key executives that provides for payments upon retirement, death or
other termination of employment. Amounts payable to participants of this plan
aggregated $1,300,000 and $835,000 at December 31, 1995 and 1994, respectively,
of which $191,000 has been classified in other current liabilities in 1995. The
balance of the liability has been included in long term obligations. Variable
annuity life insurance contracts have been purchased on the lives of the plan
participants and certain other employees in order to fund the benefit
obligations.
The net charges related to these plans are included in selling and
administrative expense, and aggregated $1,153,000, $1,278,000 and $1,205,000 in
1995, 1994 and 1993, respectively.
The benefits under each plan are paid directly by the Company and are
indirectly funded by life insurance. The Company has corporate owned life
insurance policies on current and former salaried employees. It is expected that
the net proceeds from death benefits will provide the necessary monies to fund
future payments to participants of the deferred compensation plans and
postretirement death benefits to beneficiaries of salaried employees who reach
age sixty with ten years of service. The Company is the owner and sole
beneficiary of the policies and, as such, is able to use loans against the
policy cash values to pay part or all of the annual premiums.
Other assets include cash surrender value of insurance policies, net of
loans. The aggregate cash surrender value of these policies was $29,981,000,
$23,240,000 and $20,0176,000, offset by policy loans aggregating $25,920,000,
$20,210,000 and $18,407,000 in 1995, 1994 and 1993, respectively. The Company
has no intention to repay these loans and expects that they will be liquidated
from future life insurance proceeds. Interest on policy loans amounted to
$2,128,000, $1,621,000 and $1,717,000 in 1995, 1994 and 1993, respectively, and
is included in the net costs of each plan described above. The weighted average
interest rate was 8.7%, 9.4% and 8.6% at December 31, 1995, 1994 and 1993,
respectively.
G. Stock Options
Under the Company's Stock Option Plans, options may be granted to key
employees to purchase shares of Common Stock at the market value on the date of
grant. Options to purchase shares of Common Stock were granted under these Plans
and are exercisable beginning one year after the date of grant and continuing
for an additional nine years.
During 1994 the Company established an additional Stock Option Plan. Options
may be granted to non-employee directors to purchase 150,000 shares of Common
Stock at market value on the date of grant.
Options to purchase 20,000 and 15,000 shares of Common Stock Swank, Inc Notes to
Consolidated Financial Statements (continued)
were granted under this plan in 1995 and 1994, respectively, and are immediately
exercisable and continuing for an additional five years. At December 31, 1995,
1,785,615 shares of Common Stock were reserved for future grants under these
Plans.
<TABLE>
<CAPTION>
The following table summarizes stock option activity for the years 1993
through 1995 (see Note H):
- ---------------------------------------------------------------------------
Option Shares Option Price
- ---------------------------------------------------------------------------
<S> <C> <C>
Outstanding at
December 31, 1992 2,629,194 $.94 to $1.38
Exercised (124,265) .94 to 1.16
Expired (168,875) .94 to 1.38
---------
Outstanding at
December 31, 1993 2,336,054 $.94 to $1.17
Exercised (35,000) .94
Expired (26,447) .94 to 1.16
Granted 15,000 1.16
------
Outstanding at
December 31, 1994 2,289,607 $.94 to $1.17
Exercised (51,000) .94 to 1.16
Expired (55,447) .94 to 1.16
Granted 20,000 $1.16
------
Outstanding at
December 31, 1995 2,203,160 $.94 to $1.17
- ----------------------------------------------------------------------------
</TABLE>
At December 31, 1995 options for 2,203,160 shares of Common Stock were
exercisable under the Plans at an aggregate option price of approximately
$2,354,000. Options expire at various dates through 2002.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123 ("FAS 123"), "Accounting for Stock-Based
Compensation," which is effective for fiscal year 1996. The Company has
determined that it will elect to disclose pro forma net income or loss and per
share amounts in the notes to the financial statements using the fair value
based method beginning in fiscal 1996 with comparable disclosures for fiscal
1995. The Company was not required to adopt FAS 123 during fiscal 1995 and has
not determined the impact of these pro forma adjustments.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
H. Capital
<TABLE>
<CAPTION>
The following table reconciles the total outstanding common shares with total
weighted average common shares and common share equivalents used in computing
primary earnings per share:
- ------------------------------------------------------------------------
Year Ended December 31,
1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Common shares
outstanding......... 16,509,523 16,470,636 16,435,636
Effect of using weighted
average common and
common equivalent
shares outstanding... (9,715) 274,174 823,292
Effect of excluding unallocated
shares held in ESOP. (364,440) (538,127) 0
-------------------------------------
Shares used in computing
primary earnings
per share........... 16,135,368 16,206,683 17,258,928
- ------------------------------------------------------------------------
</TABLE>
The difference between shares for primary and fully diluted earnings
per share was not significant in any year. Effective January 1, 1994 the Company
adopted Statement of Position 93-6 "Employers' Accounting for Employee Stock
Ownership Plans" and, accordingly, has reflected the unallocated ESOP shares
maintained in the Company's Plan (described in Note F) as a reduction of
outstanding shares for earnings per share purposes until such shares were
committed to be allocated. At December 31, 1995 the Company has 664,461
unallocated shares remaining in its Plan. There were no unallocated shares at
December 31, 1994.
I. Commitments and Contingencies
The Company leases certain of its warehousing, sales and office
facilities, automobiles and equipment under noncancelable long-term operating
leases. Certain of the leases provide renewal options ranging from one to ten
years and escalation clauses covering increases in various costs. The Company is
also contingently liable for premises leased by an unrelated third party. This
contingency totals $225,000 per year until March 31, 1998.
<TABLE>
<CAPTION>
Future minimum lease payments under noncancelable operating leases as
of December 31, 1995 are as follows (in thousands):
- -------------------------------------------------------------
<S> <C>
1996 $3,045
1997 2,670
1998 2,257
1999 2,013
2000 1,554
Thereafter 133
- --------------------------------------------------------------
Total minimum payment $11,672
- --------------------------------------------------------------
</TABLE>
Total rental expenses amounted to $4,017,000, $4,109,000 and
$3,979,000 in 1994, 1993 and 1992, respectively.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
On June 7, 1990 the Company received notice from the United States
Environmental Protection Agency ("EPA") that it, along with fifteen others, had
been identified as a Potentially Responsible Party ("PRP") in connection with
the release of hazardous substances at a Superfund Site located in
Massachusetts. The Company, along with six others, has voluntarily entered into
an Administrative Order pursuant to which, inter alia, they have undertaken to
conduct a remedial investigation/feasibility study ("RI/FS") with respect to the
alleged contamination at the site. This notice does not constitute the
commencement of a proceeding against the Company or necessarily indicate that a
proceeding against the Company is contemplated.
It is the position of the potentially responsible parties that the
remedial investigation has been completed. Based upon available information, it
is estimated that the feasibility study may be completed in approximately one
year; the most recent estimate of costs for completion of the feasibility study
is approximately $250,000. The estimates are subject to change since the scope
of work is within the discretion of the EPA. Accordingly, it is reasonably
possible that the Company's potential obligation may change in the near term.
The PRP group's accountant's records reflect group expenses, independent of
legal fees, in the amount of $1,910,618 as of December 31, 1995. The Company's
share of costs for the RI/FS is being allocated on an interim basis at 12.5177%.
This Superfund site is adjacent to a municipal landfill that is in the
process of being closed under Massachusetts law. Due to the proximity of the
site to the landfill and the composition of waste at the site, the issues are
under discussion regarding the site among state and federal agencies and the
United States Department of Energy.
In September 1988 the Company received notice from the Department of
Pollution Control and Ecology of the State of Arkansas that the Company,
together with numerous other companies, had been identified as a PRP in
connection with the release or threatened release of hazardous substances from
the Diaz Refinery, Incorporated site in Diaz, Arkansas. The Company has advised
the State of Arkansas that it intends to participate in negotiations with the
Department of Pollution Control and Ecology through the committees formed by the
PRPs. The Company has not received any further communications regarding the Diaz
site.
In September, 1991, the Company signed a judicial consent decree
relating to the Western Sand and Gravel site located in Burrillville and North
Smithfield, Rhode Island. The consent decree was entered on August 28, 1992 by
the U.S. District Court for the District of Rhode Island. The most likely
scenario cost estimates for remediation of the ground water at the site range
from approximately $2.8 million to approximately $7.8 million. Based on current
participation, the Company's share is 7.98% of approximately 75% of the costs.
The Company and certain other participants have commenced litigation against
non-settling potentially responsible parties to seek to obtain reimbursement for
their share of the remediation costs.
The liabilities for costs associated with environmental sites recorded
in Other Liabilities at December 31, 1995, 1994 and 1993 were $1,286,000,
$991,000 and $850,000, respectively. Management believes it has provided
adequately for the above environmental exposures.
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
J. Promotional Expenses
<TABLE>
<CAPTION>
Substantial expenditures for advertising and promotion are considered
necessary to enhance the Company's business. It is the Company's policy to
expense these expenditures within the year incurred and are reflected in the
Selling and Administrative section of the statement of operations. The following
table summarizes the various promotional expenses incurred by the Company.
- ------------------------------------------------------------------------
(in thousands) 1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
In-store markdowns...... $6,121 $5,741 $3,361
Co-op advertising......... 1,227 1,314 1,002
Displays.............. 1,966 1,124 1,246
National advertising & other 1,755 1,849 1,485
--------------------------------------
$11,069 $10,028 $7,094
Percentage of net sales 7.9% 7.0% 5.6%
- ------------------------------------------------------------------------
</TABLE>
K. Patents, Trademarks and Licenses
The Company owns the rights to various patents, trademarks and trade names and
has exclusive licenses in the United States. The Company's "Pierre Cardin",
"Anne Klein", "Anne Klein II', and "Guess?" licenses may be considered material
to the Company's business. The Company's license to distribute "Anne Klein" and
"Anne Klein II" expire December 31, 1996. The Company is currently negotiating
an extension to the licenses and presently expects to continue its relationship
beyond December 31, 1996. The Company's licenses for "Guess?" expire in 1997 and
"Pierre Cardin" expire in the year 2000.
L. Quarterly Financial Data (unaudited)
<TABLE>
<CAPTION>
The Company believes that comparison of results of operations is more meaningful
on a seasonal (six months) rather than on a quarterly basis. Within a given six
month season, the timing of shipments of the Company's products is affected by
the availability of materials, retail sales trends and forecasts and,
accordingly, the shift of sales and earnings between quarters within a season
may vary from year to year.
- ------------------------------------------------------------------------------
(in thousands) First Second Third Fourth
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995
Net sales.......... $29,966 $28,253 $35,320 $46,563
Gross profit..... 11,783 11,167 12,863 18,515
Net loss........... (1,552) (2,681) (1,375) (3,336)
Loss per share..... (.09) (.17) (.09) (.21)
1994
Net sales.......... $29,002 $28,945 $36,935 $48,614
Gross profit....... 12,418 13,097 17,624 21,235
Net income (loss).. (412) (929) 1,947 4,966
Earnings (loss) per
share............ (.03) (.06) .12 .31
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
Swank, Inc
Notes to Consolidated Financial Statements (continued)
The Company incurred a net loss in the fourth quarter primarily as a result of a
charge of $4,764,000 to reestablish a valuation allowance against its deferred
tax asset (see note D). In the fourth quarter of 1994, the Company recognized a
reduction in its deferred tax valuation allowance resulting in a net tax benefit
of approximately $2,453,000. Also during the fourth quarter of 1995, the Company
implemented a program designed to enhance the overall competitiveness,
productivity and efficiency through the reduction of overhead costs. Costs
associated with the program of $822,000, primarily severance and related
benefits, were recognized in the fourth quarter.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: May 24, 1996 SWANK, INC.
(Registrant)
By: /s/ Andrew C. Corsini
Andrew C. Corsini,
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ John A. Tulin President and Director
John A. Tulin (principal executive
officer) May 24, 1996
/s/ Andrew C. Corsini Senior Vice President,
Andrew C. Corsini Chief Financial Officer,
Treasurer and Secretary May 24, 1996
(principal financial and
accounting officer)
/s/ Mark Abramowitz Director May 24, 1996
Mark Abramowitz
/s/ John J. Macht Director May 24, 1996
John J. Macht
/s/ William B. MacLeod Director May 24, 1996
William B. MacLeod
<PAGE>
Signature Title Date
/s/ James E. Tulin Director May 24, 1996
James E. Tulin
/s/ Marshall Tulin Director May 24, 1996
Marshall Tulin
/s/ Raymond Vise Director May 24, 1996
Raymond Vise
<PAGE>
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1995
---------------------------------------
SWANK, INC.
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
- ------- ------
Exhibit Page
No. Description No.
- ------ ------
3.01 Restated Certificate of Incorporation of the Company
dated May 1, 1987, as amended to date. (The first
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1- 5354,
is incorporated herein by reference).
3.02 By-Laws of the Company, as amended to date.*
4.01 Form of Certificate of Designation of the Series A
Participating Preferred Stock and Series B
Participating Preferred Stock. (Exhibit A to Annex 1 to
the Proxy Statement/Prospectus contained in the
Company's Registration Statement, File No.33-19501,
filed on January 4, 1988, is incorporated herein by
reference).
4.02 Seocnd Amended and Restated Credit Agreement dated as of
May 24, 1995 ("Credit Agreement") between the Company,
each of the banks which is a signatory thereto and The
Chase Manhattan Bank (National Associations), as Agent
(in such capacity, the "Agent").*
4.03 Security Agreement dated as of May 24, 1996 between
between the Company and the Agent.*
4.04 Security Agreement dated as of May 24, 1996 between
Swank Sales International(V.I.), Inc. and the Agent.*
4.05 Open End Indenture of Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing (Connecticut)
dated as of December 22, 1992 ("Connecticut Mortgage")
between the Company and the Agent. (Exhibit 4.06 to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, File No. 1-5354, is
incorporated herein by reference).
4.05.1 Modification and Confirmation of the Connecticut
Mortgage dated as of July 20, 1995. (The fourth exhibit
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, File No. 1-5354, is
incorporated herein by reference).
4.05.2 Second Modification and Confirmation of the Connecticut
Mortgage dated as of May 24, 1996.*
4.06 Open End Indenture of Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing (Massachusetts)
dated as of December 22, 1992 ("Massachusetts
Mortgage")between the Company and the Agent. (Exhibit
4.07 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, File No.
1-5354, is incorporated herein by reference).
4.06.1 Modification and Confirmation of the Massachusetts
Mortgage dated as of July 20, 1995. (The fifth exhibit
to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995, File No. 1-5354, is
incorporated herein by reference).
4.06.2 Second Modification and Confirmation of the Massachusetts
Mortgage dated as of May 24, 1996.*
4.07 Revolving Credit and Security Agreement dated as of May 24, 1996
("New Agreement") between the Company, each of the lenders
which is a signatory thereto and IBJ Schroder Bank & Trust
Company, as Lender, ACM Agent and Co-Agent.*
4.08.1 Mortgage abd Security Agreement (Massachusetts), dated as of
May 24,1996, in the maximum principal amount of $25,000,000,
made by Swank, Inc to IBJ Schroder Bank & Trust Company, as
ACM Agent for itself and as agent for ratable benefit of the
Lenders.*
<PAGE>
4.08.2 Open End Mortgage, Assignment of Rents and Security Agreement
(Connecticut), dated as of May 24, 1996, in the maximum principal
amount of $25,000,000, made by Swank, Inc to IBJ Schroder Bank &
Trust Company, as ACM Agent for itself and as agent for ratable
benefit of the Lenders.*
4.08.3 FSC Security Agreement dated May 24, 1996 between Swank
International (V.I.), Inc. and IBJ Schroder Bank & Trust
Company, as Agent.*
4.08.4 Pledge and Security Agreement dated as of May 24,1996 between
the Company and IBJ Schroder Bank & Trust Company, as Agent.*
10.01 Employment Agreement dated June 20, 1991 between the
Company and Marshall Tulin. (Exhibit 10.01 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1991, File No. 1-5354, is incorporated
herein by reference).+
10.01.1 Amendment dated as of September 1, 1993 to Employment
Agreement between the Company and Marshall Tulin.
(Exhibit 10.01.1 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1993, File
No. 1-5354, is incorporated herein by reference).+
10.02 Employment Agreement dated as of January 1, 1990
between the Company and John Tulin. (Exhibit 10-03 to
the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989, File No. 1-5354, is
incorporated herein by reference).+
10.02.1 Amendments dated as of September 1, 1993 and September
2, 1993, respectively, between the Company and John
Tulin. (Exhibit 10.02.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1993, File No. 1-5354, is incorporated herein by
reference).+
10.03 Employment Agreement dated as of March 1, 1989 between
the Company and James Tulin. (Exhibit 10.05 to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988, File No. 1-5354, is
incorporated herein by reference).+
10.03.1 Amendment dated as of January 4, 1990 to Employment
Agreement between the Company and James Tulin. (Exhibit
10.05 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989, File No.
1-5354, is incorporated herein by reference).+
10.03.2 Amendment dated as of September 1, 1993 to Employment
Agreement between the Company and James Tulin. (Exhibit
10.03.2 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, File No.
1-5354, is incorporated herein by reference).+
10.04 Amended and Restated 1981 Incentive Stock Option Plan
of the Company. (Exhibit 10.08 to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1987, File No.1-5354, is incorporated herein by
reference).+
<PAGE>
10.05 1987 Incentive Stock Option Plan of the Company.
(Annex 3 to the Proxy Statement/ Prospectus contained
in the Company's Registration Statement, File
No.33-19501, filed on January 4, 1988, is incorporated
herein by reference).+
10.06 1987 Incentive Share Plan of the Company. (Annex 2 to
the Proxy Statement/Prospectus contained in the
Company's Registration Statement, File No.33-19501,
filed on January 4, 1988, is incorporated herein by
reference).+
10.07 Form of Termination Agreement effective January 1, 1996
between the Company and each of the Company's officers
listed on Schedule A thereto.*+
10.09 Deferred Compensation Plan of the Company dated as of
January 1, 1987. (Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1988, File No. 1-5354, is incorporated herein by
reference).+
10.10 Employment Agreement dated as of January 15, 1992, as
amended, between the Company and Richard Byrnes.
(Exhibit 10.10 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994, File
No. 1-5354, is incorporated herein by reference).+
10.11 Agreement dated as of July 14, 1981 between the Company
and Marshall Tulin, John Tulin and Raymond Vise as
investment managers of the Company's pension plans.
(Exhibit 10.12(b) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1981,
File No. 1-5354, is incorporated herein by reference).
10.12 The New Swank, Inc. Retirement Plan Trust Agreement
dated as of January 1, 1994 among the Company and
Marshall Tulin, John Tulin and Raymond Vise, as
co-trustees. (Exhibit 10.12 to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1994, File No. 1-5354, is incorporated herein by
reference).
10.13 Plan of Recapitalization of the Company dated as of
September 28, 1987, as amended (Exhibit 2.01 to
Post-Effective Amendment No.1 to the Company's S-4
Registration Statement, File No.33-19501, filed on
February 9, 1988, is incorporated herein by reference).
<PAGE>
10.14 Key Employee Deferred Compensation Plan. (Exhibit
10.17 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, File No.
1-5354, is incorporated herein by reference).+
10.15 1994 Non-Employee Director Stock Option Plan. (Exhibit
10.15 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, File No.
1-5354, is incorporated herein by reference).
10.15.1 Stock Option Contracts dated as of December 31, 1994
between the Company and each of Mark Abramowitz,
William B. MacLeod and Raymond Vise. (Exhibit 10.15.1
to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994, File No. 1- 5354,
is incorporated herein by reference).+
10.15.2 Stock Option Contract dated as of April 20, 1995
between the Company and Raymond Vise. (The third
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1-5354,
is incorporated herein by reference).+
10.15.3 Stock Option Contract dated as of April 20, 1995
between the Company and William B. MacLeod. (The fourth
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1-5354,
is incorporated herein by reference).+
10.15.4 Stock Option Contract dated as of April 20, 1995
between the Company and Mark Abramowitz. (The fifth
exhibit to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, File No. 1-5354,
is incorporated herein by reference).+
10.15.5 Stock Option Contract between the Company and John
J. Macht.*+
11.01 Statement Re Computation of Earnings Per Share.*
21.01 Subsidiaries of the Company. (Exhibit 22.01 to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992, File No. 1-5354, is
incorporated herein by reference).
23.01 Consent of independent accountants.*
27 Financial Data Schedule.*
- ---------------------------
*Filed herewith.
+Management contract or compensatory plan or arrangement.
EXHIBIT 3.02
BY-LAWS As of 3/1/96
OF
SWANK, INC.
ARTICLE I
OFFICES
1. The principal office shall be in the City of Dover, County of Kent, State of
Delaware, and the name of the resident agent in charge thereof is The
Prentice-Hall Corporation System, Inc.
2. The corporation may also have an office or offices at such other place or
places, within or without the State of Delaware, as the Board of Directors may
from time to time designate or the business of the corporation may require.
ARTICLE II
Stockholders' Meetings
1. The annual meeting of the stockholders of the corporation shall be held at
such place within or without the State of Delaware and at such time and date as
may be determined by the Board of Directors and shall be designated in the
notice of said meeting, for the purpose of electing directors and for the
transaction of such other business as may be properly be brought before the
meeting.
If the election of directors shall not be held on the day designated
herein for any annual meeting, or at any adjournment thereof, the Board of
Directors shall cause the election to be held at a special meeting of the
stockholders as soon thereafter as conveniently may be. At such meeting the
stockholders may elect the directors and transact other business with the same
force and effect as at an annual meeting duly called and held.
2. Special meetings of the stockholders shall be held at the principal office of
the Corporation in the state of Delaware, or at such other place within or
without the State of Delaware as may be designated in the notice of said
meeting, upon call of the Board of Directors, and shall be called by the
President or Secretary at the request in writing of stockholders owning of
record at lease twenty-five per cent of the issued and outstanding capital stock
of the corporation entitled to vote thereat.
<PAGE>
Notice of the purpose or purposes and of the time and place within or
without the State of Delaware of every meeting of stockholders shall be given by
the President or a Vice President or the Secretary or an Assistant Secretary
either personally or by mail or by telegraph or by any other lawful means of
communication not less than ten days before the meeting, to each stockholder of
record entitled to vote at such meeting. If mailed, such notice shall be
directed to each stockholder at his address as it appears on the stock book
unless he shall have filed with the Secretary of the corporation a written
request that notices intended for him be mailed to some other address, in which
case it shall be mailed or transmitted to the address designated in such
request. Such further notice shall be given as may be required by law. Except as
otherwise expressly provided by statute, no publication of any notice of a
meeting of stockholders shall be required to be given to any stockholder who
shall attend such meeting in person or by proxy, or who shall, in person or by
attorney thereunto authorized, waive such notice in writing or by telegraph,
cable, radio, or wireless either before or after such meeting. Except where
otherwise required by law, notice of any adjourned meeting of the stockholders
of the corporation shall not be required to be given.
4. A quorum at all meetings of stockholders shall consist of the holders of
record of a majority of the shares of stock of the corporation, issued and
outstanding, entitled to vote at the meeting, present in person or by proxy,
except as otherwise provided by statute or the Certificate of Incorporation. In
the absence of a quorum at any meeting or any adjournment thereof, a majority of
those present in person or by proxy and entitled to vote may adjourn such
meeting from time to time. At any such adjourned meeting at which a quorum is
present any business may be transacted which might have been transacted at the
meeting as originally called.
5. Meetings of the stockholders shall be presided over by the President, or if
he is not present, by the Chairman of the Board, if any, nor if neither the
President nor the Chairman of the Board, if any, is present, by a chairman to be
chosen by a majority of the stockholders entitled to vote who are present in
person or by proxy at the meeting. The Secretary of the corporation, or in his
absence, an Assistant Secretary, shall act as secretary of every meeting, but if
neither the Secretary nor an Assistant Secretary is present, the meeting shall
choose any person present to act as secretary of the meeting.
6. Except as otherwise provided in the By-Laws, the Certificate of
Incorporation, or in the laws of the State of Delaware, at every meeting of the
stockholders, each stockholder of the Corporation entitled to vote at such
meeting shall have one vote in person or by proxy for each share of stock having
voting rights held by him and registered in his name on the books of the
corporation at the time of such meeting. Any vote on shares of stock of the
corporation may be given by the stockholder entitled thereto in person or by his
proxy appointed by an instrument in writing, subscribed by such stockholder or
by his attorney thereunto authorized and delivered to the secretary of the
meeting. Except as otherwise required by statute, by the Certificate of
Incorporation or these By-Laws, all matters coming before any meeting of the
stockholders shall be decided by a plurality vote of the stockholders of the
Corporation present in person or by proxy at such meeting and entitled to vote
thereat, a quorum being present. At all elections of directors the voting may
but need not be by ballot and a plurality of the votes cast thereat shall elect.
<PAGE>
7. A complete list of the stockholders entitled to vote at the ensuing election
of directors, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder
shall be prepared by the Secretary or other officer of the Corporation having
charge of the stock ledger. Such list shall be open to the examination of any
stockholder during ordinary business hours, for a period of at least ten days
prior to the election, either at a place within the city, town or village where
the election is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where said meeting is to be held,
and the list shall be produced and kept at the time and place of election during
the whole time thereof, and subject to the inspection of any stockholder who may
be present.
8. At all elections of directors, or in any other case in which inspectors may
act, two inspectors of election shall be appointed by the chairman of the
meeting, except as otherwise provided by law. The inspectors of election shall
take and subscribe an oath faithfully to execute the duties of inspectors at
such meeting with strict impartiality, and according to the best of their
ability, and shall take charge of the polls and after the vote shall have been
taken shall make a certificate of the result thereof. If there be a failure to
appoint inspectors or if any inspector appointed be absent or refuse to act, or
if his office becomes vacant, the stockholders present at the meeting, by a per
capita vote, may choose temporary inspectors of the number required.
ARTICLE III
Directors
1. The property, affairs and business of the corporation shall be managed by its
Board of Directors consisting of not less than three (3) nor more than
twenty-one (21) persons. The exact number of directors within the maximum
limitations specified shall be fixed from time to time by the Board of
Directors. The Board of Directors shall be divided into three classes, Class I,
Class II and Class III, which shall be as nearly equal in number as possible. At
the annual meeting of stockholders to be held in 1995, Class I directors shall
be elected for a term expiring at the annual meeting of stockholders to be held
in 1996, and Class II directors shall be elected for a term expiring at the
annual meeting of stockholders to be held in 1997, and Class III directors shall
be elected for a term expiring at the annual meeting of stockholders to be held
in 1998, with each such director to hold office until his successor shall be
elected and qualify. At each annual meeting of stockholders commencing with the
annual meeting of stockholders to be held in 1996, the successors of the class
of directors whose term expires at that annual meeting shall be elected for a
term expiring at the third successive annual meeting of stockholders and until
their respective successors shall be elected and qualify. Directors shall be
elected by plurality vote. No decrease in the number of directors constituting
the Board of Directors shall shorten the term of any incumbent director. Newly
created directorships shall be so apportioned among the classes of directors as
to make all such classes as nearly equal in number as possible.
2. Meetings of the Board of Directors shall be held at such place
within or outside the State of Delaware as may from time to time be fixes by
resolution of the Board of Directors, or as may be specified in the notice of
<PAGE>
the meeting. Regular meetings of the Board of Directors shall be held at such
times as may from time to time be fixed by resolution of the Board of Directors,
and special meetings may be held at any time upon the call of the President,
Secretary, or a majority of the directors by oral, telegraphic or written notice
duly served on or sent or mailed to each director not less than three days
before such meeting. A meeting of the Board of Directors may be held without
notice immediately after the annual meetings of stockholders. Notice need not be
given of regular meetings of the Board of Directors. Meetings may be held at any
time without notice if all the directors are present, or if at any time before
or after the meeting those not present waive notice of the meeting in writing.
3. A majority of the members of the Board of Directors then acting, but in no
event less than one-third nor less than two of the number of directors
authorized, acting at a meeting duly assembled, shall constitute a quorum for
the transaction of business, but if at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of those present may
adjourn the meeting, without further notice, from time to time until a quorum
shall have been obtained.
4. In case one or more vacancies shall occur in the Board of Directors by reason
of death, resignation, increase in the number of directors or otherwise except
in so far as otherwise provided in these By-Laws, the remaining directors,
although less than a quorum, may, by a majority vote, elect a successor or
successors for the unexpired term or terms.
5. An Executive Committee of two (2) or more directors may be designated by
resolution passed by a majority of the whole Board of Directors. The act of a
majority of the members of said Committee shall be the act of the Committee, and
said Committee may meet at stated times or on notice. Whenever the Board of
Directors is not in session or whenever a quorum of the Board of Directors fails
to attend any regular or special meeting of the Board, said Committee shall
advise with and aid the officers of the corporation in all matters concerning
its interests and the management of its business and affairs, and generally
perform such duties and exercise such powers as may be performed and exercised
by the Board of Directors from time to time, and the Executive Committee shall
have the power to authorize the seal of the Corporation to be affixed to all
papers which may require it and, in so far as may be permitted by law, exercise
the powers and perform the obligations of the Board of Directors. The Board of
Directors may also designate one or more committees in addition to the Executive
Committee by resolution or resolutions passed by a majority of the whole Board
of Directors; such committee or committees to consist of two (2) or more
directors of the corporation and, to the extent provided in the resolution or
resolutions designating them, shall have or may exercise the specific powers of
the Board of Directors in the management of the business and affairs of the
corporation. such committee or committees shall have such name or names as may
be determined from time to time by resolution adopted by the Board of Directors.
6. Any director may be removed only for cause and only at a special meeting of
the stockholders, duly called as provided in these By-Laws, by the affirmative
vote of the holders of a majority of the issued an outstanding shares of the
corporation's shares of capital stock entitled to vote for the election of
directors.
<PAGE>
7. Each director and officer now or hereafter in office and his heirs, executors
and administrators, and each director and officer and his heirs, executors and
administrators, who now acts, or shall hereafter act, at the request of the
corporation as a director or officer of another corporation controlled by the
corporation shall be indemnified by the corporation against all costs, expenses
and amounts or liability therefor, including counsel fees, reasonably incurred
by or imposed upon him in connection with or resulting from any suit, action,
proceeding or claim to which he may be made a party, or in which he may be or
become involved by reason of his being or having been such director or officer
or, subject to the provisions hereof, any settlement thereof, whether or not he
continues to be such director or officer at the time of incurring such costs,
expenses or amounts, provided that such indemnification shall not apply with
respect to any matter as to which such director or officer shall be finally
adjudged in such action, suit or proceeding to have been individually guilty of
wilful misfeasance or malfeasance in the performance of his duty as such
director or officer, and provided, further, that the indemnification herein
provided shall, with respect to any settlement of any such suit, action,
proceeding or claim, include reimbursement of any amounts paid and expenses
reasonably incurred in settling any such suit action, proceeding or claim, when,
in the judgment of the Board of Directors of the corporation, such settlement
and reimbursement appear to be for the best interests of the corporation. The
foregoing right of indemnification shall be in addition to and not exclusive of
any and all other rights to which any such director or officer may be entitled
by statute or under any By-Law, agreement, vote of stockholders or otherwise.
8. Any action required or permitted to be taken at any meeting of the Board of
Directors or any committee thereof may be taken without a meeting if prior to
such action a written consent thereto is signed by all members of the Board of
Directors or of the committee, as the case may be, and such written consent is
filed with the minutes of proceedings of the Board of Directors or the
committee.
9. Directors may, by resolution of the Board of Directors, be allowed a fixed
sum and expenses of attendance for attendance at regular or special meetings of
the Board of Directors; provided that noting herein contained shall be construed
to preclude any director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing committees, and
others who attend pursuant to direction, may, by vote of the Board of Directors,
be allowed a like fixed sum and expenses of attendance for attending committee
meetings.
ARTICLE IV
Officers
1. The officers of the corporation shall be chosen by the Board of Directors and
shall be a President, who shall be a director, one or more Vice Presidents, a
Secretary and a Treasurer. The Board of Directors may also appoint such
Assistant Secretaries, Assistant Treasurers and such other officers as it may
deem proper. The Board of Directors may elect from its members a Chairman of the
Board, who shall be an officer of the Corporation. The Board of Directors may
also designate one of the Vice Presidents to be Executive Vice President. Any
two or more officers may be held by the same person.
<PAGE>
2. The terms of office of all officers shall be one year and until their
respective successors are elected an qualify, but any officer may be removed
from office, either with or without cause, at any time by the affirmative vote
of a majority of the members of the Board of Directors then in office. A vacancy
in any office arising from any cause may be filled for the unexpired portion of
the term by the Board of Directors.
3. Unless otherwise ordered by the Board of Directors, the President shall have
full power and authority on behalf of the Corporation to attend and to act and
to vote at any meetings of security holders of the corporations in which the
corporation may hold securities, and at such meeting shall possess and may
exercise any and all rights and powers incident to the ownership of such
securities, and which as the owner thereof the Corporation might have possessed
and exercised, if present. The Board of Directors by resolution from time to
time may confer like powers upon any other person or persons.
ARTICLE V
Duties of Officers
1. The President shall preside at all meetings of stockholders and if all
meetings of the Board of Directors. He shall be the principal executive officer
of the corporation and as such shall have general and active direction of the
business of the corporation. He shall have such other duties and powers as may
be assigned to him from time to time by the Board of Directors.
2. The Chairman of the Board, if one be elected, shall, in the absence of the
President, preside at all meeting of the Board of Directors and at all meetings
of stockholders. He shall do and perform such other duties as may be assigned to
him from time to time by the Board of Directors.
3. Except as provided above, during the absence or disability of the President,
the Executive Vice President, if one be elected, shall exercise all the
functions of the President. Each Vice President shall have such powers and
discharge such duties as may be assigned to him from time to time by the Board
of Directors.
4. The Treasurer shall have the custody of all the funds and securities of the
corporation. When necessary or proper he shall endorse on behalf of the
corporation, for collection, checks, notes and other obligations and shall
deposit the same to the credit of the corporation in such bank, or banks, or
depositories as may be designated by the Board of Directors, or by any officer
acting under authority conferred by the Board of Directors. He shall enter
regularly in books to be kept for the purpose, a full and accurate account of
all moneys received and paid by him on account of the corporation. Whenever
required by the Board of Directors, he shall render an account of all his
transactions as Treasurer and of the financial condition of the corporation. He
shall at all reasonable times exhibit his books and accounts to any director of
the corporation upon application at the office of the corporation during
business hours and he shall perform all things incident to the position of
Treasurer, subject to the control of the
<PAGE>
Board of Directors. He shall give bond for the faithful discharge of his duties
if the Board of Directors so require. He shall do and perform such other duties
as may be assigned to him from time to time by the Board of Directors.
5. The Assistant Treasurers, in the order of their seniority, shall, in the
absence of or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer and shall perform such other duties as the Board of
Directors shall prescribe.
6. The Secretary shall attend all meetings of the stockholders and all meetings
of the Board of Directors, and record all votes and the minutes of all
proceedings in a book to be kept for that purpose; and shall perform like duties
for other committees when so required. He shall give, or cause to be given,
notice of all meetings of stockholders and of the Board of Directors and of
committees and shall perform such other duties as may be prescribed by the Board
of Directors. He shall keep in safe custody the seal of the corporation and
affix the same to any instrument whose execution has been authorized. He shall
be sworn to the faithful discharge of his duties. He shall do and perform such
other duties as by be assigned to him from time to time by the Board of
Directors.
7. The Assistant Secretaries, in the order of their seniority, shall in the
absence of or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties as the Board of
Directors shall prescribe.
8. In the case of absence or inability to act of any officer of the corporation
and of any person herein authorized to act in his place, the Board of Directors
may from time to time delegate the powers and duties of such officer to any
other officer or any director or any other person whom it may select.
9. Unless the Board of Directors shall otherwise direct, the salary of the
President and of the Chairman of the Board, if one be elected, shall be fixed by
the Board of Directors and the salaries of all other officers and employees be
fixed by the President.
ARTICLE VI
Certificate of Stock
1. The interest of each stockholder of the corporation shall be evidenced by
certificates for shares of stock, certifying the number of shares represented
thereby and in such form not inconsistent with the Certificate of Incorporation
as the Board of Directors may from time to time prescribe.
Transfers of shares of stock of the corporation shall be made on the
books of the corporation by the registered holder thereof, or by his attorney
thereunto authorized by power of attorney duly executed and filed with the
Secretary of the corporation, or with a transfer clerk or a transfer agent
appointed as in these By-Laws provided, and on surrender of the certificate or
certificates for such shares properly endorsed and the payment of all taxes
thereon. The person in whose name shares of stock stand on the books of the
corporation shall be deemed the owner thereof for purposes as regards
<PAGE>
the corporation. The Board may, from time to time, make such additional rules
and regulations as it may deem expedient, not inconsistent with these By-Laws,
concerning the issue, transfer, and registration of certificates for shares of
the capital stock of the corporation.
The certificates of stock shall be signed by the Chairman or Vice-
Chairman of the Board of Directors, or the President or any Vice-President and
by the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and sealed with the seal of the Corporation. Such seal may be a
facsimile, engraved or printed. If any such certificate is countersigned by a
transfer agent or a registrar other than the Corporation, any other signatures
on the certificate may be facsimile, engraved or printed. In case any such
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
the Corporation with the same effect as if he were such officer, transfer agent
or registrar at the date of issue.
2. The Board of Directors may, in its discretion, fix in advance a date, not
exceeding sixty (60) days preceding the date of any meeting of stockholders or
the date for the payment of any dividend or the date for the allotment of rights
or the date when any change or conversion or exchange of capital stock shall go
into effect or a date in connection with obtaining such consent, as a record
date for the determination of the stockholders entitled to notice of, and to
vote at, any such meeting, and any adjournment thereof, or entitled to receive
payment of any such dividend, or to any such allotment of rights, or to exercise
the rights in respect of any such change, conversion or exchange of capital
stock, or to give such consent, and in such case such stockholder, and only such
stockholders as shall be stockholders of record on the date so fixed, shall be
entitled to such notice of, and to vote at, such meeting and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment of
rights, or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any shares of stock on the books of the
corporation after any such record date fixed as aforesaid.
3. No certificate for shares of stock of the corporation shall be issued in
place of any certificate alleged to have been lost, destroyed or stolen, except
on production of such evidence of such loss, destruction or theft and on
delivery to the Corporation, if the Board of Directors shall so require, of a
bond of indemnity in such amount, upon such terms and secured by such surety as
the Board of Directors may in its discretion require.
4. The Board of Directors may appoint one or more transfer clerks or one or more
transfer agents and one or more registrars, and may require all certificates for
shares of stock to bear the signature or signatures of any of them.
5. The books, accounts and records of the corporation, except as may otherwise
be required by statue, may be kept outside the State of Delaware, at such place
or places as the Board of Directors may from time to time appoint. The Board of
Directors shall determine whether and to what extent the books, accounts and
records of the corporation, or any of them, other than the stock ledger, shall
be open to the inspection of stockholders, and no stockholder shall have any
right to inspect any book, account or record the Corporation except as conferred
by statue or by resolution of the Board of Directors.
<PAGE>
ARTICLE VII
Corporate Seal
The corporate seal of the corporation shall consist of two concentric
circles between which shall be the name of the Corporation and the words
"Corporate Seal" and in the center shall be inscribed the words "Delaware 1936".
ARTICLE VIII
Amendments
The By-Laws of the corporation shall be subject to alteration, amendment
or repeal, and new By-Laws not inconsistent with any provision of the
Certificate of Incorporation or statute, may be made, either by the affirmative
vote of the holders of a majority in interest of the stock of the corporation
present in person or by proxy at any annual or special meeting of the
stockholders and entitled to vote thereat a quorum being present, provided that
notice of such proposed action shall have been given in the call for the
meeting, or by the affirmative vote of a majority of the whole Board, given at
any regular or special meeting of the Board of Directors.
[Execution Copy]
************************************************************
SWANK, INC.
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of May 24, 1996
------------------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
************************************************************
<PAGE>
(ii)
(i)
TABLE OF CONTENTS
This Table of Contents is inserted for convenience of
reference only and shall not constitute a part of the Agreement to which it is
attached.
Section 1. Definitions and Accounting Matters............................ 1
1.01 Certain Defined Terms...................................... 1
1.02 Accounting Terms and Determinations........................ 9
Section 2. Loans......................................................... 10
2.01 Loans...................................................... 10
2.02 Facility Fees.............................................. 10
2.03 Remedies Independent....................................... 10
2.04 Notes...................................................... 10
Section 3. Payments and Prepayments of Principal......................... 11
3.01 Repayment of the Loans..................................... 11
3.02 Mandatory Prepayments...................................... 11
3.03 Optional Prepayments....................................... 12
Section 4. Interest...................................................... 12
Section 5. Payments; Pro Rata Treatment; Computations; Etc............... 13
5.01 Payments................................................... 13
5.02 Pro Rata Treatment......................................... 14
5.03 Computations............................................... 14
5.04 Minimum and Maximum Amounts................................ 14
5.05 Certain Notices............................................ 14
5.06 Non-Receipt of Funds by the Agent.......................... 14
5.07 Sharing of Payments, Etc................................... 15
Section 6. Yield Protection, Etc......................................... 16
Section 7. Conditions Precedent.......................................... 17
Section 8. Representations and Warranties................................ 22
8.01 Corporate Existence........................................ 22
8.02 Financial Condition........................................ 22
8.03 No Breach.................................................. 23
8.04 Corporate Action........................................... 23
8.05 Approvals.................................................. 23
8.06 IBJ Schroder Credit Agreement Representations.............. 24
8.07 Delivery of IBJ Schroder Credit Documents.................. 24
Section 9. Covenants..................................................... 24
9.01 IBJ Schroder Credit Agreement Covenants.................... 25
9.02 Modifications to IBJ Schroder Credit Documents............. 26
9.03 Insurance.................................................. 26
9.04 Environmental Reports...................................... 26
9.05 Indebtedness............................................... 26
9.06 Conduct of Business........................................ 27
9.07 Financial Statements....................................... 27
Section 10. Events of Default............................................ 27
Section 11. The Agent.................................................... 30
11.01 Appointment, Powers and Immunities........................ 30
11.02 Reliance by Agent......................................... 32
11.03 Defaults.................................................. 32
11.04 Rights as a Bank.......................................... 32
11.05 Indemnification........................................... 33
11.06 Non-Reliance on Agent and other Banks..................... 33
11.07 Failure to Act............................................ 34
11.08 Resignation or Removal of Agent........................... 34
11.09 Consents under Loan Documents............................. 35
11.10 Agency Fee................................................ 35
Section 12. Miscellaneous................................................ 35
12.01 Waivers................................................... 35
12.02 Notices................................................... 35
12.03 Expenses, Etc............................................. 36
12.04 Indemnification........................................... 36
12.05 Amendments, Etc........................................... 37
12.06 Successors and Assigns; Assignments and Participations.... 37
12.07 Survival.................................................. 40
12.08 Captions.................................................. 40
12.09 Counterparts.............................................. 40
12.10 Governing Law............................................. 40
12.11 Waiver of Jury Trial...................................... 40
12.12 Treatment of Certain Information; Confidentiality......... 40
<PAGE>
(iii)
Schedule I Other Indebtedness
Exhibit A Form of Note
Exhibit B Form of Security Agreement
Exhibit C Form of FSC Security Agreement
Exhibit D Form of Guarantee Agreement
Exhibit E-1 Copy of Mortgage (Connecticut)
Exhibit E-2 Copy of Modification and Confirmation
of Connecticut Mortgage (1995)
Exhibit E-3 Form of Modification and Confirmation
of Connecticut Mortgage
Exhibit F-1 Copy of Mortgage (Massachusetts)
Exhibit F-2 Copy of Modification and Confirmation
of Massachusetts Mortgage (1995)
Exhibit F-3 Form of Modification and Confirmation
of Massachusetts Mortgage
Exhibit G Form of Intercreditor Agreement
Exhibit H Form of Opinion of Counsel to Swank
Exhibit I Form of Opinion of Special New York Counsel to
Chase
Exhibit J Form of Assignment and Assumption
Exhibit K Form of Confidentiality Agreement
<PAGE>
- 44 -
Credit Agreement
(1)
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of May
24, 1996 between: SWANK, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware ("Swank"); each of the lenders
identified under the caption "BANKS" on the signature pages hereto and each
lender that becomes a "Bank" after the date hereof pursuant to Section 12.06(c)
hereof (individually, a "Bank" and, collectively, the "Banks"); and THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION), as administrative agent for the Banks (in
such capacity, together with its successors in such capacity, the "Agent").
Swank, the Banks and the Agent are party to an Amended and
Restated Credit Agreement dated as of July 20, 1995 (as modified and
supplemented and in effect immediately prior to the Effective Date referred to
below, the "1995 Credit Agreement"). The parties hereto now wish to provide for
the payment of all loans outstanding under the 1995 Credit Agreement in excess
of $4,000,000 and, after such payment, to amend and restate the 1995 Credit
Agreement in its entirety, it being the intention of the parties hereto that the
remaining loans outstanding under the 1995 Credit Agreement on the Effective
Date (as hereinafter defined), after giving effect to such payment, shall
continue and remain outstanding as "Loans" hereunder and not be repaid on the
Effective Date.
Accordingly, the parties hereto hereby agree that, the 1995
Credit Agreement shall as of the Effective Date (but subject to the satisfaction
of the conditions precedent set forth in Section 7 hereof), be amended and
restated in its entirety, as follows:
Section 1. Definitions and Accounting MattersDefinitions
and Accounting Matters.
1.01 Certain Defined TermsCertain Defined Terms. As used
herein, the following terms shall have the following meanings (all terms defined
in this Section 1.01 or in other provisions of this Agreement in the singular to
have the same meanings when used in the plural and vice versa):
"Applicable Margin" shall mean 2.50% per annum.
"Availability" shall mean, on any date, Undrawn Availability
under and as defined in the IBJ Schroder Credit Agreement as in effect on the
date hereof.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of
1978, as amended from time to time.
"Base Rate" shall mean for any day, a rate per annum equal to
the higher of (a) the Federal Funds Rate plus 1/2 of 1% or (b) the Prime Rate.
Each change in any interest rate provided for herein based upon the Base Rate
resulting from a change in the Base Rate shall take effect at the time of such
change in the Base Rate.
"Basic Documents" shall mean this Agreement, the Notes, the
other Loan Documents and the IBJ Schroder Credit Documents.
"Business Day" shall mean any day on which commercial banks
are not authorized or required to close in New York City.
"Capital Expenditures" shall mean any expenditure by Swank or
any of its Subsidiaries (whether paid in cash or accrued as a liability, by way
of the acquisition of the securities of any Person, the incurrence of Capital
Lease Obligations or otherwise, or any obligations to make any such expenditure)
in respect of the purchase or other acquisition of fixed or capital assets,
excluding (i) normal replacements and maintenance which are properly charged to
current operations in accordance with generally accepted accounting principles
and (ii) expenditures made for purposes of replacing items with respect to which
Swank has received insurance proceeds, to the extent such expenditures do not
exceed the aggregate amount of such proceeds.
"Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person 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 classified and accounted for as a capital lease on a balance
sheet of such Person under generally accepted accounting principles (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 generally accepted accounting principles (including such Statement No. 13).
"Cash Flow" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) net operating income
(calculated before taxes, Interest Expense, extraordinary and unusual items and
income or loss attributable to equity in affiliates) for such period plus (b)
depreciation and amortization (to the extent deducted in determining net
operating income) for such period.
"Casualty Event" shall mean any loss of or damage to, or any
condemnation or other taking of, any of the Trust Estate under and as defined in
either Mortgage for which Swank receives insurance proceeds or proceeds of a
condemnation award or other compensation.
"Chase" shall mean The Chase Manhattan Bank
(National Association).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean, collectively, the collateral security
under the Security Documents.
"Debt Service" shall mean, for any period, the sum, for the
Company and its Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), of the following: (a) all regularly
scheduled payments or prepayments of principal of Indebtedness (including,
without limitation, the principal component of any payments in respect of
Capital Lease Obligations but excluding payments and prepayments of the loans
under the IBJ Schroder Credit Agreement) made during such period plus (b) all
Interest Expense for such period.
"Default" shall mean an Event of Default or an event which
with notice or lapse of time or both would become an Event of Default.
"Dollars" and "$" shall mean lawful money of the United States
of America.
"Effective Date" shall mean the date on which all of the
conditions to effectiveness set forth in Section 7 hereof shall have been
satisfied or waived by the Banks and the Agent.
"Environmental Laws" shall mean any and all applicable
Federal, state and local laws, rules or regulations, and any orders or decrees,
in each case as now or hereafter in effect, relating to the regulation or
protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Event of Default" shall have the meaning assigned to such
term in Section 10 hereof.
"Excess Cash Flow" shall mean, for any period, the excess of
(a) Cash Flow for such period over (b) the sum of (i) Capital Expenditures made
during such period (except for any such Capital Expenditures to the extent
financed with the proceeds of Indebtedness, or Capital Lease Obligations,
incurred during such period) plus (ii) the aggregate amount of Debt Service for
such period plus (iii) the aggregate amount of taxes paid during such period.
"Federal Funds Rate" shall mean, for any day, the rate per
annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business Day
next succeeding such day, provided that (a) if such day is not a Business Day,
the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day as so published on the next succeeding Business
Day, and (b) if such rate is not so published for any day, the Federal Funds
Rate for such day shall be the average rate charged to Chase on such day on such
transactions as determined by the Agent.
"FSC" shall mean Swank Sales International (V.I.), Inc., a
Virgin Islands corporation.
"FSC Security Agreement" shall mean an Amended and Restated
Security Agreement between the FSC and the Agent in substantially the form of
Exhibit C hereto, as the same shall be modified and supplemented and in effect
from time to time.
"GAAP" shall mean generally accepted accounting principles in
the United Stated of America in effect from time to time.
"Guarantee Agreement" shall mean a Guarantee Agreement
substantially in the form of Exhibit D hereto between Marshall Tulin, John Tulin
and James Tulin, as Guarantors, and the Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Hazardous Material" shall mean, collectively, (a) any
petroleum or petroleum products, flammable explosives, radioactive materials,
friable asbestos, urea formaldehyde foam insulation, and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls
(PCB's), (b) any chemicals or other materials or substances defined as or
included in the definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "restricted hazardous
wastes", "toxic substances", "toxic pollutants", "contaminants", "pollutants" or
words of similar import under any Environmental Law and (c) any other chemical
or other material or substance, exposure to which is prohibited, limited or
regulated under any Environmental Law.
"IBJ Schroder" shall mean IBJ Schroder Bank & Trust Company, a
New York banking corporation.
"IBJ Schroder Credit Agreement" shall mean the Revolving
Credit and Security Agreement dated May 24, 1996 among Swank; the financial
institutions party thereto; IBJ Schroder and General Electric Capital
Corporation, as co-agents; and IBJ Schroder as administrative and collateral
monitoring agent.
"IBJ Schroder Credit Documents" shall mean, collectively, the
IBJ Schroder Credit Agreement and each Other Document (as defined in the IBJ
Schroder Credit Agreement).
"Indebtedness" shall mean, as to any Person: (i) indebtedness
of such Person for borrowed money (whether by loan or the issuance and sale of
debt securities) or for the deferred purchase or acquisition price of Property
or services, other than accounts payable (other than for borrowed money)
incurred in the ordinary course of business; (ii) indebtedness secured by a Lien
on the Property of such Person, whether or not the respective obligation so
secured has been assumed by such Person; (iii) 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; (iv) Capital
Lease Obligations of such Person; and (v) obligations of such Person in respect
of any Interest Rate Protection Agreement.
"Intercreditor Agreement" shall mean an Intercreditor
Agreement substantially in the form of Exhibit G hereto between the Agent and
each of the Banks hereunder, and the "ACM Agent", the "Co-Agents" and each of
the "Lenders" under the IBJ Schroder Credit Agreement, and acknowledged by the
Borrower, as the same shall be modified and in effect from time to time.
"Interest Expense" shall mean, for any period, the sum of the
following: (a) all interest in respect of Indebtedness accrued or capitalized
during such period (whether or not actually paid during such period) plus (b)
the net amounts payable (or minus the net amounts receivable) under Interest
Rate Protection Agreements accrued during such period (whether or not actually
paid or received during such period), provided that in determining Interest
Expense for any period, there shall be excluded the aggregate amount of interest
on premiums borrowed by Swank to pay for life insurance policies owned by Swank.
"Interest Rate Protection Agreement" shall mean, for any
Person, an interest rate swap, cap or collar agreement or similar arrangement
between such Person and one or more financial institutions providing for the
transfer or mitigation of interest risks either generally or under specific
contingencies.
"Lien" shall mean, with respect to any asset or revenue, any
mortgage, lien, pledge, charge, security interest or encumbrance of any kind in
respect of such asset or revenue. For the purposes of this Agreement, a Person
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.
"Loan Documents" shall mean this Agreement, the Notes, the
Security Agreement, the FSC Security Agreement, the Guarantee Agreement, the
Mortgages and the Intercreditor Agreement.
"Loans" shall mean loans provided for by Section 2.01 hereof.
"Majority Banks" shall mean Banks holding at least 63-1/3% of
the outstanding aggregate principal amount of the Loans.
"Material Adverse Effect" shall mean a material adverse effect
on (a) the Property, business (including its prospects), operations, financial
condition, liabilities or capitalization of Swank and its Subsidiaries taken as
a whole, (b) the validity or enforceability of any of the Basic Documents, (c)
the rights and remedies of the Banks and the Agent under any of the Loan
Documents, (d) the ability of Swank to make timely payment of the scheduled
payments of principal of or interest on the Loans or other amounts payable in
connection therewith or (e) the ability of Swank to perform any of its material
obligations under any of the Basic Documents.
"Mortgages" shall mean, collectively, each of the following
instruments:
(i) an Open-End Indenture of Mortgage, Assignment of Rents,
Security Agreement and Fixture Filing made as of December 22, 1992 by
Swank in favor of the Agent and covering property of Swank in Norwalk,
Connecticut, and recorded on December 23, 1992 at Volume 2738 Page 3,
in the office of Norwalk Land Records, Norwalk, Connecticut, a copy of
which is attached as Exhibit E-1 hereto, as modified and supplemented
by a Modification and Confirmation of Open-End Indenture of Mortgage,
Assignment of Rents, Security Agreement and Fixture Filing made as of
July 20, 1995 by Swank in favor of the Agent, a copy of which is
attached as Exhibit E-2 hereto, as the same shall be further modified
and supplemented by a Second Modification and Confirmation of
Connecticut Mortgage in substantially the form of Exhibit E-3 hereto
and
(ii) an Indenture of Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing made as of December 22, 1992 by Swank in
favor of the Agent and covering property of Swank in Attleboro,
Massachusetts, and recorded on December 23, 1992 at Book 5341 Page 60,
in Bristol County, a copy of which is attached as Exhibit F-1 hereto,
as modified and supplemented by a Modification and Confirmation of
Indenture of Mortgage, Assignment of Rents, Security Agreement and
Fixture Filing made as of July 20, 1995 by Swank in favor of the Agent,
a copy of which is attached as Exhibit F-2 hereto, as the same shall be
further modified and supplemented by a Second Modification and
Confirmation of Massachusetts Mortgage in substantially the form of
Exhibit F-3 hereto,
and in each case as the same shall be further modified and supplemented and in
effect from time to time.
"Notes" shall mean, the promissory notes provided for by
Section 2.04 hereof, and all promissory notes delivered in substitution or
exchange therefor, in each case as the same shall be modified and supplemented
and in effect from time to time.
"Permitted Investments" of any Person shall mean: (a) direct
obligations of the United States of America, or of any agency thereof, or
obligations guaranteed as to principal and interest by the United States of
America or any agency thereof, maturing not more than 365 days from the date of
acquisition thereof by such Person; (b) certificates of deposit issued by any
Bank or any other bank or trust company organized under the laws of the United
States of America or any state thereof and having capital, surplus and undivided
profits of at least $500,000,000; (c) commercial paper rated A-1 or P-2 or
better by Standard & Poor's Ratings Group, a Division of McGraw Hill, Inc. or
Moody's Investors Services, Inc., respectively, maturing not more than 90 days
from the date of acquisition thereof by such Person; and (d) securities issued
by any registered open-end mutual fund that has total assets of not less than
$1,000,000,000 and whose portfolios substantially consist of one or more of the
investments referred to in the foregoing clauses (a) through (c).
"Person" shall mean any individual, corporation, company,
voluntary association, partnership, joint venture, trust, unincorporated
organization or government (or any agency, instrumentality or political
subdivision thereof).
"Post-Default Rate" shall mean, in respect of any principal of
any Loan or any other amount payable by Swank under this Agreement or any
Security Document which is not paid when due (whether at stated maturity, by
acceleration or otherwise), a rate per annum equal to 2 1/2% plus the Base Rate
as in effect from time to time plus the Applicable Margin.
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at its principal office as its prime commercial lending rate.
Each change in any interest rate provided for herein based upon the Prime Rate
resulting from a change in the Prime Rate shall take effect at the time of such
change in the Prime Rate.
"Principal Payment Dates" shall mean (a) the Quarterly Dates
falling on or nearest to March 31, June 30, September 30 and December 31 of each
year, commencing on June 30, 1997 through and including March 31, 1999 and (b)
May 3, 1999.
"Property" shall mean any right or interest in or to property
of any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the last Business Day of each
March, June, September and December, the first of which shall be the first such
day after the date of this Agreement.
"Regulations A, G, T, U and X" shall mean Regulations A, G, T,
U and X of the Board of Governors of the Federal Reserve System (or any
successor) as the same may be modified respectively and supplemented and in
effect from time to time.
"Regulatory Change" shall mean, with respect to any Bank, any
change on or after the date of this Agreement in United States federal, state or
foreign laws or regulations or the adoption or making on or after such date of
any interpretations, directives or requests applying to a class of banks
including such Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Security Agreement" shall mean an Amended and Restated
Security Agreement between Swank and the Agent in substantially the form of
Exhibit B hereto, as the same shall be modified and supplemented and in effect
from time to time.
"Security Documents" shall mean, collectively, the Security
Agreement, the FSC Security Agreement, the Guarantee Agreement and the
Mortgages.
"Subsidiary" shall mean, with respect to any Person (the
"parent"), 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 the parent or one
or more of the Subsidiaries of the parent or by the parent and one or more of
the Subsidiaries of the parent.
1.02 Accounting Terms and DeterminationsAccounting Terms and
Determinations. All accounting terms used herein shall (except as otherwise
expressly provided herein) be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Banks hereunder shall be prepared, in accordance with generally accepted
accounting principles as in effect from time to time.
<PAGE>
Section 2. LoansLoans.
2.01 LoansLoans. On the Effective Date, the principal of the
"Loans" outstanding under the 1995 Credit Agreement in excess of $4,000,000
shall be repaid and thereafter, the remaining principal amount of such "Loans"
shall automatically, and without any action on the part of any Person, become
Loans of the Banks hereunder. On the Effective Date, all "Interest Periods" in
respect of "Eurodollar Loans" that are designated as Loans hereunder shall
automatically be terminated and any amount payable under Section 6.05 of the
1995 Credit Agreement as a result thereof (as if such "Eurodollar Loans" were
being paid in full on such date) shall be paid in full.
2.02 Facility FeesFacility Fees. On the Effective Date, and on
each anniversary thereof, Swank shall pay to the Agent for the account of each
Bank a facility fee in an amount equal to 2.00% of the principal amount of such
Bank's Loans outstanding on the Effective Date (after giving effect to payment
contemplated to occur hereunder on the Effective Date) or on such anniversary
date, as the case may be.
2.03 Remedies IndependentRemedies Independent. The amounts
payable by Swank at any time hereunder and under the Notes to each Bank shall be
separate and independent debts and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement and the Notes, and it shall not
be necessary for any other Bank or the Agent to consent to, or be joined as an
additional party in, any proceedings for such purposes, provided that nothing
herein shall permit any individual Bank to exercise any of the rights or
remedies set forth in Section 10 hereof to the extent that said Section provides
that such rights or remedies shall be exercised by the Agent or the Majority
Banks.
<PAGE>
2.04 NotesNotes.
(a) The Loans held by each Bank shall be evidenced by a single
promissory note of Swank in substantially the form of Exhibit A hereto, dated
the Effective Date, payable to the order of such Bank in an aggregate principal
amount equal to the principal amount of the Loans held by such Bank hereunder on
the Effective Date (after giving effect to payment contemplated to occur
hereunder on the Effective Date).
(b) The date and amount of each Loan of each Bank, and each
payment made on account of the principal thereof, shall be recorded by such Bank
on its books and, prior to any transfer of the Note held by it, endorsed by such
Bank on the schedule attached to such Note or any continuation thereof; provided
that the failure of such Bank to make any such recordation or endorsement shall
not affect the obligations of Swank to make a payment when due of any amount
owing hereunder or under such Note in respect of the Loans.
(c) No Bank shall be entitled to have its Notes subdivided, by
exchange for promissory note of lesser denominations or otherwise, except in
connection with a permitted assignment of all or any portion of such Bank's
relevant Loans and Notes pursuant to Section 12.06(c) hereof.
Section 3. Payments and Prepayments of PrincipalPayments and
Prepayments of Principal.
3.01 Repayment of the LoansRepayment of the Loans. Subject to
the prepayments of principal of Loans required pursuant to Section 3.02 hereof,
Swank will pay to the Agent for the account of the Banks the principal of the
Loans in quarterly installments on the Principal Payment Dates falling on or
nearest to the dates indicated below, as follows:
Principal Payment Date Amount of Installment ($)
---------------------- -------------------------
June 30, 1997 $ 200,000
September 30, 1997 $ 200,000
December 31, 1997 $ 200,000
March 31, 1998 $ 200,000
June 30, 1998 $ 200,000
September 30, 1998 $ 200,000
December 31, 1998 $ 200,000
March 31, 1999 $ 200,000
May 3, 1999 $2,400,000
3.02 Mandatory PrepaymentsMandatory Prepayments.
(a) Excess Cash Flow. Not later than the date 90 days after
the end of each fiscal year of the Company ending after the date hereof, the
Company shall prepay the Loans in an aggregate amount equal to the excess of (A)
25% of Excess Cash Flow for such fiscal year over (B) the aggregate amount of
prepayments of Loans made during such fiscal year pursuant to Section 3.03
hereof, such prepayment to be applied to the installments of the Loans in the
inverse order of maturity, provided that if on the date such prepayment shall be
required to be made (and after giving effect thereto), the aggregate
Availability under the IBJ Schroder Credit Agreement would be less than
$3,000,000 or any "Event of Default" shall have occurred and be continuing under
the IBJ Schroder Credit Agreement, then Swank shall not be required to make such
prepayment on such date, but shall instead make such prepayment on the first day
thereafter as such Availability shall be at least equal to such amount and no
such "Event of Default" shall exist.
(b) Casualty Events. If within 90 days of the occurrence of
any Casualty Event giving rise to the receipt by Swank of any proceeds of
insurance, compensation, awards, damages and other payments or relief Swank has
not applied such proceeds to the repair or replacement of the respective
Property damage which gives rise to such proceeds (or committed to apply such
proceeds to such repair or replacement pursuant to executed construction
contracts or equipment orders), Swank shall forthwith prepay the Loans, in an
aggregate amount equal to 100% of the amount of such proceeds not so applied (or
committed to be so applied), such prepayment to be applied to the installments
of the Loans in the inverse order of maturity.
3.03 Optional PrepaymentsOptional Prepayments. Subject to
Section 5.04 hereof, Swank shall have the right to prepay Loans without penalty
(but only with the consent of both Co-Agents under and as defined in the IBJ
Schroder Credit Agreement), at any time or from time to time, provided that: (a)
Swank shall give the Agent notice of each such prepayment as provided in Section
5.05 hereof (and, upon the date specified in any such notice of prepayment, the
amount to be prepaid shall become due and payable hereunder); and (b) such
prepayments to be applied to the installments of the Loans in the inverse order
of maturity.
Section 4. InterestInterest. Swank will pay to the Agent for
account of each Bank interest on the unpaid principal amount of each Loan held
by such Bank for the period from and including the date of such Loan to but
excluding the date such Loan shall be paid in full, at a rate per annum equal to
the Base Rate (as in effect from time to time) plus the Applicable Margin.
Notwithstanding the foregoing, Swank will pay to the Agent for account of each
Bank interest at the applicable Post-Default Rate on any principal of any Loan
held by such Bank and (to the fullest extent permitted by law) on any other
amount payable by Swank under this Agreement or the Notes to or for the account
of such Bank, that shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
commencing on the due date thereof until the same is paid in full. Accrued
interest on each Loan shall be payable (i) monthly on the last Business Day of
each month and (ii) upon the payment or prepayment thereof (but only on the
principal amount so paid or prepaid), except that interest payable at the
Post-Default Rate shall be payable from time to time on demand. Promptly after
the determination of any interest rate provided for herein or any change
therein, the Agent shall notify the Banks and Swank thereof.
Section 5. Payments; Pro Rata Treatment; Computations; Etc
Payments; Pro Rata Treatment;Computations; Etc.
5.01 PaymentsPayments. Except to the extent otherwise provided
herein, all payments of principal, interest and other amounts to be made by
Swank hereunder and under the Notes shall be made in Dollars, in immediately
available funds, to the Agent at its principal office, not later than 11:00 a.m.
New York time on the date on which such payment shall become due (each such
payment made after such time on such due date to be deemed to have been made on
the next succeeding Business Day). The Agent, or any Bank for whose account any
such payment is made, may (but shall not be obligated to) debit the amount of
any such payment which is not made by such time to any ordinary deposit account
of Swank with the Agent or such Bank, as the case may be. Swank shall, at the
time of making each payment hereunder or under any Note, specify to the Agent
the Loans or other amounts payable by Swank hereunder to which such payment is
to be applied (and, in the event that it fails to so specify or if an Event of
Default has occurred and is continuing, the Agent may apply such payment as it
may elect in its sole discretion, but subject to Section 5.02 hereof). Each
payment received by the Agent hereunder or under any Note for the account of a
Bank shall be paid promptly to such Bank, in immediately available funds. If the
due date of any payment hereunder or under any Note would otherwise fall on a
day which is not a Business Day, such date shall be extended to the next
succeeding Business Day and interest shall be payable for any principal so
extended for the period of such extension.
5.02 Pro Rata TreatmentPro Rata Treatment. Except to the
extent otherwise provided herein: (a) each payment by Swank of interest on Loans
shall be made to the Agent for the account of the Banks pro rata in accordance
with the respective unpaid principal amounts of the Loans held by the Banks; and
(b) each payment by Swank of principal of the Loans shall be made to the Agent
for the account of the Banks pro rata in accordance with the respective unpaid
principal amounts of such Loans held by the Banks.
5.03 ComputationsComputations. Facility fees shall be computed
on the basis of a year of 360 days and actual days elapsed (including the first
day but excluding the last day) occurring in the period for which payable, and
interest on Loans shall be computed on the basis of a year of 365 or 366 days,
as the case may be, and actual days elapsed (including the first day but
excluding the last day) occurring in the period for which payable.
5.04 Minimum and Maximum AmountsMinimum and Maximum Amounts.
Except for mandatory prepayments made pursuant to Section 3.02 hereof, each
partial prepayment of principal of Loans shall be in an aggregate amount at
least equal to $100,000.
5.05 Certain NoticesCertain Notices. Notices by Swank to the
Agent of optional prepayments of Loans shall be irrevocable and shall be
effective only if received by the Agent not later than 11:00 a.m. New York time
on the date of the relevant prepayment. Each such notice of optional prepayment
shall specify the amount (subject to Section 5.04 hereof) to be prepaid and the
date of optional prepayment (which shall be a Business Day). The Agent shall
promptly notify the Banks of the contents of each such notice.
5.06 Non-Receipt of Funds by the AgentNon-Receipt of Funds by
the Agent. Unless the Agent shall have been notified by Swank prior to the date
on which Swank is to make payment to the Agent for account of one or more of the
Banks hereunder (any such payment being herein called the "Required Payment"),
which notice shall be effective upon receipt, that Swank does not intend to make
the Required Payment to the Agent, the Agent may assume that the Required
Payment has been made and may, in reliance upon such assumption (but shall not
be required to), make the amount thereof available to the intended recipient(s)
on such date; and, if Swank has not in fact made the Required Payment to the
Agent, the recipient(s) of such payment shall, on demand, repay to the Agent the
amount so made available together with interest thereon in respect of each day
during the period commencing on the date (the "Advance Date") such amount was so
made available by the Agent until the date the Agent recovers such amount at a
rate per annum equal to the Federal Funds Rate for such day and, if such
recipient(s) shall fail promptly to make such payment, the Agent shall be
entitled to recover such amount, on demand, from Swank, together with interest
as aforesaid, provided that if neither the recipient(s) nor Swank shall return
the Required Payment to the Agent within three Business Days of the Advance
Date, then, retroactively to the Advance Date, Swank and the recipient(s) shall
each be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment at the Post-Default Rate (without duplication of the
obligation of Swank under Section 4 hereof to pay interest on the Required
Payment at the Post-Default Rate), it being understood that the return by the
recipient(s) of the Required Payment to the Agent shall not limit such
obligation of Swank under said Section 4 to pay interest at the Post-Default
Rate in respect of the Required Payment.
5.07 Sharing of Payments, Etc.Sharing of Payments, Etc.
(a) Swank agrees that, in addition to (and without limitation
of) any right of set-off, bankers' lien or counterclaim a Bank may otherwise
have, each Bank shall be entitled, at its option, to offset balances held by it
for the account of Swank at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Bank's Loans
hereunder or other obligation of Swank hereunder held by such Bank which is not
paid when due (regardless of whether such balances are then due to Swank), in
which case it shall promptly notify Swank and the Agent thereof, provided that
such Bank's failure to give such notice shall not affect the validity thereof.
(b) If a Bank shall obtain payment of any principal of or
interest on any Loan held by it to Swank under this Agreement or other
obligation of Swank held by such Bank hereunder, through the exercise of any
right of set-off, banker's lien, counterclaim or similar right or otherwise,
and, as a result of such payment, such Bank shall have received a greater
percentage of the amounts then due hereunder by Swank to such Bank than the
percentage received by any other Bank, it shall promptly purchase from such
other Banks participations in (or, if and to the extent specified by such Bank,
direct interests in) the Loans or other obligations of Swank held, by such other
Banks in such amounts, and make such other adjustments from time to time as
shall be equitable, to the end that all the Banks shall share the benefit of
such excess payment (net of any expenses which may be incurred by such Bank in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal and interest on the Loans or other obligations of Swank held by
each of the Banks. To such end all the Banks shall make appropriate adjustments
among themselves (by the resale of participations sold or otherwise) if such
payment is rescinded or must otherwise be restored.
(c) Swank agrees that any Bank so purchasing a participation
(or direct interest) in the Loans or other obligations of Swank held, by other
Banks may exercise all rights of set-off, bankers' lien, counterclaim or similar
rights with respect to such participation as fully as if such Bank were a direct
holder of Loans or other obligations of Swank in the amount of such
participation.
(d) Nothing contained herein shall require any Bank to
exercise any such right or shall affect the right of any Bank to exercise, and
retain the benefits of exercising, any such right with respect to any other
indebtedness or obligation of Swank. If under any applicable bankruptcy,
insolvency or other similar law, any Bank receives a secured claim in lieu of a
set-off to which this Section 5.07 applies, such Bank shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Banks entitled under this Section 5.07 to
share in the benefits of any recovery on such secured claim.
Section 6. Yield Protection, EtcYield Protection, Etc.
(a) Swank shall pay directly to each Bank from time to time on
request such amounts as such Bank may determine to be necessary to compensate
such Bank (or, without duplication, the bank holding company of which such Bank
is a subsidiary) for any costs that it determines are attributable to the
maintenance by such Bank, pursuant to any law or regulation or any
interpretation, directive or request (whether or not having the force of law and
whether or not failure to comply therewith would be unlawful) of any court or
governmental or monetary authority (i) following any Regulatory Change or (ii)
implementing any risk-based capital guideline or other requirement (whether or
not having the force of law and whether or not the failure to comply therewith
would be unlawful) hereafter issued by any government or governmental or
supervisory authority implementing at the national level the Basle Accord, of
capital in respect of its Loans (such compensation to include, without
limitation, an amount equal to any reduction of the rate of return on assets or
equity of such Bank (or such bank holding company) to a level below that which
such Bank (or such bank holding company) could have achieved but for such law,
regulation, interpretation, directive or request).
(b) Each Bank shall notify Swank of any event occurring after
the date hereof entitling such Bank to compensation under paragraph (a) of this
Section 6 as promptly as practicable, but in any event within 45 days, after
such Bank obtains actual knowledge thereof; provided that if any Bank fails to
give such notice within 45 days after it obtains actual knowledge of such an
event, such Bank shall, with respect to compensation payable pursuant to this
Section 6 in respect of any costs resulting from such event, only be entitled to
payment under this Section 6 for costs incurred from and after the date 45 days
prior to the date that such Bank does give such notice. Each Bank will furnish
to Swank a certificate setting forth the basis and amount of each request by
such Bank for compensation under paragraph (a) of this Section 6. Determinations
and allocations by any Bank for purposes of this Section 6 of the effect of
capital maintained pursuant to paragraph (a) of this Section 6, on its costs or
rate of return of maintaining Loans or its obligation to make Loans, or on
amounts receivable by it in respect of Loans, and of the amounts required to
compensate such Bank under this Section 6, shall be presumptively correct,
provided that such determinations and allocations are made on a reasonable
basis.
Section 7. Conditions PrecedentConditions Precedent. The
effectiveness of this Agreement (and the amendment and restatement of the 1995
Credit Agreement provided for hereby), is subject to (i) the condition precedent
that such effectiveness shall occur on or before May 31, 1996 and (ii) the
following additional conditions precedent, each of which shall have been
fulfilled to the satisfaction of each Bank:
(a) Corporate Documents. The Agent shall have received
certified copies of the charter and by-laws of Swank and the FSC (or a
certification to the effect that none of such instruments has been
modified since the Amendment Effective Date under and as defined in the
1995 Credit Agreement), and of all corporate authority for Swank and
the FSC (including, without limitation, board of director resolutions
and evidence of the incumbency, including specimen signatures, of
officers) with respect to the execution, delivery and performance of
such of the Basic Documents to which they are intended to be a party
and each other document to be delivered by Swank and the FSC from time
to time hereunder (and the Agent and each Bank may conclusively rely on
such certificate until it receives notice in writing to the contrary).
(b) Financial Officer Certificates. The Agent shall have
received a certificate of a senior financial officer of Swank to the
effect set forth in clauses (a) and (b) of the last paragraph of this
Section 7.
(c) Notes. The Agent shall have received the Note for each
Bank, in exchange for the Notes delivered pursuant to the 1995 Credit
Agreement, in each case duly completed and executed.
(d) Security Agreement. The Security Agreement, in
substantially the form of Exhibit B hereto, shall have been duly
executed and delivered by Swank and the Agent (and, in that connection,
each Bank hereby authorizes and instructs the Agent to execute and
deliver the Security Agreement), and Swank shall have taken such other
action (including, without limitation, delivering to the Agent for
filing, appropriately completed and duly executed copies of Uniform
Commercial Code financing statements) as the Agent shall have requested
in order to perfect the security interests created pursuant to the
Security Agreement.
(e) FSC Security Agreement. The FSC Security Agreement, in
substantially the form of Exhibit C hereto, shall have been duly
executed and delivered by the FSC and the Agent (and, in that
connection, each Bank hereby authorizes and instructs the Agent to
execute and deliver the FSC Security Agreement), and Swank and the FSC
each shall have taken such other action (including, without limitation,
delivering to the Agent for filing, appropriately completed and duly
executed copies of Uniform Commercial Code financing statements) as the
Agent shall have requested in order to perfect the security interests
created pursuant to the FSC Security Agreement.
(f) Guarantee Agreement. The Guarantee Agreement shall have
been duly executed and delivered by Marshall Tulin, John Tulin, James
Tulin and the Agent (and, in that connection, each Bank hereby
authorizes and instructs the Agent to execute and deliver such
Guarantee Agreement).
(g) Mortgages and Title Insurance. The Agent shall have
received the following documents, each duly executed (and, where
appropriate, acknowledged) by Persons satisfactory to the Agent:
(i) a Second Modification and Confirmation amending
each Mortgage, in substantially the form of Exhibits E-3 and
F-3 hereto, as applicable, duly executed and delivered by
Swank in recordable form (in such number of copies as the
Agent shall have requested) and, in that connection, each Bank
hereby authorizes and instructs the Agent to execute and
deliver each such Second Modification and Confirmation; and
(ii) a so-called "date-down" endorsement of the
existing title policies issued pursuant to the 1995 Credit
Agreement on forms of and issued by one or more Title
Companies, insuring the validity and priority of the Liens
created under such Mortgages (as each Mortgage is supplemented
by such Second Modification and Confirmation referred to in
clause (i) above), for amounts satisfactory to the Majority
Banks, subject only to such exceptions as are satisfactory to
the Majority Banks and, to the extent necessary under
applicable law, for filing in the appropriate county land
offices, Uniform Commercial Code financing statements covering
fixtures, in each case appropriately completed and duly
executed.
In addition, Swank shall have paid to the Title Companies all expenses
and premiums of the Title Companies in connection with the issuance of
such policies and in addition shall have paid to the Title Companies an
amount equal to the recording and stamp taxes payable in connection
with recording the Mortgages in the appropriate county land office.
(h) Intercreditor Agreement. The Intercreditor Agreement
shall have been duly executed and delivered by each of the parties
thereto.
(i) 1995 Credit Agreement. Swank shall have (i) paid all
amounts owing under the 1995 Credit Agreement (other than principal of
the "Loans" thereunder designated as Loans hereunder as provided in
Section 2.01 hereof), including all accrued and unpaid interest and all
amounts payable under Section 6.05 of the 1995 Credit Agreement as
provided in the last sentence of Section 2.01 hereof and (ii)
terminated any outstanding "Letters of Credit" under the 1995 Credit
Agreement.
(j) IBJ Schroder Credit Documents. The IBJ Schroder Credit
Documents shall have been executed and delivered and shall be in full
force and effect and the Agent shall have received copies thereof
(including, without limitation, any exhibits and schedules thereto), as
in effect on the Effective Date, and each of such instruments shall be
in form and substance satisfactory to each Bank, and the Agent shall
have received a copy of the opinion delivered by Parker Chapin Flattau
& Klimpl, LLP, special New York counsel to Swank, in connection with
the IBJ Schroder Credit Agreement, together with a letter authorizing
reliance thereon by the Agent and the Banks.
(k) Insurance. Swank shall have delivered to the Agent
certificates of insurance satisfactory to the Agent evidencing the
existence of all insurance required to be maintained by Swank pursuant
to Section 4.11 of the IBJ Schroder Credit Agreement as incorporated
herein pursuant to Section 9.03 hereof, shall have named the Agent as
loss payee thereunder in respect of any insurance covering Trust Estate
under and as defined in the Mortgages and shall have named the Agent as
an additional insured on all policies covering any other Collateral.
(l) Opinion of Counsel to Swank. The Agent shall have received
an opinion dated the Effective Date and addressed to the Agent and the
Banks, of Parker Chapin Flattau & Klimpl, LLP, special New York counsel
to Swank, in substantially the form of Exhibit H hereto (and in that
connection Swank hereby authorizes and directs such counsel to deliver
its opinion to the Banks and the Agent and agrees that the Banks and
the Agent are entitled to rely thereon).
(m) Opinion of Special New York Counsel to Chase. The Agent
shall have received an opinion of Milbank, Tweed, Hadley & McCloy,
special New York counsel to Chase, dated the Effective Date and
addressed to the Agent and the Banks substantially in the form of
Exhibit I hereto (and in that connection Chase hereby authorizes and
directs such counsel to deliver its opinion to the Banks and the Agent
and agrees that the Banks and the Agent are entitled to rely thereon).
(n) Opinions of Local Counsel. The Agent shall have received
opinions dated the Effective Date and addressed to the Agent and the
Banks, of Day, Berry & Howard, special Connecticut counsel to Chase and
of Hill & Barlow, special Massachusetts counsel to Swank, in each case
addressing such matters with respect to the Mortgages as any Bank or
the Agent shall reasonably request (and in that connection Swank hereby
authorizes and directs such counsel to deliver its opinion to the Banks
and the Agent and agrees that the Bank and the Agent are entitled to
rely thereon).
(o) Other Documents. The Agent shall have received such other
documents as any Bank or special New York counsel to Chase may
reasonably request.
The effectiveness of this Agreement (and the amendment and restatement of the
1995 Credit Agreement provided for hereby), is also subject to (i) the payment
by Swank of such fees as Swank shall have agreed to pay or deliver to any Bank
or the Agent in connection herewith, including, without limitation, the
reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase in connection with the negotiation, preparation, execution
and delivery of this Agreement and the Notes and the other Loan Documents (to
the extent that statements for such fees and expenses have been delivered to
Swank) and (ii) the conditions that, after giving effect to the transactions
contemplated to occur on the Effective Date: (a) no Default shall have occurred
and be continuing; and (b) the representations and warranties made by Swank in
each of the Loan Documents shall be true on and as of the Effective Date with
the same force and effect as if made on and as of the Effective Date (except to
the extent such representations and warranties expressly relate to an earlier
date).
Section 8. Representations and WarrantiesRepresentations and
Warranties. Swank represents and warrants to the Banks and the Agent that:
8.01 Corporate ExistenceCorporate Existence. Each of Swank and
its Subsidiaries: (a) is a corporation duly organized and validly existing under
the laws of the jurisdiction of its incorporation; (b) has all requisite
corporate power, and has all material governmental licenses, authorizations,
consents and approvals necessary to own its assets and carry on its business as
now being or as proposed to be conducted; and (c) is qualified to do business in
all jurisdictions in which the nature of the business conducted by it makes such
qualification necessary and where failure so to qualify would have a material
adverse effect on its financial condition, operations, prospects or business.
8.02 Financial ConditionFinancial Condition. Swank has
heretofore delivered to each of the Banks the unaudited consolidated balance
sheet of Swank and its Subsidiaries as of December 31, 1995 and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the fiscal year ended December 31, 1995 of Swank and its Subsidiaries
as at said date and for the fiscal year covered thereby, all in accordance with
generally accepted accounting principles and practices applied on a consistent
basis. Neither Swank nor any of its Subsidiaries had on any of said dates any
material contingent liabilities, material liabilities for taxes, unusual and
material forward or long-term commitments or material unrealized and anticipated
losses from any unfavorable commitments, except as referred to or reflected or
provided for in said balance sheets or the footnotes thereto as at said date.
Since December 31, 1995, there has been no material adverse change in the
consolidated financial condition, operations, or business (including the
prospects) of Swank and its Subsidiaries taken as a whole from that set forth in
said financial statements as at said date.
8.03 No BreachNo Breach. None of the execution and delivery of
the Basic Documents, the consummation of the transactions therein contemplated
or compliance with the terms and provisions thereof will conflict with or result
in a breach of, or require any consent under, the charter or by-laws of Swank or
any of its Subsidiaries, or any applicable law or regulation, or any order,
writ, injunction or decree of any court or governmental authority or agency, or
any agreement or instrument to which Swank or any of its Subsidiaries is a party
or by which any of them is bound or to which any of them is subject, or
constitute a default under any such agreement or instrument, or (except for the
Liens created pursuant to the Security Documents and the IBJ Schroder Credit
Documents) result in the creation or imposition of any Lien upon any of the
revenues or assets of Swank or any of its Subsidiaries pursuant to the terms of
any such agreement or instrument.
8.04 Corporate ActionCorporate Action. Swank has all necessary
corporate power and authority to execute, deliver and perform its obligations
under each of the Basic Documents to which it is a party; and the execution,
delivery and performance by Swank of each of the Basic Documents to which it is
a party have been duly authorized by all necessary corporate action on its part;
and this Agreement has been duly and validly executed and delivered by Swank and
constitutes, and on the Effective Date each of the other Basic Documents (in the
case of the Notes, for value) will constitute, the legal, valid and binding
obligation of Swank, enforceable in accordance with their respective terms,
except as the enforceability thereof may be limited by (a) bankruptcy,
insolvency, reorganization or moratorium or similar laws of general
applicability effecting the enforcement of creditors' rights and (b) the
application of general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
8.05 ApprovalsApprovals. No authorizations, approvals or
consents of, and no filings or registrations with, any governmental or
regulatory authority or agency are necessary for the execution, delivery or
performance by Swank of each of the Basic Documents to which it is a party or
for the validity or enforceability thereof, except for the filings and
recordings of the Liens to be created pursuant thereto.
8.06 IBJ Schroder Credit Agreement RepresentationsIBJ Schroder
Credit Agreement Representations. Each of the representations and warranties in
Section 5 (other than Section 5.18) of the IBJ Schroder Credit Agreement, as in
effect on the date hereof are true and correct. Without limiting the generality
of the foregoing, the above-mentioned provisions of the IBJ Schroder Credit
Agreement, together with related definitions and ancillary provisions and
schedules and exhibits, are hereby incorporated herein by reference, as if set
forth herein in full, mutatis mutandis; provided that, as incorporated herein,
(i) each reference therein to "this Agreement" or "Other Documents" shall be
deemed to be a reference to this Agreement and the Loan Documents, respectively,
(ii) each reference therein to "Borrower" shall be deemed to be a reference to
Swank, (iii) each reference therein to "ACM Agent" or "Co-Agents" or the like
(except for any reference to "ACM Agent" or Co-Agents" in clause (a) of the
definition of "Permitted Encumbrances" in Section 1.2 of the IBJ Schroder Credit
Agreement) shall be deemed to be a reference to the Agent, (iv) each reference
therein to "Lenders" or the like (except for any reference to "Lenders" in
clause (a) of the definition of "Permitted Encumbrances" in Section 1.2 of the
IBJ Schroder Credit Agreement) shall be deemed to be a reference to the Banks
and (v) each reference therein to "Collateral" shall be deemed to be a reference
to Collateral.
8.07 Delivery of IBJ Schroder Credit DocumentsDelivery of IBJ
Schroder Credit Documents. Swank has heretofore (or on the Effective Date will
have) delivered to the Agent and each Bank complete copies of each of the IBJ
Schroder Credit Documents (including all exhibits, schedules and disclosure
letters referred to therein or delivered pursuant thereto, if any) and all
amendments thereto, waivers relating thereto and other side letters or
agreements affecting the terms thereof. None of such documents or agreements has
been amended or supplemented, nor have any of the provisions thereof been
waived, except pursuant to a written agreement or instrument which has
heretofore (or on the Effective Date will have) been delivered to the Agent and
each Bank.
Section 9. CovenantsCovenants. Swank agrees that, so long as
any Loan is outstanding and until payment in full of all amounts payable by
Swank hereunder, unless the Majority Banks shall otherwise agree as contemplated
by Section 12.05 hereof:
9.01 IBJ Schroder Credit Agreement CovenantsIBJ Schroder
Credit Agreement Covenants.
(a) The Company agrees, for the benefit of the Banks and the
Agent hereunder, to perform, comply with and be bound by each of its covenants,
agreements and obligations contained in Sections 4.7 through 4.14 (inclusive),
Section 4.19, Sections 6.2 through 6.7 (inclusive), Sections 7.1 through 7.17
(inclusive), and Section 9 of the IBJ Schroder Credit Agreement, as in effect on
the date hereof and without giving effect to any modifications or supplements
thereto, or termination thereof, after the date hereof.
(b) The Company agrees, for the benefit of the Banks and the
Agent hereunder, to perform, comply with and be bound by each of its covenants,
agreements and obligations contained in Section 6.8 of the IBJ Schroder Credit
Agreement, as modified and supplemented and in effect from time to time, or as
last in effect in the event the IBJ Schroder Credit Agreement shall be
terminated.
(c) Without limiting the generality of the foregoing, the
provisions of the IBJ Schroder Credit Agreement referred to in paragraphs (a)
and (b) above, together with related definitions and ancillary provisions and
schedules and exhibits, are hereby incorporated herein by reference, as if set
forth herein in full, mutatis mutandis; provided that, as incorporated herein,
(i) each reference therein to "this Agreement" or "Other Documents" shall be
deemed to be a reference to this Agreement and the Loan Documents, respectively,
(ii) each reference therein to "Borrower" shall be deemed to be a reference to
Swank, (iii) each reference therein to "ACM Agent" or "Co-Agents" or the like
shall be deemed to be a reference to the Agent, (except for any reference to
"ACM Agent" or "Co-Agents" in clause (a) of the definition of "Permitted
Encumbrances" in Section 1.2 of the IBJ Schroder Credit Agreement), (iv) each
reference therein to "Lenders" or the like (except for any reference to
"Lenders" in clause (a) of the definition of "Permitted Encumbrances" in Section
1.2 or in Sections 7.8 or 7.17 of the IBJ Schroder Credit Agreement) shall be
deemed to be a reference to the Banks, (v) each reference therein to
"Collateral" shall be deemed to be a reference to Collateral and (vi) each
reference therein to "Term" shall be deemed to be a reference to the period from
and including the date hereof to and including the date upon which the principal
of, and interest on, the Loans and all other amounts payable hereunder shall
have been paid in full.
9.02 Modifications to IBJ Schroder Credit
DocumentsModifications to IBJ Schroder Credit Documents. Swank will not modify
or supplement the IBJ Schroder Credit Agreement in any respect if the effect
thereof would be either (x) to increase the effective rate of interest, letter
of credit fees or other amounts payable with respect to extensions of credit
thereunder (whether loans or letters of credit) or (y) to reduce the stated
amount of the "Commitments" thereunder without the prior written consent of each
of the Banks. In addition, Swank shall deliver to each of the Banks, as soon as
possible and in any event not later than the close of business of the effective
date of any modification, supplement or waiver of any provision of the IBJ
Schroder Credit Agreement, and of any side letters or agreements affecting the
terms thereof.
9.03 InsuranceInsurance. Swank will cause the Agent at all
times to be named as the loss payee under each policy of insurance maintained
pursuant to Section 4.11 of the IBJ Schroder Credit Agreement (as incorporated
by reference herein pursuant to Section 9.01 hereof) to the extent such
insurance covers any of the Trust Estate under and as defined in the Mortgages.
9.04 Environmental ReportsEnvironmental Reports. Swank will
deliver to each of the Banks on June 30 in each year, a report of a licensed
engineer (familiar with the identification of toxic and hazardous substances)
that, based upon a physical on-site inspection within the preceding 45 days of
the properties and facilities of Swank located in Norwalk, Connecticut and
Attleboro, Massachusetts covered by the Mortgages, Swank is in compliance
(except as otherwise noted therein) with applicable environmental regulations
with respect to its manufacturing operations at such facilities.
9.05 IndebtednessIndebtedness. Swank will not, and will not
permit any of its Subsidiaries to, create, incur or suffer to exist, any
Indebtedness, other than Indebtedness hereunder, Indebtedness outstanding on the
date hereof and listed in Schedule I hereto and Indebtedness under the IBJ
Schroder Credit Agreement (such Indebtedness under the IBJ Schroder Credit
Agreement not to exceed $27,500,000 at any one time outstanding).
9.06 Conduct of BusinessConduct of Business. Swank will not,
and will not permit any of it Subsidiaries to, engage to any substantial extent
in any new line or lines of business activity, and will continue to operate its
business substantially as presently conducted on the date hereof. Without
limiting the generality of the foregoing, Swank will not permit the amounts and
types of executive compensation to increase in any material respect above the
average levels of such compensation in effect during the fiscal years ended on
December 31, 1993, 1994 and 1995.
9.07 Financial StatementsFinancial Statements. Swank will
deliver to each of the Banks within 30 days after the Effective Date
consolidated statements of operations, changes in stockholders' equity and cash
flows of Swank and its Subsidiaries for the fiscal year ending on December 31,
1995 and the related consolidated balance sheet as at the end of such fiscal
year, setting forth in comparative form the corresponding figures for the
preceding fiscal year, and accompanied by an opinion thereon of Coopers &
Lybrand or other independent certified public accountants of recognized national
standing selected by Swank and reasonably satisfactory to the Majority Banks,
which opinion shall state that said consolidated financial statements fairly
present the consolidated financial position and results of operations of Swank
and its Subsidiaries as at the end of, and for, such fiscal year.
Section 10. Events of DefaultEvents of Default. If one or more
of the following events (herein called "Events of Default") shall occur and be
continuing:
(a) Swank shall default in the payment or prepayment of any
principal of or interest on any Loan or any other amount payable by it
hereunder when due; or
(b) Any representation or warranty made or deemed made in any
Loan Document, or in any certificate furnished to any Bank or the Agent
pursuant to the provisions of any Loan Document, shall prove to have
been false or misleading in any material respect as of the time made or
furnished; or
(c) Swank shall default in the performance of any of its
obligations under Section 6.8 of the IBJ Schroder Credit Agreement (as
incorporated by reference herein pursuant to Section 9.01 hereof) and
the same shall continue unremedied for a period of 30 or more days; or
(d) Swank shall default in the performance of any of its
obligations under Sections 7.1 through 7.8 (inclusive), Section 7.11 or
Section 7.12 of the IBJ Schroder Credit Agreement (as each of such
Sections is incorporated by reference herein pursuant to Section 9.01
hereof) or Sections 9.05 or 9.06 hereof; or Swank or the FSC shall
default in the performance of any of its other obligations under this
Agreement or any other Loan Document and such default shall continue
unremedied for a period of 30 days after notice thereof to Swank by the
Agent or any Bank (through the Agent); or
(e) Swank or any of its Subsidiaries (Swank and its
Subsidiaries being referred to in this Section 10 collectively as the
"Corporations") shall admit in writing its inability to, or be
generally unable to, pay its debts as such debts become due; or
(f) Any Corporation shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee or liquidator of itself or of all or a substantial part of its
Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code
(as now or hereafter in effect), (iv) file a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or readjustment of debts,
(v) fail to controvert in a timely and appropriate manner, or acquiesce
in writing to, any petition filed against it in an involuntary case
under the Bankruptcy Code, or (vi) take any corporate action for the
purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the
application or consent of a Corporation in any court of competent
jurisdiction, seeking (i) its liquidation, reorganization, dissolution
or winding-up, or the composition or readjustment of its debts, (ii)
the appointment of a trustee, receiver, custodian, liquidator or the
like for such Corporation or of all or any substantial part of its
assets, or (iii) similar relief in respect of such Corporation under
any law relating to bankruptcy, insolvency, reorganization, winding-up,
or composition or adjustment of debts, and such proceeding or case
shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 days; or an order for relief against
such Corporation shall be entered in an involuntary case under the
Bankruptcy Code; or
(h) A reasonable basis shall exist for the assertion against
Swank or any of its Subsidiaries of (or there shall have been asserted
against Swank or any of its Subsidiaries) claims or liabilities,
whether accrued, absolute or contingent, based on or arising from the
generation, storage, transport, handling or disposal of Hazardous
Materials by Swank or any of its Subsidiaries or affiliates, or any
predecessor in interest of Swank or any of its Subsidiaries or
affiliates, or relating to any site or facility owned, operated or
leased by Swank or any of its Subsidiaries or affiliates, or any such
predecessor, which claims or liabilities (insofar as they are payable
by Swank or any of its Subsidiaries but after deducting any portion
thereof which is reasonably expected to be paid by other creditworthy
Persons jointly and severally liable therefor), in the judgment of the
Majority Banks are reasonably likely to be determined adversely to
Swank or any of its Subsidiaries, and the amount thereof is, singly or
in the aggregate, reasonably likely to have a Material Adverse Effect;
or
(i) Except for any expiration or termination in accordance
with its terms or with the consent of the parties thereto, any of the
Security Documents shall be terminated, or shall cease to be in full
force and effect, for whatever reason; or
(j) Marshall Tulin, John Tulin and James Tulin (or their
respective estates and legatees), or trusts for the benefit of any of
their immediate family or descendants (which trusts are under the
control of Marshall, John or James Tulin), shall cease to own, on a
fully diluted basis, at least 1% of the issued and outstanding shares
of capital stock of Swank; or John Tulin shall cease to be actively
involved in the management of Swank and not replaced with a Person of
equivalent knowledge and experience satisfactory to the Majority Banks
within 60 days;
(k) Swank shall default in the payment when due of any
obligations under the IBJ Schroder Credit Agreement (whether at stated
maturity, mandatory prepayment, by acceleration or otherwise); or
(l) Without limiting the foregoing provisions of this Section
10, any "Event of Default" (as defined in the IBJ Schroder Credit
Agreement) referred to in Sections 10.6 through 10.17 thereof
(inclusive) shall occur and be continuing; or IBJ Schroder shall
terminate its "Commitment" (as defined in the IBJ Schroder Credit
Agreement) or shall commence the exercise of any of its rights and
remedies under the IBJ Schroder Credit Agreement or any agreement
providing for collateral security for the obligations of Swank and its
Subsidiaries under the IBJ Schroder Credit Agreement;
THEREUPON: the Agent may (and, if directed by the Majority Banks, shall) declare
the principal amount then outstanding of and the accrued interest on the Loans
and all other amounts payable by Swank hereunder in respect of the Loans and
under the Notes to be forthwith due and payable, whereupon such amounts shall be
and become immediately due and payable, without presentment, demand, protest or
other formalities of any kind, all of which are hereby expressly waived by
Swank; provided that in the case of the occurrence of an Event of Default
referred to in clause (f) or (g) of this Section 10 with respect to Swank, the
principal amount then outstanding of and the accrued interest on the Loans and
all other amounts payable by Swank hereunder in respect of the Loans and under
the Notes shall be and become automatically and immediately due and payable,
without presentment, demand, protest or other formalities of any kind, all of
which are hereby expressly waived by Swank.
Section 11. The AgentThe Agent.
11.01 Appointment, Powers and ImmunitiesAppointment, Powers
and Immunities. Each Bank hereby irrevocably appoints and authorizes the Agent
(subject to Section 11.08 hereof) to act as its agent hereunder and under the
other Loan Documents with such powers as are specifically delegated to the Agent
by the terms hereof and the other Loan Documents, together with such other
powers as are reasonably incidental thereto. The Agent (which term as used in
this sentence and in Section 11.05 and the first sentence of Section 11.06
hereof shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those
expressly set forth in this Agreement and in the other Loan Documents,
and shall not by reason of this Agreement or any other Loan Document be
a trustee for any Bank;
(b) shall not be responsible to the Banks for any recitals,
statements, representations or warranties contained in this Agreement
or in any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by
Swank or any other Person to perform any of its obligations hereunder
or thereunder;
(c) shall not, except to the extent expressly instructed by
the Majority Banks with respect to collateral security under the
Security Documents, be required to initiate or conduct any litigation
or collection proceedings hereunder or under any other Loan Document;
and
(d) shall not be responsible for any action taken or omitted
to be taken by it hereunder or under any other Loan Document or under
any other document or instrument referred to or provided for herein or
therein or in connection herewith or therewith, except for its own
gross negligence or willful misconduct.
The Agent may employ agents and attorneys-in-fact and shall not be responsible
for the negligence or misconduct of any such agents or attorneys-in-fact
selected by it in good faith. The Agent and Swank may deem and treat the payee
of a Note as the holder thereof for all purposes hereof unless and until a
notice of the assignment or transfer thereof shall have been filed with the
Agent, together with the consent of Swank to such assignment or transfer (to the
extent required by Section 12.06 hereof).
11.02 Reliance by AgentReliance by Agent. The Agent shall be
entitled to rely upon any certification, notice or other communication
(including any thereof by telephone, telex, telecopy, telegram or cable)
believed by it to be genuine and correct and to have been signed or sent by or
on behalf of the proper Person or Persons, and upon advice and statements of
legal counsel, independent accountants and other experts selected by the Agent.
As to any matters not expressly provided for by this Agreement or any other Loan
Document, the Agent shall in all cases be fully protected in acting, or in
refraining from acting, hereunder and thereunder in accordance with instructions
signed by the Majority Banks, and such instructions of the Majority Banks and
any action taken or failure to act pursuant thereto shall be binding on all of
the Banks.
11.03 DefaultsDefaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Agent has received
notice from a Bank or Swank specifying such Default and stating that such notice
is a "Notice of Default". In the event that the Agent receives such a notice of
the occurrence of a Default, the Agent shall give prompt notice thereof to the
Banks (and shall give each Bank prompt notice of each such non-payment). The
Agent shall (subject to Section 11.07 hereof) take such action with respect to
such Default under this Agreement and under the other Loan Documents as shall be
directed by the Majority Banks, provided that, unless and until the Agent shall
have received such directions, the Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default as it shall deem advisable in the best interests of the Banks.
11.04 Rights as a BankRights as a Bank. With respect to its
Loans, Chase in its capacity as a Bank hereunder shall have the same rights,
powers and obligations hereunder as any other Bank and may exercise the same as
though it were not acting as the Agent, and the term "Bank" or "Banks" shall,
unless the context otherwise indicates, include the Agent in its individual
capacity. The Agent and its affiliates may (without having to account therefor
to any Bank) accept deposits from, lend money to and generally engage in any
kind of banking, trust or other business with Swank (and any of its Subsidiaries
and affiliates) as if it were not acting as the Agent, and the Agent may accept
fees and other consideration from Swank (in addition to the agency fees and
arrangement fees heretofore agreed to between Swank and the Agent) for services
in connection with this Agreement or otherwise without having to account for the
same to the Banks.
11.05 IndemnificationIndemnification. The Banks agree to
indemnify the Agent (to the extent not reimbursed under Section 12.03 or 12.04
hereof but without limiting the obligations of Swank under said Sections 12.03
and 12.04), ratably in accordance with the aggregate principal amount of the
Loans held by the Banks, for any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind and nature whatsoever which may be imposed on, incurred by or
asserted against the Agent in any way relating to or arising out of this
Agreement or any other Loan Document or any other documents contemplated by or
referred to herein or therein or the transactions contemplated hereby or thereby
(including, without limitation, the costs and expenses which Swank is obligated
to pay under Sections 12.03 and 12.04 hereof and including also any payments
under any indemnity which the Agent is required to issue to any bank referred to
in Section 4.02 of the Security Agreement to which remittances in respect of
Accounts, as defined therein, are to be made but excluding, unless a Default has
occurred and is continuing, normal administrative costs and expenses incident to
the performance of its agency duties hereunder) or the enforcement of any of the
terms hereof or thereof or of any such other documents, provided that no Bank
shall be liable for any of the foregoing to the extent they arise from the gross
negligence or willful misconduct of the party to be indemnified.
11.06 Non-Reliance on Agent and other BanksNon-Reliance on
Agent and other Banks. Each Bank agrees that it has, independently and without
reliance on the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of Swank
and decision to enter into this Agreement and that it will, independently and
without reliance upon the Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own analysis and decisions in taking or not taking action under this Agreement
or any of the other Loan Documents. The Agent shall not be required to keep
itself informed as to the performance or observance by Swank of this Agreement
or any of the other Loan Documents or any other document referred to or provided
for herein or therein or to inspect the properties or books of Swank or any of
its Subsidiaries. Except for notices, reports and other documents and
information expressly required to be furnished to the Banks by the Agent
hereunder or under the other Loan Documents, the Agent shall not have any duty
or responsibility to provide any Bank with any credit or other information
concerning the affairs, financial condition or business of Swank or any of its
Subsidiaries or affiliates which may come into the possession of the Agent or
any of its affiliates.
11.07 Failure to ActFailure to Act. Except for action
expressly required of the Agent hereunder and the other Loan Documents, the
Agent shall in all cases be fully justified in failing or refusing to act
hereunder and thereunder unless it shall receive further assurances to its
satisfaction by the Banks of their indemnification obligations under Section
11.05 hereof against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action.
11.08 Resignation or Removal of AgentResignation or Removal of
Agent. Subject to the appointment and acceptance of a successor Agent as
provided below, the Agent may resign at any time by giving notice thereof to the
Banks and Swank, and the Agent may be removed at any time with or without cause
by the Majority Banks. Upon any such resignation or removal, the Majority Banks
shall have the right to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Majority Banks and shall have accepted such
appointment within 30 days after the retiring Agent's giving of notice of
resignation or the Majority Banks' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Banks, appoint a successor Agent, which
shall be a bank which has an office in New York, New York with a combined
capital and surplus of at least $500,000,000. Upon the acceptance of any
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights, powers, privileges
and duties of the retiring Agent, and the retiring or removed Agent shall be
discharged from its duties and obligations hereunder. After the retiring Agent's
resignation or removal hereunder as Agent, the provisions of this Section 11
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Agent.
11.09 Consents under Loan DocumentsConsents under Loan
Documents. The Agent may, with the prior consent of the Majority Banks (but not
otherwise), consent to any modification, supplement or waiver under any of the
Loan Documents, provided that, without the prior consent of each Bank, the Agent
shall not (except as provided herein or in the Security Documents) release any
collateral or otherwise terminate any Lien under any Loan Document providing for
collateral security, or agree to additional obligations being secured by such
collateral security, except that no such consent shall be required, and the
Agent is hereby authorized, to release any Lien covering Property which is the
subject of a disposition of Property permitted hereunder or to which the
Majority Banks have consented.
11.10 Agency FeeAgency Fee. Until the payment in full of the
principal of and interest on the Loans and all other amounts payable by Swank
hereunder, Swank will pay to the Agent an agency fee of $25,000 per annum, such
fee to be paid annually in advance on the Effective Date and on each anniversary
thereof, and (once paid) to be nonrefundable.
Section 12. MiscellaneousMiscellaneous.
12.01 WaiversWaivers. No failure on the part of the Agent or
any Bank to exercise and no delay in exercising, and no course of dealing with
respect to, any right, power or privilege under this Agreement or any Note shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege under this Agreement or any Note preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
12.02 NoticesNotices. All notices and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be given or made in writing (including, without limitation, by telecopy)
or delivered to the intended recipient at the "Address for Notices" specified
below its name on the signature pages hereto; or, as to any party, at such other
address as shall be designated by such party in a notice to each other party.
Except as otherwise provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telecopier during normal
business hours on any Business Day, or otherwise on the next succeeding Business
Day, or personally delivered or, in the case of a mailed notice, upon receipt,
in each case given or addressed as aforesaid.
12.03 Expenses, Etc.Expenses, Etc. Swank agrees to pay or
reimburse each of the Banks and the Agent for paying: (a) the reasonable fees
and expenses of local counsel retained in Connecticut and Massachusetts in
connection with the Mortgages, of special New York counsel to Chase, Milbank,
Tweed, Hadley & McCloy and of counsel for Fleet National Bank, in connection
with (i) the negotiation, preparation, execution and delivery of this Agreement
and the other Loan Documents and (ii) any modification, supplement or waiver of
any of the terms of this Agreement or any of the other Loan Documents; (b) all
reasonable costs and expense of the Banks and the Agent (including, without
limitation, reasonable counsels' fees) in connection with (i) any Default and
any enforcement or collection proceedings resulting therefrom or in connection
with the negotiation of any restructuring or "work-out" (whether or not
consummated), of the obligations of the Obligors hereunder and (ii) the
enforcement of this Section 12.03; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by any Loan Document or any other document referred to therein.
12.04 IndemnificationIndemnification. Swank shall, to the
fullest extent permitted by applicable law, indemnify the Agent and each Bank
and their respective directors, officers, employees, attorneys and agents from,
and hold each of them harmless against, any and all losses, liabilities, claims,
damages or expenses incurred by any of them (including, without limitation, any
and all losses, liabilities, claims, damages or expenses incurred by the Agent
to any Bank, whether or not the Agent or any Bank is a party thereto) arising
out of or by reason of any investigation or litigation or other proceedings
(including any threatened investigation or litigation or other proceedings)
relating to the Loans hereunder or any actual or proposed use by Swank or any of
its Subsidiaries of the proceeds of any of the Loans hereunder, including,
without limitation, the reasonable fees and disbursements of counsel incurred in
connection with any such investigation or litigation or other proceedings (but
excluding any such losses, liabilities, claims, damages or expenses incurred by
reason of the gross negligence or willful misconduct of the Person to be
indemnified).
12.05 Amendments, Etc.Amendments, Etc. Except as otherwise
expressly provided in this Agreement, any provision of this Agreement may be
modified or supplemented only by an instrument in writing signed by Swank and
the Majority Banks, or by Swank and the Agent acting with the consent of the
Majority Banks, and any provision of this Agreement may be waived by the
Majority Banks or by the Agent acting with the consent of the Majority Banks;
provided that: (a) no modification, supplement or waiver shall, unless by an
instrument signed by all of the Banks or by the Agent acting with the consent of
all of the Banks: (i) extend the date fixed for the payment of principal of or
interest on any Loan or any fee hereunder, (ii) reduce the amount of any such
payment of principal, (iii) reduce the rate at which interest is payable thereon
or any fee is payable hereunder, (iv) alter the rights or obligations of Swank
to prepay Loans, (v) alter the manner in which payments or prepayments of
principal, interest or other amounts hereunder shall be applied as between the
Banks, (vi) alter the terms of this Section 12.05, (vii) modify the definition
of the term "Majority Banks" or modify in any other manner the number or
percentage of the Banks required to make any determinations or waive any rights
hereunder or to modify any provision hereof, or (viii) waive any of the
conditions precedent set forth in Section 7 hereof; and (b) any modification or
supplement of Section 11 hereof, or of any of the rights or duties of the Agent
hereunder, shall require the consent of the Agent.
12.06 Successors and Assigns; Assignments and Participations
Successors and Assigns; Assignments and Participations.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
(b) Swank may not assign its rights or obligations hereunder
or under the Notes without the prior written consent of all of the Banks and the
Agent.
(c) Either Bank may assign its Loan and Note at any time in
whole (but not in part), provided that if any Bank (the "Offering Bank")
proposes to assign its Loan and Note it shall first offer to assign the same to
the other Bank (the "Offeree Bank") specifying the proposed purchase price
therefor (as a percentage of par, plus accrued interest, and taking into account
any incentive or other fees to be paid or transferred in connection therewith).
If on or before the date 10 Business Days after receipt by the Offeree Bank of
such offer the Offeree Bank shall not have accepted such offer (or, if the
Offeree Bank shall have accepted such offer but shall not have taken and paid
for such assignment within 10 Business Days of such acceptance), the Offering
Bank shall be entitled during the period of 30 Business Days thereafter to
assign its Loan and Note to any other Person for a purchase price not lower than
the purchase price offered to the Offeree Bank. In the event that the Offering
Bank shall not have assigned (and been paid for) its Loan and Note within such
30 Business Day period, the Offering Bank shall not be entitled thereafter to
assign its Loan and Note without again complying with the foregoing provisions
of this paragraph (c). Any assignee of the Loan and Note of either Bank
hereunder shall be bound by the provisions of this paragraph (c) with respect to
any future assignments by it.
Any assignment under this paragraph (c) shall be effected
pursuant to an Assignment and Assumption in the form of Exhibit J hereto. Upon
execution and delivery by the assignor and the assignee to Swank, the Agent and
Chase of such Assignment and Assumption, and upon consent thereto by Swank, the
Agent and Chase to the extent required above, the assignee shall have (unless
otherwise consented to by Swank, the Agent and Chase), the obligations, rights
and benefits of a Bank hereunder holding the Loan and Note assigned to (in
addition to the Loan, if any, theretofore held by such assignee). Upon each such
assignment the assigning Bank shall pay the Agent an assignment fee of $3,000.
(d) A Bank may sell or agree to sell to one or more other
Persons (each a "Participant") a participation in all or any part of any Loans
held by it, provided that such Participant shall not have any rights or
obligations under this Agreement or any Note or any other Loan Document (the
Participant's rights against such Bank in respect of such participation to be
those set forth in the agreements executed by such Bank in favor of the
Participant). All amounts payable by Swank to any Bank under Section 6 hereof in
respect of Loans held by it, shall be determined as if such Bank had not sold or
agreed to sell any participations in such Loans, and as if such Bank were
funding each such Loan in the same way that it is funding the portion of such
Loan in which no participations have been sold. In no event shall a Bank that
sells a participation agree with the Participant to take or refrain from taking
any action hereunder or under any other Loan Document except that such Bank may
agree with the Participant that it will not, without the consent of the
Participant, agree to (i) extend the date fixed for the payment of principal of
or interest on the related Loan or Loans or any portion of any fee hereunder
payable to the Participant, (ii) reduce the amount of any such payment of
principal or (iii) reduce the rate at which interest is payable thereon, or any
fee hereunder payable to the Participant, to a level below the rate at which the
Participant is entitled to receive such interest or fee.
(e) In addition to the assignments and participations
permitted under the foregoing provisions of this Section 11.06, any Bank may
(without notice to Swank, the Agent or any other Bank and without payment of any
fee) (i) assign and pledge all or any portion of its Loans and its Note to any
Federal Reserve Bank as collateral security pursuant to Regulation A and any
Operating Circular issued by such Federal Reserve Bank and (ii) assign all or
any portion of its rights under this Agreement and its Loans and its Note to an
affiliate. No such assignment shall release the assigning Bank from its
obligations hereunder.
(f) A Bank may furnish any information concerning Swank or any
of its Subsidiaries in the possession of such Bank from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 12.12(b) hereof.
(g) Anything in this Section 12.06 to the contrary
notwithstanding, no Bank may assign or participate any interest in any Loan held
by it hereunder to Swank or any of its affiliates or Subsidiaries without the
prior consent of each Bank.
12.07 SurvivalSurvival. The obligations of Swank under
Sections 6, 12.03 and 12.04 hereof shall survive the repayment of the Loans. In
addition, each representation and warranty made, or deemed to be made by Swank
herein or pursuant hereto shall survive the making of such representation and
warranty, and no Bank shall be deemed to have waived, by reason of this
Agreement becoming effective, any Default which may arise by reason of such
representation or warranty proving to have been false or misleading,
notwithstanding that such Bank or the Agent may have had notice or knowledge
(other than as disclosed in the schedules and annexes attached hereto and to the
other Loan Documents) or reason to believe that such representation or warranty
was false or misleading at the time of such effectiveness.
12.08 CaptionsCaptions. Captions and section headings
appearing herein are included solely for convenience of reference and are not
intended to affect the interpretation of any provision of this Agreement.
12.09 CounterpartsCounterparts. This Agreement may be executed
in any number of counterparts, all of which taken together shall constitute one
and the same instrument and any of the parties hereto may execute this Agreement
by signing any such counterpart.
12.10 Governing LawGoverning Law. This Agreement and the Notes
shall be governed by, and construed in accordance with, the law of the State of
New York.
12.11 Waiver of Jury TrialWaiver of Jury Trial. EACH OF SWANK,
THE AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.12 Treatment of Certain Information; Confidentiality
Treatment of Certain Information;Confidentiality.
(a) Swank acknowledges that from time to time financial
advisory, investment banking and other services may be offered or provided to
Swank or one or more of its Subsidiaries (in connection with this Agreement or
otherwise) by any Bank or by one or more subsidiaries or affiliates of such Bank
and Swank hereby authorizes each Bank to share any information delivered to such
Bank by Swank and its Subsidiaries pursuant to this Agreement, or in connection
with the decision of such Bank to enter into this Agreement, to any such
subsidiary or affiliate, it being understood that any such subsidiary or
affiliate receiving such information shall be bound by the provisions of
paragraph (b) below as if it were a Bank hereunder. Such authorization shall
survive the repayment of the Loans.
(b) Each Bank and the Agent agrees (on behalf of itself and
each of its affiliates, directors, officers, employees and representatives) to
use reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same nature
and in accordance with safe and sound banking practices, any non-public
information supplied to it by Swank pursuant to this Agreement that is
identified by Swank as being confidential at the time the same is delivered to
the Banks or the Agent, provided that nothing herein shall limit the disclosure
of any such information (i) after such information shall have become public
(other than through a violation of this Section 12.12), (ii) to the extent
required by statute, rule, regulation or judicial process, (iii) to counsel for
any of the Banks or the Agent, (iv) to bank examiners (or any other regulatory
authority having jurisdiction over any Bank or the Agent), or to auditors or
accountants, (v) to the Agent or any other Bank (or to Chase Securities, Inc.),
(vi) in connection with any litigation to which any one or more of the Banks or
the Agent is a party, or in connection with the enforcement of rights or
remedies hereunder or under any other Loan Document, (vii) to a subsidiary or
affiliate of such Bank as provided in paragraph (a) above or (viii) to any
assignee or participant (or prospective assignee or participant) so long as such
assignee or participant (or prospective assignee or participant) first executes
and delivers to the respective Bank a Confidentiality Agreement substantially in
the form of Exhibit K hereto (or first executes and delivers to such Bank an
acknowledgement to the effect that it is bound by the provisions of this Section
12.12(b)); provided, further, that in no event shall any Bank or the Agent be
obligated or required to return any materials furnished by Swank. The
obligations of any assignee that has executed a Confidentiality Agreement in the
form of Exhibit K hereto shall be superseded by this Section 12.12 upon the date
upon which such assignee becomes a Bank hereunder pursuant to Section 12.06(c)
hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Credit Agreement to be duly executed and delivered as of
the day and year first above written.
SWANK, INC.
By___________________________
Title:
Address for Notices:
90 Park Avenue
New York, New York 10016
Telecopy No.: (212) 867-0203
Attention: John Tulin
With a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: William D. Freedman, Esq.
<PAGE>
BANKS:
Loans THE CHASE MANHATTAN BANK
$2,000,000 (NATIONAL ASSOCIATION)
By_______________________________
Title:
Address for Notices:
1411 Broadway, Fifth Floor
New York, New York 10018
Telecopy No.: 212-391-7117
Attention: Tracy Van Riper
Loans FLEET NATIONAL BANK
$2,000,000
By_______________________________
Title:
By_______________________________
Title:
Address for Notices:
Fleet National Bank
111 Westminster Street
Providence, Rhode Island 02903-2305
Telecopy No.: (401) 751-1274
Attention: Robert T.P. Storer
<PAGE>
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By_______________________________
Title:
Address for Notices to
Chase as Agent:
The Chase Manhattan Bank
(National Association)
c/o Chemical Bank
Agent Bank Services
140 East 48th Street
29th Floor
New York, New York 10017
Telecopy No.: 212-622-0122
Amended and Restated Security Agreement
[Execution Copy]
AMENDED AND RESTATED SECURITY AGREEMENT
AMENDED AND RESTATED SECURITY AGREEMENT dated as of May 24,
1996, between SWANK, INC., a corporation duly organized and validly existing
under the laws of the State of Delaware ("Swank"), and THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), as agent for the Banks referred to below (in such
capacity, the "Agent").
Swank and the Agent are parties to a Security Agreement dated
as of December 22, 1992 (the "1992 Security Agreement"), pursuant to which Swank
pledged and granted a security interest in the Collateral (as defined therein)
as security for (i) obligations under the Credit Agreement dated as of December
22, 1992 (the "1992 Credit Agreement") between Swank, the lenders named therein
(the "Banks") and the Agent and (ii) obligations of Swank to the Banks in
respect of certain other indebtedness.
Swank, the Banks and the Agent amended and restated the 1992
Credit Agreement pursuant to an Amended and Restated Credit Agreement dated as
of July 20, 1995 (the "1995 Credit Agreement") and, concurrently with the
execution and delivery of the 1995 Credit Agreement, the 1992 Security Agreement
was amended to provide that the obligations of Swank under the 1992 Credit
Agreement as amended and restated by the 1995 Credit Agreement became "Secured
Obligations" entitled to the benefits and security of the 1992 Security
Agreement.
Concurrently with the execution and delivery of this Amended
and Restated Security Agreement, Swank, the Banks and the Agent are amending and
restating the 1995 Credit Agreement pursuant to a Second Amended and Restated
Credit Agreement dated as of May 24, 1996 (the 1995 Credit Agreement as so
amended and restated and as further modified, and supplemented and in effect
from time to time, being hereinafter called the "Credit Agreement").
To induce the Banks to amend and restate the 1995 Credit
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Swank and the Agent have agreed to
amend and restate the 1992 Security Agreement (as heretofore amended) in its
entirety as follows:
Section 1. Definitions. Except as expressly provided herein,
terms defined in the Credit Agreement are used herein as defined therein. In
addition, as used herein:
<PAGE>
- 2 -
Amended and Restated Security Agreement
"Accounts" shall have the meaning ascribed thereto in Section 3(d).
"Collateral" shall have the meaning ascribed thereto in Section 3.
"Collateral Account" shall have the meaning ascribed thereto in
Section 4.01.
"Collateral Account Date" shall have the meaning ascribed
thereto in Section 4.01.
"Documents" shall have the meaning ascribed thereto in Section 3(j).
"Equipment" shall have the meaning ascribed thereto in Section 3(h).
"Instruments" shall have the meaning ascribed thereto in Section 3(e).
<PAGE>
- 16 -
Amended and Restated Security Agreement
"Inventory Products" shall have the meaning ascribed thereto in
Section 3(f).
"Letter of Indemnity Obligations" shall mean all obligations
of Swank outstanding to The Chase Manhattan Bank (National Association)
arising in respect of letters of indemnity, steamship guaranties,
airway releases and similar undertakings issued by The Chase Manhattan
Bank (National Association) at any time (including at any time prior to
the execution and delivery hereof) to enable Swank to obtain delivery
of goods in the possession or control of air, marine, or other
carriers, in the absence of required documents.
"Patents" shall mean any and all patents and patent
applications of Swank, including, without limitation, the inventions
and improvements described and claimed therein and those patents listed
on Annex 1, attached hereto and made a part hereof, together with (a)
the reissues, divisions, continuations, renewals, extensions and
continuations-in-part thereof, (b) all income, royalties, damages and
payments now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past
or future infringements thereof, (c) the right to sue for past, present
and future infringements thereof, and (d) all rights corresponding
thereto throughout the world.
"Pledged Stock" shall have the meaning ascribed thereto in
Section 3(a).
"Related General Intangibles" shall mean all Patents and
Trademarks; all inventions, processes, production methods, proprietary
information, know-how and trade secrets used or useful in the
businesses of Swank; all trade names, service marks, logos, copyrights
and the like owned or used by Swank and used or useful in the
businesses of Swank and goodwill relating to the same including,
without limitation, the trade names, service marks, logos, and
copyrights listed on Annex 3, attached hereto and made a part hereof;
all licenses or other agreements granted to Swank with respect to any
of the foregoing, in each case whether now or hereafter owned or used
including, without limitation, the licenses or other agreements with
respect to the trade names, service marks, logos and copyrights listed
on Annex 4, attached hereto and made a part hereof; all information,
customer lists, identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer and
automatic machinery software and programs, and the like pertaining to
operations by Swank which pertain to any of the businesses of Swank;
all field repair data, sales data and other information relating to
sales or service of products now or hereafter manufactured and which
pertain to any of the businesses of Swank; all accounting information
which pertains to any of the businesses of Swank and all media in which
or on which any of the information or knowledge or data or records
which pertain to any of the businesses of Swank may be recorded or
stored and all computer programs used for the compilation or printout
of such information, knowledge, records or data; all licenses,
consents, permits, variances, certifications and approvals of
governmental agencies now or hereafter held by Swank pertaining to
operations now or hereafter conducted by Swank which pertain to any of
the businesses of Swank; and all causes of action, claims and
warranties now or hereafter owned or acquired by Swank.
"Secured Obligations" shall mean, collectively, (i) the
principal of and interest on the Loans, the Notes, and all other
amounts owing to the Banks by Swank under the Credit Agreement or
hereunder and (ii) Letter of Indemnity Obligations.
"Stock Collateral" shall have the meaning ascribed thereto in
Section 3(c).
"Trademarks" shall mean any and all of Swank's trademarks and
trademark applications, including, without limitation (A) any and all
trademarks and trademark registration numbers of Swank that are
identified on Annex 2, attached hereto and made a part hereof, and the
product lines and goodwill associated therewith and (B) any (1)
trademark or trademark application that, at any time on or after the
date hereof is (x) registered and received by or on behalf of Swank
with the United States Patent and Trademark Office or (y) maintained by
or on behalf of Swank with the United States Patent and Trademark
Office as its valid, effective and existing trademark and trademark
application, (2) trademark registration number under which any such
trademark and trademark application is registered with the United
States Patent and Trademark Office and (3) product lines and goodwill
associated therewith.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in the State of New York from time to time.
Section 2. Representations and Warranties. Swank represents
and warrants to the Banks and the Agent that (i) the Pledged Stock is duly
authorized, validly issued, fully paid and nonassessable, (ii) Swank is, and so
long as any of the Secured Obligations remain outstanding Swank will at all
times be, the sole beneficial owner of the Collateral and no Lien exists or will
exist upon any Collateral at any time, except for Liens permitted under Section
7.2 of the IBJ Schroder Credit Agreement, as incorporated by reference in the
Credit Agreement pursuant to Section 9.01(a) thereof, and except for the pledge
and security interest in favor of the Agent for the benefit of the Banks created
or provided for herein which pledge and security interest constitutes a first
priority perfected pledge and security interest in and to all of the Collateral,
subject to the Intercreditor Agreement, (iii) the Pledged Stock constitutes all
of the issued and outstanding shares of capital stock of any class of each
Subsidiary of Swank (other than Releve Accessories S.A. and Leather Concepts
S.A.), (iv) Annex 6 correctly lists all Pledged Stock outstanding on the date
hereof, correctly identifies the certificates evidencing such Pledged Stock, the
beneficial owner and registered shareholder of such Pledged Stock and the number
of shares held by each such beneficial owner and registered shareholder, (v)
Annex 1 hereto sets forth a complete and correct list of all United States
patents, and applications for United States letters patent owned by Swank, Annex
2 hereto sets forth a complete and correct list of all United States trademarks,
and trademark applications owned by Swank, Annex 3 hereto sets forth a complete
and correct list of all United States trade names, service marks, logos and
copyrights owned by Swank and Annex 4 hereto sets forth a complete and correct
list of all licenses or other agreements relating to United States trade names,
service marks, logos and copyrights, and (vi) any goods now or hereafter
produced by Swank included in the Collateral have been and will be produced in
compliance with the requirements of the Fair Labor Standards Act, as amended.
Section 3. Collateral. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, Swank hereby pledges and grants to the
Agent, for the benefit of the Banks as hereinafter provided, a security interest
in all of its right, title and interest in the following property, whether now
owned by Swank or hereafter acquired and whether now existing or hereafter
coming into existence (all being collectively referred to herein as
"Collateral"):
(a) all shares of capital stock of whatever class of
each Subsidiary of Swank (other than Releve Accessories S.A. and
Leather Concepts S.A.) including, without limitation, all shares listed
in Annex 6 hereto, together with in each case the certificates
evidencing the same, accompanied by undated stock powers duly executed
in blank (collectively, the "Pledged Stock");
(b) all shares, securities, moneys or property
representing a dividend on any of the Pledged Stock or representing a
distribution or return of capital upon or in respect of the Pledged
Stock, or resulting from a split-up, revision, reclassification or
other like change of the Pledged Stock or otherwise received in
exchange therefor, and any subscription warrants, rights or options
issued to the holders of, or otherwise in respect of, the Pledged
Stock;
(c) without affecting the obligations of Swank under
any provision prohibiting such action under the Credit Agreement, in
the event of any consolidation or merger in which any Subsidiary is not
the surviving corporation, all shares of each class of the capital
stock of the successor corporation (unless such successor corporation
is Swank itself) formed by or resulting from such consolidation or
merger (the Pledged Stock, together with all other certificates,
shares, securities, properties or moneys as may from time to time be
pledged hereunder pursuant to clause (a) or (b) above and this clause
(c) being herein collectively called the "Stock Collateral");
(d) all accounts and general intangibles (each as
defined in the Uniform Commercial Code) of Swank constituting any right
to the payment of money, including (but not limited to) all moneys due
and to become due to Swank in respect of any loans or advances or for
Inventory Products or Equipment or other goods sold or leased or for
services rendered, all moneys due and to become due to Swank under any
guarantee (including a letter of credit) of the purchase price of
Inventory Products or Equipment sold by Swank and all tax refunds (such
accounts, general intangibles and moneys due and to become due being
herein called collectively "Accounts");
(e) all instruments, negotiable documents, chattel
paper or letters of credit (each as defined in the Uniform Commercial
Code) evidencing, representing, arising from or existing in respect of,
relating to, securing or otherwise supporting the payment of, any of
the Accounts, including (but not limited to) promissory notes, drafts,
bills of exchange and trade acceptances (herein collectively called
"Instruments");
(f) all inventory (as defined in the Uniform
Commercial Code) of Swank, including all goods obtained by Swank in
exchange for such inventory, and any products made or processed from
such inventory including all substances, if any, commingled therewith
or added thereto (herein collectively called "Inventory Products");
(g) all Related General Intangibles and all other
general intangibles not constituting Related General Intangibles or
Accounts;
(h)all equipment (as defined in the Uniform
Commercial Code) of Swank, including all motor vehicles, trucks and
trailers (herein collectively called "Equipment");
(i) each contract and other agreement relating to the
sale or other disposition of Inventory Products or Equipment;
(j) all documents of title (as defined in the Uniform
Commercial Code) or other receipts covering, evidencing or representing
Inventory Products or Equipment (herein collectively called
"Documents");
(k) all rights, claims and benefits of Swank against
any Person arising out of, relating to or in connection with Inventory
Products or Equipment purchased by Swank, including, without
limitation, any such rights, claims or benefits against any Person
storing or transporting such Inventory Products or Equipment;
(l) the balance from time to time in the Collateral
Account; and
(m) all proceeds, products and accessions of and to
any of the property described in clauses (a) through (l) above in this
Section 3 (including, without limitation, any proceeds of insurance
thereon), and, to the extent related to any property described in said
clauses or above in this clause (m), all books, correspondence, credit
files, records, invoices and other papers, including without limitation
all tapes, cards, computer runs and other papers and documents in the
possession or under the control of Swank or any computer bureau or
service company from time to time acting for Swank.
Section 4. Cash Proceeds of Collateral.
4.01 Collateral Account. There is hereby established with the
Agent a cash collateral account (the "Collateral Account") in the name and under
the control of the Agent into which, subject to the Intercreditor Agreement,
Swank may from time to time deposit any additional amounts which it wishes to
pledge to the Agent for the benefit of the Banks as additional collateral
security hereunder and into which, commencing with the date (the "Collateral
Account Date") on which the Majority Banks (through the Agent) shall give Swank
notice that they deem the same to be reasonable and appropriate, there shall be
deposited, subject to the Intercreditor Agreement, from time to time the cash
proceeds of any of the Collateral required to be delivered to the Agent pursuant
hereto. The balance from time to time in the Collateral Account shall, subject
to the Intercreditor Agreement, constitute part of the Collateral hereunder and
shall not constitute payment of the Secured Obligations until applied as
hereinafter provided. Except as expressly provided in the next sentence, the
Agent shall, subject to the Intercreditor Agreement, remit the collected balance
outstanding to the credit of the Collateral Account to or upon the order of
Swank as Swank shall from time to time instruct. However, at any time following
the occurrence and during the continuance of an Event of Default, the Agent may,
(and, if instructed by the Majority Banks, shall), subject to the Intercreditor
Agreement, in its (or their) discretion apply or cause to be applied (subject to
collection) the balance from time to time standing to the credit of the
Collateral Account to the payment of the Secured Obligations in the manner
specified in Section 5.10. The balance from time to time in the Collateral
Account shall be subject to withdrawal only as provided herein.
4.02 Proceeds of Accounts. Swank shall, subject to the
Intercreditor Agreement, commencing with the Collateral Account Date, instruct
all account debtors and other Persons obligated in respect of all Accounts to
make all payments in respect of the Accounts either (i) directly to the Agent
(by instructing that such payments be remitted to a post office box which shall
be in the name and under the control of the Agent) or (ii) to one or more other
banks in any state in the United States (by instructing that such payments be
remitted to a post office box which shall be in the name and under the control
of the Agent) under arrangements, in form and substance satisfactory to the
Agent pursuant to which Swank shall have irrevocably instructed such other bank
(and such other bank shall have agreed) to remit all proceeds of such payments
directly to the Agent for deposit into the Collateral Account. All payments made
to the Agent, as provided in the preceding sentence, shall be immediately
deposited in the Collateral Account. In addition to the foregoing, Swank agrees
that if after the Collateral Account Date the proceeds of any Collateral
hereunder (including the payments made in respect of Accounts) shall be received
by it, Swank shall as promptly as possible deposit such proceeds into the
Collateral Account. Until so deposited, all such proceeds shall be held in trust
by Swank for and as the property of the Agent and shall not be commingled with
any other funds or property of Swank.
First, to the payment of the costs and expenses of
such collection, sale or other realization, including
reasonable compensation to the Agent and its agents and
counsel, and all expenses, and advances made or incurred by
the Agent in connection therewith;
Second, to the payment in full of the Secured
Obligations (other than Letter of Indemnity Obligations in
excess of $1,000,000 in the aggregate), in each case equally
and ratably in accordance with the respective amounts thereof
then due and owing or as the Banks holding the same may
otherwise agree;
Third, to the payment in full of Letter of Indemnity
Obligations in excess of $1,000,000 in the aggregate; and
Finally, to the payment to Swank, or its successors
or assigns, or as a court of competent jurisdiction may
direct, of any surplus then remaining from such proceeds.
As used in this Section 5, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of Swank or any issuer of or obligor on any of the
Collateral.
5.11 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Agent is hereby appointed the attorney-in-fact of Swank for the
purpose of carrying out the provisions of this Section 5 and taking any action
and executing any instruments which the Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest, provided that the Agent shall not take
any action pursuant to the authority granted to it in this Section 5.11 without
first notifying Swank thereof. Without limiting the generality of the foregoing,
so long as the Agent shall be entitled under this Section 5 to make collections
in respect of the Collateral, the Agent shall have the right and power to
receive, endorse and collect all checks made payable to the order of Swank
representing any dividend, payment, or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
5.12 No Waiver. No failure on the part of the Agent or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
5.13 Termination. When all Secured Obligations shall have been
paid in full, this Agreement shall terminate, and the Agent shall forthwith
cause to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, any remaining Collateral and
money received in respect thereof, to or on the order of Swank and to be
released and canceled all licenses and rights referred to in Section 5.05(1).
5.14 Expenses. Swank agrees to pay to the Agent all reasonable
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of this
Section 5, or performance by the Agent of any obligations of Swank in respect of
the Collateral which Swank has failed or refused to perform, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Agent in respect
thereof, by litigation or otherwise, including expenses of insurance, and all
such expenses shall be Secured Obligations to the Agent secured under Section 3
hereof.
5.15 Further Assurances. Swank agrees that, from time to time
upon the written request of the Agent, Swank will execute and deliver such
further documents and do such other acts and things as the Agent may reasonably
request in order fully to effect the purposes of this Agreement.
Section 6. Miscellaneous.
6.01 Financing Statements. Prior to or concurrently with the
execution and delivery of this Agreement, Swank shall, subject to the
Intercreditor Agreement, file such financing statements and other documents in
such offices, cause the Agent (to the extent requested by any Bank) to be listed
as the lienholder on all certificates of title relating to vehicles owned by
Swank and give notice to such Persons, as the Agent may request to perfect the
security interests granted by Section 3 of this Agreement.
6.02 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, provided that as
to Collateral located in any jurisdiction other than New York, the Agent shall
have all the rights to which a secured party under the laws of such jurisdiction
is entitled.
6.03 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telexed, telecopied, telegraphed, cabled or
delivered to the intended recipient at its address or telex number specified
pursuant to Section 12.02 of the Credit Agreement and shall be deemed to have
been given at the times specified in said Section 12.02.
6.04 Waivers, etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by Swank and
the Agent (with the consent of the Banks as specified in Section 11.09 of the
Credit Agreement). Any such amendment or waiver shall be binding upon the Agent
and each Bank, each subsequent holder of any Secured Obligation, and each other
party to this Agreement.
6.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of Swank,
the Agent, the Banks and each subsequent holder of the Secured Obligations
(provided, however, that Swank shall not assign or transfer its rights hereunder
without the prior written consent of the Banks).
6.06 Counterparts. This Agreement may be executed in one or
more counterparts and all of such counterparts taken together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Security Agreement to be duly executed as of the day and
year first above written.
SWANK, INC.
By_________________________
Title:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By_________________________
Title:
AMENDED AND RESTATED FSC SECURITY AGREEMENT
AMENDED AND RESTATED FSC SECURITY AGREEMENT dated as of May
24, 1996, between SWANK SALES INTERNATIONAL (V.I.), INC., a corporation duly
organized and validly existing under the laws of the Virgin Islands of the
United States ("FSC"), and THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), as
agent for the Banks referred to below (in such capacity, the "Agent").
The FSC and the Agent are parties to a FSC Security Agreement
dated as of December 22, 1992 (the "1992 FSC Security Agreement"), pursuant to
which the FSC guaranteed, and pledged and granted a security interest in the
Collateral (as defined therein) as security for, (i) obligations under the
Credit Agreement dated as of December 22, 1992 (the "1992 Credit Agreement")
between Swank, Inc., a Delaware corporation ("Swank"), the lenders named therein
(the "Banks") and the Agent and (ii) obligations of Swank to the Banks in
respect of certain other indebtedness.
Swank, the Banks and the Agent amended and restated the 1992
Credit Agreement pursuant to an Amended and Restated Credit Agreement dated as
of July 20, 1995 (the "1995 Credit Agreement") and, concurrently with the
execution and delivery of the 1995 Credit Agreement, the 1992 FSC Security
Agreement was amended to provide that the obligations of Swank under the 1992
Credit Agreement as amended and restated by the 1995 Credit Agreement became
"Guaranteed Obligations" and "Secured Obligations" under the 1992 FSC Security
Agreement.
Concurrently with the execution and delivery of this Amended
and Restated FSC Security Agreement, (i) Swank, the Banks and the Agent are
amending and restating the 1995 Credit Agreement pursuant to a Second Amended
and Restated Credit Agreement dated as of May 24, 1996 (the 1995 Credit
Agreement as amended and restated and as further modified and supplemented and
in effect from time to time being hereinafter called the "Credit Agreement") and
(ii) Swank and the Agent are amending and restating the Security Agreement dated
as of December 22, 1995 (executed and delivered concurrently with the 1992
Credit Agreement) pursuant to and Amended and Restated Security Agreement dated
as May 24, 1996 (such Amended and Restated Security Agreement, as modified and
supplemented and in effect from time to time, being herein called the "Swank
Security Agreement").
<PAGE>
- 13 -
Amended and Restated FSC Security Agreement
To induce the Banks to amend and restate the 1995 Credit
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the FSC and the Agent have agreed
to amend and restate the 1992 Security Agreement (as heretofore amended) in its
entirety as follows:
Section 1. Definitions. Except as expressly provided herein,
terms defined in the Swank Security Agreement (including terms defined in the
Credit Agreement therein referred to and incorporated by reference therein) are
used herein as defined therein. In addition, as used herein, the following terms
shall have the following respective meanings:
"Accounts" shall have the meaning ascribed thereto in Section 4(a).
"Collateral" shall have the meaning ascribed thereto in Section 4.
"Guaranteed Obligations" shall have the meaning ascribed thereto in Section 3.
"Instruments" shall have the meaning ascribed thereto in Section 4(b).
"Letter of Indemnity Obligations" shall mean all obligations
of Swank at any time outstanding to The Chase Manhattan Bank (National
Association) arising in respect of letters of indemnity, steamship
guaranties, airway releases and similar undertakings issued by The
Chase Manhattan Bank (National Association) to enable Swank to obtain
delivery of goods in the possession or control of air, marine, or other
carriers in the absence of required documents.
"Secured Obligations" shall mean, the principal of and
interest on the Loans, the Notes and all other amounts owing to the
Banks by Swank under the Credit Agreement or under the Swank Security
Agreement.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in the State of New York from time to time.
Section 2. Representations and Warranties. The FSC represents
and warrants to the Banks and the Agent that:
2.01 Corporate Existence. The FSC (a) is a corporation duly
organized and validly existing under the laws of the Virgin Islands of the
United States of America; (b) has all requisite corporate power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would have a material adverse effect on its
financial condition, operations, prospects or business.
2.02 No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of the FSC, or
any applicable law or regulation, or any order, writ, injunction or decree of
any court or governmental authority or agency, or any agreement or instrument to
which the FSC is a party or by which it is bound or to which it is subject, or
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien (except as contemplated hereby) upon any of
the revenues or assets of the FSC pursuant to the terms of any such agreement or
instrument.
2.03 Corporate Action. The FSC has all necessary corporate
power and authority to execute, deliver and perform its obligations under this
Agreement; and the execution, delivery and performance by the FSC of this
Agreement has been duly authorized by all necessary corporate action on its
part; and this Agreement has been duly and validly executed and delivered by the
FSC and constitutes the legal, valid and binding obligation of the FSC,
enforceable in accordance with its terms, except as the enforceability thereof
may be limited by bankruptcy, insolvency, reorganization or moratorium or other
similar laws relating to the enforcement of creditors' rights generally and by
general equitable principles.
2.04 Approvals. The FSC has obtained all authorizations,
approvals and consents of, and all filings and registrations with, any
governmental or regulatory authority or agency necessary for the execution,
delivery or performance by the FSC of this Agreement, or for the validity or
enforceability hereof, except for filings and recordings of the Liens created
pursuant hereto.
2.05 Title. The FSC is, and so long as any of the Secured
Obligations remain outstanding the FSC will at all times be, the sole beneficial
owner of the Collateral and no Lien exists or will exist upon any Collateral at
any time, except for (i) the pledge and security interest in favor of the Agent
for the benefit of the Banks created or provided for herein, which pledge and
security interest constitutes a first priority perfected pledge and security
interest in and to all of the Collateral, subject to the Intercreditor Agreement
and (ii) the pledge and security interest in favor of the "ACM Agent" under the
IBJ Credit Agreement.
2.06 Foreign Sales Corporation. The FSC is a "FSC" within the
meaning of Section 922 of the Code.
Section 3. Guarantee.
3.01 Guarantee. The FSC hereby guarantees to each Bank and the
Agent and their respective successors and assigns the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on the Loans and the Note held by each Bank, and all
other amounts from time to time owing to the Banks or the Agent by Swank under
the Credit Agreement, under the Notes and under any of the other Basic Documents
and all Letter of Indemnity Obligations, in each case strictly in accordance
with the terms thereof (such obligations being herein collectively called the
"Guaranteed Obligations"). The FSC hereby further agrees that if Swank shall
fail to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the FSC will promptly pay the
same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether, at such extended
maturity, by acceleration or otherwise) strictly in accordance with the terms of
such extension or renewal.
3.02 Obligations Unconditional. The obligations of the FSC
under Section 3.01 hereof are absolute and unconditional, irrespective of the
value, genuineness, validity, regularity or enforceability of this Agreement,
the Notes or any of the other Basic Documents, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 3.02 that the obligations of the FSC
hereunder shall be absolute and unconditional under any and all circumstances.
Without limiting the generality of the foregoing, it is agreed that the
occurrence of any one or more of the following shall not affect the liability of
the FSC hereunder:
(i) at any time or from time to time, without notice to the
FSC, the time for performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of the
Basic Documents shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Basic
Documents shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Agent or any Bank or Banks as security for any of the Guaranteed
Obligations shall fail to be perfected.
The FSC hereby expressly waives diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Agent or any
Bank exhaust any right, power or remedy or proceed against Swank under the Basic
Documents, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
3.03 Reinstatement. The obligations of the FSC under this
Section 3 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of Swank in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise and the FSC agrees that it will indemnify the
Agent and each Bank on demand for all reasonable costs and expenses (including,
without limitation, fees of counsel) incurred by the Agent or such Bank in
connection with such rescission or restoration.
3.04 Subrogation. The FSC hereby waives all rights of
subrogation or contribution, whether arising by contract or operation of law
(including, without limitation, any such right arising under the Bankruptcy
Code) or otherwise by reason of any payment by it pursuant to the provisions of
this Section 3 and further agrees with Swank for the benefit of each of its
creditors (including, without limitation, each Bank and the Agent) that any such
payment by it shall constitute a contribution of capital by the FSC to Swank, or
investment by the FSC in the equity capital of Swank.
3.05 Remedies. The FSC agrees that, as between the FSC and the
Banks, the obligations of Swank under the Credit Agreement and the Notes may be
declared to be forthwith due and payable as provided in Section 10 of the Credit
Agreement for purposes of Section 3.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration as against Swank and
that, in the event of such declaration, such obligations (whether or not due and
payable by Swank) shall forthwith become due and payable by the FSC for purposes
of said Section 3.01.
3.06 Continuing Guarantee. The guarantee in this Section 3 is
a continuing guarantee and shall apply to all Guaranteed Obligations whenever
arising.
Section 4. Collateral. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, the FSC hereby pledges and grants to the
Agent, for the benefit of the Secured Parties as hereinafter provided, a
security interest in all of its right, title and interest in the following
property, whether now owned by the FSC or hereafter acquired and whether now
existing or hereafter coming into existence (all being collectively referred to
herein as "Collateral"):
(a) all accounts and general intangibles (each as defined in
the Uniform Commercial Code) of the FSC constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to the FSC in respect of any loans or advances or for
inventory or other goods sold or leased or for services rendered, all
moneys due and to become due to the FSC under any guarantee (including
a letter of credit) of the purchase price of inventory sold and all tax
refunds (such accounts, general intangibles and moneys due and to
become due being herein called collectively "Accounts");
(b) all instruments, chattel paper or letters of credit (each
as defined in the Uniform Commercial Code) evidencing, representing,
arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including
(but not limited to) promissory notes, drafts, bills of exchange and
trade acceptances (herein collectively called "Instruments");
(c) the balance from time to time in the Collateral Account
referred to in Section 5; and
(d) all proceeds, products and accessions of and to any of the
property described in clauses (a) through (c) above in this Section 3
(including, without limitation, any proceeds of insurance thereon),
and, to the extent related to any property described in said clauses or
above in this clause (d), all books, correspondence, credit files,
records, invoices and other papers, including without limitation all
tapes, cards, computer runs and other papers and documents in the
possession or under the control of the FSC or any computer bureau or
service company from time to time acting for the FSC.
Section 5. Collateral Account. The FSC shall, subject to the
Intercreditor Agreement, commencing with the Collateral Account Date, instruct
all account debtors and other Persons obligated in respect of all Accounts to
make all payments in respect of the Accounts either (i) directly to the Agent
(by instructing that such payments be remitted to a post office box which shall
be in the name and under the control of the Agent) or (ii) to one or more other
banks in any state in the United States of America (by instructing that such
payments be remitted to a post office box which shall be in the name and under
the control of the Agent) under arrangements, in form and substance satisfactory
to the Agent, pursuant to which the FSC shall have irrevocably instructed such
other bank (and such other bank shall have agreed) to remit all proceeds of such
payments directly to the Agent for deposit into the Collateral Account (to the
extent such proceeds constitute Collateral). All payments made to the Agent, as
provided in the preceding sentence, shall, subject to the Intercreditor
Agreement, be immediately deposited in the Collateral Account. In addition to
the foregoing, the FSC agrees, subject to the Intercreditor Agreement, that if
after the Collateral Account Date the proceeds of any Collateral hereunder
(including the payments made in respect of Accounts) shall be received by it,
the FSC shall as promptly as possible deposit such proceeds into the Collateral
Account. Until so deposited, all such proceeds shall, subject to the
Intercreditor Agreement, be held in trust by the FSC for and as the property of
the Agent and shall not be commingled with any other funds or property of the
FSC. The proceeds of Collateral deposited into such Collateral Account pursuant
to this Section 5 shall be subject to the provisions (including provisions
relating to withdrawal, investment and application) of the Swank Security
Agreement.
Section 6. Further Assurances; Remedies.In furtherance of the
grant of security in Section 4 hereof, the FSC hereby agrees with the Agent as
follows:
6.01 Delivery and Other Perfection. The FSC shall, subject to
the Intercreditor Agreement:
(i) deliver and pledge to the Agent any and all Instruments,
endorsed and/or accompanied by such instruments of assignment and
transfer in such form and substance as the Agent may request; provided,
that so long as no Default shall have occurred and be continuing, the
FSC may retain for collection in the ordinary course any Instruments
received by it in the ordinary course of business and the Agent shall,
promptly upon request of the FSC, make appropriate arrangements for
making any other Instrument pledged by the FSC available to it for
purposes of presentation, collection or renewal (any such arrangement
to be effected, to the extent deemed appropriate by the Agent, against
trust receipt or like document);
(ii) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate any security interest granted pursuant
hereto or to enable the Agent to exercise and enforce its rights
hereunder with respect to such security interest, provided that notices
to account debtors in respect of any Accounts or Instruments shall be
subject to the provisions of clause (v) below;
(iii) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably require in order to reflect the
security interests granted by this Agreement;
(iv) permit representatives of the Agent at any time during normal
business hours to inspect and make abstracts from its books and records
pertaining to the Collateral, and permit representatives of the Agent
to be present at the places of business of the FSC to receive copies of
all communications and remittances relating to the Collateral, all in
such manner as the Agent may require; and
(v) upon the occurrence and during the continuance of any
Default, upon request of the Agent, promptly notify (and the FSC hereby
authorizes the Agent so to notify) each account debtor in respect of
any Accounts or Instruments that such Collateral has been assigned to
the Agent hereunder, and that any payments due or to become due in
respect of such Collateral are to be made directly to the Agent.
6.02 Other Financing Statements and Liens. Without the prior
written consent of the Agent, the FSC shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Agent or the "ACM Agent" under the IBJ Credit Agreement are not named as the
sole secured party.
6.03 Preservation of Rights. The Agent shall not be required
to take steps necessary to preserve any rights against prior parties to any of
the Collateral.
6.04 Events of Default, etc. During the period an Event of
Default shall have occurred and be continuing and subject to the Intercreditor
Agreement:
(i) the FSC shall, at the request of the Agent, assemble the
Collateral owned by it at such place or places, reasonably convenient
to both the Agent and the FSC, designated in its request;
(ii) the Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise
modify the terms of, any of the Collateral;
(iii) the Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted);
(iv) the Agent in its discretion may, in its name or in the name of
the FSC or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange
for any of the Collateral, but shall be under no obligation to do so;
and
(v) the Agent may, upon 10 Business Days' prior written notice
to the FSC of the time and place, with respect to the Collateral owned
by it or any part thereof which shall then be or shall thereafter come
into the possession, custody or control of the Agent, any of the Banks
or any of their respective agents, sell, lease, assign or otherwise
dispose of all or any of such Collateral, at such place or places as
the Agent deems best, and for cash or on credit or for future delivery
(without thereby assuming any credit risk), at public or private sale,
without demand of performance or notice of intention to effect any such
disposition or of time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived) and the
Agent or any Bank or anyone else may be the purchaser, lessee, assignee
or recipient of any or all of the Collateral so disposed of at any
public sale (or, to the extent permitted by law, at any private sale),
and thereafter hold the same absolutely, free from any claim or right
of whatsoever kind, including any equity of redemption, of the FSC, any
such demand, notice or right and equity being hereby expressly waived
and released. The proceeds of each collection, sale or other
disposition under this Section 6.04 shall be applied in accordance with
Section 6.07.
6.05 Removals, etc. Without 15 days' prior written notice to
the Agent, the FSC shall not maintain any of its books or records with respect
to the Accounts at any office or maintain its chief executive office or its
principal place of business at any place, or permit any Collateral to be located
anywhere other than at the address indicated beneath the signature of the FSC to
this Security Agreement or at the address of Swank specified in the Swank
Security Agreement.
6.06 Private Sale. The Agent and the Banks shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale conducted in a commercially reasonable manner. The FSC hereby
waives any claims against the Agent or any Bank arising by reason of the fact
that the price at which the Collateral may have been sold at such a private sale
was less than the price which might have been obtained at a public sale or was
less than the aggregate amount of the Secured Obligations, even if the Agent
accepts the first offer received and does not offer the Collateral to more than
one offeree, unless the related sale was not conducted in a commercially
reasonable manner.
6.07 Application of Proceeds. Except as otherwise herein
expressly provided and subject to the Intercreditor Agreement, the proceeds of
any collection, sale or other realization of all or any part of the Collateral,
and any other cash at the time held by the Agent under this Section 6, shall be
applied by the Agent:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
compensation to the Agent and its agents and counsel, and all expenses,
and advances made or incurred by the Agent in connection therewith;
Second, to the payment in full of the Secured Obligations
(other than Letter of Indemnity Obligations in excess of $1,000,000 in
the aggregate), in each case equally and ratably in accordance with the
respective amounts thereof then due and owing or as the Banks holding
the same may otherwise agree;
Third, to the payment in full of Letter of Indemnity
Obligations in excess of $1,000,000 in the aggregate; and
Finally, to the payment to the FSC, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining from such proceeds.
As used in this Section 6, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of the FSC or any issuer of or obligor on any of the
Collateral.
6.08 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Agent is hereby appointed the attorney-in-fact of the FSC for the
purpose of carrying out the provisions of this Section 6 and taking any action
and executing any instruments which the Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest, provided that the Agent shall not take
any action pursuant to the authority granted to it in this Section 6.08 without
first notifying the FSC thereof. Without limiting the generality of the
foregoing, so long as the Agent shall be entitled under this Section 6 to make
collections in respect of the Collateral, the Agent shall have the right and
power to receive, endorse and collect all checks made payable to the order of
the FSC representing any dividend, payment, or other distribution in respect of
the Collateral or any part thereof and to give full discharge for the same.
6.09 No Waiver. No failure on the part of the Agent or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
6.10 Termination. When all Secured Obligations under and as
defined in the Swank Security Agreement shall have been paid in full, this
Agreement shall terminate as to the Collateral, and the Agent shall forthwith
cause to be assigned, transferred and delivered, against receipt but without any
recourse, warranty or representation whatsoever, the Collateral and the money
received in respect thereof, to or on the order of the FSC entitled thereto.
6.11 Expenses. The FSC agrees to pay to the Agent all
reasonable out-of-pocket expenses (including reasonable expenses for legal
services of every kind) of, or incident to, the enforcement of any of the
provisions of this Section 6, or performance by the Agent of any obligations of
the FSC in respect of the Collateral which the FSC has failed or refused to
perform, or any actual or attempted sale, or any exchange, enforcement,
collection, compromise or settlement in respect of any of the Collateral, and
for the care of the Collateral and defending or asserting rights and claims of
the Agent in respect thereof, by litigation or otherwise, including expenses of
insurance, and all such expenses shall be Secured Obligations entitled to the
benefits of the collateral accounts under Section 4.
6.12 Further Assurances. The FSC agrees that, from time to
time upon the written request of the Agent, the FSC will execute and deliver
such further documents and do such other acts and things as the Agent may
reasonably request in order fully to effect the purposes of this Agreement.
Section 7. Miscellaneous.
7.01 Financing Statements. Prior to or concurrently with the
execution and delivery of this Agreement, the FSC shall file such financing
statements and other documents in such offices, and give notice to such Persons,
as the Agent may request to perfect the security interests granted by Section 4
of this Agreement.
7.02 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, provided that as
to Collateral located in any jurisdiction other than New York, the Agent shall
have all the rights to which a secured party under the laws of such jurisdiction
is entitled.
7.03 Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or mailed or delivered to the
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereto; or as to either party, at such other address as shall be
designated by such party in a notice to the other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
7.04 Waivers, etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by the FSC and
the Agent (with the consent of the Banks as specified in Section 11.09 of the
Credit Agreement). Any such amendment or waiver shall be binding upon the FSC
and the Agent, each Bank and each subsequent holder of any Secured Obligation.
7.05 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
FSC, the Agent, the Banks and each subsequent holder of the Secured Obligations
(provided, however, that the FSC shall not assign or transfer its rights
hereunder without the prior written consent of the Agent).
7.06 Counterparts. This Agreement may be executed in one or
more counterparts and all of such counterparts taken together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated Security Agreement to be duly executed as of the day and
year first above written.
SWANK SALES INTERNATIONAL
(V.I.), INC.
By_________________________
Title:
Address for Notices:
Swank Sales International
(V.I.), Inc.
c/o Swank, Inc.
6 Hazel Street
Attleboro, Massachusetts 02703
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By_________________________
Title:
The Chase Manhattan Bank
(National Association)
c/o Chemical Bank Agent
Bank Services 140 East 48th
Street 29th Floor New York,
New York 10017 with a copy
to:
The Chase Manhattan Bank
(National Association)
1411 Broadway
5th Floor
New York, New York 10018
Attention: Tracy Van Riper
Vice President
Second Modification and Confirmation (Connecticut)
[Execution Copy]
Recording requested by
CHICAGO TITLE INSURANCE COMPANY
This Second Modification and Confirmation was prepared by and when recorded
should be mailed to:
Jaime S. Steinfink, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
- ----------------------------------------------------------------
Space above this line for recorder's use
SECOND MODIFICATION AND CONFIRMATION OF OPEN-END
INDENTURE OF MORTGAGE, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
KNOW ALL MEN BY THESE PRESENTS:
THIS SECOND MODIFICATION AND CONFIRMATION OF OPEN-END
INDENTURE OF MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE
FILING (this "Second Modification and Confirmation") is made as of the 24th day
of May, 1996 by SWANK, INC., a Delaware corporation having a mailing address at
6 Hazel Street, Attleboro, Massachusetts 02703 (the "Mortgagor"), in favor of
THE CHASE MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association
having its principal office at 1 Chase Manhattan Plaza, New York, New York
10081, as agent for the Banks referred to below (in such capacity, the
"Mortgagee").
W I T N E S S E T H:
WHEREAS, in connection with the execution and delivery of a
Credit Agreement dated as of December 22nd, 1992 between the Mortgagor, certain
banks (collectively, the "Banks") and The Chase Manhattan Bank (National
Association), as Agent (the "1992 Credit Agreement"), the Mortgagor executed and
delivered in favor of the Mortgagee an Open-End Indenture of Mortgage,
Assignment of Rents, Security Agreement and Fixture Filing dated as of the 22nd
day of December, 1992 (the "1992 Mortgage") and recorded on December 23, 1992 at
volume 2738 Page 3, in the office of Norwalk Land Records, Norwalk, Connecticut,
pursuant to which the Mortgagor conveyed to the Mortgagee, all of Mortgagor's
right, title and interest in and to the Trust Estate (as defined in the 1992
Mortgage) and granted to the Mortgagee a security interest in the Fixtures (as
so defined) for the purpose of securing the obligations of the Mortgagor under
the Loan Instruments (as so defined) as more particularly described in the 1992
Mortgage; and
<PAGE>
- 6 -
Second Modification and Confirmation (Connecticut)
WHEREAS, the Trust Estate under and as defined in the 1992
Mortgage includes the lands and premises located in South Norwalk, Connecticut
more particularly described in Schedule I hereto and made a part hereof; and
WHEREAS, the Mortgagor, the Banks and the Mortgagee amended
and restated the 1992 Credit Agreement pursuant to an Amended and Restated
Credit Agreement dated as of July 20, 1995 (the "1995 Credit Agreement"), and
concurrently with the execution and delivery of the 1995 Credit Agreement, the
Mortgagor and the Mortgagee executed and delivered a Modification and
Confirmation of Open-End Indenture of Mortgage, Assignment of Rents, Security
Agreement and Fixture Filing dated as of the 20th day of July, 1995 (the "First
Modification and Confirmation"; the 1992 Mortgage as modified and confirmed
pursuant to the First Modification and Confirmation being herein called the
"Existing Mortgage") and recorded on July 25, 1995 at volume 3092 Page 1, in the
office of Norwalk Land Records, Norwalk, Connecticut, pursuant to which the
Mortgagor confirmed that the liens and security interests created pursuant to
the 1992 Mortgage continued to secure the 1992 Credit Agreement as amended and
restated pursuant to the 1995 Credit Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Second Modification and Confirmation, the Mortgagor, the Banks and the Mortgagee
are entering into a Second Amended and Restated Credit Agreement dated as of May
24, 1996 (as modified and supplemented and in effect from time to time being
hereinafter called the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for the extension and renewal of the Mortgagor's outstanding
indebtedness under the 1995 Credit Agreement (such indebtedness, as so extended,
renewed and reduced, being herein collectively called the "Obligations"); and
WHEREAS, a copy of the Credit Agreement (including the
Exhibits thereto) is attached as Schedule II hereto and made a part hereof; and
WHEREAS, concurrently with the execution and delivery of this
Second Modification and Confirmation, the Mortgagor, certain financial
institutions, IBJ Schroder Bank & Trust Company and General Electric Capital
Corporation, as Co-Agents, and IBJ Schroder Bank & Trust Company, as ACM Agent,
are entering into a Revolving Credit and Security (as modified and supplemented
and in effect from time to time being hereinafter called the "IBJ Schroder
Credit Agreement"); and
WHEREAS, concurrently with the execution and delivery of this
Second Modification and Confirmation, the Mortgagee, the Banks, the "Agent", the
"Co-Agents" and each of the "Lenders" under the IBJ Schroder Credit Agreement
are entering into an Intercreditor Agreement (as modified and supplemented and
in effect from time to time being hereinafter called the "Intercreditor
Agreement"); and
WHEREAS, the Mortgagee has been authorized by each of the
Banks party to the 1995 Credit Agreement (and the 1992 Credit Agreement) to
enter into this Second Modification and Confirmation; and
WHEREAS, it is a condition to the obligation of the Banks to
extend and renew the indebtedness of the Mortgagor pursuant to the Credit
Agreement that the Mortgagor execute and deliver this Second Modification and
Confirmation.
NOW, THEREFORE, to induce the Banks to amend and restate the
1995 Credit Agreement and to extend and renew the indebtedness thereunder, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Mortgagor has agreed that the Existing Mortgage
shall be amended as follows:
Section 1. Defined Terms. Each capitalized term used herein
and not otherwise defined herein shall have the meaning assigned thereto in the
Existing Mortgage. In addition, certain terms defined in the Existing Mortgage
shall be used therein as follows:
(a) any reference in the Existing Mortgage to "this
Indenture" shall be deemed to be a reference to the Existing Mortgage
as amended by this Second Modification and Confirmation;
(b) any reference in the Existing Mortgage to "the Credit
Agreement" shall be deemed to be a reference to the 1995 Credit
Agreement as amended and restated by the Credit Agreement;
(c) any reference in the Existing Mortgage to "the Notes"
shall be deemed to be a reference to the Notes as defined in the
Credit Agreement;
(d) any reference in the Existing Mortgage to the "Loans"
shall be deemed to be a reference to the Loans as defined in the Credit
Agreement;
(e) any reference in the Existing Mortgage to "Term Loans"
shall be deemed a reference to "Loans" under the Credit Agreement;
(f) any reference in the Existing Mortgage to "Secured
Obligations" shall be deemed a reference to the following:
"the payment of the principal of and interest on the Loans,
the Notes, and all other amounts owing to the Banks by the
Mortgagor under the Credit Agreement, the Notes and any of the
Basic Documents"
(g) any reference in the Existing Mortgage to "Section 9.12"
of the Credit Agreement shall be deemed to be a reference to Section
7.2 of the IBJ Schroder Credit Agreement (as such term is defined in
the Credit Agreement), as incorporated in the Credit Agreement pursuant
to Section 9.01(a) thereof; and
(h) any reference in the Existing Mortgage to "Section
3.02(d)" of the Credit Agreement shall be deemed to be a reference to
Section 3.02(b) of the Credit Agreement,
it being the intent of this Second Modification and Confirmation that the
obligations of the Mortgagor under the 1995 Credit Agreement as amended and
restated by the Credit Agreement shall be entitled to the benefits and
collateral security under the Existing Mortgage, subject to the Intercreditor
Agreement, as fully as if such obligations had been incurred under the 1992
Credit Agreement as originally in effect.
Section 2. Confirmation and Restatement. The Mortgagor, to
induce the Mortgagee and the Banks to consummate the transactions contemplated
by the Credit Agreement and to extend credit thereunder, and in order to
continue to secure the payment of the Obligations, hereby confirms and restates
(a) the conveyance pursuant to the Existing Mortgage to the Mortgagee of the
Trust Estate and (b) the grant pursuant to the Existing Mortgage of a security
interest in the Fixtures. Nothing contained in this Second Modification and
Confirmation shall be construed as (a) a novation of the Obligations or (b) a
release or waiver of all or any portion of the conveyance to the Mortgagee of
the Trust Estate, or the grant to the Mortgagee of a security interest in the
Fixtures, pursuant to the Existing Mortgage.
Section 3. Representations and Warranties. The Mortgagor
hereby represents and warrants that the representations and warranties made by
it in the Existing Mortgage are true and complete on and as of the date hereof
as if made on and as of the date hereof and as if each reference therein to
"this Mortgage" included reference to the Existing Mortgage as amended by this
Second Modification and Confirmation.
Section 4. Covenants. The Mortgagor hereby covenants and
agrees to perform each and every duty and obligation of the Mortgagor contained
in the Existing Mortgage as amended by this Second Modification and
Confirmation.
Section 5. Acknowledgement of Consent. The Mortgagee hereby
acknowledges that each Bank has consented to this Second Modification and
Confirmation as required by Section 11.09 of the 1992 Credit Agreement.
Section 6. Effectiveness. This Second Modification and
Confirmation shall be effective as of the day and year first written above upon
its execution and delivery by the Mortgagor and the Mortgagee. Except as herein
provided, the Existing Mortgage shall remain unchanged and in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, this Second Modification and Confirmation
has been duly executed by the Mortgagor and the Mortgagee as of the day and year
first above written.
SWANK, INC.
By
Title:
Signed and acknowledged
in the presence of:
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By
Title:
Signed and acknowledged
in the presence of:
Second Modification and Confirmation (Massachusetts)
Recording requested by
CHICAGO TITLE INSURANCE COMPANY
This Second Modification and Confirmation was prepared by and when recorded
should be mailed to:
Jaime S. Steinfink, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
- -----------------------------------------------------------------
Space above this line for recorder's use
SECOND MODIFICATION AND CONFIRMATION OF INDENTURE
OF MORTGAGE, ASSIGNMENT OF RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
KNOW ALL MEN BY THESE PRESENTS:
THIS SECOND MODIFICATION AND CONFIRMATION OF INDENTURE OF
MORTGAGE, ASSIGNMENT OF RENTS, SECURITY AGREEMENT AND FIXTURE FILING (this
"Second Modification and Confirmation") is made as of the 24th day of May, 1996
by SWANK, INC., a Delaware corporation having a mailing address at 6 Hazel
Street, Attleboro, Massachusetts 02703 (the "Mortgagor"), in favor of THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION), a national banking association having its
principal office at 1 Chase Manhattan Plaza, New York, New York 10081, as agent
for the Banks referred to below (in such capacity, the "Mortgagee").
W I T N E S S E T H:
WHEREAS, in connection with the execution and delivery of a
Credit Agreement dated as of December 22nd, 1992 between the Mortgagor, certain
banks (collectively, the "Banks") and The Chase Manhattan Bank (National
Association), as Agent (the "1992 Credit Agreement"), the Mortgagor executed and
delivered in favor of the Mortgagee an Indenture of Mortgage, Assignment of
Rents, Security Agreement and Fixture Filing dated as of the 22nd day of
December, 1992 (the "1992 Mortgage") and recorded on December 23, 1992 at Book
5341 Page 60, in the office of the Bristol County Northern Registry of Deeds,
Massachusetts, pursuant to which the Mortgagor conveyed to the Mortgagee, all of
Mortgagor's right, title and interest in and to the Trust Estate (as defined in
the 1992 Mortgage) and granted to the Mortgagee a security interest in the
Fixtures (as so defined) for the purpose of securing the obligations of the
Mortgagor under the Loan Instruments (as so defined) as more particularly
described in the 1992 Mortgage; and
<PAGE>
5
Second Modification and Confirmation (Massachusetts)
WHEREAS, the Trust Estate under and as defined in the 1992
Mortgage includes the lands and premises located in South Attleboro,
Massachusetts more particularly described in Schedule I hereto and made a part
hereof; and
WHEREAS, the Mortgagor, the Banks and the Mortgagee amended
and restated the 1992 Credit Agreement pursuant to an Amended and Restated
Credit Agreement dated as of July 20, 1995 (the "1995 Credit Agreement"), and
concurrently with the execution and delivery of the 1995 Credit Agreement, the
Mortgagor and the Mortgagee executed and delivered a Modification and
Confirmation of Indenture of Mortgage, Assignment of Rents, Security Agreement
and Fixture Filing dated as of the 20th day of July, 1995 (the "First
Modification and Confirmation"; the 1992 Mortgage as modified and confirmed
pursuant to the First Modification and Confirmation being herein called the
"Existing Mortgage") and recorded on July 21, 1995 at Book 6419 Page 275, in the
office of Bristol County Northern Registry of Deeds, Massachusetts, pursuant to
which the Mortgagor confirmed that the liens and security interests created
pursuant to the 1992 Mortgage continued to secure the 1992 Credit Agreement as
amended and restated pursuant to the 1995 Credit Agreement; and
WHEREAS, concurrently with the execution and delivery of this
Second Modification and Confirmation, the Mortgagor, the Banks and the Mortgagee
are entering into a Second Amended and Restated Credit Agreement dated as of May
24, 1996 (as modified and supplemented and in effect from time to time being
hereinafter called the "Credit Agreement"), providing, subject to the terms and
conditions thereof, for the extension and renewal of the Mortgagor's outstanding
indebtedness under the 1995 Credit Agreement (such indebtedness, as so extended
and renewed, being herein collectively called the "Obligations"); and
WHEREAS, concurrently with the execution and delivery of this
Second Modification and Confirmation, the Mortgagor, certain financial
institutions, IBJ Schroder Bank & Trust Company and General Electric Capital
Corporation, as Co-agents and IBJ Schroder Bank & Trust Company, as ACM Agent
are entering into a Revolving Credit and Security (as modified and supplemented
and in effect from time to time being hereinafter called the "IBJ Schroder
Credit Agreement"); and
WHEREAS, concurrently with the execution and delivery of this
Second Modification and Confirmation, the Mortgagee, the Banks, the "Agent", the
"Co-Agents" and each of the "Lenders" under the IBJ Schroder Credit Agreement
are entering into an Intercreditor Agreement (as modified and supplemented and
in effect from time to time being hereinafter called the "Intercreditor
Agreement"); and
WHEREAS, it is a condition to the obligation of the Banks to
extend and renew the indebtedness of the Mortgagor pursuant to the Credit
Agreement that the Mortgagor execute and deliver this Second Modification and
Confirmation.
NOW, THEREFORE, to induce the Banks to amend and restate the
1995 Credit Agreement and to extend and renew the indebtedness thereunder, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the Mortgagor has agreed that the Existing Mortgage
shall be amended as follows:
Section 1. Defined Terms. Each capitalized term used herein
and not otherwise defined herein shall have the meaning assigned thereto in the
Existing Mortgage. In addition, certain terms defined in the Existing Mortgage
shall be used therein as follows:
(a) any reference in the Existing Mortgage to "this
Indenture" shall be deemed to be a reference to the Existing Mortgage
as amended by this Second Modification and Confirmation;
(b) any reference in the Existing Mortgage to "the Credit
Agreement" shall be deemed to be a reference to the 1995 Credit
Agreement as amended and restated by the Credit Agreement;
(c) any reference in the Existing Mortgage to "the Notes"
shall be deemed to be a reference to the Notes as defined in the Credit
Agreement;
(d) any reference in the Existing Mortgage to the "Loans"
shall be deemed to be a reference to the Loans as defined in the Credit
Agreement;
(e) any reference in the Existing Mortgage to "Term Loans"
shall be deemed a reference to "Loans" under the Credit Agreement;
(f) any reference in the Existing Mortgage to "Secured
Obligations" shall be deemed a reference to the following:
"the payment of the principal of and interest on the Loans,
the Notes, and all other amounts owing to the Banks by the
Mortgagor under the Credit Agreement, the Notes and any of the
Basic Documents"
(g) any reference in the Existing Mortgage to "Section 9.12"
of the Credit Agreement shall be deemed to be a reference to Section
7.2 of the IBJ Schroder Credit Agreement (as such term is defined in
the Credit Agreement), as incorporated in the Credit Agreement pursuant
to Section 9.01(a) thereof; and
(h) any reference in the Existing Mortgage to "Section
3.02(d)" of the Credit Agreement shall be deemed to be a reference to
Section 3.02(b) of the Credit Agreement,
it being the intent of this Second Modification and Confirmation that the
obligations of the Mortgagor under the 1995 Credit Agreement as amended and
restated by the Credit Agreement shall be entitled to the benefits and
collateral security under the Existing Mortgage, subject to the Intercreditor
Agreement, as fully as if such obligations had been incurred under the 1992
Credit Agreement as originally in effect.
Section 2. Confirmation and Restatement. The Mortgagor, to
induce the Mortgagee and the Banks to consummate the transactions contemplated
by the Credit Agreement and to extend credit thereunder, and in order to
continue to secure the payment of the Obligations, hereby confirms and restates
(a) the conveyance pursuant to the Existing Mortgage to the Mortgagee of the
Trust Estate and (b) the grant pursuant to the Existing Mortgage of a security
interest in the Fixtures. Nothing contained in this Second Modification and
Confirmation shall be construed as (a) a novation of the Obligations or (b) a
release or waiver of all or any portion of the conveyance to the Mortgagee of
the Trust Estate, or the grant to the Mortgagee of a security interest in the
Fixtures, pursuant to the Existing Mortgage.
Section 3. Representations and Warranties. The Mortgagor
hereby represents and warrants that the representations and warranties made by
it in the Existing Mortgage are true and complete on and as of the date hereof
as if made on and as of the date hereof and as if each reference therein to
"this Mortgage" included reference to the Existing Mortgage as amended by this
Second Modification and Confirmation.
Section 4. Covenants. The Mortgagor hereby covenants and
agrees to perform each and every duty and obligation of the Mortgagor contained
in the Existing Mortgage as amended by this Second Modification and
Confirmation.
Section 5. Acknowledgement of Consent. The Mortgagee hereby
acknowledges that each Bank has consented to this Second Modification and
Confirmation as required by Section 11.09 of the 1992 Credit Agreement.
Section 6. Effectiveness. This Second Modification and
Confirmation shall be effective as of the day and year first written above upon
its execution and delivery by the Mortgagor and the Mortgagee. Except as herein
provided, the Existing Mortgage shall remain unchanged and in full force and
effect.
IN WITNESS WHEREOF, this Second Modification and Confirmation
has been duly executed by the Mortgagor and the Mortgagee as of the day and year
first above written.
SWANK, INC.
By:___________________
Title:
Signed and acknowledged
in the presence of:
- ----------------------------
- -----------------------------
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Agent
By:___________________
Title:
Signed and acknowledged
in the presence of:
- ----------------------------
- -----------------------------
REVOLVING CREDIT
AND
SECURITY AGREEMENT
- -------------------------------------------------------------------------------
IBJ SCHRODER BANK & TRUST COMPANY
(AS LENDER, ACM AGENT AND CO-AGENT)
WITH
GENERAL ELECTRIC CAPITAL CORPORATION
(AS LENDER AND CO-AGENT)
- -------------------------------------------------------------------------------
AND
- -------------------------------------------------------------------------------
SWANK, INC.
(BORROWER)
- -------------------------------------------------------------------------------
Dated as of May 24, 1996
- -------------------------------------------------------------------------------
758495.7/LCB/25254/061 5/24/96
<PAGE>
Table of Contents
I. DEFINITIONS.......................................................... 1
1.1. Accounting Terms....................................... 1
1.2. General Terms.......................................... 1
1.3. Uniform Commercial Code Terms.......................... 16
1.4. Certain Matters of Construction........................ 16
II. ADVANCES, PAYMENTS................................................... 16
2.1. (a) Revolving Advances.......................... 16
(b) Discretionary Rights........................ 17
(c) Reinstatement of Seasonal Advance Amount.... 17
2.2. Procedure for Revolving Advances Borrowing............. 17
2.3. Disbursement of Advance Proceeds....................... 17
2.4. Maximum Advances....................................... 18
2.5. Repayment of Advances.................................. 18
2.6. Repayment of Excess Advances........................... 18
2.7. Statement of Account................................... 18
2.8. Letters of Credit...................................... 19
2.9. Issuance of Letters of Credit.......................... 19
2.10. Requirements For Issuance of Letters of Credit......... 20
2.11. Additional Payments.................................... 21
2.12. Manner of Borrowing and Payment........................ 22
2.13. Mandatory Reductions................................... 23
2.14. Use of Proceeds........................................ 24
2.15. Defaulting Lender...................................... 24
III.INTEREST AND FEES.................................................... 25
3.1. Interest............................................... 25
3.2. Letter of Credit Fees.................................. 25
3.3. Facility Fee........................................... 26
3.4. Additional Fees........................................ 26
3.5. Computation of Interest and Fees....................... 26
3.6. Maximum Charges........................................ 26
3.7. Increased Costs........................................ 26
3.8. Capital Adequacy....................................... 27
IV.COLLATERAL: GENERAL TERMS............................................ 28
4.1. Security Interest in the Collateral.................... 28
4.2. Perfection of Security Interest........................ 28
4.3. Disposition of Collateral.............................. 29
4.4. Preservation of Collateral............................. 29
4.5. Ownership of Collateral................................ 29
4.6. Defense of ACM Agent's and Lenders' Interests.......... 30
4.7. Books and Records...................................... 30
4.8. Financial Disclosure................................... 31
4.9. Compliance with Laws................................... 31
4.10. Inspection of Premises................................. 31
4.11. Insurance.............................................. 31
4.12. Failure to Pay Insurance............................... 32
4.13. Payment of Taxes....................................... 33
4.14. Payment of Leasehold Obligations....................... 33
4.15. Receivables............................................ 33
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(a) Nature of Receivables...................... 33
(b) Solvency of Customers...................... 34
(c) Locations of Borrower...................... 34
(d) Collection of Receivables.................. 34
(e) Notification of Assignment of Receivables.. 34
(f) Power of ACM Agent to Act on Borrower's
Behalf..................................... 34
(g) No Liability............................... 35
(h) Establishment of a Lockbox Account, Dominion
Account.................................... 36
(i) Adjustments................................ 36
4.16. Inventory............................................. 36
4.17. Maintenance of Equipment.............................. 36
4.18. Exculpation of Liability.............................. 37
4.19. Environmental Matters................................. 37
4.20. Financing Statements.................................. 39
V.REPRESENTATIONS AND WARRANTIES......................................... 39
5.1. Authority............................................. 39
5.2. Formation and Qualification........................... 40
5.3. Survival of Representations and Warranties............ 40
5.4. Tax Returns........................................... 40
5.5. Financial Statements.................................. 40
5.6. Corporate Name........................................ 41
5.7. O.S.H.A. and Environmental Compliance................. 41
5.8. Solvency; No Litigation, Violation, Indebtedness
or Default....................................... 42
5.9. Patents, Trademarks, Copyrights and Licenses.......... 43
5.10. Licenses and Permits.................................. 43
5.11. Default of Indebtedness............................... 44
5.12. No Default............................................ 44
5.13. No Burdensome Restrictions............................ 44
5.14. No Labor Disputes..................................... 44
5.15. Margin Regulations.................................... 44
5.16. Investment Company Act................................ 44
5.17. Disclosure............................................ 44
5.18. Delivery of .......................................... 44
5.19. Swaps................................................. 45
5.20. Conflicting Agreements................................ 45
5.21. Application of Certain Laws and Regulations........... 45
5.22. Business and Property of Borrower..................... 45
VI.AFFIRMATIVE COVENANTS................................................. 45
6.1. Payment of Fees....................................... 45
6.2. Conduct of Business and Maintenance of Existence
and Assets....................................... 46
6.3. Violations............................................ 46
6.4. Government Receivables................................ 46
6.5. Execution of Supplemental Instruments................. 46
6.6. Payment of Indebtedness............................... 46
6.7. Standards of Financial Statements..................... 47
6.8. FINANCIAL COVENANTS................................... 47
(a) Fixed Charge Coverage...................... 47
(b) Additional Fixed Charge Coverage........... 47
(c) Leverage Ratio............................. 47
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(d) Inventory Turnover........................ 47
VII.NEGATIVE COVENANTS................................................... 48
7.1. Merger, Consolidation, Acquisition and Sale of
Assets.......................................... 48
7.2. Creation of Liens...................................... 48
7.3. Guarantees............................................. 48
7.4. Investments............................................ 48
7.5. Loans.................................................. 49
7.6. Capital Expenditures................................... 49
7.7. Dividends.............................................. 49
7.8. Indebtedness........................................... 49
7.9. Nature of Business..................................... 50
7.10. Transactions with Affiliates........................... 50
7.11. Leases................................................. 50
7.12. Subsidiaries........................................... 50
7.13. Fiscal Year and Accounting Changes..................... 50
7.14. Pledge of Credit....................................... 50
7.15. Amendment of Articles of Incorporation, By-Laws........ 50
7.16. Compliance with ERISA.................................. 50
7.17. Prepayment of Indebtedness............................. 51
7.18. Payment of Term Loan Note(s)........................... 51
VIII. CONDITIONS PRECEDENT............................................... 51
8.1. Conditions to Initial Advances......................... 51
(a) Note........................................ 52
(b) Filings, Registrations and Recordings....... 52
(c) Corporate Proceedings of Borrower........... 52
(d) Incumbency Certificates of Borrower......... 52
(e) Certificates................................ 52
(f) Good Standing Certificates.................. 52
(g) Legal Opinion............................... 53
(h) No Litigation............................... 53
(i) Financial Condition Certificates............ 53
(j) Collateral Examination...................... 53
(k) Fees........................................ 53
(l) Projections................................. 53
(m) Term Loan Note(s)........................... 53
(n) Intercreditor Agreements.................... 53
(o) Insurance................................... 54
(p) Title Insurance............................. 54
(q) Environmental Reports....................... 54
(r) Payment Instructions........................ 54
(s) Blocked Accounts............................ 54
(t) Consents.................................... 54
(u) No Adverse Material Change.................. 54
(v) Leasehold Agreements........................ 55
(w) Mortgage.................................... 55
(x) Other Documents............................. 55
(y) Contract Review............................. 55
(z) Closing Certificate......................... 55
(aa) Undrawn Availability........................ 55
(ab) Other....................................... 55
8.2. Conditions to Each Advance............................. 55
(a) Representations and Warranties.............. 55
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(b) No Default................................ 56
(c) Maximum Advances.......................... 56
IX.INFORMATION AS TO BORROWER........................................... 56
9.1. Disclosure of Material Matters....................... 56
9.2. Schedules............................................ 57
9.3. Environmental Reports................................ 57
9.4. Litigation........................................... 57
9.5. Material Occurrences................................. 57
9.6. Government Receivables............................... 58
9.7. Annual Financial Statements.......................... 58
9.8. Quarterly Financial Statements....................... 58
9.9. Monthly Financial Statements......................... 59
9.10. Other Reports........................................ 59
9.11. Additional Information............................... 59
9.12. Projected Operating Budget........................... 60
9.13. Variances............................................ 60
9.14. Notice of Suits, Adverse Events...................... 60
9.15. ERISA Notices and Requests........................... 60
9.16. Additional Documents................................. 61
X. EVENTS OF DEFAULT.................................................... 61
XI.LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT........................... 64
11.1. Rights and Remedies.................................. 64
11.2. ACM Agent's Discretion............................... 65
11.3. Setoff............................................... 65
11.4. Rights and Remedies not Exclusive.................... 65
XII.WAIVERS AND JUDICIAL PROCEEDINGS.................................... 66
12.1. Waiver of Notice..................................... 66
12.2. Delay................................................ 66
12.3. Jury Waiver.......................................... 66
XIII.EFFECTIVE DATE AND TERMINATION..................................... 66
13.1. Term................................................. 66
13.2. Termination.......................................... 67
XIV.REGARDING ACM AGENT AND THE CO-AGENTS............................... 67
14.1. Appointment.......................................... 67
14.2. Nature of Duties..................................... 68
14.3. Lack of Reliance on ACM Agent or Co-Agents and
Resignation.......................................... 68
14.4. Certain Rights of ACM Agent.......................... 69
14.5. Reliance............................................. 69
14.6. Notice of Default.................................... 70
14.7. Indemnification...................................... 70
14.8. Individual Capacity.................................. 70
14.9. Delivery of Documents................................ 70
14.10. Borrower's Undertaking to ACM Agent and Co-Agents.... 70
XIV. MISCELLANEOUS...................................................... 71
15.1. Governing Law........................................ 71
15.2. Entire Understanding................................. 71
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15.3. Successors and Assigns; Participations; New
Lenders............................................. 72
15.4. Application of Payments............................. 74
15.5. Indemnity........................................... 74
15.6. Notice.............................................. 74
15.7. Severability........................................ 76
15.8. Expenses............................................ 76
15.9. Injunctive Relief................................... 76
15.10. Consequential Damages............................... 76
15.11. Captions............................................ 76
15.13. Construction........................................ 77
15.14. Survival............................................ 77
15.15. Confidentiality..................................... 77
15.16. Publicity........................................... 77
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List of Exhibits and Schedules
Exhibits
Exhibit 2.1(a) Revolving Credit Note
Exhibit 2.4 Term Note
Exhibit 2.4(b) Equipment Note
Exhibit 2.9 Letter of Credit and Security Agreement
Exhibit 5.5(a) Financial Projections
Exhibit 8.1(i) Financial Condition Certificate
Exhibit 15.3 Commitment Transfer Supplement
Schedules
Schedule 1.2 Permitted Encumbrances
Schedule 4.5 Equipment and Inventory Locations
Schedule 5.2(a) States of Qualification and Good Standing
Schedule 5.2(b) Subsidiaries
Schedule 5.6 Prior Names
Schedule 5.7 Environmental
Schedule 5.8(b) Litigation
Schedule 5.8(d) Plans
Schedule 5.9 Intellectual Property, Source Code Escrow
Agreements
Schedule 5.10 Licenses and Permits
Schedule 5.14 Labor Disputes
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<PAGE>
REVOLVING CREDIT
AND
SECURITY AGREEMENT
Revolving Credit and Security Agreement dated as of May 24,
1996 among SWANK, INC., a corporation organized under the laws of the State of
Delaware ("Borrower"), the undersigned financial institutions and the various
financial institutions which in accordance with the terms and provisions of
Section 15.3(c) hereof become Purchasing Lenders (collectively, the "Lenders"
and individually a "Lender"), IBJ SCHRODER BANK & TRUST COMPANY ("IBJS"),
GENERAL ELECTRIC CAPITAL CORPORATION ("GECC"), IBJS and GECC as agents for the
Lenders (IBJS and GECC in such capacity, the "Co-Agents") and IBJS as
administrative and collateral monitoring agent for the Lenders (IBJS in such
capacity, the "ACM Agent").
IN CONSIDERATION of the mutual covenants and undertakings
herein contained, Borrower, Lenders, ACM Agent and Co-Agents hereby agree as
follows:
I. DEFINITIONS.
1.1. Accounting Terms. As used in this Agreement or any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.2 or elsewhere in this
Agreement and accounting terms partly defined in Section 1.2 to the extent not
defined, shall have the respective meanings given to them under GAAP; provided,
however, whenever such accounting terms are used for the purposes of determining
compliance with financial covenants in this Agreement, such accounting terms
shall be defined in accordance with GAAP applied in preparation of the audited
financial statements of Borrower on a consolidated basis for the fiscal year
ended December 31, 1995.
1.2. General Terms. For purposes of this Agreement the
following terms shall have the following meanings:
"ACM Agent" shall have the meaning set forth in the
preamble of this Agreement.
"Additional Fixed Charge Coverage" shall mean and
include, with respect to any fiscal period, the ratio of (I) (a) EBITDA for such
period minus (b) actual capital expenditures of Borrower on a consolidated basis
minus (c) cash payments for income taxes made by Borrower on a consolidated
basis during such period to (II) the sum of (a) the aggregate interest expense
during such period plus (b) the aggregate regularly scheduled principal payments
with respect to Indebtedness for borrowed money and capitalized leases actually
made during such period (but excluding the repayment of Advances hereunder and
the repayment of the Indebtedness to the Term Loan Lenders contemplated by
Section 2.14(i)) plus (c) the aggregate amount of all loans, advances and other
cash contributions or expenditures made by Borrower with respect to the Swank
ESOP during such period.
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<PAGE>
"Advances" shall mean and include the Revolving
Advances and Letters of Credit.
"Advance Rates" shall have the meaning set forth in
Section 2.1(a) hereof.
"Affiliate" of any Person shall mean (a) any Person
(other than a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with such Person, or (b) any Person
who is a director or officer (i) of such Person, (ii) of any Subsidiary of such
Person or (iii) of any Person described in clause (a) above. For purposes of
this definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 5% or more of the securities having ordinary voting power for the
election of directors of such Person, or (y) to direct or cause the direction of
the management and policies of such Person whether by contract or otherwise.
"Alternate Base Rate" shall mean, for any day, a rate
per annum equal to the higher of (i) the Base Rate in effect on such day and
(ii) the Federal Funds Rate in effect on such day plus 1/2 of 1%.
"Authority" shall have the meaning set forth in
Section 4.19(d).
"Base Rate" shall mean the base commercial lending
rate of IBJS as publicly announced to be in effect from time to time, such rate
to be adjusted automatically, without notice, on the effective date of any
change in such rate. This rate of interest is determined from time to time by
IBJS as a means of pricing some loans to its customers and is neither tied to
any external rate of interest or index nor does it necessarily reflect the
lowest rate of interest actually charged by IBJS to any particular class or
category of customers of IBJS.
"Blocked Accounts" shall have the meaning set forth
in Section 4.15(h).
"Borrower" shall mean Swank, Inc., a Delaware
corporation, and all permitted successors and assigns.
"Borrower on a consolidated basis" shall mean the
consolidation in accordance with GAAP of the accounts or other
items of Borrower and its Subsidiaries.
"Borrower's Account" shall have the meaning set forth
in Section 2.7.
"Business Day" shall mean any day other than a day on
which commercial banks in New York are authorized or required by
law to close.
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"CERCLA" shall mean the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42
U.S.C. ss.ss.9601 et seq.
"Change of Control" shall mean (a) the occurrence of
any event (whether in one or more transactions) which results in a transfer of
control of Borrower or (b) any merger or consolidation of or with Borrower or
sale of all or substantially all of the property or assets of Borrower. For
purposes of this definition, "control of Borrower" shall mean the power, direct
or indirect (x) to vote 50% or more of the securities having ordinary voting
power for the election of directors of Borrower or (y) to direct or cause the
direction of the management and policies of Borrower by contract or otherwise.
"Charges" shall mean all taxes, charges, fees,
imposts, levies or other assessments, including, without limitation, all net
income, gross income, gross receipts, sales, use, ad valorem, value added,
transfer, franchise, profits, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation and property taxes, custom duties, fees, assessments, liens, claims
and charges of any kind whatsoever, together with any interest and any
penalties, additions to tax or additional amounts, imposed by any taxing or
other authority, domestic or foreign (including, without limitation, the Pension
Benefit Guaranty Corporation or any environmental agency or superfund), upon the
Collateral, Borrower or any of its Subsidiaries.
"Closing Date" shall mean May 24, 1996 or such other
date as may be agreed to by the parties hereto.
"Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time and the regulations promulgated
thereunder.
"Collateral" shall mean and include:
(a) all Receivables;
(b) all Equipment;
(c) all General Intangibles;
(d) all Inventory;
(e) all Real Property;
(f) all of Borrower's right, title and
interest in and to (i) its goods and other property including, but not limited
to all merchandise returned or rejected by Customers, relating to or securing
any of the Receivables; (ii) all of Borrower's rights as a consignor, a
consignee, an unpaid vendor, mechanic, artisan, or other lienor, including
stoppage in transit,
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<PAGE>
setoff, detinue, replevin, reclamation and repurchase; (iii) all additional
amounts due to Borrower from any Customer relating to the Receivables; (iv)
other property, including warranty claims, relating to any goods securing the
Obligations; (v) all of Borrower's contract rights, rights of payment which have
been earned under a contract right, instruments, documents, chattel paper,
warehouse receipts, deposit accounts, money and securities; (vi) if and when
obtained by Borrower, all real and personal property of third parties in which
Borrower has been granted a lien or security interest as security for the
payment or enforcement of Receivables; and (vii) any other goods, personal
property or real property now owned or hereafter acquired in which Borrower has
expressly granted a security interest or may in the future grant a security
interest to ACM Agent hereunder, or in any amendment or supplement hereto or
executed in connection herewith;
(g) all of Borrower's ledger sheets, ledger
cards, files, correspondence, records, books of account, business papers,
computers, computer software (owned by Borrower or in which it has an interest),
computer programs, tapes, disks and documents relating to (a), (b), (c), (d),
(e), (f) or (g) of this Paragraph; and
(h) all proceeds and products of (a), (b),
(c), (d), (e), (f) and (g) in whatever form, including, but not limited to:
cash, deposit accounts (whether or not comprised solely of proceeds),
certificates of deposit, insurance proceeds (including hazard, flood and credit
insurance), negotiable instruments and other instruments for the payment of
money, chattel paper, security agreements, documents, eminent domain proceeds,
condemnation proceeds and tort claim proceeds.
"Commitment Percentage" of any Lender shall mean the
percentage set forth below such Lender's name on the signature page hereof as
same may be adjusted upon any assignment by a Lender pursuant to Section 15.3(b)
hereof.
"Commitment Transfer Supplement" shall mean a
document in the form of Exhibit 15.3 hereto, properly completed and otherwise in
form and substance satisfactory to ACM Agent by which the Purchasing Lender
purchases and assumes a portion of the obligation of Lenders to make Advances
under this Agreement.
"Consents" shall mean all filings and all licenses,
permits, consents, approvals, authorizations, qualifications and orders of
governmental authorities and other third parties, domestic or foreign, necessary
to carry on Borrower's business, including, without limitation, any Consents
required under all applicable federal, state or other law.
"Controlled Group" shall mean all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with Borrower, are treated as
a single employer under Section 414 of the Code.
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<PAGE>
"Current Assets" at a particular date, shall mean all
cash, cash equivalents, accounts and inventory of Borrower and its Subsidiaries
and all other items which would, in conformity with GAAP, be included under
current assets on a balance sheet of Borrower on a consolidated basis as at such
date; provided, however, that such amounts shall not include (a) any amounts for
any Indebtedness owing by an Affiliate to Borrower or its Subsidiaries, unless
such Indebtedness arose in connection with the sale of goods or rendition of
services in the ordinary course of business and would otherwise constitute
current assets in conformity with GAAP, (b) any shares of stock issued by an
Affiliate of Borrower or its Subsidiaries, or (c) the cash surrender value of
any life insurance policy.
"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 on a consolidated basis, as at such
date, but in any event including, without limitation, the amounts of (a) all
Indebtedness of Borrower and its Subsidiaries payable on demand, or, at the
option of the Person to whom such Indebtedness is owed, not more than twelve
(12) months after such date, (b) any payments in respect of any Indebtedness of
Borrower and its Subsidiaries (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 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, and (d) all accruals for federal or other taxes
measured by income payable within the following twelve (12) month period.
"Customer" shall mean and include the account debtor
with respect to any Receivable.
"Default" shall mean an event which, with the giving
of notice or passage of time or both, would constitute an Event of
Default.
"Default Rate" shall have the meaning set forth in
Section 3.1 hereof.
"Defaulting Lender" shall have the meaning set forth
in Section 2.15(g) hereof.
"Depository Accounts" shall have the meaning set
forth in Section 4.15(h) hereof.
"Documents" shall have the meaning set forth in
Section 8.1(c) hereof.
"Dollar" and the sign "$" shall mean lawful money of
the United States of America.
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<PAGE>
"EBITDA" shall mean for any period the net income of
Borrower on a consolidated basis excluding extraordinary or non-recurring income
items before interest expense, taxes, depreciation and amortization for said
period of Borrower on a consolidated basis.
"Eligible Inventory" shall mean and include Inventory
excluding work in process but including unboxed but finished goods, valued at
the lower of cost or market value, determined on a first- in-first-out basis,
which is not, in ACM Agent's reasonable opinion, obsolete, slow moving or
unmerchantable and which ACM Agent, in its reasonable discretion, shall not deem
ineligible Inventory, based on such considerations as ACM Agent may from time to
time deem reasonably appropriate including, without limitation, whether the
Inventory is subject to a perfected, first priority security interest in favor
of ACM Agent and whether the Inventory conforms to all standards imposed by any
governmental agency, division or department thereof which has regulatory
authority over such goods or the use or sale thereof the effect of which is to
render such goods obsolete, slow moving or unmerchantable.
"Eligible Receivables" shall mean each Receivable
arising in the ordinary course of Borrower's business and which ACM Agent, in
its sole credit judgment, shall deem to be an Eligible Receivable, based on such
considerations as ACM Agent may from time to time deem reasonably appropriate. A
Receivable shall not be deemed eligible unless such Receivable is subject to ACM
Agent's perfected security interest and no Lien (other than Permitted
Encumbrances), and is evidenced by an invoice or other documentary evidence that
is customary in Borrower's industry and is satisfactory to ACM Agent. In
addition, no Receivable shall be an Eligible Receivable if:
(a) it arises out of a sale made by Borrower to an
Affiliate of Borrower or to a Person controlled by an Affiliate of
Borrower;
(b) it is due or unpaid more than (i) one hundred
twenty (120) days after its original invoice date or (ii) sixty (60) days after
the original due date therefor;
(c) fifty percent (50%) or more of the Receivables
from such Customer are not deemed Eligible Receivables hereunder;
Such percentage may, in ACM Agent's sole discretion, be increased or decreased
from time to time;
(d) any covenant, representation or warranty
contained in this Agreement with respect to such Receivable has
been breached in any material respect;
(e) the Customer shall (i) apply for, suffer, or
consent to the appointment of, or the taking of possession by, a receiver,
custodian, trustee or liquidator of itself or of all or a substantial part of
its property or call a meeting of its
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<PAGE>
creditors, (ii) admit in writing its inability, or be generally unable, to pay
its debts as they become due or cease operations of its present business, (iii)
make a general assignment for the benefit of creditors, (iv) commence a
voluntary case under any state or federal bankruptcy laws (as now or hereafter
in effect), (v) be adjudicated as bankrupt or insolvent, (vi) file a petition
seeking to take advantage of any other law providing for the relief of debtors,
(vii) acquiesce to, or fail to have dismissed, any petition which is filed
against it in any involuntary case under such bankruptcy laws, or (viii) take
any action for the purpose of effecting any of the foregoing;
(f) the sale is to a Customer outside the
continental United States of America, unless the sale is on letter of credit,
guaranty or acceptance terms, in each case acceptable to ACM Agent in its sole
discretion;
(g) the sale to the Customer is on a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval, consignment or any other
repurchase or return basis or is evidenced by chattel paper (unless Borrower
shall have delivered such chattel paper to ACM Agent);
(h) ACM Agent believes, in its sole credit judgment,
that such Receivable may not be paid by reason of the Customer's
financial inability to pay;
(i) the Customer is the United States of America,
any state or any department, agency or instrumentality of any of
them, unless Borrower assigns its right to payment of such
Receivable to Agent pursuant to the Assignment of Claims Act of
1940, as amended (31 U.S.C. Sub-Section 3727 et seq. and 41 U.S.C.
Sub-Section 15 et seq.) or has otherwise complied with other
applicable statutes or ordinances;
(j) the goods giving rise to such Receivable have
not been shipped to the Customer or the services giving rise to such Receivable
have not been performed by Borrower and accepted by the Customer or the
Receivable otherwise does not represent a final sale (subject to Section
4.15(i));
(k) the Receivables of the Customer exceed a credit
limit determined by ACM Agent, in its sole discretion, to the
extent such Receivable exceeds such limit;
(l) the Receivable is subject to an offset,
deduction, defense, dispute, or counterclaim asserted by a Customer (but only to
the extent of such offset, deduction, defense, dispute or counterclaim) or the
Customer is also a creditor or supplier or the Receivable is contingent in any
respect or for any reason;
(m) Borrower has made any agreement with any
Customer for any deduction therefrom, except for discounts or allowances made in
the ordinary course of business, which discounts
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<PAGE>
or allowances are reflected in the calculation of the face value of
each respective invoice related thereto;
(n) shipment of the merchandise or the rendition of
services has not been completed;
(o) any return, rejection or repossession of the
merchandise has occurred [to the extent of such return, rejection
or repossession];
(p) such Receivable is not payable to Borrower; or
(q) such Receivable is not otherwise satisfactory to
ACM Agent as determined in good faith by ACM Agent in the exercise of its
discretion in a reasonable manner.
"Environmental Complaint" shall have the meaning set
forth in Section 4.19(d) hereof.
"Environmental Laws" shall mean all federal, state
and local environmental, land use, zoning, health, chemical use, safety and
sanitation laws, statutes, ordinances and codes relating to the protection of
the environment and/or governing the use, storage, treatment, generation,
transportation, processing, handling, production or disposal of Hazardous
Substances and the rules, regulations, policies, guidelines, interpretations,
decisions, orders and directives of federal, state and local governmental
agencies and authorities with respect thereto.
"Equipment" shall mean and include all of Borrower's
goods (excluding Inventory) whether now owned or hereafter acquired and wherever
located including, without limitation, all equipment, machinery, apparatus,
motor vehicles, fittings, furniture, furnishings, fixtures, parts, accessories
and all replacements and substitutions therefor or accessions thereto.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time and the rules and regulations
promulgated thereunder.
"Event of Default" shall mean the occurrence and
continuance of any of the events set forth in Article X hereof.
"Federal Funds Rate" shall mean, for any day, the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or if such rate
is not so published for any day which is a Business Day, the average of
quotations for such day on such transactions received by IBJS from three Federal
funds brokers of recognized standing selected by IBJS.
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"Fee Letter" shall mean the letter agreement dated
the Closing Date between Borrower and ACM Agent.
"Finished Goods Advance Rate" shall have the meaning
set forth in Section 2.1(a).
"Fixed Charge Coverage" shall mean and include, with
respect to any fiscal period, the ratio of (I) (a) EBITDA for such period minus
(b) actual capital expenditures of Borrower on a consolidated basis minus (c)
cash payments for income taxes made by Borrower on a consolidated basis during
such period to (II) the sum of (a) the aggregate interest expense during such
period plus (b) the aggregate regularly scheduled principal payments with
respect to Indebtedness for borrowed money and capitalized leases actually made
during such period of Borrower on a consolidated basis (but excluding the
repayment of Advances hereunder and the repayment of the Indebtedness to the
Term Loan Lenders contemplated by Section 2.14(i)).
"Formula Amount" shall have the meaning set forth in
Section 2.1(a).
"GAAP" shall mean generally accepted accounting
principles in the United States of America in effect from time to
time.
"General Intangibles" shall mean and include all of
Borrower's general intangibles, whether now owned or hereafter acquired
including, without limitation, all choses in action, causes of action, corporate
or other business records, inventions, designs, patents, patent applications,
equipment formulations, manufacturing procedures, quality control procedures,
trademarks, trade secrets, goodwill, copyrights, registrations, licenses,
franchises, customer lists, tax refunds, tax refund claims, computer programs,
all claims under guaranties, security interests or other security held by or
granted to Borrower to secure payment of any of the Receivables by a Customer,
all rights of indemnification and all other intangible property of every kind
and nature (other than Receivables).
"Governmental Body" shall mean any nation or
government, any state or other political subdivision thereof or any entity
exercising the legislative, judicial, regulatory or administrative functions of
or pertaining to a government.
"Hazardous Discharge" shall have the meaning set
forth in Section 4.19(d) hereof.
"Hazardous Substance" shall mean, without limitation,
any flammable explosives, radon, radioactive materials, asbestos, urea
formaldehyde foam insulation, polychlorinated byphenyls, petroleum and petroleum
products, methane, hazardous materials, Hazardous Wastes, hazardous or toxic
substances or related materials as defined in CERCLA, the Hazardous Materials
Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.),
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RCRA, or any other applicable Environmental Law and in the regulations adopted
pursuant thereto.
"Hazardous Wastes" shall mean all waste materials
regulated under Environmental Laws.
"Indebtedness" of a Person at a particular date shall
mean all obligations of such Person which in accordance with GAAP would be
classified upon a balance sheet as liabilities (except capital stock and surplus
earned or otherwise) and in any event, without limitation by reason of
enumeration, shall include all indebtedness, debt and other similar monetary
obligations of such Person whether direct or guaranteed, and all premiums, if
any, due at the required prepayment dates of such indebtedness, and all
indebtedness secured by a Lien on assets owned by such Person, whether or not
such indebtedness actually shall have been created, assumed or incurred by such
Person. Any indebtedness of such Person resulting from the acquisition by such
Person of any assets subject to any Lien shall be deemed, for the purposes
hereof, to be the equivalent of the creation, assumption and incurring of the
indebtedness secured thereby, whether or not actually so created, assumed or
incurred.
"Intercreditor Agreement" shall mean the
Intercreditor Agreement dated May 24, 1996 between ACM Agent and Term Loan
Agent.
"Inventory" shall mean all of Borrower's now owned or
hereafter acquired goods, merchandise and other personal property, wherever
located, to be furnished under any contract of service or held for sale or
lease, all raw materials, work in process, finished goods and materials and
supplies of any kind, nature or description which are or might be used or
consumed in Borrower's business or used in selling or furnishing such goods,
merchandise and other personal property, and all documents of title or other
documents representing them.
"Lender" and "Lenders" shall have the meaning
ascribed to such term in the Preamble and shall include each person which is a
Purchasing Lender.
"Lender Default" shall have the meaning set forth in
Section 2.15(a) hereof.
"Letters of Credit" shall have the meaning set forth
in Section 2.8.
"Letter of Credit Fees" shall have the meaning set
forth in Section 3.2.
"Leverage Ratio" shall mean and include, at a
particular date, the ratio of (a) the aggregate amount of all liabilities of
Borrower on a consolidated basis to (b) Tangible Net Worth at such date.
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"Lien" shall mean any mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, lien (whether statutory or
otherwise), Charge, claim or encumbrance, or preference, priority or other
security agreement or preferential arrangement held or asserted in respect of
any asset of any kind or nature whatsoever including, without limitation, any
conditional sale or other title retention agreement, any lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement under the Uniform Commercial
Code or comparable law of any jurisdiction.
"Material Adverse Effect" shall mean a material
adverse effect on (i) the business, assets, operations, prospects or financial
condition of Borrower, (ii) Borrower's ability to pay the Obligations in
accordance with the terms thereof, (iii) the Collateral or ACM Agent's Liens on
the Collateral or the priority of any such Lien, or (iv) ACM Agent's, Co-Agents'
and Lenders' rights and remedies under this Agreement and the Other Documents.
"Maximum Loan Amount" shall mean $25,000,000.
"Monthly Advances" shall have the meaning set forth
in Section 3.1 hereof.
"Mortgage" shall mean, collectively, the mortgages on
the Real Property, each securing the original principal amount of [$25,000,000]
together with all extensions, renewals, amendments, supplements, modifications,
substitutions and replacements thereto and thereof.
"Net Worth" at a particular date, shall mean all
amounts which would be included under shareholders' equity on a balance sheet of
Borrower determined in accordance with GAAP as at such date.
"Non-Defaulting Lenders" shall have the meaning set
forth in Section 2.15(b) hereof.
"Obligations" shall mean and include any and all of
Borrower's Indebtedness and/or liabilities to ACM Agent, Co-Agents or Lenders or
any corporation that directly or indirectly controls or is controlled by or is
under common control with any Lender of every kind, nature and description,
direct or indirect, secured or unsecured, joint, several, joint and several,
absolute or contingent, due or to become due, now existing or hereafter arising,
contractual or tortious, liquidated or unliquidated, whether arising under this
Agreement or under any Other Document and all obligations of Borrower to ACM
Agent, Co-Agents or Lenders to perform acts or refrain from taking any action
hereunder or thereunder.
"Other Documents" shall mean the Mortgage, the
Questionnaire and any and all other agreements, instruments and documents,
including, without limitation, guaranties, pledges, powers of attorney,
consents, and all other writings heretofore,
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now or hereafter executed by Borrower and delivered to ACM Agent or any Co-Agent
in respect of the transactions contemplated by this Agreement.
"Parent" of any Person shall mean a corporation or
other entity owning, directly or indirectly at least 50% of the shares of stock
or other ownership interests having ordinary voting power to elect a majority of
the directors of the Person, or other Persons performing similar functions for
any such Person.
"Participant" shall mean each Person who shall be
granted the right by any Lender to participate in any of the Advances and who
shall have entered into a participation agreement in form and substance
satisfactory to such Lender.
"Payment Office" shall mean initially One State
Street, New York, New York 10004; thereafter, such other office of ACM Agent, if
any, which it may designate by notice to Borrower and to each Lender to be the
Payment Office.
"Permitted Encumbrances" shall mean (a) Liens in
favor of Agent for the benefit of ACM Agent, Co-Agents and Lenders; (b) Liens
for taxes, assessments or other governmental charges not delinquent, or, being
contested in good faith and by appropriate proceedings and with respect to which
proper reserves have been taken by Borrower; provided, that, the Lien shall have
no effect on the priority of the Liens in favor of ACM Agent or the value of the
assets in which ACM Agent has such a Lien and a stay of enforcement of any such
Lien shall be in effect; (c) Liens disclosed in the financial statements
referred to in Section 5.5; (d) deposits or pledges to secure obligations under
worker's compensation, social security or similar laws, or under unemployment
insurance; (e) deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of Borrower's business; (f) judgment Liens that have been stayed or
bonded and mechanics', worker's, materialmen's or other like Liens arising in
the ordinary course of Borrower's business with respect to obligations which are
not due or which are being contested in good faith by Borrower; (g) Liens placed
upon the Equipment, Real Property or other fixed assets hereafter acquired to
secure a portion of the purchase price thereof, provided that (x) any such lien
shall not encumber any other property of Borrower and (y) the aggregate amount
of Indebtedness secured by such Liens incurred as a result of such purchases
during any fiscal year shall not exceed the amount provided for in Section 7.6;
(h) Liens in favor of Term Loan Agent and Term Loan Lenders as in existence on
the Closing Date (subject to the priorities established in the Intercreditor
Agreement); and (i) Liens disclosed on Schedule 1.2.
"Person" shall mean an individual, a partnership, a
corporation, a business trust, a joint stock company, a trust, an unincorporated
association, a joint venture, a governmental authority or any other entity of
whatever nature.
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"Plan" shall mean any employee benefit plan within
the meaning of Section 3(3) of ERISA, maintained for employees of Borrower or
any member of the Controlled Group or any such Plan to which Borrower or any
member of the Controlled Group is required to contribute on behalf of any of its
employees.
"Prepayment Date" shall have the meaning set forth in
Section 13.1 hereof.
"Projections" shall have the meaning set forth in
Section 5.5(a) hereof.
"Purchasing Lender" shall have the meaning set forth
in Section 15.3 hereof.
"Questionnaire" shall mean the Documentation
Information Questionnaire and the responses thereto provided by Borrower and
delivered to ACM Agent.
"Raw Material Advance Rate" shall have the meaning
set forth in Section 2.1(a) hereof.
"RCRA" shall mean the Resource Conservation and
Recovery Act, 42 U.S.C. ss.ss. 6901 et seq., as same may be amended
from time to time.
"Real Property" shall mean all of Borrower's rights,
title and interest in and to the premises located at 6 Hazel
Street, Attleboro, Massachusetts and 345 Ely Avenue, So. Norwalk,
Connecticut.
"Receivables" shall mean and include all of
Borrower's accounts, contract rights, instruments (including those evidencing
indebtedness owed to Borrower by its Affiliates), documents, chattel paper,
general intangibles relating to accounts, drafts and acceptances, and all other
forms of obligations owing to Borrower arising out of or in connection with the
sale or lease of Inventory or the rendition of services, all guarantees and
other security therefor, whether secured or unsecured, now existing or hereafter
created, and whether or not specifically sold or assigned to ACM Agent or
Lenders hereunder.
"Receivables Advance Rate" shall have the meaning set
forth in Section 2.1(a)(i) hereof.
"Related Person" shall mean as to any Person, any
other Person which, together with such Person, is treated as a single employer
under Section 414(c) of the Code.
"Release" shall have the meaning set forth in Section
5.7(c)(i) hereof.
"Required Lenders" shall mean Lenders holding at
least fifty one percent (51%) of the Advances as of the most recent
Settlement Date.
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"Revolving Advances" shall mean Advances made other
than Letters of Credit.
"Revolving Credit Note" shall mean the promissory
note referred to in Section 2.1(a) hereof.
"Revolving Interest Rate" shall mean an interest rate
per annum equal to the sum of the Alternate Base Rate plus one and one-half
percent (1.5%) .
"Seasonal Advance Amount" at any date during the
Seasonal Advance Period shall mean up to $1,500,000 subject to reduction
pursuant to Section 2.13 hereof and reinstatement pursuant to Section 2.1(c)
hereof.
"Seasonal Advance Period" shall mean the period
commencing on March 1 of each year and ending on September 30 of such year
during the Term.
"Settlement Date" shall mean the Closing Date and
thereafter Wednesday of each week unless such day is not a Business Day in which
case it shall be the next succeeding Business Day.
"Swank ESOP" shall mean The New Swank, Inc.
Retirement Plan.
"Subsidiary" of any Person shall mean a corporation
or other entity whose shares of stock or other ownership interests having
ordinary voting power (other than stock or other ownership interests having such
power only by reason of the happening of a contingency) to elect a majority of
the directors of such corporation, or other Persons performing similar functions
for such entity, are owned, directly or indirectly, by such Person.
"Tangible Net Worth" shall mean (a) the aggregate
amount of all assets of Borrower on a consolidated basis 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 on a consolidated basis.
"Term" shall have the meaning set forth in Section
13.1 hereof.
"Termination Event" shall mean (i) a Reportable Event
with respect to any Plan or Multiemployer Plan; (ii) the withdrawal of either
Borrower or any member of the Controlled Group from a Plan or Multiemployer Plan
during a plan year in which such entity was a "substantial employer" as defined
in Section 4001(a)(2) of ERISA; (iii) the providing of notice of intent to
terminate a Plan in a distress termination described in Section 4041(c) of
ERISA; (iv) the institution by the PBGC of proceedings to terminate a Plan or
Multiemployer Plan; (v) any event or condition (a) which might constitute
grounds under Section 4042 of ERISA for the termination of, or the appointment
of a trustee to administer, any Plan or
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Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of either
Borrower or any member of the Controlled Group from a Multiemployer Plan.
"Term Loan Agent" shall mean The Chase Manhattan
Bank, N.A.
"Term Loan Agreement" shall mean the Second Amended
and Restated Credit Agreement dated as of May 24, 1996 among
Borrower, Term Loan Lenders and Term Loan Agent.
"Term Loan Lenders" shall mean The Chase Manhattan
Bank, N.A., Fleet National Bank and their permitted successors and assigns.
"Term Loan Note(s)" shall mean the promissory note(s)
issued by Borrower in favor of Term Loan Lenders pursuant to the Term Loan
Agreement in the aggregate principal sum of not less than $4,000,000.
"Toxic Substance" shall mean and include any material
present on the Real Property or the Leasehold Interests which has been shown to
have significant adverse effect on human health or which is subject to
regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. ss.ss. 2601
et seq., applicable state law, or any other applicable Federal or state laws now
in force or hereafter enacted relating to toxic substances. "Toxic substance"
includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and
lead-based paints.
"Transferee" shall have the meaning set forth in
Section 15.3(b) hereof.
"Undrawn Availability" at a particular date shall
mean an amount equal to (a) the lesser of (i) the Formula Amount at such date or
(ii) the Maximum Loan Amount, minus (b) the sum of (i) the outstanding amount of
Advances at such date plus (ii) all amounts due and owing to Borrower's trade
creditors which are sixty (60) days or more past due at such date, plus, solely
for purposes of Section 7.18 hereof, (c) cash on hand of Borrower in excess of
$250,000.
"Virgin Island Subsidiary" shall mean Swank Sales
International (V.I.) Inc., a Virgin Islands corporation.
"Week" shall mean the time period commencing with the
opening of business on a Wednesday and ending on the end of
business the following Tuesday.
"Working Capital" at a particular date, shall mean
the excess, if any, of Current Assets over Current Liabilities at
such date.
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1.3. Uniform Commercial Code Terms. All terms used herein
and defined in the Uniform Commercial Code as adopted in the State
of New York shall have the meaning given therein unless otherwise
defined herein.
1.4. Certain Matters of Construction. The terms "herein", "hereof"
and "hereunder" and other words of similar import refer to this Agreement as a
whole and not to any particular section, paragraph or subdivision. Any pronoun
used shall be deemed to cover all genders. Wherever appropriate in the context,
terms used herein in the singular also include the plural and vice versa. All
references to statutes and related regulations shall include any amendments of
same and any successor statutes and regulations. Unless otherwise provided, all
references to any instruments or agreements, including, without limitation,
references to any of the Other Documents, shall include any and all
modifications or amendments thereto and any and all extensions or renewals
thereof.
II. ADVANCES, PAYMENTS.
2.1. (a) Revolving Advances. Subject to the terms and
conditions set forth in this Agreement, each Lender, severally and
not jointly, will make Revolving Advances to Borrower in aggregate
amounts outstanding at any time equal to such Lender's Commitment
Percentage of the lesser of (x) the Maximum Loan Amount less the
sum of (i) aggregate amount of outstanding Letters of Credit and
(ii) such reserves as ACM Agent may reasonably deem proper and
necessary from time to time or (y) an amount equal to the sum of:
(i) 85%, subject to the provisions of Section 2.1(b)
hereof ("Receivables Advance Rate"), of Eligible
Receivables, plus
(ii) the lesser of (A) (I) 15%, subject to the
provisions of Section 2.1(b) hereof ("Raw Material
Advance Rate"), of the value of the Eligible Inventory
consisting of raw materials plus (II) 50%, subject to
the provisions of Section 2.1(b) hereof ("Finished
Goods Advance Rate") of the value of the Eligible
Inventory consisting of finished goods (including
unboxed but finished goods) (the Receivables Advance
Rate, the Raw Material Advance Rate and the Finished
Goods Advance Rate shall be referred to, collectively,
as the "Advance Rates") or (B) $12,500,000, plus
(iii) solely during the Seasonal Advance Period, the
Seasonal Advance Amount, minus
(iv) the aggregate amount of outstanding Letters of
Credit, minus
(v) such reserves as ACM Agent may reasonably deem
proper and necessary from time to time.
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The amount derived from the sum of (x) Sections 2.1(a)(y)(i) and
(ii) and (iii) minus (y) Section 2.1 (a)(y)(v) at any time and from time to time
shall be referred to as the "Formula Amount". The Revolving Advances shall
otherwise be evidenced by the secured promissory note ("Revolving Credit Note")
substantially in the form attached hereto as Exhibit 2.1(a).
(b) Discretionary Rights. The Advance Rates may be
increased with the consent of Co-Agents or decreased by ACM Agent at any time
and from time to time in the exercise of its reasonable discretion. Borrower
consents to any such increases or decreases and acknowledges that decreasing the
Advance Rates or increasing the reserves may limit or restrict Advances
requested by Borrower.
(c) Reinstatement of Seasonal Advance Amount. In
the event and to the extent the Seasonal Advance Amount has been reduced
pursuant to Section 2.13 hereof at any time and from time to time, the Seasonal
Advance Amount shall be increased (but in no event shall such increase cause the
Seasonal Advance Amount to exceed $1,500,000) by an amount equal to fifty
percent (50%) of the "hard cost" of new Equipment acquired by Borrower so long
as Borrower has not financed the acquisition of such Equipment (other than
through the use of Revolving Advances). As used herein, "hard cost" means the
invoice cost of such Equipment less shipping, handling, taxes, installation and
all other "soft" costs.
2.2. Procedure for Revolving Advances Borrowing.
Borrower may notify ACM Agent prior to 1:00 p.m. on a
Business Day of its request to incur, on that day, a Revolving Advance
hereunder. Should any amount required to be paid as interest hereunder, or as
fees or other charges under this Agreement or any Other Document or with respect
to any other Obligation, become due, same shall be deemed a request for a
Revolving Advance as of the date such payment is due, in the amount required to
pay in full such interest, fee, charge or Obligation and such request shall be
irrevocable.
2.3. Disbursement of Advance Proceeds. All Advances shall be
disbursed from whichever office or other place ACM Agent may designate from time
to time and, together with any and all other Obligations of Borrower to ACM
Agent, Co-Agents or Lenders, shall be charged to Borrower's Account on ACM
Agent's books. During the Term, Borrower may use the Revolving Advances by
borrowing, prepaying and reborrowing, all in accordance with the terms and
conditions hereof. The proceeds of each Revolving Advance requested by Borrower
or deemed to have been requested by Borrower under Section 2.2 hereof shall,
with respect to requested Revolving Advances to the extent Lenders make such
Revolving Advances, be made available to Borrower on the day so requested by way
of credit to Borrower's operating account at IBJS, or such other bank as
Borrower may designate following notification to ACM Agent, in immediately
available federal funds or other immediately available funds or, with respect to
Revolving Advances deemed to have been
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<PAGE>
requested, be disbursed to ACM Agent to be applied to the outstanding
Obligations giving rise to such deemed request.
2.4. Maximum Advances. The aggregate balance of Advances
outstanding at any time shall not exceed the lesser of (a) Maximum
Loan Amount or (b) the Formula Amount at such time.
2.5. Repayment of Advances.
(a) The Advances shall be due and payable in full on
the last day of the Term subject to earlier prepayment as herein
provided.
(b) Borrower recognizes that the amounts evidenced
by checks, notes, drafts or any other items of payment relating to and/or
proceeds of Collateral may not be collectible by ACM Agent on the date received.
However, ACM Agent agrees to conditionally credit Borrower's Account (subject to
collection) in the amount of such checks, notes, drafts and other items on the
Business Day it receives those items of payment. In consideration of ACM Agent's
agreement to so credit Borrower's Account, Borrower agrees that, in computing
the charges under this Agreement, all items of payment shall be deemed applied
by ACM Agent on account of the Obligations one (1) Business Day after ACM Agent
receives such payments via wire transfer or electronic depositary check. ACM
Agent is not, however, required to credit Borrower's Account for the amount of
any item of payment which is unsatisfactory to ACM Agent and ACM Agent may
charge Borrower's Account for the amount of any item of payment which is
returned to ACM Agent unpaid (to the extent that such amount has previously been
credited to the Borrower's Account and/or Obligations).
(c) All payments of principal, interest and other
amounts payable hereunder, or under any of the related agreements shall be made
to ACM Agent at the Payment Office not later than 1:00 P.M. (New York Time) on
the due date therefor in lawful money of the United States of America in federal
funds or other funds immediately available to ACM Agent. ACM Agent shall have
the right to effectuate payment on any and all Obligations due and owing
hereunder by charging Borrower's Account or by making Advances as provided in
Section 2.2 hereof.
(d) Borrower shall pay principal, interest, and all
other amounts payable hereunder, or under any Other Document, without any
deduction whatsoever, including, but not limited to, any deduction for any
setoff or counterclaim.
2.6. Repayment of Excess Advances. The aggregate balance of
Advances outstanding at any time in excess of the maximum amount of Advances
permitted hereunder shall be immediately due and payable without the necessity
of any demand, at the Payment Office, whether or not a Default or Event of
Default has occurred.
2.7. Statement of Account. ACM Agent shall maintain, in
accordance with its customary procedures, a loan account
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("Borrower's Account") in the name of Borrower in which shall be recorded the
date and amount of each Advance made by Lenders and the date and amount of each
payment in respect thereof; provided, however, the failure by ACM Agent to
record the date and amount of any Advance shall not adversely affect ACM Agent
or any Lender. Each month, ACM Agent shall send to Borrower a statement showing
the accounting for the Advances made, payments made or credited in respect
thereof, and other transactions between Lenders and Borrower, during such month.
The monthly statements shall be deemed correct and binding upon Borrower in the
absence of manifest error and shall constitute an account stated between Lenders
and Borrower unless ACM Agent receives a written statement of Borrower's
specific exceptions thereto within thirty (30) days after such statement is
received by Borrower. The records of ACM Agent with respect to the loan account
shall be conclusive evidence absent manifest error of the amounts of Advances
and other charges thereto and of payments applicable thereto.
2.8. Letters of Credit. Subject to the terms and conditions hereof,
ACM Agent shall issue or cause the issuance of Letters of Credit ("Letters of
Credit"); provided, however, that ACM Agent will not be required to issue or
cause to be issued any Letters of Credit to the extent that the face amount of
such Letters of Credit would then cause the sum of (i) the outstanding Revolving
Advances plus (ii) outstanding Letters of Credit (with the requested Letter of
Credit being deemed to be outstanding for purposes of this calculation) to
exceed the lesser of (x) the Maximum Loan Amount or (y) the Formula Amount. The
maximum amount of outstanding Letters of Credit shall not exceed $3,000,000 in
the aggregate at any time. All disbursements or payments related to Letters of
Credit shall be deemed to be Revolving Advances and shall bear interest at the
Revolving Interest Rate; Letters of Credit that have not been drawn upon shall
not bear interest. Letters of Credit shall be subject to the terms and
conditions set forth in the Letter of Credit Application attached hereto as
Exhibit 2.8.
2.9. Issuance of Letters of Credit.
(a) Borrower may request ACM Agent to issue or cause
the issuance of a Letter of Credit by delivering to ACM Agent at the Payment
Office Bank's standard form of Letter of Credit Application (collectively, the
"Letter of Credit Application") completed to the satisfaction of ACM Agent; and,
such other certificates, documents and other papers and information as ACM Agent
may reasonably request.
(b) Each Letter of Credit shall, among other things,
(i) provide for the payment of sight drafts when presented for honor thereunder
in accordance with the terms thereof and when accompanied by the documents
described therein and (ii) have an expiry date not later than six (6) months
after such Letter of Credit's date of issuance. Unless otherwise stated in the
Letter of Credit Application or the Letter of Credit, as the case may be, each
Letter of Credit Application and each Letter of Credit shall
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be subject to the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce
Publication No. 500, and any amendments or revision thereof and, to
the extent not inconsistent therewith, the laws of the State of New
York.
2.10. Requirements For Issuance of Letters of Credit.
(a) In connection with the issuance of any Letter of
Credit Borrower shall indemnify, save and hold ACM Agent, Co-Agents and each
Lender harmless from any loss, cost, expense or liability, including, without
limitation, payments made by ACM Agent, Co- Agents and any Lender, and expenses
and reasonable attorneys' fees incurred by ACM Agent, Co-Agents or any Lender
arising out of, or in connection with, any Letter of Credit to be issued or
created for Borrower, except for the willful misconduct or gross negligence of
such indemnified party. Borrower shall be bound by ACM Agent's or any issuing or
accepting bank's regulations and good faith interpretations of any Letter of
Credit issued or created for Borrower's Account, although this interpretation
may be different from Borrower's own;, and, neither ACM Agent, any Co-Agent nor
any Lender, the bank which opened the Letter of Credit, nor any of its
correspondents shall be liable for any error, negligence, or mistakes, whether
of omission or commission, in following Borrower's instructions or those
contained in any Letter of Credit or of any modifications, amendments or
supplements thereto or in issuing or paying any Letter of Credit, except for the
willful misconduct or gross negligence of such indemnified party.
(b) Borrower shall authorize and direct any bank
which issues a Letter of Credit to name Borrower as the "Account Party" therein
and to deliver to ACM Agent upon its request all instruments, documents, and
other writings and property received by the bank pursuant to the Letter of
Credit and, if ACM Agent is in possession of such items, to accept and rely upon
ACM Agent's instructions and agreements with respect to all matters arising in
connection with the Letter of Credit, the application therefor or any acceptance
therefor.
(c) In connection with all Letters of Credit issued
or caused to be issued by ACM Agent under this Agreement, Borrower hereby
appoints ACM Agent, or its designee, as its attorney, with full power and
authority at any time following the occurrence and during the continuance of an
Event of Default, (i) to sign and/or endorse Borrower's name upon any warehouse
or other receipts, letter of credit applications and acceptances; (ii) to sign
Borrower's name on bills of lading; (iii) to clear Inventory through the United
States of America Customs Department ("Customs") in the name of Borrower or any
Lender or such Lender's designee, and to sign and deliver to Customs officials
powers of attorney in the name of Borrower for such purpose; and (iv) to
complete in Borrower's name or ACM Agent's, or in the name of ACM Agent's
designee, any order, sale or transaction, obtain the necessary documents in
connection therewith, and collect the proceeds thereof. Neither ACM Agent,
Co-Agents nor their respective
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attorneys will be liable for any acts or omissions nor for any error of judgment
or mistakes of fact or law, except for its own or its attorney's willful
misconduct or gross negligence. This power, being coupled with an interest, is
irrevocable as long as any Letters of Credit remain outstanding.
(d) Each Lender shall to the extent of the
percentage amount equal to the product of such Lender's Commitment Percentage
times the aggregate amount of all unreimbursed reimbursement obligations with
respect to the Letters of Credit be deemed to have irrevocably purchased an
undivided participation in each Revolving Advance made as a consequence of such
disbursement. In the event that at the time a disbursement is made the unpaid
balance of Revolving Advances exceeds or would exceed, with the making of such
disbursement, the lesser of the Maximum Loan Amount or the Formula Amount, and
such disbursement is not reimbursed by Borrower within two (2) Business Days,
ACM Agent shall promptly notify each Lender and upon ACM Agent's demand each
Lender shall pay to ACM Agent such Lender's proportionate share of such
unreimbursed disbursement together with such Lender's proportionate share of ACM
Agent's unreimbursed costs and expenses relating to such unreimbursed
disbursement. Upon receipt by ACM Agent of a repayment from Borrower of any
amount disbursed by ACM Agent for which ACM Agent had already been reimbursed by
Lenders, ACM Agent shall deliver to each Lender that Lender's pro rata share of
such repayment. Each Lender's participation commitment shall continue until the
last to occur of any of the following events: (A) ACM Agent ceases to be
obligated to issue Letters of Credit hereunder; (B) no Letter of Credit issued
hereunder remains outstanding and uncancelled or (C) all Persons (other than
Borrower) have been fully reimbursed for all payments made under or relating to
Letters of Credit.
(e) On demand on the last day of the Term, Borrower
will cause cash to be deposited and maintained in an interest bearing account
with ACM Agent as cash collateral an amount equal to 103% of the aggregate face
amount of outstanding Letters of Credit as of the close of business on such date
("Required LC Collateral"), and Borrower hereby irrevocably authorizes ACM Agent
in its discretion on Borrower's behalf and in Borrower's name to open such an
account if required above and to make and maintain deposits therein or in an
account opened by Borrower in the amounts required to be made by Borrower out of
the proceeds of Receivables or other Collateral or out of any other funds of
Borrower coming into ACM Agent's possession. ACM Agent will invest such cash
collateral (less applicable reserves) in such short-term money-market items as
to which ACM Agent and Borrower mutually agree and the net return on such
investments shall be credited to such account and constitute additional cash
collateral. Borrower may not withdraw amounts credited to any such account
except upon payment and performance in full of all Obligations.
2.11. Additional Payments. Any sums expended by ACM Agent,
any Co-Agent or any Lender due to Borrower's failure to perform or
comply with its Obligations under this Agreement or any Other
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Document including, without limitation, Borrower's obligations under Sections
4.2, 4.4, 4.12, 4.13, 4.14 and 6.1 hereof, may be charged to Borrower's Account
as a Revolving Advance and added to the Obligations.
2.12. Manner of Borrowing and Payment.
(a) Each borrowing of Revolving Advances shall be
advanced according to the Commitment Percentages of Lenders.
(b) Each payment (including each prepayment) by
Borrower on account of the principal of and interest on the Revolving Credit
Note, shall be applied to the Revolving Advances pro rata according to the
Commitment Percentages of Lenders. Except as expressly provided herein
(including, without limitation, Section 4.15(h)), all payments (including
prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set-off or counterclaim and shall be made to ACM Agent on
behalf of Lenders to the Payment Office, in each case on or prior to 1:00 P.M.,
New York time, in Dollars and in immediately available funds.
(c) (i) Notwithstanding anything to the contrary
contained in Sections 2.12(a) and (b) hereof or 2.10(d) hereof, commencing with
the first Business Day following the Closing Date, each borrowing of Revolving
Advances shall be advanced by ACM Agent and each payment by Borrower on account
of Revolving Advances shall be applied first to those Revolving Advances made by
ACM Agent. On or before 1:00 P.M., New York time, on each Settlement Date
commencing with the first Settlement Date following the Closing Date, ACM Agent
and Lenders shall make certain payments as follows: (I) if the aggregate amount
of new Revolving Advances made by ACM Agent during the preceding Week exceeds
the aggregate amount of repayments applied to outstanding Revolving Advances
during such preceding Week, then each Lender shall provide ACM Agent with funds
in an amount equal to its Commitment Percentage of the difference between (w)
such Revolving Advances and (x) such repayments and (II) if the aggregate amount
of repayments applied to outstanding Revolving Advances during such Week exceeds
the aggregate amount of new Revolving Advances made during such Week, then ACM
Agent shall provide each Lender with its Commitment Percentage of the difference
between (y) such repayments and (z) such Revolving Advances.
(ii) Each Lender shall be entitled to earn
interest at the Revolving Interest Rate on outstanding Revolving
Advances which it has funded.
(iii) Promptly following each Settlement Date,
ACM Agent shall submit to each Lender a certificate with respect to payments
received and Advances made during the Week immediately preceding such Settlement
Date. Such certificate of ACM Agent shall be conclusive in the absence of
manifest error.
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(d) If any Lender or Participant (a "benefitted
Lender") shall at any time receive any payment of all or part of its Advances,
or interest thereon, or receive any Collateral in respect thereof (whether
voluntarily or involuntarily or by set-off) in a greater proportion than any
such payment to and Collateral received by any other Lender, if any, in respect
of such other Lender's Advances, or interest thereon, and such greater
proportionate payment or receipt of Collateral is not expressly permitted
hereunder, such benefitted Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Advances, or shall provide such other
Lender with the benefits of any such Collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the excess payment
or benefits of such Collateral or proceeds ratably with each of Lenders;
provided, however, that if all or any portion of such excess payment or
Collateral is thereafter recovered from such benefitted Lender, such purchase
shall be rescinded, and the purchase price and Collateral returned, to the
extent of such recovery, but without interest. Each Lender so purchasing a
portion of another Lender's Advances may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion.
(e) Unless ACM Agent shall have been notified by
telephone, confirmed in writing, by any Lender that such Lender will not make
the amount which would constitute its Commitment Percentage of the Advances
available to ACM Agent, ACM Agent may (but shall not be obligated to) assume
that such Lender shall make such amount available to ACM Agent and, in reliance
upon such assumption, make available to Borrower a corresponding amount. ACM
Agent will promptly notify Borrower of its receipt of any such notice from a
Lender. If such amount is made available to ACM Agent on a date after a
Settlement Date, such Lender shall pay to ACM Agent on demand an amount equal to
the product of (i) the daily average federal funds rate (computed on the basis
of a year of 360 days) during such period as quoted by ACM Agent, times (ii)
such amount, times (iii) the number of days from and including such Settlement
Date to the date on which such amount becomes immediately available to ACM
Agent. A certificate of ACM Agent submitted to any Lender with respect to any
amounts owing under this paragraph (e) shall be conclusive, in the absence of
manifest error. If such amount is not in fact made available to ACM Agent by
such Lender within three (3) Business Days after such Settlement Date, ACM Agent
shall be entitled to recover such an amount, with interest thereon at the rate
per annum then applicable to Revolving Advances hereunder, on demand from
Borrower; provided, however, that ACM Agent's right to such recovery shall not
prejudice or otherwise adversely affect Borrower's rights (if any) against such
Lender.
2.13. Mandatory Reductions.
When Borrower sells or otherwise disposes of any
Collateral (other than Inventory in the ordinary course of business
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or Equipment to the extent permitted by Section 4.3), Borrower shall repay the
Advances in an amount equal to the net proceeds of such sale (i.e., gross
proceeds less the reasonable costs of such sales or other dispositions
including, taxes and other amounts required by law to be paid or withheld with
respect thereto), such repayments to be made promptly but in no event more than
one (1) Business Day following receipt of such net proceeds, and until the date
of payment, such proceeds shall be held in trust for Lenders. The foregoing
shall not be deemed to be implied consent to any such sale otherwise prohibited
by the terms and conditions hereof. The Seasonal Advance Amount shall be
automatically and permanently reduced, without notice, in an amount equal to
such payment in the event of a sale or other disposition of Equipment.
2.14. Use of Proceeds. Borrower shall apply the proceeds
of Advances to (i) repay certain Indebtedness due and owing to Term
Loan Lenders and (ii) to provide for its working capital needs.
2.15. Defaulting Lender.
(a) Notwithstanding anything to the contrary
contained herein, in the event any Lender (x) has refused (which refusal
constitutes a breach by such Lender of its obligations under this Agreement) to
make available its portion of any Advance or (y) notifies either ACM Agent or
Borrower that it does not intend to make available its portion of any Advance
(if the actual refusal would constitute a breach by such Lender of its
obligations under this Agreement) (each, a "Lender Default"), all rights and
obligations hereunder of such Lender (a "Defaulting Lender") as to which a
Lender Default is in effect and of the other parties hereto shall be modified to
the extent of the express provisions of this Section 2.15 while such Lender
Default remains in effect.
(b) Advances shall be incurred pro rata from Lenders
(the "Non-Defaulting Lenders") which are not Defaulting Lenders based on their
respective Commitment Percentages, and no Commitment Percentage of any Lender or
any pro rata share of any Advances required to be advanced by any Lender shall
be increased as a result of such Lender Default. Amounts received in respect of
principal of any type of Advances shall be applied to reduce the applicable
Advances of each Lender pro rata based on the aggregate of the outstanding
Advances of that type of all Lenders at the time of such application; provided,
that, such amount shall not be applied to any Advances of a Defaulting Lender at
any time when, and to the extent that, the aggregate amount of Advances of any
Non-Defaulting Lender exceeds such Non-Defaulting Lender's Commitment Percentage
of all Advances then outstanding.
(c) A Defaulting Lender shall not be entitled to
give instructions to ACM Agent, to approve, disapprove, consent to or vote on
any matters relating to this Agreement and the Other Documents or to receive any
early termination fees payable pursuant to Section 13.1 while such Lender is a
Defaulting Lender. All amendments, waivers and other modifications of this
Agreement and the Other Documents may be made without regard to a Defaulting
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<PAGE>
Lender and, for purposes of the definition of "Required Lenders", a Defaulting
Lender shall be deemed not to be a Lender and not to have Advances outstanding.
(d) Other than as expressly set forth in this
Section 2.16, the rights and obligations of a Defaulting Lender (including the
obligation to indemnify Agent) and the other parties hereto shall remain
unchanged. Nothing in this Section 2.16 shall be deemed to release any
Defaulting Lender from its obligations under this Agreement and the Other
Documents, shall alter such obligations, shall operate as a waiver of any
default by such Defaulting Lender hereunder, or shall prejudice any rights which
Borrower, ACM Agent or any Lender may have against any Defaulting Lender as a
result of any default by such Defaulting Lender hereunder.
(e) In the event a Defaulting Lender retroactively
cures to the satisfaction of ACM Agent the breach which caused a Lender to
become a Defaulting Lender, such Defaulting Lender shall no longer be a
Defaulting Lender and shall be treated as a Lender under this Agreement.
III. INTEREST AND FEES.
3.1. Interest. Interest on Revolving Advances shall be payable in
arrears on the first Business Day of each month . Interest charges shall be
computed on the actual principal of Revolving Advances outstanding during the
month (the "Monthly Advances") at a rate per annum equal to the Revolving
Interest Rate. Whenever, subsequent to the date of this Agreement, the Alternate
Base Rate is increased or decreased, the Revolving Interest Rate shall be
similarly changed without notice or demand of any kind by an amount equal to the
amount of such change in the Alternate Base Rate during the time such change or
changes remain in effect. Upon and after the occurrence of an Event of Default,
and during the continuation thereof, the Obligations shall bear interest at the
Revolving Interest Rate plus two (2%) percent per annum (the "Default Rate").
3.2. Letter of Credit Fees.
Borrower shall pay to ACM Agent, for the benefit of
Lenders, fees for each Letter of Credit for the period from and including the
date of issuance of same to and excluding the date of expiration or termination,
equal to the average daily face amount of each Letter of Credit multiplied by
two percent (2.00%) per annum, such fees to be calculated on the basis of a
360-day year for the actual number of days elapsed and to be payable monthly in
arrears on the first day of each month and on the last day of the Term. Borrower
shall also pay to the issuing bank any and all fees and expenses customarily
charged by such issuing bank in connection with any Letter of Credit (the fees
for which have been disclosed to Borrower) including, without limitation, in
connection with the opening, amendment or renewal of any such Letter of Credit
and
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shall reimburse ACM Agent for any and all fees and expenses, if any, paid by ACM
Agent to any issuer of any such Letter of Credit.
3.3. Facility Fee. Borrower shall pay to ACM Agent for the ratable
benefit of Lenders a fee at a rate equal to one-half of one percent (.50%) per
annum on the amount by which the Maximum Loan Amount exceeds the average daily
unpaid balance of Revolving Advances. Such fee shall be payable to ACM Agent
monthly, in arrears, on the first day of each month.
3.4. Additional Fees. Borrower shall pay to ACM Agent all
fees specified in the Fee Letter in the amounts and at the times
specified therein.
3.5. Computation of Interest and Fees. Interest and fees hereunder
shall be computed on the basis of a year of 360 days and for the actual number
of days elapsed. If any payment to be made hereunder becomes due and payable on
a day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day and interest thereon shall be payable at the
Revolving Interest Rate during such extension.
3.6. Maximum Charges. In no event whatsoever shall interest and
other charges charged hereunder exceed the highest rate permissible under law.
In the event interest and other charges as computed hereunder would otherwise
exceed the highest rate permitted under law, such excess amount shall be first
applied to any unpaid principal balance owed by Borrower, and if the then
remaining excess amount is greater than the previously unpaid principal balance,
Lenders shall promptly refund such excess amount to Borrower and the provisions
hereof shall be deemed amended to provide for such permissible rate.
3.7. Increased Costs. In the event that any change in applicable
law, treaty or governmental regulation or in the interpretation or application
thereof, or compliance by any Lender (for purposes of this Section 3.7, the term
"Lender" shall include ACM Agent, Co-Agents or any Lender and any corporation or
bank controlling ACM Agent or any Lender) with any request or directive (whether
or not having the force of law) from any central bank or other financial,
monetary or other authority, shall:
(a) subject ACM Agent, any Co-Agent or any Lender to
any tax of any kind whatsoever with respect to this Agreement or change the
basis of taxation of payments to ACM Agent, any Co-Agent or any Lender of
principal, fees, interest or any other amount payable hereunder or under any
Other Documents (except for changes in the rate of tax on the overall net income
of ACM Agent, any Co- Agent or any Lender);
(b) impose, modify or hold applicable any reserve,
special deposit, assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other credit
extended by, any office of ACM Agent, any Co- Agent or any Lender, including
(without limitation) pursuant to
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Regulation D of the Board of Governors of the Federal Reserve
System; or
(c) impose on ACM Agent, any Co-Agent or any Lender
any other condition with respect to this Agreement, or any Other
Documents;
and the result of any of the foregoing is to increase the cost to ACM Agent, any
Co-Agent or any Lender of making, renewing or maintaining its Advances hereunder
by an amount that ACM Agent, any Co-Agent or such Lender deems to be material or
to reduce the amount of any payment (whether of principal, interest or
otherwise) in respect of any of the Advances by an amount that ACM Agent, any
Co-Agent or such Lender deems to be material, then, in any case Borrower shall
promptly pay ACM Agent, such Co-Agent or such Lender, upon its demand, such
additional amount as will compensate ACM Agent or such Lender for such
additional cost or such reduction, as the case may be. ACM Agent, such Co-Agent
or such Lender shall certify the amount of such additional cost or reduced
amount to Borrower, and such certification shall be conclusive absent manifest
error.
3.8. Capital Adequacy.
(a) In the event that ACM Agent, any Co-Agent or any
Lender shall have determined that any change in applicable law, rule, regulation
or guideline regarding capital adequacy, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by ACM Agent, any Co-Agent or any Lender (for purposes of this Section 3.8, the
term "Lender" shall include ACM Agent, any Co-Agent or any Lender and any
corporation or bank controlling ACM Agent, any Co- Agent or any Lender) with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on ACM Agent, any Co-Agent or any
Lender's capital as a consequence of its obligations hereunder to a level below
that which ACM Agent, such Co-Agent or such Lender could have achieved but for
such adoption, change or compliance (taking into consideration ACM Agent's, each
Co-Agent's and each Lender's policies with respect to capital adequacy) by an
amount deemed by ACM Agent, any Co-Agent or any Lender to be material, then,
from time to time, Borrower shall pay upon demand to ACM Agent, any Co-Agent or
such Lender such additional amount or amounts as will compensate ACM Agent, such
Co- Agent or such Lender for such reduction. In determining such amount or
amounts, ACM Agent, such Co-Agent or such Lender may use any reasonable
averaging or attribution methods. The protection of this Section 3.8 shall be
available to ACM Agent, each Co-Agent and each Lender regardless of any possible
contention of invalidity or inapplicability with respect to the applicable law,
regulation or condition.
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(b) A certificate of ACM Agent or such Lender
setting forth such amount or amounts as shall be necessary to compensate ACM
Agent, such Co-Agent or such Lender with respect to Section 3.8(a) hereof when
delivered to Borrower shall be conclusive absent manifest error.
IV. COLLATERAL: GENERAL TERMS
4.1. Security Interest in the Collateral. To secure the prompt
payment and performance of the Obligations to ACM Agent, each Co-Agent and each
Lender, Borrower hereby assigns, pledges and grants to ACM Agent for the ratable
benefit of ACM Agent, each Co- Agent and each Lender a continuing security
interest in and to all of the Collateral, whether now owned or existing or
hereafter acquired or arising and wheresoever located. Borrower shall mark its
books and records as may be necessary or appropriate to evidence, protect and
perfect ACM Agent's security interest and shall cause, to the extent required by
GAAP, its financial statements to reflect such security interest.
4.2. Perfection of Security Interest. Borrower shall take all
action that may be necessary or desirable, or that ACM Agent may request, so as
at all times to maintain the validity, perfection, enforceability and priority
of ACM Agent's security interest in the Collateral or to enable ACM Agent to
protect, exercise or enforce its rights hereunder and in the Collateral,
including, but not limited to (i) immediately discharging all Liens other than
Permitted Encumbrances, (ii) obtaining landlords' or mortgagees' lien waivers,
(iii) delivering to ACM Agent, endorsed or accompanied by such instruments of
assignment as ACM Agent may specify, and stamping or marking, in such manner as
ACM Agent may specify, any and all chattel paper, instruments, letters of
credits and advices thereof and documents evidencing or forming a part of the
Collateral, (iv) entering into warehousing, lockbox and other custodial
arrangements satisfactory to ACM Agent, and (v) executing and delivering
financing statements, instruments of pledge, mortgages, notices and assignments,
in each case in form and substance satisfactory to ACM Agent, relating to the
creation, validity, perfection, maintenance or continuation of ACM Agent's
security interest under the Uniform Commercial Code or other applicable law. ACM
Agent is hereby authorized to file financing statements signed by ACM Agent
instead of Borrower in accordance with Section 9-402(2) of Uniform Commercial
Code as adopted in the State of New York. ACM Agent shall not exercise its
rights under Section 9-402(2)(e) unless (x) an Event of Default shall have
occurred and be continuing or (y) Borrower fails to deliver executed financing
statements to ACM Agent within five (5) Business Days following ACM Agent's
request therefor. All charges, out-of-pocket expenses and fees ACM Agent may
incur in doing any of the foregoing, and any local taxes relating thereto, shall
be charged to Borrower's Account as a Revolving Advance and added to the
Obligations, or, at ACM Agent's option, shall be paid to ACM Agent for the
ratable benefit of Lenders immediately upon demand.
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4.3. Disposition of Collateral. Borrower will safeguard and protect
all Collateral for the benefit of the ACM Agent and make no disposition thereof
whether by sale, lease or otherwise except (a) the sale of Inventory in the
ordinary course of business or (b) the sale, transfer or other disposition of
Equipment in the ordinary course of Borrower's business during any fiscal year
having an aggregate fair market value of not more than $50,000, or (c) in
addition to clause (a) above, the sale, transfer or other disposition of other
Collateral located at Borrower's retail store operations having an aggregate
fair market value of not more than $150,000.
4.4. Preservation of Collateral. Following the occurrence and
during the continuation of an Event of Default in addition to the rights and
remedies set forth in Section 11.1 hereof, ACM Agent, for the benefit of the
Lenders: (a) may at any time take such steps as ACM Agent deems necessary to
protect ACM Agent's interest in and to preserve the Collateral, including the
hiring of such security guards or the placing of other security protection
measures as ACM Agent may deem appropriate; (b) may employ and maintain at any
of Borrower's premises a custodian who shall have full authority to do all acts
necessary to protect ACM Agent's interests in the Collateral; (c) may lease
warehouse facilities to which ACM Agent may move all or part of the Collateral;
and (d) may use any of Borrower's owned or leased lifts, hoists, trucks and
other facilities or equipment for handling or removing the Collateral. In
addition, ACM Agent shall have, and is hereby granted, a right of ingress and
egress to the places where the Collateral is located, and may proceed over and
through any of Borrower's owned or leased property. Borrower shall cooperate
fully with all of ACM Agent's reasonable efforts to preserve the Collateral and
will take such reasonable actions to preserve the Collateral as ACM Agent may
direct. All of ACM Agent's reasonable out of pocket expenses of preserving the
Collateral, including any reasonable expenses relating to the bonding of a
custodian, shall be charged to Borrower's Account as a Revolving Advance and
added to the Obligations.
4.5. Ownership of Collateral. With respect to the Collateral, at
the time the Collateral becomes subject to ACM Agent's security interest: (a)
Borrower shall be the sole owner of and fully authorized and able to sell,
transfer, pledge and/or grant a first security interest in each and every item
of the Collateral to ACM Agent; and, except for Permitted Encumbrances the
Collateral shall be free and clear of all Liens and encumbrances whatsoever; (b)
each document and agreement executed by Borrower or delivered to ACM Agent or
any Lender in connection with this Agreement shall be true and correct in all
respects; (c) all signatures and endorsements of Borrower that appear on such
documents and agreements shall be genuine and Borrower shall have full capacity
to execute same; and (d) Borrower's Equipment and Inventory shall be located as
set forth on Schedule 4.5 and shall not be removed from such location(s) (other
than to another location set forth on Schedule 4.5) without the prior written
consent of ACM Agent except with respect to the sale of Inventory
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in the ordinary course of business and the sale of Equipment to the extent
permitted in Section 4.3 hereof. Borrower may update Schedule 4.5 from time to
time to add additional locations in the United States by giving ACM Agent 30
days prior written notice thereof and executing such additional UCC-1 financing
statements and taking such other actions as ACM Agent may reasonably request to
perfect and protect its security interest on Collateral situated at such
locations.
4.6. Defense of ACM Agent's and Lenders' Interests. Until
(a) payment and performance in full of all of the Obligations and
(b) termination of this Agreement, ACM Agent's interests in the
Collateral shall continue in full force and effect. During such
period Borrower shall not, without ACM Agent's prior written
consent, pledge, sell (except Inventory in the ordinary course of
business and Equipment as provided in Section 4.3), assign,
transfer, create or suffer to exist a Lien upon or encumber or
allow or suffer to be encumbered in any way except for Permitted
Encumbrances, any part of the Collateral. Borrower shall defend
ACM Agent's interests in the Collateral against any and all persons
whatsoever. At any time following demand by ACM Agent for payment
of all Obligations in accordance with the terms and provisions
hereof, ACM Agent shall have the right to take possession of the
indicia of the Collateral and the Collateral in whatever physical
form contained, including without limitation: labels, stationery,
documents, instruments and advertising materials. If ACM Agent
exercises this right to take possession of the Collateral, Borrower
shall, upon demand, assemble it in the best manner possible and
make it available to ACM Agent at a place reasonably convenient to
ACM Agent. In addition, with respect to all Collateral, ACM Agent
shall be entitled to all of the rights and remedies set forth
herein and further provided by the Uniform Commercial Code or other
applicable law. Borrower shall, and ACM Agent may, at its option,
instruct all suppliers, carriers, forwarders, warehouses or others
receiving or holding cash, checks, Inventory, documents or
instruments in which ACM Agent holds a security interest to deliver
same to ACM Agent and/or subject to ACM Agent's order and if they
shall come into Borrower's possession, they, and each of them,
shall be held by Borrower in trust as ACM Agent's trustee, and
Borrower will immediately deliver them to ACM Agent in their
original form together with any necessary endorsement.
4.7. Books and Records. Borrower (a) shall keep proper
books of record and account in which full, true and correct entries
will be made of all dealings or transactions of or in relation to
its business and affairs; (b) set up on its books accruals with
respect to all taxes, assessments, charges, levies and claims; and
(c) on a reasonably current basis set up on its books, from its
earnings, allowances against doubtful Receivables, advances and
investments and all other proper accruals (including without
limitation by reason of enumeration, accruals for premiums, if any,
due on required payments and accruals for depreciation,
obsolescence, or amortization of properties), which should be set
aside from such earnings in connection with its business; in each
instance in accordance with GAAP. All determinations pursuant to
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this subsection shall be made in accordance with, or as required by, GAAP
consistently applied.
4.8. Financial Disclosure. Borrower hereby irrevocably authorizes
and directs all accountants and auditors employed by Borrower at any time during
the Term to exhibit and deliver to ACM Agent and each Lender copies of any of
Borrower's financial statements, trial balances or other accounting records of
any sort in the accountant's or auditor's possession, and to disclose to ACM
Agent and each Lender any information such accountants may have concerning
Borrower's financial status and business operations. Borrower hereby authorizes
all federal, state and municipal authorities to furnish to ACM Agent and each
Lender copies of reports or examinations relating to Borrower, whether made by
Borrower or otherwise; however, ACM Agent and each Lender will attempt to obtain
such information or materials directly from Borrower prior to obtaining such
information or materials from such accountants or such authorities.
4.9. Compliance with Laws. Borrower shall comply in all material
respects with all acts, rules, regulations and orders of any legislative,
administrative or judicial body or official applicable to the Collateral or any
part thereof or to the operation of Borrower's business the non-compliance with
which could reasonably be expected to have a Material Adverse Effect. Borrower
may, however, contest or dispute any acts, rules, regulations, orders and
directions of those bodies or officials in any reasonable manner, provided that
any related lien is inchoate or stayed and sufficient reserves are established
to the reasonable satisfaction of Lenders to protect ACM Agent's Lien on or
security interest in the Collateral. The Collateral at all times shall be
maintained in accordance with the requirements of all insurance carriers which
provide insurance with respect to the Collateral so that such insurance shall
remain in full force and effect.
4.10. Inspection of Premises. At all reasonable times ACM Agent and
each Lender shall have full access to and the right to audit, check, inspect and
make abstracts and copies from Borrower's books, records, audits, correspondence
and all other papers relating to the Collateral and the operation of Borrower's
business. ACM Agent, any Co-Agent and any Lender and their agents may enter upon
any of Borrower's premises at any time during business hours and at any other
reasonable time, and from time to time, for the purpose of inspecting the
Collateral and any and all records pertaining thereto and the operation of
Borrower's business.
4.11. Insurance. Borrower shall bear the full risk of any loss of
any nature whatsoever with respect to the Collateral. At Borrower's own cost and
expense in amounts and with carriers acceptable to ACM Agent, Borrower shall (a)
keep all its insurable properties and properties in which Borrower has an
interest insured against the hazards of fire, flood, sprinkler leakage, those
hazards covered by extended coverage insurance and such other hazards, and for
such amounts, as is customary in the case of
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companies engaged in businesses similar to Borrower's including, without
limitation, business interruption insurance;, (b) maintain a bond in such
amounts as is customary in the case of companies engaged in businesses similar
to Borrower's insuring against larceny, embezzlement or other criminal
misappropriation of insured's officers and employees who may either singly or
jointly with others at any time have access to the assets or funds of Borrower
either directly or through authority to draw upon such funds or to direct
generally the disposition of such assets; (c) maintain public and product
liability insurance against claims for personal injury, death or property damage
suffered by others; (d) maintain all such worker's compensation or similar
insurance as may be required under the laws of any state or jurisdiction in
which Borrower is engaged in business; (e) furnish ACM Agent with (i) copies of
all policies and evidence of the maintenance of such policies by the renewal
thereof at least thirty (30) days before any expiration date, and (ii) with
respect to casualty (i.e. property, boiler, machinery and business interruption)
insurance policies, appropriate loss payable endorsements in form and substance
satisfactory to ACM Agent, naming ACM Agent as a loss payee as its interests may
appear, and with respect to liability (i.e. public and product) insurance
policies, appropriate endorsements in form and substance satisfactory to ACM
Agent, naming ACM Agent as an additional insured for all insurance coverage
referred to in clauses (a), and (b) above, and providing (A) that all proceeds
thereunder shall be payable to ACM Agent and the Term Loan Agent, as their
interests may appear, (B) no such insurance shall be affected by any act or
neglect of the insured or owner of the property described in such policy, and
(C) that such policy and loss payable clauses may not be cancelled, amended or
terminated unless at least thirty (30) days' prior written notice is given to
ACM Agent. In the event of any loss thereunder, the carriers named therein
hereby are directed by ACM Agent and Borrower to make payment for such loss to
ACM Agent and the Term Loan Agent, as their interests may appear and not to
Borrower and ACM Agent jointly. If any insurance losses are paid by check, draft
or other instrument payable to Borrower and ACM Agent jointly, ACM Agent may
endorse Borrower's name thereon and do such other reasonable things as ACM Agent
may deem advisable to reduce the same to cash. After the occurrence and during
continuance of an Event of Default, ACM Agent may adjust and compromise claims
under insurance coverage referred to in clauses (a), and (b) above. Except as
provided in the Mortgage, all loss recoveries received by ACM Agent upon any
such insurance shall be applied to the Obligations, in such order as ACM Agent
in its sole discretion shall determine. Any surplus shall be paid by ACM Agent
to Borrower or applied as may be otherwise required by law. Any deficiency
thereon shall be paid by Borrower to ACM Agent, on demand.
4.12. Failure to Pay Insurance. If Borrower fails to
obtain insurance as hereinabove provided, or to keep the same in
force, ACM Agent, if ACM Agent so elects, may obtain such insurance
and pay the premium therefor for Borrower's Account, and charge
Borrower's Account therefor and such expenses so paid shall be part
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of the Obligations. ACM Agent shall provide Borrower with notice
of such charge at the time of such payment.
4.13. Payment of Taxes. Borrower will pay, when due, all taxes,
assessments and other Charges lawfully levied or assessed upon Borrower or any
of the Collateral including, without limitation, real and personal property
taxes, assessments and charges and all franchise, income, employment, social
security benefits, withholding, and sales taxes provided Borrower may, in good
faith, contest or dispute such taxes, assessments or other Charges by
expeditious protest, administrative or judicial appeal or similar proceeding. If
any tax by any governmental authority is or may )be imposed on or as a result of
any transaction between Borrower and ACM Agent or any Lender which ACM Agent or
any Lender may be required to withhold or pay (other than taxes on the income of
ACM Agent, any Co-Agent or any Lender) or if any such taxes, assessments, or
other Charges remain unpaid after the date fixed for their payment, or if any
claim shall be made which, in ACM Agent's or any Lender's opinion, could
reasonably be expected to create a valid Lien on the Collateral, ACM Agent may
without notice to Borrower pay the taxes, assessments or other Charges and
Borrower hereby indemnifies and holds ACM Agent and each Lender harmless in
respect thereof. ACM Agent will not pay any taxes, assessments or Charges to the
extent that Borrower has contested or disputed those taxes, assessments or
Charges in good faith, by expeditious protest, administrative or judicial appeal
or similar proceeding provided that any related tax lien is stayed and
sufficient reserves are established to the reasonable satisfaction of ACM Agent
to protect ACM Agent's security interest in or Lien on the Collateral. The
amount of any payment by ACM Agent under this Section 4.13 shall be charged to
Borrower's Account as a Revolving Advance and added to the Obligations and,
until Borrower shall furnish ACM Agent with an indemnity therefor (or supply ACM
Agent with evidence satisfactory to ACM Agent that due provision for the payment
thereof has been made), ACM Agent may hold without interest any balance standing
to Borrower's credit and ACM Agent shall retain its security interest in any and
all Collateral held by ACM Agent.
4.14. Payment of Leasehold Obligations. Borrower shall at all times
pay, when and as due, its rental obligations under all leases under which it is
a tenant, and shall otherwise comply, in all material respects, with all other
terms of such leases and keep them in full force and effect and, at ACM Agent's
request will provide evidence of having done so.
4.15. Receivables.
(a) Nature of Receivables. Each of the Receivables
shall be a bona fide and valid account representing a bona fide indebtedness
incurred by the Customer therein named, for a fixed sum as set forth in the
invoice relating thereto (provided immaterial or unintentional invoice errors
shall not be deemed to be a breach hereof) with respect to an absolute sale or
lease and delivery of goods of Borrower, or work, labor or services
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theretofore rendered by Borrower as of the date each Receivable is created. Same
shall be due and owing in accordance with Borrower's standard terms of sale with
respect to such Customer without dispute, setoff or counterclaim except as may
be stated on the accounts receivable schedules delivered by Borrower to ACM
Agent or as otherwise permitted hereby.
(b) Solvency of Customers. Each Customer, to the
best of Borrower's knowledge, as of the date each Receivable is created, is and
will be solvent and able to pay all Receivables on which the Customer is
obligated in full when due unless ACM Agent is notified by Borrower in writing
to the contrary. With respect to such Customers of Borrower who are not solvent
Borrower shall set up on its books and in its financial records bad debt
reserves adequate to cover the Receivables of such Customers in such amounts as
shall be required by GAAP.
(c) Locations of Borrower. Borrower's chief
executive office is located at 6 Hazel Street, Attleboro, Massachusetts 02703.
Until written notice is given to ACM Agent by Borrower of any other office at
which it keeps its records pertaining to Receivables, all such records shall be
kept at such executive office.
(d) Collection of Receivables. Until Borrower's
authority to do so is terminated by ACM Agent (which notice ACM Agent may give
at any time following the occurrence and during the continuance of an Event of
Default), Borrower will, at Borrower's sole cost and expense, but on ACM Agent's
behalf and for ACM Agent's account, collect as ACM Agent's property and in trust
for ACM Agent all amounts received on Receivables, and shall not commingle such
collections with Borrower's funds or use the same except to pay Obligations.
Borrower shall, upon request, deliver to ACM Agent or the Blocked Account in
original form and no later than the Business Day after the date of receipt
thereof, all checks, drafts, notes, money orders, acceptances, cash and other
evidences of Indebtedness.
(e) Notification of Assignment of Receivables. At
any time following the occurrence and during the continuance of an Event of
Default or a Default, ACM Agent shall have the right to send notice of the
assignment of, and ACM Agent's security interest in, the Receivables to any and
all Customers or any third party holding or otherwise concerned with any of the
Collateral. Thereafter, ACM Agent shall have the sole right to collect the
Receivables, take possession of the Collateral, or both. ACM Agent's actual
collection expenses, including, but not limited to, stationery and postage,
telephone and telegraph, secretarial and clerical expenses and the salaries of
any collection personnel used for collection, may be charged to Borrower's
Account and added to the Obligations.
(f) Power of ACM Agent to Act on Borrower's Behalf.
ACM Agent shall have the right to receive, endorse, assign and/or deliver in the
name of ACM Agent or Borrower any and all checks,
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drafts and other instruments for the payment of money relating to the
Receivables, and Borrower hereby waives notice of presentment, protest and
non-payment of any instrument so endorsed. Borrower hereby constitutes ACM Agent
or ACM Agent's designee as Borrower's attorney with power (A) following the
occurrence and during the continuance of an Event of Default (i) to sign
Borrower's name on any invoice or bill of lading relating to any of the
Receivables, drafts against Customers, assignments and verifications of
Receivables; (ii) to sign Borrower's name on all financing statements or any
other documents or instruments deemed necessary or appropriate by ACM Agent to
preserve, protect, or perfect ACM Agent's interest in the Collateral and to file
same; (iii) to demand payment of the Receivables; (iv) to enforce payment of the
Receivables by legal proceedings or otherwise; (v) to exercise all of Borrower's
rights and remedies with respect to the collection of the Receivables and any
other Collateral; (vi) to settle, adjust, compromise, extend or renew the
Receivables; (vii) to settle, adjust or compromise any legal proceedings brought
to collect Receivables; (viii) to prepare, file and sign Borrower's name on a
proof of claim in bankruptcy or similar document against any Customer; and (ix)
to prepare, file and sign Borrower's name on any notice of Lien, assignment or
satisfaction of Lien or similar document in connection with the Receivables; and
(B) at any time to (i) to endorse Borrower's name upon any notes, acceptances,
checks, drafts, money orders or other evidences of payment or Collateral; (ii)
send verifications of Receivables to any Customer and (iii) to do all other acts
and things necessary to carry out this Agreement. All acts of said attorney or
designee are hereby ratified and approved, and said attorney or designee shall
not be liable for any acts of omission or commission nor for any error of
judgment or mistake of fact or of law, unless done maliciously or with gross
(not mere) negligence; this power being coupled with an interest is irrevocable
while any of the Obligations remain unpaid. ACM Agent shall have the right at
any time following the occurrence and during the continuance of an Event of
Default or Default, to change the address for delivery of mail addressed to
Borrower to such address as ACM Agent may designate.
(g) No Liability. Neither ACM Agent nor any Lender
shall, under any circumstances or in any event whatsoever, have any liability
for any error or omission or delay of any kind occurring in the settlement,
collection or payment of any of the Receivables or any instrument received in
payment thereof, or for any damage resulting therefrom. Following the occurrence
and during the continuance of an Event of Default or Default the ACM Agent may,
without notice or consent from Borrower, sue upon or otherwise collect, extend
the time of payment of, compromise or settle for cash, credit or upon any terms
any of the Receivables or any other securities, instruments or insurance
applicable thereto and/or release any obligor thereof. ACM Agent is authorized
and empowered to accept following the occurrence of an Event of Default or
Default the return of the goods represented by any of the Receivables, without
notice to or consent by Borrower, all without discharging or in any way
affecting Borrower's liability hereunder.
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(h) Establishment of a Lockbox Account, Dominion
Account. All proceeds of Collateral shall be deposited by Borrower into a
lockbox account, dominion account or such other "blocked account" ("Blocked
Accounts") as ACM Agent may require pursuant to an arrangement with such bank as
may be selected by Borrower and be acceptable to ACM Agent; provided, however,
Borrower shall not be obligated to cause cash receipts from retail store
locations to be deposited to any Blocked Account more frequently than on
Thursday of each week so long as there is no Event of Default which has occurred
and is continuing and the aggregate amount of such cash receipts (which amounts,
except for cash receipts not exceeding $50,000 in the aggregate at any time
outstanding that Borrower shall maintain at its retail store locations in the
ordinary course of business, shall be deposited in local bank accounts) shall
not exceed $200,000 at any time or from time to time. In the event the aggregate
amount of such cash receipts exceeds $200,000, amounts in excess of $100,000
shall be remitted to a Blocked Account on each day such condition exists.
Borrower shall issue to any such bank, an irrevocable letter of instruction
directing said bank to transfer such funds so deposited to ACM Agent, either to
any account maintained by ACM Agent at said bank or by wire transfer to
appropriate account(s) of ACM Agent. All funds deposited in such "blocked
account" shall immediately become the property of ACM Agent and Borrower shall
obtain the agreement by such bank to waive any offset rights against the funds
so deposited. ACM Agent assumes no responsibility for such "blocked account"
arrangement, including without limitation, any claim of accord and satisfaction
or release with respect to deposits accepted by any bank thereunder.
Alternatively, ACM Agent may establish depository accounts ("Depository
Accounts") in the name of ACM Agent at a bank or banks for the deposit of such
funds and Borrower shall deposit all proceeds of Collateral or cause same to be
deposited, in kind, in such Depository Accounts of ACM Agent in lieu of
depositing same to the Blocked Accounts.
(i) Adjustments. Borrower will not, without the
Required Lenders' consent, compromise or adjust any Receivables (or extend the
time for payment thereof) or accept any returns of merchandise or grant any
additional discounts, allowances or credits thereon except for those
compromises, adjustments, returns, discounts, credits and allowances as have
been heretofore customary in the business of Borrower.
4.16. Inventory. All Inventory held for sale or lease has
been, and will be, in all material respects produced by Borrower in
accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations and orders thereunder.
4.17. Maintenance of Equipment. The Equipment shall be maintained
in good operating condition and repair (reasonable wear and tear excepted) and
all necessary replacements of and repairs thereto shall be made so that the
value and operating efficiency of the Equipment shall be maintained and
preserved. Borrower shall not use or operate the Equipment in violation of any
law, statute, ordinance, code, rule or regulation. Borrower shall have the right
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to sell the Equipment to the extent set forth in Section 4.3
hereof.
4.18. Exculpation of Liability. Nothing herein contained shall be
construed to constitute ACM Agent, any Co-Agent or any Lender as Borrower's
agent for any purpose whatsoever, nor shall ACM Agent, any Co-Agent or any
Lender be responsible or liable for any shortage, discrepancy, damage, loss or
destruction of any part of the Collateral wherever the same may be located and
regardless of the cause thereof. Neither ACM Agent, any Co-Agent nor any Lender,
whether by anything herein or in any assignment or otherwise, shall assume any
of Borrower's obligations under any contract or agreement assigned to ACM Agent,
any Co-Agent or such Lender, and neither ACM Agent nor any Lender shall be
responsible in any way for the performance by Borrower of any of the terms and
conditions thereof.
4.19. Environmental Matters.
(a) Borrower will operate the
Real Property in compliance with all Environmental Laws, except for
such non-compliance which could not reasonably be expected to have a Material
Adverse Effect.
(b) Borrower will maintain its current procedures
pursuant to which Borrower represents, assures and monitors continued compliance
with all applicable Environmental Laws through an annual audit of Compliance
with such Environmental Laws.
(c) Borrower will dispose of any and all Hazardous
Waste generated at the Real Property in compliance with all Environmental Laws,
except for such non-compliance which could not reasonably be expected to have a
Material Adverse Effect. Without limiting the generality of the foregoing,
Borrower shall use its best efforts to obtain certificates of disposal, such as
hazardous waste manifest receipts, from all treatment, transport, storage or
disposal facilities or operators employed by Borrower in connection with the
transport or disposal of any Hazardous Waste generated at the Real Property.
(d) In the event Borrower obtains, gives or receives
notice of any Release or threat of Release of a reportable quantity of any
Hazardous Substances at the Real Property (any such event being hereinafter
referred to as a "Hazardous Discharge") or receives any notice of violation,
request for information or notification that it is potentially responsible for
investigation or cleanup of environmental conditions at the Real Property,
demand letter or complaint, order, citation, or other written notice with regard
to any Hazardous Discharge or violation of Environmental Laws affecting the Real
Property or Borrower's interest therein (any of the foregoing is referred to
herein as an "Environmental Complaint") from any Person or entity, including any
state agency responsible in whole or in part for environmental matters in the
state in which the Real Property is located or the United States Environmental
Protection Agency (any such person or entity hereinafter the "Authority"), then
Borrower shall, within five (5) Business Days, give written notice of same to
ACM Agent and within
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thirty (30) days thereafter give a further written notice of same to ACM Agent
detailing facts and circumstances of which Borrower is aware giving rise to the
Hazardous Discharge or Environmental Complaint. Such information is to be
provided to allow ACM Agent to protect its security interest in the Real
Property and is not intended to create nor shall it create any obligation upon
ACM Agent or any Lender with respect thereto.
(e) Borrower shall promptly forward to ACM Agent
copies of any request for information, notification of potential liability,
demand letter relating to potential responsibility with respect to the
investigation or cleanup of Hazardous Substances at any other site owned,
operated or used by Borrower to dispose of Hazardous Substances and shall
continue to forward copies of correspondence between Borrower and the Authority
regarding such claims to ACM Agent until the claim is settled. Borrower shall
promptly forward to ACM Agent copies of all documents and reports concerning a
Hazardous Discharge at the Real Property that Borrower is required to file under
any Environmental Laws. Such information is to be provided solely to allow ACM
Agent to protect ACM Agent's security interest in the Real Property and the
Collateral.
(f) Borrower shall respond promptly to any Hazardous
Discharge or Environmental Complaint in order to avoid subjecting the Collateral
or Real Property to any Lien. If Borrower shall fail to respond promptly to any
Hazardous Discharge or Environmental Complaint or Borrower shall fail to comply
with any of the requirements of any Environmental Laws, ACM Agent with the
consent of all Lenders may, but without the obligation to do so, for the sole
purpose of protecting ACM Agent's interest in Collateral: (A) give such notices
or (B) enter onto the Real Property (or authorize third parties to enter onto
the Real Property) and take such actions as Co-Agents (or such third parties as
directed by Co-Agents) deem reasonably necessary or advisable, to clean up,
remove, mitigate or otherwise deal with any such Hazardous Discharge or
Environmental Complaint. All reasonable costs and expenses incurred by ACM Agent
and Lenders (or such third parties) in the exercise of any such rights,
including any sums paid in connection with any judicial or administrative
investigation or proceedings, fines and penalties, together with interest
thereon from the date expended at the Default Rate shall be paid upon demand by
Borrower, and until paid shall be added to and become a part of the Obligations
secured by the Liens created by the terms of this Agreement or any other
agreement between ACM Agent, Co-Agents, any Lender and Borrower.
(g) Promptly upon the written request of ACM Agent
from time to time (which request shall be made only upon the reasonable belief
of ACM Agent that a Hazardous Discharge has occurred and has not been remedied),
Borrower shall provide ACM Agent, at Borrower's expense, with an environmental
site assessment or environmental audit report prepared by an environmental
engineering firm acceptable in the reasonable opinion of ACM Agent, to assess
with a reasonable degree of certainty the existence of a Hazardous Discharge and
the potential costs in connection with
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abatement, cleanup and removal of any Hazardous Substances found on, under, at
or within the Real Property. Any report or investigation of such Hazardous
Discharge proposed and acceptable to an appropriate Authority that is charged to
oversee the clean-up of such Hazardous Discharge shall be acceptable to ACM
Agent. If such estimates, individually or in the aggregate, exceed $100,000, ACM
Agent shall have the right to require Borrower to post a bond, letter of credit
or other security reasonably satisfactory to ACM Agent to secure payment of
these costs and expenses unless Borrower shall direct ACM Agent to establish a
reserve in accordance with Section 2.1(a).
(h) Borrower shall defend and indemnify ACM Agent,
Co-Agents and Lenders and hold ACM Agent, Co-Agents, Lenders and their
respective employees, agents, directors and officers harmless from and against
all loss, liability, damage and expense, claims, costs, fines and penalties,
including attorney's fees, suffered or incurred by ACM Agent, Co-Agents or
Lenders under or on account of any Environmental Laws, including, without
limitation, the assertion of any lien thereunder, with respect to any Hazardous
Discharge, the presence of any Hazardous Substances affecting the Real Property,
whether or not the same originates or emerges from the Real Property or any
contiguous real estate, except to the extent such loss, liability, damage and
expenses is attributable to any Hazardous Discharge or violation of any
Environmental Laws resulting from actions on the part of ACM Agent, Co-Agents or
any Lender. Borrower's obligations under this Section 4.19 shall arise upon the
occurrence of any Hazardous Discharge at the Real Property, whether or not any
federal, state, or local environmental agency has taken or threatened any action
in connection with any Hazardous Discharge or the presence of any Hazardous
Substances. Borrower's obligation and the indemnifications hereunder shall
survive the termination of this Agreement.
(i) For purposes of Section 4.19 and 5.7, all
references to Real Property shall be deemed to include all of Borrower's right,
title and interest in and to its owned and leased premises.
4.20. Financing Statements. Except as respects the
financing statements filed by ACM Agent and the financing
statements described on Schedule 1.2, no valid or effective
financing statement covering any of the Collateral or any proceeds
thereof is on file in any public office.
V. REPRESENTATIONS AND WARRANTIES.
Borrower represents and warrants as follows:
5.1. Authority. Borrower has full power, authority and
legal right to enter into this Agreement and the Other Documents
and perform all Obligations hereunder and thereunder. The
execution, delivery and performance hereof and of the Other
Documents (a) are within Borrower's corporate powers, have been
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<PAGE>
duly authorized, are not in contravention of law or the terms of Borrower's
by-laws, certificate of incorporation or of any material agreement or
undertaking to which Borrower is a party or by which Borrower is bound, and (b)
will not conflict with nor result in any breach in any of the provisions of or
constitute a default under or result in the creation of any Lien except
Permitted Encumbrances upon any asset of Borrower under the provisions of any
agreement, charter document, instrument, by-law, or other instrument to which
Borrower or its property is a party or by which it may be bound.
5.2. Formation and Qualification. (a) Borrower is duly incorporated
and in good standing under the laws of the State of Delaware and is qualified to
do business and is in good standing in the states listed on Schedule 5.2(a)
which constitute all states in which qualification and good standing are
necessary for Borrower to conduct its business and own its property except where
the failure to so qualify could not reasonably be expected to have a Material
Adverse Effect. Borrower has delivered to ACM Agent true and complete copies of
its certificate of incorporation and by-laws and will promptly notify ACM Agent
of any amendment or changes thereto.
(b) The only Subsidiaries of Borrower are listed on
Schedule 5.2(b).
5.3. Survival of Representations and Warranties. All
representations and warranties of Borrower contained in this Agreement and the
Other Documents shall be true at the time of Borrower's execution of this
Agreement and the Other Documents, and shall survive the execution, delivery and
acceptance thereof by the parties thereto and the closing of the transactions
described therein or related thereto.
5.4. Tax Returns. Borrower's federal tax identification number is
04-1886990. Borrower has filed all federal, state and local tax returns and
other reports it is required by law to file and has paid all taxes, assessments,
fees and other governmental charges that are due and payable and are not being
contested, in good faith and by expeditious protest or appropriate proceeding.
Federal income tax returns of Borrower have been examined and reported upon by
the appropriate taxing authority or closed by applicable statute and satisfied
for all fiscal years prior to and including the fiscal year ending December 31,
1993. The provision for taxes on the books of Borrower are adequate for all
years not closed by applicable statutes, and for its current fiscal year, and
Borrower has no knowledge of any deficiency or additional assessment in
connection therewith not provided for on its books.
5.5. Financial Statements.
(a) The nine month cash flow projections of Borrower
and its projected balance sheets as of the Closing Date, copies of which are
annexed hereto as Exhibit 5.5(a) (the "Projections") were prepared by the Chief
Financial Officer of Borrower, are based on underlying assumptions which provide
a reasonable basis for the
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projections contained therein and reflect Borrower's judgment based on present
circumstances of the most likely set of conditions and course of action for the
projected period. The cash flow Projections together with the Pro Forma Balance
Sheet, are referred to as the "Pro Forma Financial Statements".
(b) Draft copies of the consolidated balance sheets
of Borrower, its Subsidiaries and such other Persons described therein
(including the accounts of all Subsidiaries for the respective periods during
which a subsidiary relationship existed) as of December 31, 1995 (subject to the
completion of footnotes), and the related statements of income, changes in
stockholder's equity, and changes in cash flow for the period ended on such
date, copies of which have been delivered to ACM Agent, have been prepared in
accordance with GAAP, consistently applied (except for changes in application in
which Borrower's accountants concur) and present fairly the financial position
of Borrower and its Subsidiaries at such date and the results of their
operations for such period. Since December 31, 1995 there has been no change in
the condition, financial or otherwise, of Borrower or its Subsidiaries as shown
on the consolidated balance sheet as of such date and no change in the aggregate
value of machinery, equipment and Real Property owned by Borrower and its
Subsidiaries, except changes in the ordinary course of business, none of which
individually or in the aggregate has been materially adverse.
5.6. Corporate Name. Borrower has not been known by any other
corporate name in the past five years and does not sell Inventory under any
other name except as set forth on Schedule 5.6, nor has Borrower been the
surviving corporation of a merger or consolidation or acquired all or
substantially all of the assets of any Person during the preceding five (5)
years.
5.7. O.S.H.A. and Environmental Compliance.
(a) Except as described on Schedule 5.7, Borrower
has duly complied with, and its facilities, business, assets, property,
leaseholds and Equipment are in compliance in all material respects with, the
provisions of the Federal Occupational Safety and Health Act, the Environmental
Protection Act, RCRA and all other Environmental Laws; there have been no
outstanding citations, notices or orders of non-compliance issued to Borrower or
relating to its business, assets, property, leaseholds or equipment under any
such laws, rules or regulations.
(b) Borrower has been issued all required federal,
state and local licenses, certificates or permits relating to all
applicable Environmental Laws.
(c) (i) There are no visible signs of releases,
spills, discharges, leaks or disposal (collectively referred to as "Releases")
of Hazardous Substances at, upon, under or within any Real Property or any
premises leased by Borrower; (ii) except as set forth on Schedule 5.7, there are
no underground storage tanks or polychlorinated biphenyls on the Real Property
or any premises
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leased by Borrower; (iii) neither the Real Property nor any premises leased by
Borrower has ever been used as a treatment, storage or disposal facility of
Hazardous Waste; and (iv) no Hazardous Substances are present on the Real
Property or any premises leased by Borrower, excepting such quantities as are
handled in accordance with all applicable manufacturer's instructions and
governmental regulations and in proper storage containers and as are necessary
for the operation of the commercial business of Borrower or of its tenants.
5.8. Solvency; No Litigation, Violation, Indebtedness or
Default.
(a) After giving effect to the transactions
contemplated by this Agreement, Borrower is solvent, able to pay its debts as
they mature, has capital sufficient to carry on its business and all businesses
in which it is about to engage, and (i) as of the Closing Date, the fair present
saleable value of its assets, calculated on a going concern basis, is in excess
of the amount of its liabilities and (ii) subsequent to the Closing Date, the
fair saleable value of its assets (calculated on a going concern basis) will be
in excess of the amount of its liabilities.
(b) Except as disclosed in Schedule 5.8(b), Borrower
has (i) no pending or threatened litigation, arbitration, actions or proceedings
which could reasonably be expected to have a Material Adverse Effect, and (ii)
no Indebtedness other than the Obligations.
(c) Borrower is not in violation of any applicable
statute, regulation or ordinance in any respect which could reasonably be
expected to have a Material Adverse Effect, nor is Borrower in violation of any
order of any court, governmental authority or arbitration board or tribunal.
(d) Neither Borrower nor any member of the
Controlled Group maintains or contributes to any Plan other than those listed on
Schedule 5.8(d) hereto. Except as set forth in Schedule 5.8(d), (i) no Plan has
incurred any "accumulated funding deficiency," as defined in Section 302(a)(2)
of ERISA and Section 412(a) of the Code, whether or not waived, and Borrower and
each member of the Controlled Group has met all applicable minimum funding
requirements under Section 302 of ERISA in respect of each Plan, (ii) each Plan
which is intended to be a qualified plan under Section 401(a) of the Code as
currently in effect has been determined by the Internal Revenue Service to be
qualified under Section 401(a) of the Code and the trust related thereto is
exempt from federal income tax under Section 501(a) of the Code, (iii) neither
Borrower nor any member of the Controlled Group has incurred any liability to
the PBGC other than for the payment of premiums, and there are no premium
payments which have become due which are unpaid, (iv) no Plan has been
terminated by the plan administrator thereof or by the PBGC, and there is no
occurrence which would cause the PBGC to institute proceedings under Title IV of
ERISA to terminate any Plan, (v) neither Borrower nor any member
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of the Controlled Group has breached any of the responsibilities, obligations or
duties imposed on it by ERISA with respect to any Plan which reasonably could be
expected to have a Material Adverse Effect, (vi) neither Borrower nor any member
of a Controlled Group has incurred any liability for any excise tax arising
under Section 4972 or 4980B of the Code, and to the best of Borrower's knowledge
no fact exists which could give rise to any such liability, (vii) neither
Borrower nor any member of the Controlled Group nor any fiduciary of, nor any
trustee to, any Plan, has engaged in a "prohibited transaction" described in
Section 406 of the ERISA or Section 4975 of the Code nor taken any action which
would constitute or result in a Termination Event with respect to any such Plan
which is subject to ERISA, (viii) Borrower and each member of the Controlled
Group has made all contributions due and payable with respect to each Plan, (ix)
there exists no event described in Section 4043(b) of ERISA, for which the
thirty (30) day notice period contained in 29 CFR ss.2615.3 has not been waived
and (x) neither Borrower nor any member of the Controlled Group has any
fiduciary responsibility for investments with respect to any plan existing for
the benefit of persons other than employees or former employees of Borrower and
any member of the Controlled Group.
5.9. Patents, Trademarks, Copyrights and Licenses. All
patents, patent applications, trademarks, trademark applications,
service marks, service mark applications, copyrights, copyright
applications, design rights, tradenames, assumed names, trade
secrets and licenses owned by Borrower are set forth on Schedule
5.9, are valid and have been duly registered or filed with the
governmental authorities set forth on Schedule 5.9 and constitute,
together with intellectual property rights licensed to Borrower,
all of the intellectual property rights which are necessary for the
operation of its business; there is no objection to or pending
challenge to the validity of any such owned material patent,
trademark, copyright, design rights tradename, trade secret or
license and Borrower is not aware of any grounds for any challenge,
except as set forth in Schedule 5.9 hereto. Each patent, patent
application, patent license, trademark, trademark application,
trademark license, service mark, service mark application, service
mark license, copyright, copyright application and copyright
license owned or held by Borrower and all trade secrets used by or
useful to Borrower consists of original material or property
developed by Borrower or was lawfully acquired by Borrower from the
proper and lawful owner thereof. Each of such items used or useful
has been maintained so as to preserve the value thereof from the
date of creation or acquisition thereof.
5.10. Licenses and Permits. Except as set forth in Schedule 5.10,
Borrower (a) is in compliance with and (b) has procured and is now in possession
of, all material licenses or permits required by any applicable federal, state
or local law or regulation for the operation of its business in each
jurisdiction wherein it is now conducting or proposes to conduct business except
where the failure to so comply or to procure such licenses or permits could not
reasonably be expected to have a Material Adverse Effect.
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5.11. Default of Indebtedness. Borrower is not in default in the
payment of the principal of or interest on any Indebtedness for borrowed money
or under any instrument or agreement under or subject to which any such
Indebtedness has been issued and no event has occurred under the provisions of
any such instrument or agreement which with or without the lapse of time or the
giving of notice, or both, constitutes or would constitute an event of default
thereunder.
5.12. No Default. Borrower is not in default in the
payment or performance of any of its material contractual
obligations and no Default has occurred.
5.13. No Burdensome Restrictions. Borrower is not party to any
contract or agreement the performance of which could reasonably be expected to
have a Material Adverse Effect. Borrower has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
its property, whether now owned or hereafter acquired, to be subject to a Lien
which is not a Permitted Encumbrance.
5.14. No Labor Disputes. Borrower is not involved in any
labor dispute; there are no strikes or walkouts or union
organization of any of Borrower's employees threatened or in
existence and no labor contract is scheduled to expire during the
Term other than as set forth on Schedule 5.14 hereto.
5.15. Margin Regulations. Borrower is not engaged, nor will it
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under
Regulation U or Regulation G of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect. No part of the proceeds
of any Advance will be used for "purchasing" or "carrying" "margin stock" as
defined in Regulation U of such Board of Governors.
5.16. Investment Company Act. Borrower is not an
"Investment Company" registered or required to be registered under
the Investment Company Act of 1940, as amended, nor is it
controlled by such a company.
5.17. Disclosure. No representation or warranty made by Borrower in
this Agreement or in any financial statement, report, certificate or any other
document furnished in connection herewith contains any untrue statement of a
material fact or omits to state any material fact necessary to make the
statements herein or therein not misleading. There is no fact known to Borrower
which Borrower has not disclosed to ACM Agent in writing with respect to the
transactions contemplated by the Term Loan Note(s) or this Agreement which could
reasonably be expected to have a Material Adverse Effect.
5.18. Delivery of Term Loan Note(s). Co-Agents have
received complete copies of the Term Loan Note(s) (including all
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exhibits, schedules and disclosure letters referred to therein or delivered
pursuant thereto, if any) and all amendments thereto, waivers relating thereto
and other side letters or agreements affecting the terms thereof. None of such
documents and agreements has been amended or supplemented, nor have any of the
provisions thereof been waived, except pursuant to a written agreement or
instrument which has heretofore been delivered to ACM Agent.
5.19. Swaps. Borrower is not a party to, nor will it be a party to,
any swap agreement whereby Borrower has agreed or will agree to swap interest
rates or currencies unless same provides that damages upon termination following
an event of default thereunder are payable on an unlimited "two-way basis"
without regard to fault on the part of either party.
5.20. Conflicting Agreements. Except as set forth in Schedule 5.20,
no provision of any mortgage, indenture, contract, agreement, judgment, decree
or order binding on Borrower or affecting the Collateral conflicts with, or
requires any Consent which has not already been obtained to, or would in any way
prevent the execution, delivery or performance of, the terms of this Agreement
or the Other Documents.
5.21. Application of Certain Laws and Regulations. Neither Borrower
nor any Affiliate of Borrower is subject to any statute, rule or regulation
which regulates the incurrence of any Indebtedness, including without
limitation, statutes or regulations relative to common or interstate carriers or
to the sale of electricity, gas, steam, water, telephone, telegraph or other
public utility services.
5.22. Business and Property of Borrower. Upon and after the Closing
Date, Borrower does not propose to engage in any business other than the
manufacture, promotion, distribution and sale of gift items, jewelry, leather
accessories, watches and related products (the "Activities") and activities
necessary to conduct the Activities. On the Closing Date, Borrower will own or
lease all the property and possess all of the material rights and Consents
necessary for the conduct of the business of Borrower.
VI. AFFIRMATIVE COVENANTS.
Borrower shall, until payment in full of the Obligations and
termination of this Agreement:
6.1. Payment of Fees. Pay to ACM Agent on demand all usual and
customary fees and expenses which ACM Agent incurs in connection with (a) the
forwarding of Advance proceeds and (b) the establishment and maintenance of any
Blocked Accounts or Depository Accounts as provided for in Section 4.15(h). ACM
Agent may, without making demand, charge the account of Borrower for all such
fees and expenses.
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6.2. Conduct of Business and Maintenance of Existence and Assets.
(a) Conduct continuously and operate actively its business according to good
business practices and maintain all of its properties useful or necessary in its
business in good working order and condition (reasonable wear and tear excepted
and except as may be disposed of in accordance with the terms of this Agreement,
the Patent Collateral Security Agreement or the Trademark Collateral Security
Agreement), including, without limitation, all licenses, owned patents,
copyrights, design rights, tradenames, trade secrets and trademarks and, except
as provided in the Trademark Collateral Security Agreement of Borrower in favor
of ACM Agent dated the date hereof, take all actions necessary to enforce and
protect the validity of any such owned intellectual property right included in
the Collateral; (b) keep in full force and effect its existence and comply in
all material respects with the laws and regulations governing the conduct of its
business where the failure to do so could reasonably be expected to have a
Material Adverse Effect; and (c) make all such reports and pay all such
franchise and other taxes and license fees and do all such other acts and things
as may be lawfully required to maintain its rights, licenses, leases, powers and
franchises under the laws of the United States or any political subdivision
thereof where the failure to do so could reasonably be expected to have a
Material Adverse Effect.
6.3. Violations. Promptly notify ACM Agent in writing of
any violation of any law, statute, regulation or ordinance of any
governmental entity, or of any agency thereof, applicable to
Borrower which could reasonably be expected to have a Material
Adverse Effect.
6.4. Government Receivables. If requested by ACM Agent, take all
steps necessary to protect ACM Agent's interest in the Collateral under the
Federal Assignment of Claims Act or other applicable state or local statutes or
ordinances and deliver to ACM Agent appropriately endorsed, any instrument or
chattel paper connected with any Receivable arising out of contracts between
Borrower and the United States, any state or any local government, department,
agency or instrumentality of any of them.
6.5. Execution of Supplemental Instruments. Execute and deliver to
ACM Agent from time to time, upon demand, such supplemental agreements,
statements, assignments and transfers, or instructions or documents relating to
the Collateral, and such other instruments as ACM Agent may reasonably request,
in order that the full intent of this Agreement may be carried into effect.
6.6. Payment of Indebtedness. Pay, discharge or otherwise satisfy
at or before maturity (subject, where applicable, to specified grace periods
and, in the case of the trade payables, to normal payment practices) all its
obligations and liabilities of whatever nature, except when the failure to do so
could not reasonably be expected to have a Material Adverse Effect or when the
amount or validity thereof is currently being contested in good
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faith by appropriate proceedings and Borrower shall have provided for such
reserves as may be required by GAAP.
6.7. Standards of Financial Statements. Cause all financial
statements referred to in Sections 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13 and
9.14 as to those to which GAAP is applicable to be complete and correct in all
material respects (subject, in the case of interim financial statements, to
normal year-end audit adjustments) and to be prepared in reasonable detail and
in accordance with GAAP applied consistently throughout the periods reflected
therein (except as concurred in by such reporting accountants or officer, as the
case may be, and disclosed therein).
6.8. FINANCIAL COVENANTS.
(a) Fixed Charge Coverage. Maintain Fixed Charge
Coverage not less than 1.15 to 1.0 at December 31, 1996 and at the end of each
fiscal quarter thereafter with respect to the twelve months then ended.
(b) Additional Fixed Charge Coverage. Maintain
Additional Fixed Charge Coverage not less than 1.0 to 1.0 at December 31, 1996
and at the end of each fiscal quarter thereafter with respect to the twelve
months then ended.
(c) Leverage Ratio. Maintain Leverage Ratio at the
end of each fiscal quarter in an amount not greater than the amounts shown below
opposite the date corresponding thereto:
Fiscal Quarter Ended Ratio
June 30, 1996 4.0 to 1.0
September 30, 1996 4.0 to 1.0
December 31, 1996 2.0 to 1.0
March 31, 1997 3.0 to 1.0
June 30, 1997 4.0 to 1.0
September 30, 1997 4.0 to 1.0
December 31, 1997 2.0 to 1.0
March 31, 1998 3.0 to 1.0
June 30, 1998 4.0 to 1.0
September 30, 1998 4.0 to 1.0
December 31, 1998 2.0 to 1.0
March 31, 1999 3.0 to 1.0
(d) Inventory Turnover. Maintain a ratio of (a) the
accumulated cost of goods sold from the beginning of each fiscal year through
the end of such fiscal quarter (multiplied by 4 with respect to the first fiscal
quarter, 2 with respect to the second fiscal quarter, 1.33 with respect to the
third fiscal quarter and 1 with respect to the fourth fiscal quarter) to (b)
average Inventory at the end of any fiscal quarter (calculated by adding the
book value of Inventory as of December 31 of the immediately preceding fiscal
year and the book value of Inventory as of the end of such fiscal quarter and
dividing such sum by two (2)), in an amount not
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less than the amount shown below opposite the date corresponding
thereto:
Fiscal Quarter Ended Ratio
June 30, 1996 2.0 to 1.0
September 30, 1996 2.0 to 1.0
December 31, 1996 2.25 to 1.0
March 31, 1997 2.25 to 1.0
June 30, 1997 2.0 to 1.0
September 30, 1997 2.0 to 1.0
December 31, 1997 2.25 to 1.0
March 31, 1998 2.25 to 1.0
June 30, 1998 2.0 to 1.0
September 30, 1998 2.0 to 1.0
December 31, 1998 2.25 to 1.0
March 31, 1999 2.25 to 1.0
(e) Net Income. Achieve net income of at least $1
in each fiscal year.
VII. NEGATIVE COVENANTS.
Borrower shall not, until satisfaction in full of the Obligations
and termination of this Agreement:
7.1. Merger, Consolidation, Acquisition and Sale of
Assets.
(a) Enter into any merger, consolidation or other
reorganization with or into any other Person (other than with a Subsidiary if
Borrower shall be the surviving entity) or acquire all or a substantial portion
of the assets or stock of any Person or, except as provided above, permit any
other Person to consolidate with or merge with it.
(b) Sell, lease, transfer or otherwise dispose of
any of its properties or assets, except in the ordinary course of its business
or as permitted in Section 4.3 hereto.
7.2. Creation of Liens. Create or suffer to exist any
Lien upon or against any of its property or assets now owned or
hereafter acquired, except Permitted Encumbrances.
7.3. Guarantees. Become liable upon the obligations of
any Person by assumption, endorsement or guaranty thereof or
otherwise (other than to Lenders) except for the endorsement of
checks in the ordinary course of business.
7.4. Investments. Purchase or acquire obligations or
stock of, or any other interest in, any Person, except (a)
obligations issued or guaranteed by the United States of America or
any agency thereof, (b) commercial paper with maturities of not
more than 180 days and a published rating of not less than A-1 or
P-1 (or the equivalent rating), (c) certificates of time deposit
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and bankers' acceptances having maturities of not more than 180 days and
repurchase agreements backed by United States government securities of a
commercial bank if (i) such bank has a combined capital and surplus of at least
$500,000,000, or (ii) its debt obligations, or those of a holding company of
which it is a Subsidiary, are rated not less than A (or the equivalent rating)
by a nationally recognized investment rating agency, (d) U.S. money market funds
that invest solely in obligations issued or guaranteed by the United States of
America or an agency thereof, (e) the purchase by Borrower of outstanding shares
of common stock of Borrower provided, (i) the purchase price for such shares is
no greater than the price quoted for such shares on the NASDAQ SmallCap Market
at the time of such purchase and (ii) the aggregate purchase price paid in any
fiscal year for such shares do not exceed $250,000, (f) deposits and other
commercial banking accounts with commercial banks maintained by Borrower in the
ordinary course of its business, (g) promissory notes or other similar
instruments issued by Customers to Borrower with respect to outstanding
Receivables in an aggregate amount not to exceed $150,000 at any time
outstanding, (h) the Virgin Island Subsidiary, in an amount not to exceed $5,000
per year and (i) miscellaneous investments in an aggregate amount not to exceed
$200,000 at any one time provided, Borrower shall not make cash expenditures in
excess of $75,000 to purchase the stock or other interests in any Person.
7.5. Loans. Make advances, loans or extensions of credit to any
Person, including without limitation, any Parent, Subsidiary or Affiliate other
than (i) extensions of trade credit in the ordinary course of its business, (ii)
loans or advances or cash expenditures with respect to the Swank ESOP to enable
the Swank ESOP to, among other things, fund required payments of retirement
benefits which loans, advances and/or cash expenditures shall not exceed
aggregate sum of $750,000 in any fiscal year and (iii) loans or advances to its
employees with respect to travel/entertainment expense in an aggregate amount
not to exceed $200,000 at any time outstanding.
7.6. Capital Expenditures. Contract for, purchase or make
any expenditure or commitments for fixed or capital assets
(including capitalized leases) in any fiscal year in an amount in
excess of $1,500,000.
7.7. Dividends. Declare, pay or make any dividend or distribution
on any shares of the common stock or preferred stock of Borrower (other than
dividends or distributions payable in its stock, or split-ups or
reclassifications of its stock) or apply any of its funds, property or assets to
the purchase, redemption or other retirement of any common or preferred stock,
or of any options to purchase or acquire any such shares of common or preferred
stock of Borrower.
7.8. Indebtedness. Create, incur, assume or suffer to
exist any Indebtedness for borrowed money (exclusive of trade debt)
of Borrower except in respect of (i) Indebtedness to Lenders; (ii)
Indebtedness incurred for capital expenditures permitted under
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Section 7.6 hereof; (iii) Indebtedness under the Term Loan Note(s) or the Term
Loan Agreement; and (iv) Indebtedness arising from loans obtained by Borrower
against the cash surrender value of life insurance policies owned by Borrower so
long as the aggregate amount of such Indebtedness does not exceed the aggregate
cash surrender value of the policies.
7.9. Nature of Business. Substantially change the nature of the
business in which it is presently engaged, nor except as specifically permitted
hereby purchase or invest, directly or indirectly, in any assets or property
other than in the ordinary course of business for assets or property which are
useful in and are intended to be used in its business as presently conducted.
7.10. Transactions with Affiliates. Directly or indirectly,
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, or otherwise deal with, any Affiliate, except transactions
disclosed in the ordinary course of business, on an arm's-length basis on terms
no less favorable than terms which would have been obtainable from a Person
other than an Affiliate.
7.11. Leases. Enter as lessee into any lease arrangement for real
or personal property (unless capitalized and permitted under Section 7.6 hereof)
if after giving effect thereto, aggregate annual rental payments for all leased
property would exceed [$4,500,000] in any one fiscal year.
7.12. Subsidiaries.
(a) Form any Subsidiary.
(b) Enter into any partnership, joint venture or
similar arrangement.
(c) Change the nature of the business in which any
Subsidiary is presently engaged.
7.13. Fiscal Year and Accounting Changes. Change its fiscal year
end from December 31 or make any significant change (i) in accounting treatment
and reporting practices except as required or permitted by GAAP or (ii) in tax
reporting treatment except as required or permitted by law.
7.14. Pledge of Credit. Now or hereafter pledge any
Lender's credit on any purchases or for any purpose whatsoever or
use any portion of any Advance in or for any business other than
Borrower's business as conducted on the date of this Agreement.
7.15. Amendment of Articles of Incorporation, By-Laws.
Amend, modify or waive any material term or provision of its
Articles of Incorporation or By-Laws unless required by law.
7.16. Compliance with ERISA. (i) engage, or permit any
member of the Controlled Group to engage, in any non-exempt
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"prohibited transaction", as that term is defined in section 406 of ERISA and
Section 4975 of the Code, (ii) incur, or permit any member of the Controlled
Group to incur, any "accumulated funding deficiency", as that term is defined in
Section 302 of ERISA or Section 412 of the Code, (iii) terminate, or permit any
member of the Controlled Group to terminate, any Plan where such event could
reasonably be expected to result in a Material Adverse Effect, (iv) assume, or
permit any member of the Controlled Group to assume, any obligation to
contribute to any Multiemployer Plan not disclosed on Schedule 5.8(d), (v)
incur, or permit any member of the Controlled Group to incur, any withdrawal
liability to any Multiemployer Plan; (vi) fail promptly to notify ACM Agent of
the occurrence of any Termination Event, (vii) fail to comply, or permit a
member of the Controlled Group to fail to comply, with the requirements of ERISA
or the Code or other applicable laws in respect of any Plan and the result of
such failure to comply could reasonably be expected to have a Material Adverse
Effect, (viii) fail to meet, or permit any member of the Controlled Group to
fail to meet, all minimum funding requirements under ERISA or the Code or
postpone or delay or allow any member of the Controlled Group to postpone or
delay any funding requirement with respect of any Plan.
7.17. Prepayment of Indebtedness. At any time, directly or
indirectly, prepay any Indebtedness for borrowed money (other than to Lenders or
Term Loan Lenders in accordance with Section 7.18 hereof), or repurchase,
redeem, retire or otherwise acquire any Indebtedness for borrowed money of
Borrower.
7.18. Payment of Term Loan Note(s). At any time, directly or
indirectly, pay or prepay, repurchase, redeem, retire or otherwise acquire, or
make payment on account of any principal of, interest on or premium payable in
connection with the Term Loan Note(s) or the Term Loan Agreement except for
scheduled principal payments in quarterly installments of $200,000 each, the
final payment on May 3, 1999 and the mandatory prepayment under Section 3.02(a)
of the Term Loan Agreement as set forth therein as in effect on the Closing Date
or as may be amended in accordance with the provisions hereof, provided, at the
time of and after giving effect to such mandatory prepayment (i) no Event of
Default shall have occurred and be continuing and (ii) Borrower shall have
Undrawn Availability of at least $3,000,000 and provided, further, neither the
Term Loan Note(s) nor Term Loan Agreement shall be amended without the prior
written consent of the Required Lenders to the extent such amendment relates to
or affects the aggregate principal amount, fees payable thereunder, interest
rate or payment terms (other than extensions of due dates for payments owed
thereunder).
VIII. CONDITIONS PRECEDENT.
8.1. Conditions to Initial Advances. The agreement of
Lenders to make the initial Advances requested to be made on the
Closing Date is subject to the satisfaction, or waiver by Lenders,
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prior to or concurrently with the making of such Advances, of the
following conditions precedent:
(a) Note. Lenders shall have received the Revolving
Credit Notes duly executed and delivered by an authorized officer
of Borrower;
(b) Filings, Registrations and Recordings. Each
document (including, without limitation, any Uniform Commercial Code financing
statement) required by this Agreement, any related agreement, under law or as
reasonably requested by the Co-Agents to be filed, registered or recorded in
order to create, in favor of ACM Agent, a perfected security interest in or lien
upon the Collateral shall have been properly filed, registered or recorded in
each jurisdiction in which the filing, registration or recordation thereof is so
required or requested, and ACM Agent shall have received an acknowledgment copy,
or other evidence satisfactory to Co-Agents, of each such filing, registration
or recordation and satisfactory evidence of the payment of any necessary fee,
tax or expense relating thereto;
(c) Corporate Proceedings of Borrower. Co-Agents
shall have received a copy of the resolutions in form and substance reasonably
satisfactory to the Co-Agents, of the Board of Directors of Borrower authorizing
(i) the execution, delivery and performance of this Agreement, the Revolving
Credit Note, the Mortgage, any related agreements and the Term Loan Note(s)
(collectively the "Documents") and (ii) the granting by Borrower of the security
interests in and liens upon the Collateral in each case certified by the
Secretary or an Assistant Secretary of Borrower as of the Closing Date; and,
such certificate shall state that the resolutions thereby certified have not
been amended, modified, revoked or rescinded as of the date of such certificate;
(d) Incumbency Certificates of Borrower. Co-Agents
shall have received a certificate of the Secretary or an Assistant Secretary of
Borrower, dated the Closing Date, as to the incumbency and signature of the
officers of Borrower executing this Agreement, any certificate or other
documents to be delivered by it pursuant hereto, together with evidence of the
incumbency of such Secretary or Assistant Secretary;
(e) Certificates. Co-Agents shall have received a
copy of the Articles or Certificate of Incorporation of Borrower, and all
amendments thereto, certified by the Secretary of State or other appropriate
official of its jurisdiction of incorporation together with copies of the
By-Laws of Borrower certified as accurate and complete by the Secretary of
Borrower;
(f) Good Standing Certificates. Co-Agents shall
have received good standing certificates for Borrower dated not more than thirty
(30) days prior to the Closing, issued by the Secretary of State or other
appropriate official of Borrower's jurisdiction of incorporation and each
jurisdiction where the
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conduct of Borrower's business activities or the ownership of its
properties necessitates qualification;
(g) Legal Opinion. Co-Agents shall have received
the executed legal opinion of Parker Chapin Flattau & Klimpl, LLP in form and
substance satisfactory to Co-Agents which shall cover such matters incident to
the transactions contemplated by this Agreement and related agreements as ACM
Agent may reasonably require and Borrower hereby authorizes and directs such
counsel to deliver such opinions to Co-Agents and Lenders;
(h) No Litigation. (i) No litigation, investigation
or proceeding before or by any arbitrator or governmental authority shall be
continuing or threatened against Borrower (A) in connection with the Documents
or any of the transactions contemplated thereby and which, in the reasonable
opinion of Lenders, is deemed material or (B) which could, in the reasonable
opinion of Lenders, have a Material Adverse Effect; and (ii) no injunction,
writ, restraining order or other order of any nature materially adverse to
Borrower or the conduct of its business or inconsistent with the due
consummation of the transactions contemplated by this Agreement shall have been
issued by any governmental authority;
(i) Financial Condition Certificates. ACM Agent
shall have received executed Financial Condition Certificates in the form of
Exhibit 8.1(i).
(j) Collateral Examination. Co-Agents shall have
completed Collateral examinations and received appraisals, the results of which
shall be satisfactory in form and substance to Lenders, of the Receivables,
Inventory, General Intangibles and Equipment of Borrower and all books and
records in connection therewith;
(k) Fees. ACM Agent shall have received all fees
payable to it or Lenders on or prior to the Closing Date pursuant
to the Fee Letter and Article III hereof;
(l) Projections. Co-Agents shall have received a
copy of the Projections and the other financial statements referenced in Section
5.5 hereof, all of which shall be satisfactory in all respects to Lenders;
(m) Term Loan Note(s). Co-Agents shall have
received in form and substance satisfactory to Co-Agents final executed copies
of the Term Loan Note(s) aggregating not less than $4,000,000 and all related
agreements, documents and instruments as in effect on the Closing Date and the
transactions contemplated by such documentation shall be consummated
concurrently with the making of the initial Advance;
(n) Intercreditor Agreements. ACM Agent and Lenders
shall have entered into an Intercreditor Agreement with Term Loan Lenders which
shall set forth the relative rights of ACM Agent, Co-
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Agents, Lenders and the Term Loan Agent and Term Loan Lenders with respect to
the Collateral, which shall be satisfactory in form and substance to Lenders in
their sole discretion;
(o) Insurance. Co-Agents shall have received in
form and substance satisfactory to Co-Agents, certified copies of Borrower's
casualty insurance policies, together with loss payable endorsements on ACM
Agent's standard form of loss payee endorsement naming Lenders as loss payee,
and certified copies of Borrower's liability insurance policies, together with
endorsements naming ACM Agent as a co-insured;
(p) Title Insurance. ACM Agent shall have received
fully paid mortgagee title insurance policies (or binding commitments to issue
title insurance policies, marked to the satisfaction of Co-Agents to evidence
the form of such policies to be delivered with respect to the Mortgage), in
standard ALTA form, issued by a title insurance company satisfactory to ACM
Agent, each in an amount equal to not less than the fair market value of the
Real Property subject to the Mortgage, insuring the Mortgage to create a valid
Lien on the Real Property with no exceptions which ACM Agent shall not have
approved in writing and no survey exceptions;
(q) Environmental Reports. Co-Agents shall have
received all environmental studies and reports prepared by independent
environmental engineering firms of all Real Property owned or leased by
Borrower;
(r) Payment Instructions. ACM Agent shall have
received written instructions from Borrower directing the application of
proceeds of the initial Advances made pursuant to this Agreement;
(s) Blocked Accounts. ACM Agent shall have received
duly executed agreements establishing the Blocked Accounts or Depository
Accounts with financial institutions acceptable to Lenders for the collection or
servicing of the Receivables and proceeds of the Collateral;
(t) Consents. ACM Agent shall have received any and
all Consents necessary to permit the effectuation of the transactions
contemplated by this Agreement and the Other Documents; and, ACM Agent shall
have received such Consents and waivers of such third parties as might assert
claims with respect to the Collateral as Co-Agents and their counsel shall deem
necessary;
(u) No Adverse Material Change. (i) since December
31, 1995, there shall not have occurred any event, condition or state of facts
which could reasonably be expected to have a Material Adverse Effect and (ii) no
representations made or information supplied to Lenders shall have been proven
to be inaccurate or misleading in any material respect;
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(v) Leasehold Agreements. Co-Agents shall have
received landlord, mortgagee or warehouseman agreements
satisfactory to Co-Agents;
(w) Mortgage. Co-Agents shall have received in form
and substance satisfactory to Co-Agents (i) an executed Mortgage [and] (ii) a
title policy for the Real Property [and (iii) surveys]; and
(x) Other Documents. Co-Agents shall have received
final executed copies of all Other Documents in form and substance
satisfactory to Co-Agents;
(y) Contract Review. ACM Agent shall have reviewed
all material contracts of Borrower including, without limitation, leases, union
contracts, labor contracts, vendor supply contracts, license agreements and
distributorship agreements and such contracts and agreements shall be
satisfactory in all respects to Co-Agents;
(z) Closing Certificate. Co-Agents shall have
received a closing certificate signed by the Chief Financial Officer of Borrower
dated as of the date hereof, stating that (i) all representations and warranties
set forth in this Agreement and the other Documents are true and correct on and
as of such date, (ii) Borrower is on such date in compliance with all the terms
and provisions set forth in this Agreement and the Other Documents and (iii) on
such date no Default or Event of Default has occurred or is continuing; and
(aa) Undrawn Availability. Co-Agents shall have
received evidence from Borrower that the aggregate amount of Eligible
Receivables and Eligible Inventory is sufficient in value and amount so that
after giving effect to the initial Advances hereunder and the payment of all
fees, expenses and other transaction costs related to the closing of the
transactions contemplated by this Agreement, Borrower shall have Undrawn
Availability of at least $3,000,000; and
(ab) Other. All corporate and other proceedings, and
all documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement shall be satisfactory in form and
substance to ACM Agent, Co-Agents, Lenders and their respective counsel.
8.2. Conditions to Each Advance. The agreement of Lenders
to make any Advance requested to be made on any date (including,
without limitation, its initial Advance), is subject to the
satisfaction of the following conditions precedent as of the date
such Advance is made:
(a) Representations and Warranties. Each of the
representations and warranties made by Borrower in or pursuant to this Agreement
and any related agreements to which it is a party, and each of the
representations and warranties contained in any
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certificate, document or financial or other statement furnished at any time
under or in connection with this Agreement or any related agreement shall be
true and correct in all material respects on and as of such date as if made on
and as of such date taking into account any amendments to the Schedules hereto
as a result of any disclosures made by Borrower to ACM Agent after the Closing
Date as to changes in circumstances arising after the Closing Date to the extent
permitted by Section 9.1 hereof;
(b) No Default. No Event of Default or Default
shall have occurred and be continuing on such date, or would exist after giving
effect to the Advances requested to be made, on such date and, in the case of
the initial Advance, after giving effect to the consummation of the transactions
contemplated by this Agreement; provided, however that Lenders in their sole
discretion, may continue to make Advances notwithstanding the existence of an
Event of Default or Default and that any Advances so made shall not be deemed a
waiver of any such Event of Default or Default; and
(c) Maximum Advances. In the case of any Advances
requested to be made, after giving effect thereto, the aggregate Advances shall
not exceed the maximum Advances permitted under Section 2.1 hereof.
Each request for an Advance by Borrower hereunder shall constitute a
representation and warranty by Borrower as of the date of such Advance that the
conditions contained in this subsection shall have been satisfied.
IX. INFORMATION AS TO BORROWER.
Borrower shall, until satisfaction in full of the Obligations and
the termination of this Agreement:
9.1. Disclosure of Material Matters. Immediately upon learning
thereof, report to Co-Agents (i) all matters materially affecting the value,
enforceability or collectibility of any portion of the Collateral including,
without limitation, Borrower's reclamation or repossession of, or the return to
Borrower of, a material amount of goods or claims or disputes asserted by any
Customer or other obligor and (ii) in writing of the occurrence of any event or
the existence of any fact which renders any representation or warranty in this
Agreement or any of the Other Documents inaccurate, incomplete or misleading in
any material respect. Any such notice shall be deemed to automatically amend the
Schedule to this Agreement with respect to the subject matter of such
disclosure; provided, the existence or disclosure of such fact does not disclose
or give rise to an Event of Default under this Agreement. Borrower will not,
without ACM Agent's consent, compromise or adjust any material amount of the
Receivables (or extend the time for payment thereof) or accept any material
returns of merchandise or grant any additional discounts, allowances or credits
thereon except for those compromises, adjustments, returns,
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discounts, credits and allowances as have been heretofore customary
in the business of Borrower.
9.2. Schedules. Deliver to ACM Agent on or before the fifteenth
(15th) day of each month as and for the prior month (a) accounts receivable
ageings, (b) accounts payable schedules and (c) Inventory reports. In addition,
Borrower will deliver to ACM Agent at such intervals as ACM Agent may reasonably
require: (i) confirmatory assignment schedules, (ii) copies of Customer's
invoices, (iii) evidence of shipment or delivery, and (iv) such further
schedules, documents and/or information regarding the Collateral as ACM Agent
may reasonably require including, without limitation, trial balances and test
verifications. ACM Agent shall have the right to confirm and verify all
Receivables by any manner and through any medium it considers advisable and do
whatever it may deem reasonably necessary to protect its interests hereunder.
The items to be provided under this Section are to be in form satisfactory to
ACM Agent and executed by Borrower and delivered to ACM Agent from time to time
solely for ACM Agent's convenience in maintaining records of the Collateral, and
Borrower's failure to deliver any of such items to ACM Agent shall not affect,
terminate, modify or otherwise limit ACM Agent's Lien with respect to the
Collateral.
9.3. Environmental Reports. Furnish Co-Agents, concurrently with
the delivery of the financial statements referred to in Sections 9.7 and 9.8,
with a certificate of Borrower signed by the President of Borrower stating, to
the best of his knowledge, that Borrower (a) is in compliance in all material
respects with all federal, state and local laws relating to environmental
protection and control and occupational safety and health or (b) Borrower is not
in compliance with the foregoing laws, the certificate shall set forth with
specificity all areas of non-compliance and the proposed action Borrower will
implement in order to achieve full compliance.
9.4. Litigation. Promptly notify Co-Agents in writing of
any litigation, suit or administrative proceeding affecting
Borrower, whether or not the claim is covered by insurance, and of
any suit or administrative proceeding, which in any such case could
reasonably be expected to have a Material Adverse Effect.
9.5. Material Occurrences. Promptly notify Co-Agents in writing
upon the occurrence of (a) any Event of Default or Default; (b) any event of
default under the Term Loan Note(s); (c) any event which with the giving of
notice or lapse of time, or both, would constitute an event of default under the
Term Loan Note(s); (d) any event, development or circumstance whereby any
financial statements or other reports furnished to ACM Agent fail in any
material respect to present fairly, in accordance with GAAP consistently
applied, the financial condition or operating results of Borrower as of the date
of such statements; (e) any accumulated retirement plan funding deficiency
which, if such deficiency continued for two plan years and was not corrected as
provided in Section 4971 of the Internal Revenue Code, could subject Borrower to
a tax imposed by
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Section 4971 of the Internal Revenue Code; (f) each and every default by
Borrower which might result in the acceleration of the maturity of any
Indebtedness for borrowed money in excess of $200,000, including the names and
addresses of the holders of such Indebtedness with respect to which there is a
default existing or with respect to which the maturity has been or could be
accelerated, and the amount of such Indebtedness; and (g) any other development
in the business or affairs of Borrower which could reasonably be expected to
have a Material Adverse Effect; in each case describing the nature thereof and
the action Borrower proposes to take with respect thereto.
9.6. Government Receivables. Notify Co-Agents promptly if
any of its Receivables arise out of contracts between Borrower and
the United States, any state or local government, or any
department, agency or instrumentality of any of them.
9.7. Annual Financial Statements. Furnish Co-Agents within (a)
fifteen (15) days after the Closing Date with respect to fiscal year ended
December 31, 1995 and (b) ninety (90) days after the end of each fiscal year of
Borrower, financial statements of Borrower on a consolidated basis (and, if any
significant business is conducted by any Subsidiary of Borrower, on a
consolidating basis) including, but not limited to, statements of income and
stockholders' equity and cash flow from the beginning of the current fiscal year
to the end of such fiscal year and the balance sheet as at the end of such
fiscal year, all prepared in accordance with GAAP applied on a basis consistent
with prior practices, and in reasonable detail and with the consolidated
statements reported upon without qualification by Coopers & Lybrand or another
independent certified public accounting firm selected by Borrower and
satisfactory to Co-Agents (the "Accountants"). Beginning with the year ended
December 31, 1996, the report of the Accountants shall be accompanied by a
statement of the Accountants certifying that in making the audit upon which such
report was based either no information came to their attention which to their
knowledge indicates noncompliance with the financial covenants under this
Agreement as set forth in Sections 6.8, 7.6 and 7.11 insofar as they relate to
accounting matters or, if such information came to their attention, specifying
those financial covenants in which the Borrower was not in compliance. In
addition, the reports shall be accompanied by a certificate of Borrower's Chief
Financial Officer which shall state that, based on an examination sufficient to
permit him to make an informed statement, no Default or Event of Default exists,
or, if such is not the case, specifying such Default or Event of Default and,
the extent known by such Person, its nature, when it occurred, whether it is
continuing and the steps being taken by Borrower with respect to such event and,
such certificate shall have appended thereto calculations which set forth
Borrower's compliance with the requirements or restrictions imposed by Sections
6.8, 7.6 and 7.11 hereof.
9.8. Quarterly Financial Statements. Furnish Co-Agents
within forty five (45) days after the end of each fiscal quarter
other than the last fiscal quarter of any year, an unaudited
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balance sheet of Borrower on a consolidated basis (and, if any significant
business is conducted by any Subsidiary of Borrower, on a consolidating basis)
and unaudited statements of income and stockholders' equity and cash flow of
Borrower on a consolidated basis (and, if any significant business is conducted
by any Subsidiary of Borrower, on a consolidating basis) reflecting results of
operations from the beginning of the fiscal year to the end of such quarter and
for such quarter, prepared on a basis consistent with prior practices and
complete and correct in all material respects, subject to normal year end
adjustments. The reports shall be accompanied by a certificate of Borrower's
Chief Financial Officer which shall state that, based on an examination
sufficient to permit him to make an informed statement, no Default or Event of
Default exists, or, if such is not the case, specifying such Default or Event of
Default and, to the extent known by such Person, its nature, when it occurred,
whether it is continuing and the steps being taken by Borrower with respect to
such event and such certificate shall have appended thereto calculations which
set forth Borrower's compliance with the requirements or restrictions imposed by
Section 6.8, 7.6 and 7.11 hereof.
9.9. Monthly Financial Statements. Furnish Co-Agents within thirty
(30) days after the end of each month, an unaudited balance sheet of Borrower
and unaudited statements of income and stockholders' equity and cash flow of
Borrower on a consolidated (and, if any significant business is conducted by any
Subsidiary of Borrower, on a consolidating basis) reflecting results of
operations from the beginning of the fiscal year to the end of such month and
for such month and comparing such results to the prior year's equivalent period,
prepared on a basis consistent with prior practices and complete and correct in
all material respects, subject to normal year end adjustments. The reports shall
be accompanied by a certificate of Borrower's Chief Financial Officer which
shall state that, based on an examination sufficient to permit him to make an
informed statement, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default and, to the extent known
by such Person, its nature, when it occurred, whether it is continuing and the
steps being taken by Borrower with respect to such event and, such certificate
shall have appended thereto calculations which set forth Borrower's compliance
with the requirements or restrictions imposed by Sections 6.8, 7.6 and 7.11
hereof.
9.10. Other Reports. Furnish Co-Agents as soon as available, but in
any event within ten (10) days after the issuance thereof, (i) with copies of
such financial statements, reports and returns as Borrower shall send to its
stockholders and (ii) copies of all notices (x) filed with the Securities and
Exchange Commission and/or (y) sent pursuant to the Term Loan Agreement.
9.11. Additional Information. Furnish ACM Agent with
additional information as Co-Agents shall reasonably request in
order to enable ACM Agent, Co-Agents and Lenders to determine
whether the terms, covenants, provisions and conditions of this
Agreement have been complied with by Borrower including, without
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limitation and without the necessity of any request by Co-Agents, (a) copies of
all environmental audits and reviews, (b) at least thirty (30) days prior
thereto, notice of Borrower's opening of any new office or place of business or
Borrower's closing of any existing office or place of business, and (c) promptly
upon Borrower's learning thereof, of any labor dispute to which Borrower may
become a party, any strikes or walkouts relating to any of its plants or other
facilities, and the expiration of any labor contract to which Borrower is a
party or by which Borrower is bound.
9.12. Projected Operating Budget. Furnish Co-Agents, no less than
thirty (30) days prior to the beginning of each of Borrower's fiscal years
commencing with fiscal year 199[7], a month by month projected operating budget
and cash flow of Borrower for such fiscal year (including an income statement
for each month and a balance sheet as at the end of the last month in each
fiscal quarter), such projections to be accompanied by a certificate signed by
Borrower's President or Chief Financial Officer to the effect that such
projections have been prepared on the basis of sound financial planning practice
consistent with past budgets and financial statements and were reasonable.
9.13. Variances. Furnish Co-Agents, concurrently with the delivery
of the financial statements referred to in Section 9.7 and each monthly report,
a written report summarizing all material variances from budgets submitted by
Borrower pursuant to Section 9.12, comparing Borrower's performance in the
fiscal period which is subject of such financial statement with Borrower's
performance in the same fiscal period during the prior fiscal year and a
discussion and analysis by management with respect to such variances.
9.14. Notice of Suits, Adverse Events. Furnish Co-Agents with
prompt notice of (i) any lapse or other termination of any Consent issued to
Borrower by any Governmental Body or any other Person that is material to the
operation of Borrower's business, (ii) any refusal by any Governmental Body or
any other Person to renew or extend any such Consent; and (iii) copies of any
periodic or special reports filed by Borrower with any Governmental Body or
Person, if such reports indicate any material change in the business,
operations, affairs or condition of Borrower, or if copies thereof are requested
by Co-Agents, and (iv) copies of any material notices and other communications
from any Governmental Body or Person which specifically relate to Borrower.
9.15. ERISA Notices and Requests. Furnish Co-Agents with immediate
written notice in the event that (i) Borrower or any member of the Controlled
Group knows or has reason to know that a Termination Event has occurred,
together with a written statement describing such Termination Event and the
action, if any, which Borrower or member of the Controlled Group has taken, is
taking, or proposes to take with respect thereto and, when known, any action
taken or threatened by the Internal Revenue Service, Department of Labor or PBGC
with respect thereto, (ii) Borrower or any member of
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the Controlled Group knows or has reason to know that a prohibited transaction
(as defined in Sections 406 of ERISA and 4975 of the Internal Revenue Code) has
occurred together with a written statement describing such transaction and the
action which Borrower or any member of the Controlled Group has taken, is taking
or proposes to take with respect thereto, (iii) a funding waiver request has
been filed with respect to any Plan together with all communications received by
either Borrower or any member of the Controlled Group with respect to such
request, (iv) any increase in the benefits of any existing Plan or the
establishment of any new Plan or the commencement of contributions to any Plan
to which either Borrower or any member of the Controlled Group was not
previously contributing shall occur, (v) Borrower or any member of the
Controlled Group shall receive from the PBGC a notice of intention to terminate
a Plan or to have a trustee appointed to administer a Plan, together with copies
of each such notice, (vi) Borrower or any member of the Controlled Group shall
receive any favorable or unfavorable determination letter from the Internal
Revenue Service regarding the qualification of a Plan under Section 401(a) of
the Internal Revenue Code, together with copies of each such letter; (vii)
Borrower or any member of the Controlled Group shall receive a notice regarding
the imposition of withdrawal liability, together with copies of each such
notice; (viii) Borrower or any member of the Controlled Group shall fail to make
a required installment or any other required payment under Section 412 of the
Internal Revenue Code on or before the due date for such installment or payment;
(ix) Borrower or any member of the Controlled Group knows that (a) a
Multiemployer Plan has been terminated, (b) the administrator or plan sponsor of
a Multiemploy- er Plan intends to terminate a Multiemployer Plan, or (c) the
PBGC has instituted or will institute proceedings under Section 4042 of ERISA to
terminate a Multiemployer Plan.
9.16. Additional Documents. Execute and deliver to Co-
Agents, upon request, such documents and agreements as ACM Agent
may, from time to time, reasonably request to carry out the
purposes, terms or conditions of this Agreement.
X. EVENTS OF DEFAULT.
The occurrence of any one or more of the following events shall
constitute an "Event of Default":
10.1. failure by Borrower to pay any principal or interest on the
Obligations when due, whether at maturity or by reason of acceleration pursuant
to the terms of this Agreement or by notice of intention to prepay, or by
required prepayment or failure to pay any other liabilities or make any other
payment, fee or charge provided for herein when due or in any other Document;
10.2. any representation or warranty made or deemed made by
Borrower in this Agreement or any related agreement or in any
certificate, document or financial or other statement furnished at
any time in connection herewith or therewith shall prove to have
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been incorrect in any material respect on the date when made or
deemed to have been made;
10.3. failure by Borrower to (i) furnish financial
information when due or within five (5) days of when requested, or
(ii) permit the inspection of its books or records;
10.4. issuance of a notice of Lien, levy, assessment,
injunction or attachment against a material portion of Borrower's
property which is not stayed or lifted within forty (40) days;
10.5. (a) failure or neglect of Borrower to perform, keep or
observe any term, provision, condition or covenant, contained in Sections 4.6,
4.7, 4.9, 4.11, 6.1, 6.3, 6.4, 9.4 or 9.6 hereof which is not cured within
fifteen (15) days from the occurrence of such failure or neglect; or
(b) failure of Borrower to perform, keep or observe
any other term, provision, condition, covenant herein contained, or
contained in any Other Document;
10.6. any judgment is rendered or judgment liens in excess
of $250,000 filed against Borrower which within forty (40) days of
such rendering or filing is not either satisfied, stayed or
discharged of record;
10.7. Borrower shall (i) apply for, consent to or suffer the
appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or similar fiduciary of itself or of all or a substantial part of its
property, (ii) make a general assignment for the benefit of creditors, (iii)
commence a voluntary case under any state or federal bankruptcy laws (as now or
hereafter in effect), (iv) be adjudicated as bankrupt or insolvent, (v) file a
petition seeking to take advantage of any other law providing for the relief of
debtors, (vi) acquiesce to, or fail to have dismissed, within forty (40) days,
any petition filed against it in any involuntary case under such bankruptcy
laws, or (vii) take any action for the purpose of effecting any of the
foregoing;
10.8. Borrower shall admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease
operations of its present business;
10.9. any Subsidiary of Borrower shall (i) apply for, consent to or
suffer the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or similar fiduciary of itself or of all or a
substantial part of its property, (ii) admit in writing its inability, or be
generally unable, to pay its debts as they become due or cease operations of its
present business, (iii) make a general assignment for the benefit of creditors,
(iv) commence a voluntary case under any state or federal bankruptcy laws (as
now or hereafter in effect), (v) be adjudicated as bankrupt or insolvent, (vi)
file a petition seeking to take advantage of any other law providing for the
relief
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of debtors, (vii) acquiesce to, or fail to have dismissed, within forty (40)
days, any petition filed against it in any involuntary case under such
bankruptcy laws, or (viii) take any action for the purpose of effecting any of
the foregoing;
10.10. any change in Borrower's condition or affairs (financial or
otherwise) which has a Material Adverse Effect including, without limitation, if
a default of the obligations of Borrower under any other agreement to which it
is a party shall occur which default is not cured within any applicable grace
period;
10.11. any Lien created hereunder or provided for hereby or under
any related agreement for any reason ceases to be or is not a valid and
perfected Lien having a first priority interest (other than with respect to
Permitted Encumbrances and with respect to items of Collateral which cannot be
perfected by filings under the Uniform Commercial Code or in the applicable real
estate records).
10.12. an event of default has occurred and been declared
under any Term Loan Note which default shall not have been cured or
waived within any applicable grace period;
10.13. any Change of Control;
10.14. any material provision of this Agreement shall, for
any reason, cease to be valid and binding on Borrower, or Borrower
shall so claim in writing to ACM Agent;
10.15. (i) any Governmental Body shall (A) revoke, terminate,
suspend or adversely modify any material license, permit, patent trademark or
tradename of Borrower which is necessary to the operation of Borrower's
business, or (B) commence proceedings to suspend, revoke, terminate or adversely
modify any such material license, permit, trademark, tradename or patent which
is necessary to the operation of Borrower's business and such proceedings shall
not be dismissed or discharged within sixty (60) days, or (c) schedule or
conduct a hearing on the renewal of any material license, permit, trademark,
tradename or patent necessary for the continuation of Borrower's business and
the staff of such Governmental Body issues a report recommending the
termination, revocation, suspension or material, adverse modification of such
material license, permit, trademark, tradename or patent; (ii) any agreement
which is material to the operation of Borrower's business shall be revoked or
terminated and not replaced by a substitute acceptable to ACM Agent within
thirty (30) days after the date of such revocation or termination, and such
revocation or termination and non-replacement would reasonably be expected to
have a Material Adverse Effect;
10.16. any material portion of the Collateral shall be seized or
taken by a Governmental Body, or Borrower or the title and rights of Borrower in
and to any material portion of the Collateral shall have become the subject
matter of litigation which might, in the opinion of ACM Agent, upon final
determination,
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result in impairment or loss of a material portion of the
Collateral provided by this Agreement or the Other Documents;
10.17. the operations of Borrower's manufacturing facility are
interrupted at any time for more than eight consecutive hours during any period
of two consecutive days, unless Borrower shall (i) be entitled to receive for
such period of interruption, proceeds of business interruption insurance
sufficient to assure that its per diem cash needs during such period is at least
equal to its average per diem cash needs for the consecutive [three month]
period immediately preceding the initial date of interruption and (ii) receive
such proceeds in the amount described in clause (i) preceding not later than
forty-five (45) days following the initial date of any such interruption;
provided, however, that notwithstanding the provisions of clauses (i) and (ii)
of this section, an Event of Default shall be deemed to have occurred if
Borrower shall be receiving the proceeds of business interruption insurance for
a period of forty-five (45) consecutive days; or
10.18. an event or condition specified in Sections 7.16 or 9.15
hereof shall occur or exist with respect to any Plan and, as a result of such
event or condition, together with all other such events or conditions, Borrower
or any member of the Controlled Group shall incur, or in the opinion of ACM
Agent be reasonably likely to incur, a liability to a Plan or the PBGC (or both)
which, in the reasonable judgment of Lenders, would have a Material Adverse
Effect.
XI. LENDERS' RIGHTS AND REMEDIES AFTER DEFAULT.
11.1. Rights and Remedies. Upon the occurrence of (i) an Event of
Default pursuant to Section 10.7 all Obligations shall be immediately due and
payable and this Agreement and the obligation of Lenders to make Advances shall
be deemed terminated; and, (ii) any of the other Events of Default and at any
time thereafter (such default not having previously been cured or waived), at
the option of Required Lenders all Obligations shall be immediately due and
payable and Lenders shall have the right to terminate this Agreement and to
terminate the obligation of Lenders to make Advances and (iii) a filing of a
petition against Borrower in any involuntary case under any state or federal
bankruptcy laws the obligation of Lenders to make Advances hereunder shall be
terminated other than as may be required by an appropriate order of the
bankruptcy court having jurisdiction over Borrower. Upon the occurrence and
during the continuance of any Event of Default, ACM Agent shall have the right
to exercise any and all other rights and remedies provided for herein, under the
Uniform Commercial Code and at law or equity generally, including, without
limitation, the right to foreclose the security interests granted herein and to
realize upon any Collateral by any available judicial procedure and/or to take
possession of and sell any or all of the Collateral with or without judicial
process. ACM Agent may enter any of Borrower's premises or other premises
without legal process and
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without incurring liability to Borrower therefor, and ACM Agent may thereupon,
or at any time thereafter, in its discretion without notice or demand, take the
Collateral and remove the same to such place as ACM Agent may deem advisable and
ACM Agent may require Borrower to make the Collateral available to ACM Agent at
a convenient place. With or without having the Collateral at the time or place
of sale, ACM Agent may sell the Collateral, or any part thereof, at public or
private sale, at any time or place, in one or more sales, at such price or
prices, and upon such terms, either for cash, credit or future delivery, as ACM
Agent may elect. Except as to that part of the Collateral which is perishable or
threatens to decline speedily in value or is of a type customarily sold on a
recognized market, ACM Agent shall give Borrower reasonable notification of such
sale or sales, it being agreed that in all events written notice mailed to
Borrower at least ten (10) days prior to such sale or sales is reasonable
notification. At any public sale ACM Agent or any Lender may bid for and become
the purchaser, and ACM Agent, any Lender or any other purchaser at any such sale
thereafter shall hold the Collateral sold absolutely free from any claim or
right of whatsoever kind, including any equity of redemption and such right and
equity are hereby expressly waived and released by Borrower. In connection with
the exercise of the foregoing remedies, ACM Agent is granted permission to use
(a) all of Borrower's trademarks, trade styles, trade names, patents, patent
applications, licenses, franchises and other proprietary rights which are used
in connection with Inventory for the purpose of disposing of such Inventory and
(b) Equipment for the purpose of completing the manufacture of unfinished goods.
The proceeds realized from the sale of any Collateral shall be applied as
follows: first, to the reasonable costs, expenses and attorneys' fees and out of
pocket expenses incurred by ACM Agent for collection and for acquisition,
completion, protection, removal, storage, sale and delivery of the Collateral;
second, to interest due upon any of the Obligations; and, third, to the
principal of the Obligations. If any deficiency shall arise, Borrower shall
remain liable to ACM Agent and Lenders therefor.
11.2. ACM Agent's Discretion. ACM Agent shall have the right in its
sole discretion to determine which rights, Liens, security interests or remedies
ACM Agent may at any time pursue, relinquish, subordinate, or modify or to take
any other action with respect thereto and such determination will not in any way
modify or affect any of ACM Agent's or Lenders' rights hereunder; provided,
however, ACM Agent shall not foreclose upon any Real Property without the
consent of the Co-Agents.
11.3. Setoff. In addition to any other rights which ACM Agent,
Co-Agents or any Lender may have under applicable law, upon the occurrence and
during the continuance of an Event of Default hereunder, ACM Agent, Co-Agents
and such Lender shall have a right to apply any of Borrower's property held by
ACM Agent, such Co-Agent and such Lender to reduce the Obligations.
11.4. Rights and Remedies not Exclusive. The enumeration of the
foregoing rights and remedies is not intended to be exhaustive and the exercise
of any right or remedy shall not preclude the exercise of any other right or
remedies provided for herein or otherwise provided by law, all of which shall be
cumulative and not alternative.
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XII. WAIVERS AND JUDICIAL PROCEEDINGS.
12.1. Waiver of Notice. Borrower hereby waives notice of
non-payment of any of the Receivables, demand, presentment, protest and notice
thereof with respect to any and all instruments, notice of acceptance hereof,
notice of loans or advances made, credit extended, Collateral received or
delivered, or any other action taken in reliance hereon, and all other demands
and notices of any description, except such as are expressly provided for
herein.
12.2. Delay. No delay or omission on ACM Agent's or any
Lender's part in exercising any right, remedy or option shall
operate as a waiver of such or any other right, remedy or option or
of any default.
12.3. Jury Waiver. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT RELATED HERETO OR THERETO IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE AND EACH PARTY HEREBY CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENTS OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
XIII. EFFECTIVE DATE AND TERMINATION.
13.1. Term. This Agreement, which shall inure to the benefit of and
shall be binding upon the respective successors and permitted assigns of each of
Borrower, ACM Agent and each Lender, shall become effective on the date hereof
and shall continue in full force and effect until April 30, 1999 ("Term") unless
sooner terminated as herein provided. Borrower may terminate this Agreement at
any time upon thirty (30) days' prior written notice upon payment in full of the
Obligations. In the event the Obligations are prepaid in full prior to the last
day of the Term (the date of such prepayment hereafter referred to as the
"Prepayment Date") Borrower shall pay an early termination fee in the amount of
$500,000 (less an amount equal to the product of (x) $500,000 and (y) the
Commitment Percentage of a Defaulting Lender, if any) if the Prepayment Date
occurs from the Closing Date to and including the date immediately preceding the
second anniversary of the Closing Date.
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13.2. Termination. The termination of the Agreement shall not
affect any of Borrower's, ACM Agent's, Co-Agents' or any Lender's rights, or any
of the Obligations having their inception prior to the effective date of such
termination, and the provisions hereof shall continue to be fully operative
until all transactions entered into, rights or interests created or Obligations
have been fully disposed of, concluded or liquidated. The security interests,
Liens and rights granted to ACM Agent, Co-Agents and Lenders hereunder and the
financing statements filed hereunder shall continue in full force and effect,
notwithstanding the termination of this Agreement or the fact that Borrower's
Account may from time to time be temporarily in a zero or credit position, until
all of the Obligations of Borrower have been paid or performed in full after the
termination of this Agreement or Borrower has furnished ACM Agent, Co-Agents and
Lenders with an indemnification satisfactory to ACM Agent and Lenders with
respect thereto. Accordingly, Borrower waives any rights which it may have under
Section 9-404(1) of the Uniform Commercial Code to demand the filing of
termination statements with respect to the Collateral, and ACM Agent shall not
be required to send such termination statements to Borrower, or to file them
with any filing office, unless and until this Agreement shall have been
terminated in accordance with its terms and all Obligations paid in full in
immediately available funds. All representations, warranties, covenants, waivers
and agreements contained herein shall survive termination hereof until all
Obligations are paid or performed in full.
XIV. REGARDING ACM AGENT AND THE CO-AGENTS.
14.1. Appointment. Each Lender hereby designates IBJS to act as ACM
Agent and IBJS and GECC to act as Co-Agents for such Lender under this Agreement
and the Other Documents. Each Lender hereby irrevocably authorizes ACM Agent to
take such action on its behalf under the provisions of this Agreement and the
Other Documents and to exercise such powers and to perform such duties hereunder
and thereunder as are specifically delegated to or required of ACM Agent or
Co-Agents by the terms hereof and thereof and such other powers as are
reasonably incidental thereto and ACM Agent and Co-Agents shall hold all
Collateral, payments of principal and interest, fees (except the fees set forth
in the Fee Letter), charges and collections (without giving effect to any
collection days) received pursuant to this Agreement, for the ratable benefit of
Lenders. ACM Agent may perform any of its duties hereunder by or through its
agents or employees. As to any matters not expressly provided for by this
Agreement (including without limitation, collection of the Revolving Credit
Notes) ACM Agent and Co-Agents shall not be required to exercise any discretion
or take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding;
provided, however, that neither ACM Agent nor Co-Agents shall be required to
take any action which exposes ACM Agent or Co-Agents to liability or which is
contrary to this Agreement or the Other Documents or applicable
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law unless ACM Agent or Co-Agents is furnished with an indemnification
reasonably satisfactory to ACM Agent and Co-Agents with respect thereto.
14.2. Nature of Duties. Neither ACM Agent nor Co-Agent shall have
any duties or responsibilities except those expressly set forth in this
Agreement and the Other Documents. Neither ACM Agent nor Co-Agents nor any of
their respective officers, directors, employees or agents shall be (i) liable
for any action taken or omitted by them as such hereunder or in connection
herewith, unless caused by their gross negligence (but not mere negligence) or
willful misconduct or gross (not mere) negligence, or (ii) responsible in any
manner for any recitals, statements, representations or warranties made by
Borrower or any officer thereof contained in this Agreement, or in any of the
Other Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by ACM Agent or Co-Agents under or
in connection with, this Agreement or any of the Other Documents or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement, or any of the Other Documents or for any failure of Borrower to
perform its obligations hereunder. Neither ACM Agent nor Co-Agents shall be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement or any of the Other Documents, or to inspect the properties,
books or records of Borrower. The duties of ACM Agent and Co-Agents as respects
the Advances to Borrower shall be mechanical and administrative in nature;
neither ACM Agent nor Co-Agents shall have by reason of this Agreement a
fiduciary relationship in respect of any Lender; and nothing in this Agreement,
expressed or implied, is intended to or shall be so construed as to impose upon
ACM Agent or Co-Agents any obligations in respect of this Agreement except as
expressly set forth herein.
14.3. Lack of Reliance on ACM Agent or Co-Agents and Resignation.
Independently and without reliance upon ACM Agent, Co-Agents or any other
Lender, each Lender has made and shall continue to make (i) its own independent
investigation of the financial condition and affairs of Borrower in connection
with the making and the continuance of the Advances hereunder and the taking or
not taking of any action in connection herewith, and (ii) its own appraisal of
the creditworthiness of Borrower. Neither ACM Agent nor Co-Agents shall have any
duty or responsibility, either initially or on a continuing basis, to provide
any Lender with any credit or other information with respect thereto, whether
coming into its possession before making of the Advances or at any time or times
thereafter except as shall be provided by Borrower pursuant to the terms hereof.
Neither ACM Agent nor Co-Agents shall be responsible to any Lender for any
recitals, statements, information, representations or warranties herein or in
any agreement, document, certificate or a statement delivered in connection with
or for the execution, effectiveness, genuineness, validity, enforceability,
collectibility or sufficiency of this Agreement or any Other Document, or of the
financial condition of
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Borrower, or be required to make any inquiry concerning either the performance
or observance of any of the terms, provisions or conditions of this Agreement,
the Other Documents or the financial condition of Borrower, or the existence of
any Event of Default or any Default.
ACM Agent and/or any Co-Agent may resign on sixty (60) days'
written notice to each of Lenders and Borrower and upon such resignation, the
Required Lenders will promptly designate a successor reasonably satisfactory to
Borrower.
Any such successor ACM Agent shall succeed to the rights, powers
and duties of ACM Agent, and the term "ACM Agent" shall mean such successor
agent effective upon its appointment, and the former ACM Agent's rights, powers
and duties as ACM Agent shall be terminated, without any other or further act or
deed on the part of such former ACM Agent. After any ACM Agent's resignation,
the provisions of this Article XIV shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was ACM Agent under this Agreement.
If at any time the dollar commitment of GECC exceeds the dollar
commitment of IBJS (such dollar commitment determined by multiplying the Maximum
Loan Amount by the applicable Commitment Percentage) by more than $3,000,000
than IBJS shall resign as ACM Agent and GECC shall become the ACM Agent.
14.4. Certain Rights of ACM Agent. If ACM Agent or any Co- Agent
shall request instructions from Lenders with respect to any act or action
(including failure to act) in connection with this Agreement or any Other
Document, ACM Agent or any Co-Agent shall be entitled to refrain from such act
or taking such action unless and until ACM Agent or such Co-Agent shall have
received instructions from the Required Lenders; and ACM Agent and Co-Agents
shall not incur liability to any Person by reason of so refraining. Without
limiting the foregoing, Lenders shall not have any right of action whatsoever
against ACM Agent or any Co-Agent as a result of its acting or refraining from
acting hereunder in accordance with the instructions of the Required Lenders.
14.5. Reliance. ACM Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram, order
or other document or telephone message believed by it to be genuine and correct
and to have been signed, sent or made by the proper person or entity, and, with
respect to all legal matters pertaining to this Agreement and the Other
Documents and its duties hereunder, upon advice of counsel selected by it. ACM
Agent and Co-Agents may employ agents and attorneys-in-fact and shall not be
liable for the default or misconduct of any such agents or attorneys-in-fact
selected by ACM Agent with reasonable care.
14.6. Notice of Default. Neither ACM Agent nor Co-Agents
shall be deemed to have knowledge or notice of the occurrence of
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any Default or Event of Default hereunder or under the Other Documents, unless
ACM Agent or such Co-Agent has received notice from a Lender or Borrower
referring to this Agreement or the Other Documents, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that ACM Agent or Co-Agents receive such a notice, ACM Agent or such Co-
Agents shall give notice thereof to Lenders. ACM Agent and Co- Agents shall take
such action with respect to such Default or Event of Default as shall be
reasonably directed by the Required Lenders; provided, that, unless and until
ACM Agent or Co-Agents shall have received such directions, ACM Agent or
Co-Agents may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of Default as it shall
deem advisable in the best interests of Lenders.
14.7. Indemnification. To the extent ACM Agent or Co- Agents are
not reimbursed and indemnified by Borrower, each Lender will reimburse and
indemnify ACM Agent and Co-Agents in proportion to their respective portion of
the Advances (or, if no Advances are outstanding, according to their Commitment
Percentage), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever which may be imposed on, incurred by or
asserted against ACM Agent or Co-Agents in performing their respective duties
hereunder, or in any way relating to or arising out of this Agreement or any
Other Loan Document; provided that, Lenders shall not be liable for any portion
of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from ACM Agent's or
any Co-Agent's willful misconduct or gross (not mere) negligence.
14.8. Individual Capacity. With respect to the obligation of ACM
Agent or any Co-Agent to lend under this Agreement, the Advances made by it each
shall have the same rights and powers hereunder as any other Lender and as if it
were not performing the duties as ACM Agent or Co-Agent specified herein; and
the term "Lender" or any similar term shall, unless the context clearly
otherwise indicates, include ACM Agent and Co-Agents in their individual
capacity as a Lender. ACM Agent and Co-Agents may engage in business with
Borrower as if they were not performing the duties specified herein, and may
accept fees and other consideration from Borrower for services in connection
with this Agreement or otherwise without having to account for the same to
Lenders.
14.9. Delivery of Documents. To the extent ACM Agent and
Co-Agents receive documents and information from Borrower pursuant
to the terms of this Agreement, ACM Agent and Co-Agents will
promptly furnish such documents and information to Lenders.
14.10. Borrower's Undertaking to ACM Agent and Co-Agents.
Without prejudice to their respective obligations to Lenders under
the other provisions of this Agreement, Borrower hereby undertakes
with ACM Agent and Co-Agents to pay to ACM Agent from time to time
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on demand all amounts from time to time due and payable by it for the account of
ACM Agent and Co-Agents or Lenders or any of them pursuant to this Agreement to
the extent not already paid. Any payment made pursuant to any such demand shall
pro tanto satisfy Borrower's obligations to make payments for the account of
Lenders or the relevant one or more of them pursuant to this Agreement.
XIV. MISCELLANEOUS.
15.1. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applied to
contracts to be performed wholly within the State of New York. Any judicial
proceeding brought by or against Borrower with respect to any of the
Obligations, this Agreement or any related agreement may be brought in any court
of competent jurisdiction in the State of New York, United States of America,
and, by execution and delivery of this Agreement, Borrower accepts for itself
and in connection with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts, and irrevocably agrees to be
bound by any judgment rendered thereby in connection with this Agreement.
Nothing herein shall affect the right to serve process in any manner permitted
by law or shall limit the right of Lenders to bring proceedings against Borrower
in the courts of any other jurisdiction. Borrower waives any objection to
jurisdiction and venue of any action instituted hereunder and shall not assert
any defense based on lack of jurisdiction or venue or based upon forum non
conveniens. Any judicial proceeding by Borrower against ACM Agent, Co-Agents or
Lenders involving, directly or indirectly, any matter or claim in any way
arising out of, related to or connected with this Agreement or any related
agreement, shall be brought only in a federal or state court located in the City
of New York, State of New York.
15.2. Entire Understanding. (a) This Agreement and the documents
executed concurrently herewith contain the entire understanding between
Borrower, ACM Agent, Co-Agents and each Lender and supersedes all prior
agreements and understandings, if any, relating to the subject matter hereof.
Any promises, representations, warranties or guarantees not herein contained and
hereinafter made shall have no force and effect unless in writing, and executed
by the party or parties making such representations, warranties or guaranties.
Neither this Agreement nor any portion or provisions hereof may be changed,
modified, amended, waived, supplemented, discharged, cancelled or terminated
orally or by any course of dealing, or in any manner other than by an agreement
in writing, signed by the party to be charged. Borrower acknowledges that it has
been advised by counsel in connection with the execution of this Agreement and
Other Documents and is not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.
(b) ACM Agent with the consent in writing of the
Required Lenders, Co-Agents and Borrower may, subject to the provisions of this
Section 15.2 (b), from time to time enter into
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written supplemental agreements to this Agreement or the Other Documents
executed by Borrower, for the purpose of adding or deleting any provisions or
otherwise changing, varying or waiving in any manner the rights of Lenders, ACM
Agent or Co-Agents or the conditions, provisions or terms thereof of waiving any
Event of Default thereunder, but only to the extent specified in such written
agreements; provided, however, that no such supplemental agreement shall,
without the consent of all Lenders:
(i) increase the Commitment Percentage of any
Lender.
(ii) extend the maturity of any Revolving
Credit Note or the due date for any amount payable hereunder, or decrease the
rate of interest or reduce any fee payable by Borrower to ACM Agent, Co-Agents
or Lenders pursuant to this Agreement.
(iii)alter the definition of the term Required
Lenders or alter, amend or modify this Section 15.2(b).
(iv) to the extent not otherwise permitted
under this Agreement, release any Collateral during any calendar year having an
aggregate value in excess of $100,000.
(v) change the rights and duties of ACM Agent
or any Co-Agent.
Any such supplemental agreement shall apply equally to each of Lenders and shall
be binding upon Borrower, Lenders, ACM Agent and Co-Agents and all future
holders of the Obligations. In the case of any waiver, Borrower, ACM Agent and
Lenders shall be restored to their former positions and rights, and any Event of
Default waived shall be deemed to be cured and not continuing, but no waiver of
a specific Event of Default shall extend to any subsequent Event of Default
(whether or not the subsequent Event of Default is the same as the Event of
Default which was waived), or impair any right consequent thereon.
15.3. Successors and Assigns; Participations; New Lenders.
(a) This Agreement shall be binding upon and inure
to the benefit of Borrower, ACM Agent, Co-Agents, each Lender, all future
holders of any Revolving Credit Note and their respective successors and
assigns, except that Borrower may not assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of ACM Agent,
Co-Agents and each Lender.
(b) Borrower acknowledges that in the regular course
of commercial banking business one or more Lenders may at any time and from time
to time sell participating interests in the Advances to other financial
institutions (each such transferee or purchaser of a participating interest, a
"Transferee"). Each Transferee may exercise all rights of payment (including
without limitation rights of set-off) with respect to the portion of such
Advances held by it
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or other Obligations payable hereunder as fully as if such Transferee were the
direct holder thereof provided that Borrower shall not be required to pay to any
Transferee more than the amount which it would have been required to pay to
Lender which granted an interest in its Advances or other Obligations payable
hereunder to such Transferee had such Lender retained such interest in the
Advances hereunder or other Obligations payable hereunder and in no event shall
Borrower be required to pay any such amount arising from the same circumstances
and with respect to the same Advances or other Obligations payable hereunder to
both such Lender and such Transferee. Borrower hereby grants to any Transferee a
continuing security interest in any deposits, moneys or other property actually
or constructively held by such Transferee as security for the Transferee's
interest in the Advances.
(c) Any Lender may sell, assign or transfer all or
any part of its rights under this Agreement and the Other Documents to one or
more additional banks or financial institutions and one or more additional banks
or financial institutions may commit to make Advances hereunder (each a
"Purchasing Lender"), in minimum amounts of not less than $3,000,000, pursuant
to a Commitment Transfer Supplement, executed by a Purchasing Lender, the
transferor Lender, and ACM Agent and delivered to ACM Agent for recording. Upon
such execution, delivery, acceptance and recording, from and after the transfer
effective date determined pursuant to such Commitment Transfer Supplement, (i)
Purchasing Lender thereunder shall be a party hereto and, to the extent provided
in such Commitment Transfer Supplement, have the rights and obligations of a
Lender thereunder with a Commitment Percentage as set forth therein, and (ii)
the transferor Lender thereunder shall, to the extent provided in such
Commitment Transfer Supplement, be released from its obligations under this
Agreement, the Commitment Transfer Supplement creating a novation for that
purpose. Such Commitment Transfer Supplement shall be deemed to amend this
Agreement to the extent, and only to the extent, necessary to reflect the
addition of such Purchasing Lender and the resulting adjustment of the
Commitment Percentages arising from the purchase by such Purchasing Lender of
all or a portion of the rights and obligations of such transferor Lender under
this Agreement and the Other Documents. Borrower hereby consents to the addition
of such Purchasing Lender and the resulting adjustment of the Commitment
Percentages arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender under this
Agreement and the Other Documents and shall execute such instruments and
documents as may be required.
(d) ACM Agent shall maintain at its address a copy
of each Commitment Transfer Supplement delivered to it and a
register (the "Register") for the recordation of the names and
addresses of the Advances owing to each Lender from time to time.
The entries in the Register shall be conclusive, in the absence of
manifest error, and Borrower, ACM Agent and Lenders may treat each
Person whose name is recorded in the Register as the owner of the
Advance recorded therein for the purposes of this Agreement. The
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Register shall be available for inspection by Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice. ACM Agent
shall receive a fee in the amount of $3,500 payable by the applicable Purchasing
Lender upon the effective date of each transfer or assignment to such Purchasing
Lender.
(e) Subject to Section 15.15 hereof, Borrower
authorizes each Lender to disclose to any Transferee or Purchasing Lender and
any prospective Transferee or Purchasing Lender any and all financial
information in such Lender's possession concerning Borrower which has been
delivered to such Lender by or on behalf of Borrower pursuant to this Agreement
or in connection with such Lender's credit evaluation of Borrower.
15.4. Application of Payments. ACM Agent shall have the continuing
and exclusive right to apply or reverse and re-apply any payment and any and all
proceeds of Collateral to any portion of the Obligations. To the extent that
Borrower makes a payment or ACM Agent or any Lender receives any payment or
proceeds of the Collateral for Borrower's benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to
be repaid to a trustee, debtor in possession, receiver, custodian or any other
party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be
revived and continue as if such payment or proceeds had not been received by ACM
Agent or such Lender.
15.5. Indemnity. Borrower shall indemnify ACM Agent, each Co-Agent
and each Lender and each of their respective officers, directors, employees, and
agents from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses and disbursements of any
kind or nature whatsoever (including, without limitation, fees and disbursements
of counsel) which may be imposed on, incurred by, or asserted against ACM Agent,
any Co-Agent or any Lender in any litigation, proceeding or investigation
instituted or conducted by any governmental agency or instrumentality or any
other Person with respect to any aspect of, or any transaction contemplated by,
or referred to in, or any matter related to, this Agreement, whether or not ACM
Agent, Co-Agents or any Lender is a party thereto, except to the extent that any
of the foregoing arises out of the willful misconduct or gross negligence of the
party being indemnified.
15.6. Notice. Any notice or request hereunder may be given to
Borrower or to ACM Agent, Co-Agents or any Lender at their respective addresses
set forth below or at such other address as may hereafter be specified in a
notice designated as a notice of change of address under this Section. Any
notice or request hereunder shall be given by (a) hand delivery, (b) overnight
courier, (c) registered or certified mail, return receipt requested, (d) telex
or telegram, subsequently confirmed by registered or certified mail, or (e)
telecopy to the number set out
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<PAGE>
below (or such other number as may hereafter be specified in a notice designated
as a notice of change of address) with telephone communication to a duly
authorized officer of the recipient confirming its receipt as subsequently
confirmed by registered or certified mail. Any notice or other communication
required or permitted pursuant to this Agreement shall be deemed given (a) when
personally delivered to any officer of the party to whom it is addressed, (b) on
the earlier of actual receipt thereof or three (3) days following posting
thereof by certified or registered mail, postage prepaid, or (c) upon actual
receipt thereof when sent by a recognized overnight delivery service or (d) upon
actual receipt thereof when sent by telecopier to the number set forth below
with telephone or electronic communication confirming receipt and subsequently
confirmed by registered, certified or overnight mail to the address set forth
below, in each case addressed to each party at its address set forth below or at
such other address as has been furnished in writing by a party to the other by
like notice:
(A) If to ACM Agent or IBJ Schroder Bank & Trust Company
IBJS at: One State Street
New York, New York 10004
Attention: Wing Louie
Telephone: (212) 858-2939
Telecopier: (212) 858-2151
with a copy to: Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
(B) If to Co-Agents or any Lender other than ACM Agent,
as specified on the signature pages hereof
(C) If to Borrower, at: Swank, Inc.
90 Park Avenue
New York, New York 10016
Attention: John Tulin
Telephone: (212) 867-2600
Telecopier: (212) 370-1039
Swank, Inc.
6 Hazel Street
Attleboro, Massachusetts 02703
Attention: Andrew Corsini
Telephone: (508) 222-3400
Telecopier: (508) 226-9598
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<PAGE>
with a copy to: Parker Chapin Flattau & Klimpl LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: William Freedman, Esq.
Telephone: (212) 704-6193
Telecopier: (212) 704-6288
15.7. Severability. If any part of this Agreement is contrary to,
prohibited by, or deemed invalid under applicable laws or regulations, such
provision shall be inapplicable and deemed omitted to the extent so contrary,
prohibited or invalid, but the remainder hereof shall not be invalidated thereby
and shall be given effect so far as possible.
15.8. Expenses. All costs and out of pocket expenses including,
without limitation, reasonable attorneys' fees and disbursements incurred by ACM
Agent, ACM Agent on behalf of Lenders and Lenders (a) in all efforts made to
enforce payment of any Obligation or effect collection of any Collateral, or (b)
in connection with the entering into, modification, amendment, administration
and enforcement of this Agreement or any consents or waivers hereunder and all
related agreements, documents and instruments, or (c) in instituting,
maintaining, preserving, enforcing and foreclosing on ACM Agent's security
interest in or Lien on any of the Collateral, whether through judicial
proceedings or otherwise, or (d) in defending or prosecuting any actions or
proceedings arising out of or relating to ACM Agent's or any Lender's
transactions with Borrower, or (e) in connection with any advice given to ACM
Agent or any Lender with respect to its rights and obligations under this
Agreement and all related agreements, may be charged to Borrower's Account and
shall be part of the Obligations.
15.9. Injunctive Relief. Borrower recognizes that, in the event
Borrower fails to perform, observe or discharge any of its obligations or
liabilities under this Agreement, any remedy at law may prove to be inadequate
relief to Lenders; therefore, ACM Agent, if ACM Agent so requests, shall be
entitled to temporary and permanent injunctive relief in any such case without
the necessity of proving that actual damages are not an adequate remedy.
15.10. Consequential Damages. Neither ACM Agent, Co-Agents
nor any agent or attorney for any of them shall be liable to
Borrower for consequential damages arising from any breach of
contract, tort or other wrong relating to the establishment,
administration or collection of the Obligations.
15.11. Captions. The captions at various places in this
Agreement are intended for convenience only and do not constitute
and shall not be interpreted as part of this Agreement.
15.12. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and
all of which when taken together shall constitute one and the same
agreement.
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<PAGE>
15.13. Construction. The parties acknowledge that each party and
its counsel have reviewed this Agreement and that the normal rule of
construction to the effect that any ambiguities are to be resolved against the
drafting party shall not be employed in the interpretation of this Agreement or
any amendments, schedules or exhibits thereto.
15.14. Survival. The obligations of Borrower under Sections
3.7 and 3.8 shall survive termination of this Agreement and the
Other Documents and payment in full of the Obligations.
15.15. Confidentiality. ACM Agent, each Lender and each Transferee
shall hold all non-public information obtained by ACM Agent, such Lender or such
Transferee pursuant to the requirements of this Agreement in accordance with ACM
Agent's, such Co-Agent's such Lender's and such Transferee's customary
procedures for handling confidential information of this nature; provided,
however, ACM Agent, each Co-Agent, each Lender and each Transferee may disclose
such confidential information (a) to its examiners, affiliates, outside
auditors, counsel and other professional advisors, (b) to ACM Agent, Co-Agents,
any Lender or to any prospective Transferees and Purchasing Lenders, and (c) as
required or requested by any Governmental Body or representative thereof or
pursuant to legal process; provided, further that (i) unless specifically
prohibited by applicable law or court order, ACM Agent, each Co-Agent, each
Lender and each Transferee shall use its best efforts prior to disclosure
thereof, to notify Borrower of the applicable request for disclosure of such
non-public information (A) by a Governmental Body or representative thereof
(other than any such request in connection with an examination of the financial
condition of a Lender or a Transferee by such Governmental Body) or (B) pursuant
to legal process and (ii) in no event shall ACM Agent, any Co-Agent, any Lender
or any Transferee be obligated to return any materials furnished by any Borrower
other than those documents and instruments in possession of ACM Agent, any
Co-Agent or any Lender in order to perfect its Lien on the Collateral once the
Obligations have been paid in full and this Agreement has been terminated.
15.16. Publicity. Borrower hereby authorizes ACM Agent, Co- Agents
and Lenders to make appropriate announcements of the financial arrangement
entered into among Borrower, ACM Agent and Lenders, including, without
limitation, announcements which are commonly known as tombstones, in such
publications and to such selected parties as ACM Agent, Co-Agents or Lenders
shall in its sole and absolute discretion deem appropriate. Any announcement
which specifically refers to GECC shall only be issued with GECC's prior written
approval, which approval shall not be unreasonably withheld or delayed.
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<PAGE>
Each of the parties has signed this Agreement as of the day and
year first above written.
SWANK, INC.
ATTEST:
By:_______________________________
________________________ Name:_____________________________
[SEAL] Title:____________________________
90 Park Avenue
New York, New York 10016
IBJ SCHRODER BANK & TRUST COMPANY,
as Lender, ACM Agent and as Co-
Agent
By:_______________________________
Name:_____________________________
Title:____________________________
One State Street
New York, New York 10004
Commitment Percentage: 50%
GENERAL ELECTRIC CAPITAL
CORPORATION, as Lender and as Co-
Agent
By:_______________________________
Name:_____________________________
Title:____________________________
201 High Ridge Road
Stamford, Connecticut 06927
Commitment Percentage: 50%
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Massachusetts
MORTGAGE AND SECURITY AGREEMENT
Dated as of: May 24, 1996
in the amount of
$25,000,000
SWANK, INC.
having an office at:
6 Hazel Street
Attleboro, Massachusetts 02703
the Mortgagor,
TO
IBJ SCHRODER BANK & TRUST COMPANY, AS ACM AGENT
having an office at:
One State Street
New York, New York 10004
the Mortgagee
After recording, please return by mail to:
HAHN & HESSEN LLP
350 Fifth Avenue
New York, New York 10118
Attention: Mark D. Graham, Esq.
This instrument was prepared by:
Mark D. Graham, Esq.
Hahn & Hessen LLP
350 Fifth Avenue
New York, New York 10118
759037.5/LMV/25254/061 5/24/96
<PAGE>
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT, made as of the day of
May, 1996 by SWANK, INC., a Delaware corporation having an office at 90 Park
Avenue, New York, New York 10016 (the "Mortgagor"), to IBJ SCHRODER BANK & TRUST
COMPANY, as ACM Agent (as hereinafter defined), having an office at 6 Hazel
Street, Attleboro, Massachusetts 02703, for itself and as agent for the lenders
now or hereafter named in the Loan Agreement, as such term is hereinafter
defined (the "Mortgagee").
WITNESSETH, pursuant to a certain Revolving Credit
and Security Agreement dated as of May 24, 1996 by and between the Mortgagor, as
borrower, and IBJ Schroder Bank & Trust Company ("IBJS"), General Electric
Capital Corporation ("GECC") and various other financial institutions which now
or hereafter become parties thereto, (IBJS, GECC and such other financial
institutions, individually, a "Lender" and, collectively, the "Lenders"), IBJS
and GECC as agents for the Lenders (IBJS and GECC, in such capacity, the
"Co-Agents") and IBJS as administrative and collateral monitoring agent for the
Lenders (IBJS, in such capacity, the "ACM Agent") (the "Loan Agreement"), the
Lenders have agreed to make and the Mortgagor has agreed to accept the following
certain loan in the maximum aggregate principal amount of $25,000,000: a
revolving credit loan in the principal amount of up to $25,000,000 to be
advanced, or advanced, repaid and readvanced pursuant to the Loan Agreement and
evidenced by (i) a Revolving Credit Note dated of even date herewith payable to
IBJS in the principal amount of $12,500,000 and (ii) a Revolving Credit Note
dated of even date herewith payable to GECC in the principal amount of
$12,500,000 (collectively, the "Note"). Pursuant to the Loan Agreement, the
Mortgagee has been designated as the agent for the ratable benefit of the
present or future holders of the Indebtedness (as hereinafter defined) secured
by this Mortgage.
The Note shall mature on April 30, 1999.
WITNESSETH, that to secure the payment of the maximum
principal sum of TWENTY FIVE MILLION ($25,000,000) DOLLARS lawful money of the
United States, as evidenced by the Loan Agreement and the Note, or so much as is
outstanding from time to time, to be paid according to the Loan Agreement and
the Note, as said Loan Agreement and Note may be hereinafter modified, amended,
extended, renewed or substituted for, and any and all sums, amounts and expenses
paid hereunder or thereunder by the Mortgagee according to the terms hereof and
all other obligations and liabilities of the Mortgagor under this Mortgage, the
Loan Agreement and Note, together with all interests on the said indebtedness,
obligations, liabilities, sums, amounts and expenses and any and all other
obligations and liabilities now due and owing or to the extent allowed by law,
which may hereafter be or become due and owing by the Mortgagor to the Mortgagee
until paid, (all of the aforesaid are hereinafter collectively, the
"Indebtedness"). Subject to the Permitted Encumbrances (as defined in the Loan
Agreement) the Mortgagor, as hereinafter provided, hereby mortgages, grants,
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<PAGE>
bargains, sells, warrants, conveys, alienates, remises, releases, assigns, sets
over and confirms to the Mortgagee and grants to the Mortgagee a security
interest in:
I. All of the right, title and interest of the
Mortgagor in and to that certain lot, piece or parcel of land (the
"Real Property") more particularly described as on Schedule "A"
annexed hereto and made a part hereof; and
II. All of the right, title and interest of the Mortgagor in
and to the buildings and improvements (hereinafter, collectively, together with
all building equipment, the "Improvements") now or hereafter located on the Real
Property and all of its right, title and interest, if any, in and to the streets
and roads abutting the Real Property to the center lines thereof, and strips and
gores within or adjoining the Real Property, the air space and right to use said
air space above the Real Property, all rights of ingress and egress by motor
vehicles to parking facilities on or within the Real Property, all easements now
or hereafter affecting and benefiting the Real Property or the Improvements, all
royalties and all rights appertaining to the use and enjoyment of the Real
Property or the Improvements, including, without limitation, alley, drainage,
crop, timber, agricultural, horticultural, mineral, water, oil and gas rights;
and
III. All of the right, title and interest of the Mortgagor, if
any, in and to all fixtures and all of the Mortgagor's articles of personal
property and all appurtenances and additions thereto and substitutions or
replacements thereof, now or hereafter attached to, or contained in, the Real
Property and/or the Improvements or placed on any part thereof, though not
attached thereto, including, but not limited to, all screens, awnings, shades,
blinds, curtains, draperies, carpets, rugs, furniture and furnishings, heating,
lighting, plumbing, ventilating, air conditioning, refrigerating, incinerator
and/or compacting and elevator plants, stoves, ranges, vacuum cleaning systems,
call systems, sprinkler systems and other fire prevention and extinguishing
apparatus and materials, motors, machinery, pipes, appliances, equipment,
fittings and fixtures, and the trade name, good will and books and records
relating to the business operated on the Real Property and/or the Improvements.
Without limiting the foregoing, the Mortgagor hereby grants to the Mortgagee a
security interest in all of its present and future "equipment" and "general
intangibles" (as said quoted terms are defined in the Uniform Commercial Code of
the State wherein the Real Property and/or the Improvements are located) and the
Mortgagee shall have, in addition to all rights and remedies provided herein,
and in any other agreements, commitments and undertakings made by the Mortgagor
to the Mortgagee, all of the rights and remedies of a "secured party" under the
said Uniform Commercial Code. To the extent permitted under applicable law, this
Mortgage shall be deemed to be a "security agreement" (as defined in the
aforesaid Uniform Commercial Code). If the lien of this Mortgage is subject to a
security interest covering any such personal property, then all of the right,
title and interest of the Mortgagor in and to any and all such property is
hereby assigned to the Mortgagee, together with the benefits of all deposits and
payments now or hereafter made thereon by the Mortgagor; and
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<PAGE>
IV. All of the right, title and interest of the Mortgagor in
and to all leases, lettings and licenses of the Real Property, the Improvements
and/or any other property or rights encumbered or conveyed hereby, or any part
thereof, now or hereafter entered into and all right, title and interest of the
Mortgagor thereunder, including, without limitation, cash and securities
deposited thereunder, the right to receive and collect the rents, issues and
profits payable thereunder and the right to enforce, whether by action at law or
in equity or by other means, all provisions, covenants and agreements thereof;
and
V. All right, title and interest of the Mortgagor in and to
all unearned premiums, accrued, accruing or to accrue under insurance policies
now or hereafter obtained by the Mortgagor and, subject to the terms and
conditions of the Loan Agreement, all proceeds of the conversion, voluntary or
involuntary, of the Real Property, the Improvements and/or any other property or
rights encumbered or conveyed hereby, or any part thereof, into cash or
liquidated claims, including, without limitation, proceeds of hazard and title
insurance and all awards and compensation heretofore and hereafter made to the
present and all subsequent owners of the Real Property, the Improvements and/or
any other property or rights encumbered or conveyed hereby by any governmental
or other lawful authority for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Real Property, the Improvements and/or any
other property or rights encumbered or conveyed hereby or any easement therein,
including, but not limited to, awards for any change of grade of streets; and
VI. All right, title and interest of the Mortgagor in and to
all extensions, improvements, betterments, renewals, substitutions and
replacements of and all additions and appurtenances to the Real Property, the
Improvements and/or any other property or rights encumbered or conveyed hereby,
hereafter acquired by or released to the Mortgagor or constructed, assembled or
placed by the Mortgagor on the Real Property, the Improvements and/or any other
property or rights encumbered or conveyed hereby, and all conversions of the
security constituted thereby which, immediately upon such acquisition, release,
construction, assembling, placement or conversion as the case may be, and in
each such case without any further mortgage, conveyance, assignment or other act
by the Mortgagor, shall become subject to the lien of this Mortgage as fully and
completely, and with the same effect, as though now owned by the Mortgagor and
specifically described herein (the Real Property and the Improvements, together
with the fixtures and other property, rights, privileges and interests
encumbered or conveyed hereby hereinafter, collectively, the "Premises").
TO HAVE AND TO HOLD the Premises unto the Mortgagee and its
successors and assigns until the Indebtedness is paid in full.
AND the Mortgagor covenants and agrees with the Mortgagee as
follows:
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<PAGE>
ARTICLE I
Representations and Warranties of the Mortgagor
The Mortgagor represents and warrants to the Mortgagee as
follows:
Section 1.01. Title to the Premises. (i) The right, title and
interest of the Mortgagor constitutes good and insurable title to the Premises,
subject only to those exceptions to title in respect of the Real Property and
the Improvements set forth in the title insurance policy issued by Lawyers Title
Insurance Company insuring the lien of this Mortgage (the "Title Binder") and to
other Permitted Encumbrances; (ii) the Mortgagor has full power and lawful
authority to encumber the Premises in the manner and form set forth hereunder;
(iii) the Mortgagor owns all fixtures and articles of personal property now or
hereafter comprising part of the Premises, subject to the rights of space
tenants in and to any such fixtures, personal property or installations,
including any substitutions or replacements thereof free and clear of all liens
and claims other than the matters set forth in this Section including, but not
limited to, the Permitted Encumbrances; (iv) this Mortgage is and will remain a
valid and enforceable second lien on the Premises subject only to the title
exceptions set forth in clause (i) of this Section and the lien of the Prior
Mortgage (as hereinafter defined); and (v) the Mortgagor will preserve such
title, and will forever warrant and defend the validity and priority of the lien
hereof against the claims of all persons and parties whatsoever.
Section 1.02. Intentionally Omitted.
Section 1.03. Flood Insurance Status. The Premises are not
located in an area identified by the Secretary of Housing and Urban Development
as an area having special flood hazards pursuant to the terms of the National
Flood Insurance Act of 1968, or the Flood Disaster Protection Act of 1973, as
same may have been amended to date.
Section 1.04. Operation of the Premises. (i) The Mortgagor has
all necessary certificates, licenses, authorizations, registrations, permits
and/or approvals necessary for the operation of the Premises or any part
thereof, and all required environmental permits, all of which as of the date of
the signing hereof are in full force and effect and not, to the knowledge of the
Mortgagor, subject to any revocation, amendment, release, suspension, forfeiture
or the like, (ii) the present use and/or occupancy of the Premises and/or
Improvements does not conflict with or violate any such certificate, license,
authorization, registration, permit and/or approval, or any applicable law,
ordinance, statute, rule, order, requirement or regulation and (iii) the
Mortgagor has delivered to the Mortgagee, prior to the signing hereof, duplicate
originals or appropriately certified copies of all such
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<PAGE>
certificates, licenses, authorizations, registrations, permits
and/or approvals.
Section 1.05. Use of Proceeds of the Note. All the proceeds of
the Note shall be used for business or commercial purposes, and none of the
proceeds of the Note shall be used for personal, family or household purposes.
ARTICLE II
Covenants of the Mortgagor
Section 2.01. Payment of the Indebtedness. The Mortgagor will
punctually pay the Indebtedness in accordance with the terms and conditions of
the Loan Agreement.
Section 2.02. Maintenance of the Improvements. (i) The
Mortgagor shall maintain the Improvements in good repair, shall comply with the
requirements of any governmental authority claiming jurisdiction over the
Premises within the lesser of thirty (30) days after an order (an "Order")
containing such requirement has been issued by any such authority (unless such
requirement cannot be complied with within such thirty (30) day period, in which
event Mortgagor shall have such longer period as necessary to cause compliance
provided, however, that Mortgagor shall promptly commence and diligently
prosecute to completion such compliance and provided, further, that such period
shall not exceed the time required pursuant to the terms of such Order, as such
time may be extended from time to time by any such authority) or the time
required pursuant to the terms of such Order, as such time may be extended from
time to time by any such authority and shall permit the Mortgagee to enter upon
the Improvements and inspect the Improvements at all reasonable hours and
without prior notice. The Mortgagor shall not, without the prior written consent
of the Mortgagee, threaten, commit, permit or suffer to occur any waste or
except as may be expressly permitted under the terms of the Loan Agreement, the
material alteration, demolition or removal of the Improvements or any part
thereof; provided, however, that fixtures and articles of personal property
owned by Mortgagor may be removed from the Improvements if the Mortgagor
concurrently therewith replaces same with equivalent items which do not reduce
the value of the Premises or the Improvements, free of any lien, charge or claim
superior to the lien and/or security interest created hereby, except as
otherwise provided for in the Loan Agreement.
(ii) Nothing in this Section 2.02 shall require the
compliance by the Mortgagor with any Order so long as (a) the failure so to do
shall not be a default or event of default under any other mortgage or security
agreement affecting the Premises, any part thereof or interest therein, (b) the
failure so to do shall not result in the voiding, rescission or invalidation of
the certificate of occupancy or any other license, certificate, permit
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or registration in respect of the Premises, (c) the failure so to do shall not
prevent, hinder or interfere with the lawful use and occupancy of the entirety
of the Improvements for their present use and occupancy, (d) the failure so to
do shall not void or invalidate any insurance maintained by the Mortgagor in
respect of the Premises, or result in a material increase of any premium
therefor or a material decrease in any coverage provided thereby, and (e) the
Mortgagor in good faith and at its own expense shall contest the Order or the
validity thereof by appropriate legal proceedings, which proceedings must
operate to prevent (1) the occurrence of any of the events described in the
preceding clauses (a) through (d) of this paragraph (ii) and (2) the collection
or other realization on any sums due or payable as a consequence of the Order,
and/or the sale or forfeiture of the Premises, any part thereof or interest
therein; provided that during such contest the Mortgagor shall, at the option of
the Mortgagee and only to the extent required under the Loan Agreement, provide
security reasonably satisfactory to the Mortgagee assuring the discharge of the
Mortgagor's obligations hereunder and of any interest, charge, fine, penalty,
fee or expense arising from or incurred as a result of such contest; and
provided further if at any time compliance with any obligation imposed upon the
Mortgagor by the Order shall become necessary to prevent (1) the occurrence of
any of the events described in clauses (a) through (d) of this paragraph (ii) or
(2) the delivery of a deed conveying the Premises or any portion thereof or
interest therein because of noncompliance, or (3) the imposition of any penalty,
fine, charge, fee, cost or expense on the Mortgagee, then the Mortgagor shall
comply with the Order in sufficient time to prevent the occurrence of any such
events, the delivery of such deed, or the imposition of such penalty, fine,
charge, fee, cost or expense on the Mortgagee.
Section 2.03. Insurance; Coverage. The Mortgagor shall keep
the Improvements insured in accordance with the terms of the Loan Agreement. The
Mortgagor shall additionally keep the Improvements insured against loss by flood
if the Premises are located in an area identified by the Secretary of Housing
and Urban Development as an area having special flood hazards and in which the
Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as
the same may have been or may hereafter be amended or modified (and any
successor acts thereto) in an amount at least equal to the outstanding
Indebtedness or the maximum limit of coverage available with respect to the
Improvements under said Act, whichever is less, and in a company or companies to
be approved by the Mortgagee, which approval shall not be unreasonably withheld
or delayed.
Section 2.04. Insurance; Proceeds. The Mortgagor shall give
the Mortgagee prompt notice of any loss covered by insurance and the Mortgagee
shall have the right to join the Mortgagor in adjusting any loss in excess of
$100,000. Except as otherwise provided in this Mortgage, the Mortgagee shall
have the option, in its sole discretion, to apply any insurance proceeds it may
receive pursuant to Section 2.03, or otherwise, to the payment of the
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Indebtedness or to allow all or a portion of such proceeds to be used for the
restoration of the Improvements, subject, however, to the provisions of Section
2.06 hereof. In the event any such insurance proceeds shall be used to reduce
the Indebtedness, the same shall be applied in accordance with the terms of the
Loan Agreement. In the event that the Mortgagee elects or has agreed herein to
allow the use of such proceeds for the restoration of the Improvements, then
such use of the proceeds shall be governed as hereinafter provided in Section
2.06.
Section 2.05. Restoration of the Improvements. In the event of
damage or destruction of the Improvements, or any part thereof, as a result of
casualty, condemnation, taking or other cause, the Mortgagor shall give prompt
written notice thereof to the Mortgagee and (except in the event of
impossibility of restoration or repair in the event of condemnation or other
taking), provided that the insurance proceeds (if any) (or in the event of
condemnation or taking, the award (if any) arising out of such condemnation or
taking) recovered by the Mortgagee as herein provided are made available to
Mortgagor by Mortgagee, the Mortgagor shall promptly commence and diligently
continue to perform the repair, restoration and rebuilding of that portion of
the Improvements so damaged or destroyed (hereinafter, the "Work") so as to
restore the Improvements in full compliance with all legal requirements and so
that the Improvements shall have substantially the same value and general
utility as they were prior to the damage or destruction, and if the cost of the
Work, as reasonably estimated by the Mortgagee, shall exceed One Hundred
Thousand ($100,000) Dollars (hereinafter, collectively, "Major Work"), the
Mortgagor shall, prior to the commencement of the Major Work, furnish to the
Mortgagee for its approval: (i) complete plans and specifications for the Major
Work, with satisfactory evidence of the approval thereof (a) by all governmental
authorities whose approval is required, (b) by all parties to or having an
interest in the leases, if any, of any portion of the Premises whose approval is
required, and (c) by an architect reasonably satisfactory to the Mortgagee
(hereinafter, the "Architect") and which shall be accompanied by the Architect's
signed estimate, bearing the Architect's seal, of the entire cost of completing
the Major Work; and (ii) certified or photostatic copies of all permits and
approvals required by law in connection with the commencement of the Major Work
and as and when obtainable, the conduct of the Major Work.
The Mortgagor shall not commence any of the Major Work until
the Mortgagor shall have complied with the applicable requirements referred to
in this Section, and after commencing the Major Work the Mortgagor shall perform
the Major Work diligently and in good faith substantially in accordance with the
plans and specifications referred to in this Section 2.05, if applicable.
Section 2.06. Restoration; Advances. So long as no
Event of Default (as hereinafter defined) has occurred and is
continuing, the insurance proceeds recovered by the Mortgagee on
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account of damage or destruction to the Improvements (if any) less the
reasonable cost, if any, to the Mortgagee of such recovery and of paying out
such proceeds (including reasonable attorneys' fees and reasonable costs
allocable to inspecting the Work and the plans and specifications therefor),
shall be applied by the Mortgagee to the payment of the cost of the Work and
shall be paid out from time to time to the Mortgagor and/or, at the Mortgagee's
option exercised from time to time, directly to the contractor, subcontractors,
materialmen, laborers, engineers, architects and other persons rendering
services or materials for the Work, as said Work progresses except as otherwise
hereinafter provided, but subject to the following conditions, any of which the
Mortgagee may waive:
(i) if the Work to be done is Major Work, as
determined by the Mortgagee, the Architect shall be in charge of
the Work;
(ii) each request for payment shall be made on three
(3) days' prior notice to the Mortgagee and shall be accompanied by (a) a
certificate of an officer of the Mortgagor specifying the party to whom (and for
the account of which) such payment is to be made and (b) a certificate of the
Architect if one be required under Section 2.05 above, otherwise by a
certificate of an officer of the Mortgagor stating (a) that all of the Work
completed has been done in substantial compliance with the approved plans and
specifications, if any be required under said Section 2.05, and in accordance
with all material provisions of law; (b) the sum requested is justly required to
reimburse the Mortgagor for payments by the Mortgagor to, or is justly due to,
the contractor, subcontractors, materialmen, laborers, engineers, architects or
other persons rendering services or materials for the Work (giving a brief
description of such services and materials), and that when added to all sums, if
any, previously paid out by the Mortgagee does not exceed the value of the Work
done to the date of such certificate, and (c) that the amount of such proceeds
remaining in the hands of the Mortgagee, together with any sums made available
by the Mortgagor, will be sufficient on completion of the Work to pay for the
same in full (giving in such reasonable detail as the Mortgagee may require an
estimate of the cost of such completion);
(iii) each request shall be accompanied by sworn
statements and waivers of liens, or if unavailable, lien bonds, satisfactory to
the Mortgagee covering that part of the Work previously paid for, if any, and by
a evidence satisfactory to the Mortgagee, that there has not been filed with
respect to the Premises any mechanic's lien or other lien or instrument for the
retention of title in respect of any part of the Work not discharged of record
or bonded and that there exist no encumbrances on or affecting the Premises (or
any part thereof) other than encumbrances, if any, existing as of the date
hereof and which have been approved by the Mortgagee;
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(iv) no event shall have occurred and be continuing
which with the passage of time or the giving of notice, or both,
would constitute an Event of Default;
(v) the request for any payment after the Work has
been completed shall be accompanied by certified copies of all certificates,
permits, licenses, waivers and/or other documents required by law (or pursuant
to any agreement binding upon the Mortgagor or affecting the Premises or any
part thereof) to render occupancy of the Premises legal; and
(vi) the Work can be completed not later than one
(1) month prior to the expiration of the Term as defined in the
Loan Agreement; and
(vii) the Mortgagor, prior to the commencement of
the Work, shall have either (i) deposited with the Mortgagee an amount equal to
the difference between the cost of the Work, as estimated by the Architect, and
the net insurance proceeds (or condemnation award, as the case may be) after the
deduction therefrom of the cost, if any, to the Mortgagee of the recovery and
paying out of such proceeds (including reasonable attorneys' fees and costs
allocable to inspecting the Work and the plans and specifications therefor); or
(ii) provided Mortgagee with evidence reasonably satisfactory to Mortgagee that
adequate funds are available to Mortgagor to complete the Work and that adequate
funds will be so applied by Mortgagor; provided, however, that the amount of
such deposit required hereunder (if any) shall be reduced by an amount of any
deposit which is held by the Prior Mortgagee (as defined in Section 4.11 hereof)
under the Prior Mortgage (as defined in Section 4.11 hereof) as a similar
assurance for the completion of the Work.
Upon completion of the Work and payment in full therefor, or
upon failure on the part of the Mortgagor promptly to commence or diligently to
continue the Work, or at any time upon request by the Mortgagor, the Mortgagee
may, at its option, apply the amount of any such proceeds then or thereafter in
the hands of the Mortgagee to the payment of the Indebtedness, provided ,
however, that nothing herein contained shall prevent the Mortgagee from applying
at any time the whole or any part of such proceeds to the curing of any Event of
Default.
In the event the Work to be done is not Major Work, as
determined by the Mortgagee, then the net insurance proceeds held by the
Mortgagee for application thereto shall be paid to the Mortgagor by the
Mortgagee from time to time upon submission to the Mortgagee of bills and/or
invoices showing costs incurred in connection with the Work, subject, however,
to the foregoing provisions of this Section 2.06, except those which are
applicable only if the Work to be done is Major Work, as determined by the
Mortgagee.
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Section 2.07. Restoration by the Mortgagee. Provided that the
Mortgagee shall make available to the Mortgagor, or is required herein to make
available to Mortgagor, the insurance proceeds (if any) recovered by the
Mortgagee as herein provided, if within one hundred eighty (180) days after the
occurrence of any damage or destruction to the Improvements requiring Major Work
in order to restore the Improvements, the Mortgagor shall not have submitted to
Mortgagee plans and specifications for the repair, restoration and rebuilding of
the Improvements so damaged or destroyed (approved by the Architect and by all
governmental authorities and other persons or entities, if any, whose approval
is required), or if, after such plans and specifications are approved by all
such governmental authorities and other persons or entities, if any, and the
Mortgagee, the Mortgagor shall fail to commence promptly such repair,
restoration and rebuilding (except by reason of force majeure), or if thereafter
the Mortgagor fails diligently to continue such repair, restoration and
rebuilding or is delinquent in the payment to mechanics, materialmen or others
of the costs incurred in connection with such Major Work, or, in the case of any
damage or destruction not requiring Major Work, as determined by the Mortgagee,
in order to restore the Improvements, if the Mortgagor shall fail to repair,
restore and rebuild promptly the Improvements so damaged or destroyed, then, in
addition to all other rights herein set forth, and after giving the Mortgagor
ten (10) days' written notice of the nonfulfillment of one or more of the
foregoing conditions, the Mortgagee, or any lawfully appointed receiver of the
Premises, may at their respective options, perform or cause to be performed such
repair, restoration and rebuilding, and may take such other steps as they deem
advisable to perform such repair, restoration and rebuilding, and upon
twenty-four (24) hours' prior written notice to the Mortgagor, the Mortgagee may
enter upon the Improvements to the extent reasonably necessary or appropriate
for any of the foregoing purposes, and the Mortgagor hereby waives, for the
Mortgagor and all others holding under the Mortgagor, any claim against the
Mortgagee and such receiver arising out of anything done by the Mortgagee or
such receiver pursuant hereto (except for any claim arising out of the gross
negligence, but not mere negligence, or willful misconduct of Mortgagee or any
receiver), and the Mortgagee may, at its option, apply insurance proceeds
(without the need by the Mortgagee to fulfill any other requirements of this
Mortgage) to reimburse the Mortgagee, and/or such receiver for all reasonable
amounts expended or incurred by them, respectively, in connection with the
performance of such Work, and any excess costs shall be paid by the Mortgagor to
the Mortgagee upon demand, and such payment of excess costs shall be deemed part
of the Indebtedness and shall be secured by the lien of this Mortgage.
Section 2.08. Intentionally Omitted.
Section 2.09. Intentionally Omitted.
Section 2.10. Mechanics' and Other Liens.
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(i) The Mortgagor shall pay, bond or discharge of
record, from time to time, forthwith, all liens (and all claims and demands of
mechanics, materialmen, laborers or others, which, if unpaid, might result in or
permit the creation of a lien) on or affecting the Premises or any part thereof,
or on or affecting the revenues, rents, issues, income or profits arising
therefrom and, in general, the Mortgagor forthwith shall do, at the cost of the
Mortgagor and without expense to the Mortgagee, everything necessary to fully
preserve the lien of this Mortgage. In the event that the Mortgagor fails in a
timely manner to make payment in full of, bond or discharge, such liens the
Mortgagee may, but shall not be obligated to, make payment, bond or discharge
such liens, upon notice to the Mortgagor if practicable in order fully to
preserve the lien of this Mortgage and the collateral value of the Premises, and
the Mortgagor shall, on demand, reimburse the Mortgagee for all sums so expended
and such sums shall bear interest at the rate provided for under the Loan
Agreement.
(ii) Nothing in this Section 2.10 shall require the
payment or discharge of any obligation imposed upon the Mortgagor by subsection
(i) of this Section 2.10 so long as the Mortgagor shall bond or discharge any
lien on the Premises arising from such obligation or in good faith and at its
own expense contest the same or the validity thereof by appropriate legal
proceedings which proceedings must operate to prevent the collection thereof or
other realization thereon, the sale of the lien thereof and the sale or
forfeiture of the Premises or any part thereof, to satisfy the same; provided
that during such contest the Mortgagor shall, at the option of the Mortgagee,
provide security reasonably satisfactory to the Mortgagee, assuring the
discharge of the Mortgagor's obligation hereunder and of any additional interest
charge, penalty or expense arising from or incurred as a result of such contest;
and provided, further, that if at any time payment of any obligation imposed
upon the Mortgagor by subsection (i) of this Section 2.10 shall become necessary
(a) to prevent the sale or forfeiture of the Premises or any portion thereof
because of non-payment, or (b) to protect the lien of this Mortgage, then the
Mortgagor shall pay the same in sufficient time to prevent the sale or
forfeiture of the Premises or to protect the lien of this Mortgage, as the case
may be.
Section 2.11. Condemnation Awards. The Mortgagor, promptly
after obtaining knowledge of the institution of any proceedings for the
condemnation of the Premises or any portion thereof, will notify the Mortgagee
of the pendency of such proceedings. The Mortgagee may participate in any such
proceedings, and the Mortgagor from time to time will deliver to the Mortgagee
all instruments requested by it to permit such participation. All awards and
compensation payable to the Mortgagor as a result of any condemnation or other
taking or purchase in lieu thereof, of the Premises or any part thereof, are
hereby assigned to and shall be paid to the Mortgagee. The Mortgagor hereby
authorizes the Mortgagee to collect and receive such awards and compensation, to
give proper receipts and
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acquittances therefor and, in the Mortgagee's sole discretion, to apply the same
toward the payment of the Indebtedness in accordance with the terms of the Loan
Agreement. Notwithstanding the foregoing, so long as no Event of Default has
occurred and is continuing, any awards recovered by Mortgagee, less the
reasonable cost, if any, to Mortgagee of such recovery and of paying out such
proceeds shall be applied by the Mortgagee to the restoration of the
Improvements. The Mortgagor, upon request by the Mortgagee, shall make, execute
and deliver any and all instruments requested for the purpose of confirming the
assignment of the aforesaid awards and compensation to the Mortgagee free and
clear of any liens, charges or encumbrances of any kind or nature whatsoever,
except for the Permitted Encumbrances. The Mortgagee shall not be limited to the
interest paid on the proceeds of any award or compensation, but shall be
entitled to the payment by the Mortgagor of interest at the applicable rate
provided for in the Loan Agreement.
Notwithstanding the voiding of the original sale(s) or
leasing(s) of all or any portion of the Premises, the Mortgagor shall continue
to pay the Indebtedness at the time and in the manner provided for its payment
in the Loan Agreement. The Mortgagee may apply any such payment to the discharge
of the Indebtedness whether or not then due and payable in such priority and
proportions as the Mortgagee in its discretion shall deem to be proper. If the
Premises are sold, through foreclosure or otherwise, prior to the receipt by the
Mortgagee of such payment, the Mortgagee shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive said payment, or a portion thereof sufficient to pay the Indebtedness,
whichever is less. The Mortgagor, after obtaining the prior written consent of
the Mortgagee, shall file and prosecute its claim or claims for any such payment
in good faith and with due diligence and cause the same to be collected and paid
over to the Mortgagee, and hereby irrevocably authorizes and empowers the
Mortgagee, in the name of the Mortgagor or otherwise, to collect and receipt for
any such payment and to file and prosecute such claim or claims, and although it
is hereby expressly agreed that the same shall not be necessary in any event,
the Mortgagor shall, upon demand of the Mortgagee, make, execute and deliver any
and all assignments and other instruments sufficient for the purpose of
assigning any such payment to the Mortgagee, free and clear of any encumbrances
of any kind or nature whatsoever, except for the Permitted Encumbrances and the
rights of the holder of the Prior Mortgage.
Section 2.12. Costs of Defending and Upholding the Lien. If
any action or proceeding is commenced with respect to the Premises to which
action or proceeding the Mortgagee is made a party or in which it becomes
necessary to defend or uphold the lien of this Mortgage, the Mortgagor shall, on
demand, reimburse the Mortgagee for all reasonable expenses (including, without
limitation, reasonable attorneys' fees and disbursements and reasonable
appellate attorneys' fees and disbursements) incurred by
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the Mortgagee in any such action or proceeding and such expenses shall bear
interest at the rate provided for in the Loan Agreement until reimbursed. In any
action or proceeding to foreclose this Mortgage or to recover or collect the
Indebtedness, the provisions of law relating to the recovering of costs,
disbursements and allowances shall prevail unaffected by this covenant.
Section 2.13. Additional Advances and Disbursements. The
Mortgagor shall pay by the last day payable without premium or penalty all
payments and charges on all liens, encumbrances, ground and other leases and
security interests which affect or may affect or attach or may attach to the
Premises, or any part thereof, and in default thereof, the Mortgagee shall have
the right, but shall not be obligated, to pay, without prior notice to the
Mortgagor, such payments and charges and the Mortgagor shall, on demand,
reimburse the Mortgagee for amounts so paid. In addition, upon default of the
Mortgagor in the performance of any other terms, covenants, conditions or
obligations by it to be performed hereunder or under any such lien, encumbrance,
lease or security interest, the Mortgagee shall have the right, but shall not be
obligated, to cure such default in the name and on behalf of the Mortgagor. All
sums advanced and reasonable expenses incurred at any time by the Mortgagee
pursuant to this Section 2.13 or as otherwise provided under the terms and
provisions of this Mortgage or under applicable law shall bear interest from the
date that such sum is advanced or expenses incurred, to and including the date
of reimbursement, computed at a rate set forth in the Loan Agreement (the
"Default Rate"). All interest payable hereunder shall be computed on the basis
of a 360-day year over the actual number of days elapsed. Any such amounts
advanced or incurred by the Mortgagee, together with the interest thereon, shall
be payable on demand, shall, until paid, be secured by this Mortgage as a lien
on the Premises and shall be part of the Indebtedness.
Section 2.14. Costs of Enforcement. The Mortgagor agrees to
bear and pay all expenses (including, without limitation, reasonable attorneys'
fees and disbursements and reasonable appellate attorneys' fees and
disbursements for legal services of every kind) of or incidental to the
enforcement of any provision hereof, or the enforcement, compromise of
settlement of this Mortgage, the Loan Agreement, the Note or the Indebtedness,
and for the curing thereof, or for defending or asserting the rights and claims
of the Mortgagee in respect thereof, by litigation or otherwise. All rights and
remedies of the Mortgagee shall be cumulative and may be exercised singly or
concurrently. Notwithstanding anything herein contained to the contrary, the
Mortgagor: (i) hereby waives trial by jury; and (ii) will not (a) at any time
insist upon, or plead, or in any manner whatever claim or take any benefit or
advantage of any stay or extension or moratorium law, any exemption from
execution or sale of the Premises or any part thereof, wherever enacted, now or
at any time hereafter in force, which may affect the covenants and terms of
performance of this Mortgage, nor (b) claim, take or insist upon any benefit or
advantage of any law now or hereafter in force
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providing for the valuation or appraisal of the Premises, or any part thereof,
prior to any sale or sales thereof which may be made pursuant to any provision
hereof, or pursuant to the decree, judgment or order of any court of competent
jurisdiction; nor (c) after any such sale or sales, claim or exercise any right
under any statute heretofore or hereafter enacted to redeem the property so sold
or any part thereof; (iii) hereby expressly waives all benefit or advantage of
any such law or laws; and (iv) covenants not to hinder, delay or impede the
execution of any power herein granted or delegated to the Mortgagee, but to
suffer and permit the execution of every power as though no such law or laws had
been made or enacted. The Mortgagor, for itself and all who may claim under it,
waives, to the extent that it lawfully may, all right to have the Premises (or
any part thereof) marshalled upon any foreclosure hereof.
Section 2.15. Filing Charges, Recording Fees, Taxes, etc. The
Mortgagor shall pay any and all taxes, charges, filing, registration and
recording fees, excises and levies imposed upon the Mortgagee by reason of its
ownership of the Note or this Mortgage or any mortgage supplemental hereto, any
security instrument with respect to any interest of the Mortgagor in and to any
fixture or personal property at the Premises or any instrument of further
assurance, other than income, franchise, succession, inheritance, business and
similar taxes, and shall pay all other taxes, if any, required to be paid on the
debt evidenced by the Note. In the event the Mortgagor fails to make such
payment within ten (10) days after written notice thereof to the Mortgagor, then
the Mortgagee shall have the right, but shall not be obligated, to pay the
amount due, and the Mortgagor shall, on demand, reimburse the Mortgagee for said
amount, together with interest thereon computed at the Default Rate.
Section 2.16. Restrictive Covenants and Leasing Requirements.
Without the prior written consent of the Mortgagee, the Mortgagor shall not: (i)
execute or permit to exist any lease or occupancy of all or substantially all of
the Premises except for the actual use and occupancy of the tenant thereof; (ii)
modify, renew or amend in any material respect any lease or occupancy agreement
affecting the Premises; (iii) grant rent concessions, or discount any rents, or
collect any rents for a period of more than one month in advance; (iv) execute
any conditional bill of sale, chattel mortgage or other security instruments
covering any furniture, furnishings, fixtures and equipment, intended to be
incorporated in the Premises or the appurtenances thereto, or covering articles
of personal property placed in the Premises or purchase any of such furniture,
furnishings, fixtures and equipment so that ownership of the same will not vest
unconditionally in the Mortgagor, free from encumbrances on delivery to the
Premises except as otherwise provided in the Loan Agreement; (v) further assign
the leases and rents affecting the Premises, except in connection with the Prior
Mortgage; (vi) sell, transfer, alienate, grant, convey or assign any interest in
the Premises or any part thereof except as otherwise provided in the Loan
Agreement; (vii)
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further mortgage, encumber, alienate, hypothecate, grant a security interest in
or grant any other interest whatsoever in the Premises or any part thereof, or
interest therein except as otherwise provided in the Loan Agreement; or (viii)
if the Premises are now or should at any time in the future be subject to the
terms of any rent control or rent stabilization statute, ordinance, rule or
regulation, fail to comply and/or cause the Premises to comply with the terms
and requirements of such statute, ordinance, rule or regulation, so and in such
fashion as to insure that the Premises shall be subject to the terms and
provisions, and receive the benefits, of said statute, ordinance, rule or
regulation.
Section 2.17. Assignment of Rents. Subject to the Permitted
Encumbrances and the assignment of rents granted in connection with the Prior
Mortgage, the Mortgagor hereby assigns to the Mortgagee, as further security for
the payment of the Indebtedness, its interest in the rents, issues and profits
of the Premises, together with its interest in all leases and other documents
evidencing such rents, issues and profits now or hereafter in effect and its
interest in any and all deposits held as security under said leases, and shall,
upon demand, deliver to the Mortgagee a copy of each lease or other document to
which it is a party and which affects the Premises. Nothing contained in the
foregoing sentence shall be construed to bind the Mortgagee to the performance
of any of the covenants, conditions or provisions contained in any such lease or
other document or otherwise to impose any obligation on the Mortgagee
(including, without limitation, any liability under the covenant of quiet
enjoyment contained in any lease or in any law of the State in which the
Premises are located in the event that any tenant shall have been joined as a
party defendant in any action to foreclose this Mortgage and shall have been
barred and foreclosed thereby of all right, title and interest and equity of
redemption in the Premises), except that the Mortgagee shall be accountable for
any money actually received pursuant to such assignment. The Mortgagor hereby
further grants to the Mortgagee the right (i) to enter upon and take possession
of the Premises for the purpose of collecting the said rents, issues and
profits, (ii) to dispossess by the usual summary proceedings (or any other
proceedings of the Mortgagee's selection) any tenant defaulting in the payment
thereof to the Mortgagee, (iii) to let the Premises, or any part thereof, and
(iv) to apply said rents, issues and profits, after payment of all necessary
charges and expenses on account of said Indebtedness. Such assignment and grant
shall continue in effect until the Indebtedness is paid, the execution of this
Mortgage constituting and evidencing the irrevocable consent of the Mortgagor to
the entry upon and taking possession of the Premises by the Mortgagee pursuant
to such grant, whether foreclosure has been instituted or not and without
applying for a receiver. Until the occurrence of an Event of Default, the
Mortgagor shall have a revocable license to receive said rents, issues and
profits and otherwise manage the Premises. The Mortgagor agrees to hold said
rents, issues and profits in trust and to use the same first, in payment of the
cost of the improvement and second, in payment of the Indebtedness to
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the extent the same is then due and owing. Such license of the Mortgagor to
collect and receive said rents, issues and profits may be revoked by the
Mortgagee upon the occurrence of an Event of Default by giving not less than
five (5) days' written notice of such revocation, served personally upon or sent
by registered mail to the record owner of the Premises. The Mortgagor hereby
appoints the Mortgagee as its attorney-in-fact, coupled with an interest, to
receive and collect all rent, additional rent and other sums due under the terms
of each lease to which the Mortgagor is a party and to direct any such tenant,
by written notice or otherwise, to forward such rent, additional rent or other
sums by mail or in person to the Mortgagee.
Section 2.18. Indemnity. The Mortgagor agrees that it shall
indemnify, defend and hold harmless the Mortgagee from and against all loss,
liability, obligation, claim, damage, penalty, cause or action, cost and
expense, including without limitation any assessments, levies, impositions,
judgments, reasonable attorneys' fees and disbursements, cost of appeal bonds
and printing costs, imposed upon or incurred by or asserted against the
Mortgagee (other than those arising from the gross negligence, but not mere
negligence, or willful misconduct of Mortgagee) by reason of (a) ownership of
this Mortgage; (b) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Premises; (c) any use, non-use or
condition of the Premises; (d) any failure on the part of the Mortgagor to
perform or comply with any of the terms of this Mortgage; (e) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Premises or any part for maintenance or otherwise; (f) the
imposition of any mortgage, real estate or governmental tax incurred as a result
of this Mortgage or the Note, other than income tax payable by, or other taxes
personal to, the Mortgagee; or (g) any violation or alleged violation by the
Mortgagor of any law. Any amounts payable under this Section 2.18 shall be due
and payable on demand and until paid shall bear interest at the Default Rate. If
any action is brought against the Mortgagee by reason of any of the foregoing
occurrences, the Mortgagor will, upon the Mortgagee's request, defend and resist
such action, suit or proceeding, at the Mortgagor's sole cost and expense by
counsel approved by the Mortgagee.
ARTICLE III
Default and Remedies
Section 3.01. Events of Default. The following shall
constitute "Events of Default" under this Mortgage: the occurrence
of any Event of Default under the Loan Agreement.
Section 3.02. Remedies.
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(i) Upon the occurrence of an Event of Default
under Section 10.7 of the Loan Agreement, the entire unpaid Indebtedness shall
be immediately due and payable and the Mortgagee may exercise any of the rights
and remedies described in this Section 3.02(i). Upon the occurrence of any Event
of Default, the Mortgagee may, in addition to any rights or remedies available
to it hereunder, take such action as it deems advisable to protect and enforce
its rights against the Mortgagor and in and to the Premises, including, but not
limited to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as the Mortgagee may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of the Mortgagee: (1) declare the entire unpaid Indebtedness to be
immediately due and payable; or (2) enter into or upon the Premises, either
personally or by its agents, nominees or attorneys and dispossess the Mortgagor
and its agents and servants therefrom, and thereupon the Mortgagee may (a) use,
operate, manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Premises and conduct the business thereat; (b)
complete any construction on the Premises in such manner and form as the
Mortgagee deems advisable; (c) make alterations, additions, renewals,
replacements and improvements to or on the Improvements and the balance of the
Premises; (d) exercise all rights and powers of the Mortgagor with respect to
the Premises, whether in the name of the Mortgagor or otherwise, including,
without limitation, the right to make, cancel, enforce or modify leases, obtain
and evict tenants, and sue for, collect and receive all earnings, revenues,
rents, issues, profits and other income of the Premises and every part thereof;
and (e) apply the receipts from the Premises to the payment of the Indebtedness,
after deducting therefrom all expenses (including reasonable attorneys' fees and
disbursements) incurred in connection with the aforesaid operations and all
amounts necessary to pay the taxes, assessments, insurance and other charges in
connection with the Premises, as well as just and reasonable compensation for
the services of the Mortgagee, its counsel, agents and employees; or (3) if
allowed under applicable law, institute proceedings for the complete foreclosure
of this Mortgage in which case the Premises may be sold for cash or credit in
one or more parcels; or (4) with or without entry and, to the extent permitted,
and pursuant to the procedures provided by applicable law, institute proceedings
for the partial foreclosure of this Mortgage for the portion of the Indebtedness
then due and payable, subject to the lien of this Mortgage continuing unimpaired
and without loss of priority so as to secure the balance of the Indebtedness not
then due; or (5) institute an action, suit or proceeding in equity for the
specific performance of any covenants, condition or agreement contained herein,
in the Loan Agreement or in the Note; or (6) recover judgment on the Note, the
Loan Agreement or any guaranty either before, during or after or in lieu of any
proceedings for the enforcement of this Mortgage; or (7) apply for the
appointment of a trustee, receiver, liquidator or conservator of the Premises,
without regard for the adequacy of the security for the Indebtedness and without
regard for the solvency of the Mortgagor,
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any guarantor or of any person, firm or other entity liable for the payment of
the Indebtedness to which appointment the Mortgagor does hereby consent; or (8)
sell the Premises, or any part thereof, to the extent permitted and pursuant to
the procedures provided by the laws of the State in which the Premises are
located, and all estate, right, title and interest, claim and demand therein,
and right of redemption thereat, at one or more sales, as an entity or in
parcels, and at such time and place, upon such terms and after such notice
thereof as may be required by applicable law; or (9) exercise the Statutory
Power of Sale; or (10) pursue such other remedies as the Mortgagee may have
under applicable law.
(ii) The purchase money proceeds or avails of any
sale made under or by virtue of this Article III, together with any other sums
which then may be held by the Mortgagee under this Mortgage, whether under the
provisions of this Article III or otherwise, shall be applied as follows:
First: To the payment of the costs and
expenses of any such sale, or the costs and
expenses of entering upon, taking possession of,
removal from, holding, operating and managing the
Premises or any part thereof, as the case may be,
including reasonable compensation to the
Mortgagee, its agents and counsel, and of any
judicial proceedings wherein the same may be made,
and of all expenses, liabilities and advances made
or incurred by the Mortgagee under this Mortgage,
together with interest as provided herein on all
advances made by the Mortgagee and all taxes or
assessments, except any taxes, assessments or
other charges subject to which the Premises shall
have been sold.
Second: To the payment of the whole amount
then due, owing or unpaid upon the Note for
principal and interest with interest on the unpaid
principal at the rate herein specified from and
after the happening of any Event of Default from
the due date of any such payment of principal
until the same is paid.
Third: To the payment of any other sums
required to be paid by the Mortgagor pursuant to
any provision of this Mortgage, the Loan Agreement
or of the Note.
Fourth: To the payment of the surplus, if any,
to whomsoever may be lawfully entitled to receive
the same.
The Mortgagee and any receiver of the Premises or any part thereof shall be
liable to account for only those rents, issues and profits actually received by
it.
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(iii) The Mortgagee may adjourn from time to
time any sale by it to be made under or by virtue of this Mortgage by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and except as otherwise provided by any applicable provision of
law, the Mortgagee, without further notice or publication, may make such sale at
the time and place to which the same shall be so adjourned.
(iv) Upon the completion of any sale or sales made
by the Mortgagee under or by virtue of this Article III, the Mortgagee, or an
officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, granting, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold. The
Mortgagee is hereby irrevocably appointed the true and lawful attorney of the
Mortgagor (coupled with an interest), in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Premises and
rights so sold and for that purpose the Mortgagee may execute all necessary
instruments of conveyance, assignment, transfer and delivery, and may substitute
one or more persons with like power, the Mortgagor hereby ratifying and
confirming all that said attorney or such substitute or substitutes shall
lawfully do by virtue hereof. Nevertheless, the Mortgagor, if so requested by
the Mortgagee, shall ratify and confirm any such sale or sales by executing and
delivering to the Mortgagee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of the Mortgagee, for the
purpose, and as may be designated in such request. Any such sale or sales made
under or by virtue of this Article III, whether made under the power of sale
herein granted or otherwise, shall operate to divest all the estate, right,
title, interest, claim and demand whatsoever, whether at law or in equity, of
the Mortgagor in and to the properties and rights so sold, and shall be a
perpetual bar both at law and in equity against the Mortgagor and against any
and all persons claiming or who may claim the same, or any part thereof from,
through or under the Mortgagor.
(v) In the event of any sale made under or by
virtue of this Article III, the entire Indebtedness, if not previously due and
payable, immediately thereupon shall, anything in the Note, the Loan Agreement
or in this Mortgage to the contrary notwithstanding, become due and payable.
(vi) Upon any sale made under or by virtue of this
Article III, the Mortgagee may bid for and acquire the Premises or any part
thereof or interest therein and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the Indebtedness of the
Mortgagor secured by this Mortgage the net sales price after deducting therefrom
the expenses of the sale and the costs of the action and any other sums which
the Mortgagee is authorized to deduct under this Mortgage.
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(vii) No recovery of any judgment by the
Mortgagee and no levy of an execution under any judgment upon the Premises or
upon any other property of the Mortgagor shall affect in any manner or to any
extent, the lien of this Mortgage upon the Premises or any part thereof, or any
liens, rights, powers or remedies of the Mortgagee hereunder, but such liens,
rights, powers and remedies of the Mortgagee shall continue unimpaired as
before.
Section 3.03. Statutory Condition and Power of Sale.
Notwithstanding any other provision herein to the contrary, this Mortgage is
upon the STATUTORY CONDITION and upon the further condition that all covenants
and agreements of, and conditions imposed upon, the Mortgagor contained herein
and in the Note or the Loan Agreement and other instruments and agreements
evidencing or securing the Indebtedness secured hereby shall be kept and fully
performed, for any breach of which (remaining uncured beyond the grace period,
if any, provided herein or therein) the Mortgagee shall have the STATUTORY POWER
OF SALE, and upon the further condition that upon default (remaining uncured as
aforesaid) the Mortgagee shall have as to the personal property all of the
remedies of a Secured Party under the Uniform Commercial Code as now in effect
in the Commonwealth of Massachusetts including (but not limited to) the option
to proceed as to both the real estate and personal property under the law
relating to foreclosures of real estate mortgages, and such further remedies as
from time to time may hereafter be provided in Massachusetts for a Secured
Party, and upon the further condition that all rights of the Mortgagee under
this Mortgage as to the personal property and the real estate may be exercised
together or separately. In case of a foreclosure sale the Mortgagee shall be
entitled to retain one (1%) percent of the purchase money in addition to the
costs, charges and expenses allowed under the Statutory Power of Sale or under
this Mortgage. In case redemption is had by the Mortgagor after foreclosure
proceedings have been begun, the Mortgagee shall be entitled to collect all
costs, charges and expenses, including reasonable attorneys' fees, incurred upon
the time of redemption plus a fee of one (1%) percent of the Indebtedness
secured hereby.
In exercising its power of sale under this
instrument, the Mortgagee may sell the personal property, or any part thereof,
either separately from or together with the real estate, or any part thereof,
either as one unit or in such separate units, all as the Mortgagee may in its
discretion elect; and may so sell the real estate as one unit or in such
separate units, all as Mortgagee may in its discretion elect; and may so sell
the Premises or any part thereof either separately from or together with the
whole or any part of other collateral which may constitute security for any
obligation secured by the Premises, also as Mortgagee may in its discretion
elect. In the event of any separate sale of personal property, the Mortgagee
will give to the Mortgagor reasonable notice of the time and place of any public
sale or of the time after which any private sale or other intended disposition
thereof is to be made, and such requirement of reasonable notice shall be met if
such notice is mailed postage prepaid to the
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address of the Mortgagor as provided in this Mortgage at least five (5) days
before the time of the sale or other disposition.
Section 3.04. Payment of Indebtedness After Default. Upon the
occurrence of any Event of Default and the acceleration of the maturity hereof,
if, at any time prior to foreclosure sale, the Mortgagor or any other person
tenders payment of the amount necessary to satisfy the Indebtedness, the same
shall constitute an evasion of the payment terms hereof and/or of the Note
and/or the Loan Agreement and shall be deemed to be a voluntary prepayment
hereunder, in which case such payment must include the premium and/or fee
required under the prepayment provision, if any, contained herein or in the
Note. This provision shall be of no force or effect if at the time that such
tender of payment is made, the Mortgagor has the right under this Mortgage, the
Loan Agreement or the Note to prepay the Indebtedness without penalty or
premium.
Section 3.05. Possession of the Premises. Upon the occurrence
of any Event of Default hereunder, it is agreed that the Mortgagor, if it is the
occupant of the Premises or any part thereof, shall immediately surrender
possession of the Premises so occupied to the Mortgagee, and if the Mortgagor is
permitted to remain in possession, the possession shall be as a tenant of the
Mortgagee and, on demand, Mortgagor shall pay to the Mortgagee monthly, in
advance, a reasonable rental for the space so occupied and in default thereof
Mortgagor may be dispossessed by the usual summary proceedings. The covenants
herein contained may be enforced by a receiver of the Premises or any part
thereof. Nothing in this Section 3.05 shall be deemed to be a waiver of the
provisions of this Mortgage prohibiting the sale or other disposition of the
Premises without the Mortgagee's prior written consent.
Section 3.06. Interest After Default. All unpaid and accrued
interest, including any interest accruing after an Event of Default, shall be
secured by this Mortgage as a part of the Indebtedness. Nothing in this Section
3.06 or in any other provision of this Mortgage shall constitute an extension of
the time of payment of the Indebtedness.
Section 3.07. Mortgagor's Actions After Default. After the
happening of any Event of Default and immediately upon the commencement of any
action, suit or other legal proceedings by the Mortgagee to obtain judgment for
the Indebtedness, or of any other nature in aid of the enforcement of the Note,
the Loan Agreement or of this Mortgage, the Mortgagor will (i) waive the
issuance and service of process and enter its voluntary appearance in such
action, suit or proceeding and (ii) if required by the Mortgagee, consent to the
appointment of a receiver or receivers of the Premises and of all the earnings,
revenues, rents, issues, profits and income thereof.
Section 3.08. Control by Mortgagee After Default.
Notwithstanding the appointment of any receiver, liquidator or
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trustee of the Mortgagor, or of any of its property, or of the Premises or any
part thereof, the Mortgagee shall be entitled to retain possession and control
of all property now and hereafter covered by this Mortgage.
ARTICLE IV
Miscellaneous
Section 4.01. Credits Waived. The Mortgagor will not claim nor
demand nor be entitled to any credit or credits against the Indebtedness for so
much of the taxes assessed against the Premises or any part thereof, as is equal
to the tax rate applied to the amount due on this Mortgage or any part thereof,
and no deductions shall otherwise be made or claimed from the taxable value of
the Premises or any part thereof by reason of this Mortgage or the Indebtedness
secured hereby.
Section 4.02. No Releases. The Mortgagor agrees, that in the
event the Premises (or any part thereof or interest therein) are sold and the
Mortgagee enters into any agreement with the then owner of the Premises
extending the time of payment of the Indebtedness, or otherwise modifying the
terms hereof, the Mortgagor shall continue to be liable to pay the Indebtedness
according to the tenor of any such agreement unless expressly released and
discharged in writing by the Mortgagee.
Section 4.03. Notices. All notices hereunder shall be in
writing and shall be deemed to have been sufficiently given or served for all
purposes when sent to any party hereto in accordance with the terms and
conditions of the Loan Agreement.
Section 4.04. Binding Obligations. The provisions and
covenants of this Mortgage shall run with the land, shall be binding upon the
Mortgagor and shall inure to the benefit of the Mortgagee, subsequent holders of
this Mortgage, and the respective successors and assigns of the foregoing. For
the purpose of this Mortgage, the term "Mortgagor" shall include and refer to
the Mortgagor named herein, any subsequent owners of the Premises (or any part
thereof or interest therein), and their respective heirs, executors, legal
representatives, successors and assigns. If there is more than one Mortgagor,
all their undertakings hereunder shall be deemed joint and several.
Section 4.05. Legal Construction. The creation of this
Mortgage, the perfection of the lien or security interest in the Premises, and
the rights and remedies of the Mortgagee with respect to the Premises, as
provided herein and by the laws of the State wherein the Real Property is
located, shall be governed by and construed in accordance with the internal laws
of the state wherein the Real Property is located without regard to principles
of conflict of law. Otherwise, to the extent permitted by applicable
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law, this Mortgage, the Note, the Loan Agreement and all other obligations of
Mortgagor (including the liability of Mortgagor for any deficiency following a
foreclosure of all or any part of the Premises) shall be governed by and
construed in accordance with the internal laws of the State of New York without
regard to principles of conflicts of laws, such state being the state where such
documents were executed and delivered. Nothing in this Mortgage, the Loan
Agreement, the Note or in any other agreement between the Mortgagor and the
Mortgagee shall require the Mortgagor to pay, or the Mortgagee to accept,
interest in an amount which would subject the Mortgagee to any penalty or
forfeiture under applicable law. In the event that the payment of any charges,
fees or other sums due hereunder or under the Note, the Loan Agreement or any
such other agreement which are or could be held to be in the nature of interest
and which would subject the Mortgagee to any penalty or forfeiture under
applicable law, then ipso facto the obligations of the Mortgagor to make such
payment shall be reduced to the highest rate authorized under applicable law.
Should the Mortgagee receive any payment which is or would be in excess of the
highest rate authorized under law, such payment shall have been, and shall be
deemed to have been, made in error and shall automatically be held by the
Mortgagee as additional cash collateral for the Indebtedness.
Section 4.06. Captions. The captions of the Sections of this
Mortgage are for the purpose of convenience only and are not intended to be a
part of this Mortgage and shall not be deemed to modify, explain, enlarge or
restrict any of the provisions hereof.
Section 4.07. Further Assurances. The Mortgagor shall do,
execute, acknowledge and deliver, at the sole cost and expense of the Mortgagor,
all and ever such further acts, deeds, conveyances, mortgages, assignments,
estoppel certificates, notices of assignment, transfers and assurances as the
Mortgagee may require from time to time in order to better assure, convey,
grant, assign, transfer and confirm unto the Mortgagee, the rights now or
hereafter intended to be granted to the Mortgagee under this Mortgage, any other
instrument executed in connection with this Mortgage or any other instrument
under which the Mortgagor may be or may hereafter become bound to convey,
mortgage or assign to the Mortgagee for carrying out the intention of
facilitating the performance of the terms of this Mortgage. The Mortgagor hereby
appoints the Mortgagee its attorney-in-fact to execute, acknowledge and deliver
for and in the name of the Mortgagor any and all of the instruments mentioned in
this Section 4.07 and this power, being coupled with an interest, shall be,
irrevocable as long as any part of the Indebtedness remains unpaid.
Section 4.08. Severability. Any provision of this
Mortgage which is prohibited or unenforceable in any jurisdiction
or prohibited or unenforceable as to any person or entity shall, as
to such jurisdiction, person or entity or circumstance be
ineffective to the extent of such prohibition or unenforceability
without invalidating the remaining provisions hereof or affecting
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the validity or enforceability of such provisions in any other jurisdiction or
as to any other person or entity or circumstance.
Section 4.09. General Conditions.
(i) All covenants hereof shall be construed as
affording to the Mortgagee rights additional to and not exclusive of the rights
conferred under the provisions of any other applicable law.
(ii) This Mortgage cannot be altered, amended,
modified or discharged orally and no executory agreement shall be effective to
modify or discharge it in whole or in part, unless it is in writing and signed
by the party against whom enforcement of the modification, alteration, amendment
or discharge is sought.
(iii) No remedy herein conferred upon or
reserved to the Mortgagee is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative, and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. No delay or omission of the Mortgagee in
exercising any right or power accruing upon any Event of Default shall impair
any such right or power, or shall be construed to be a waiver of any such Event
of Default, or any acquiescence therein. Acceptance of any payment (other than a
monetary payment in cure of a monetary default) after the occurrence of an Event
of Default shall not be deemed a waiver of or a cure of such Event of Default
and every power and remedy given by this Mortgage to the Mortgagee may be
exercised from time to time as often as may be deemed expedient by the
Mortgagee. Nothing in this Mortgage, the Loan Agreement or in the Note shall
limit or diminish the obligation of the Mortgagor to pay the Indebtedness in the
manner and at the time and place therein respectively expressed.
(iv) No waiver by the Mortgagee will be effective
unless it is in writing and then only to the extent specifically stated. Without
limiting the generality of the foregoing, any payment made by the Mortgagee for
insurance premiums, taxes, assessments, water rates, sewer rentals, levies, fees
or any other charges affecting the Premises, shall not constitute a waiver of
the Mortgagor's default in making such payments and shall not obligate the
Mortgagee to make any further payments.
(v) The Mortgagee shall have the right to appear in
and defend any action or proceeding, in the name and on behalf of the Mortgagor
which the Mortgagee, in its reasonable discretion, feels may adversely affect
the Premises or this Mortgage. The Mortgagee shall also have the right to
institute any action or proceeding which the Mortgagee, in its discretion, feels
should be brought to protect its interest in the Premises or its rights
hereunder. All costs and expenses incurred by the Mortgagee in connection with
such actions or proceedings, including, without limitation, reasonable
attorneys' fees and expenses and appellate
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attorneys' fees and expenses, shall be paid by the Mortgagor on demand and shall
be secured by this Mortgage.
(vi) In the event of the passage after the date of
this Mortgage of any law of any governmental authority having jurisdiction
hereof or the Premises, deducting from the value of land for the purpose of
taxation, affecting any lien thereon or changing in any way the laws for the
taxation of mortgages or debts secured by mortgages for federal, state or local
purposes, or the manner of the collection of any such taxes, so as to affect
this Mortgage, the Mortgagor shall promptly pay to the Mortgagee, on demand, all
taxes, costs and charges for which the Mortgagee is or may be liable as a result
thereof; provided that if said payment shall be prohibited by law, render the
Note usurious or subject the Mortgagee to any penalty or forfeiture, then and in
such event the Indebtedness shall, at the option of the Mortgagee, be
immediately due and payable.
(vii) The Mortgagor hereby appoints the Mortgagee
as its attorney-in-fact in connection with the personal property and fixtures
covered by this Mortgage, where permitted by law, to file on its behalf any
financing statements or other statements in connection therewith with the
appropriate public office signed by the Mortgagee, as secured party. This power,
being coupled with an interest, shall be irrevocable so long as any part of the
Indebtedness remains unpaid.
Section 4.10. Multisite Real Estate Transaction. Mortgagor
acknowledges that this Mortgage is one of a number of other mortgages, deeds of
trust and assignments of leases and rents and other security documents
(hereinafter collectively the "Other Loan Documents") which secure the
Indebtedness in whole or in part. Mortgagor agrees that the lien of this
Mortgage shall be absolute and unconditional and shall not in any manner be
affected or impaired by any acts or omissions whatsoever of Mortgagee and,
without limiting the generality of the foregoing, the lien hereof shall not be
impaired by any acceptance by Mortgagee of any security for or guarantors upon
any of the Indebtedness or by any failure, neglect or omission on the part of
Mortgagee to realize upon or protect any of the Indebtedness or any collateral
security therefor including the Other Loan Documents. The lien hereof shall not
in any manner be impaired or affected by any release (except as to the property
released), sale, pledge, surrender, compromise, settlement, renewal, extension,
indulgence, alteration, changing, modification or any disposition of any of the
Indebtedness or of any of the collateral security therefor, including the Other
Loan Documents or any guarantee thereof. Mortgagee may, at its discretion,
foreclose, exercise any power of sale or exercise any other remedy available to
it under any or all of the Other Loan Documents without first exercising or
enforcing any of its rights and remedies hereunder, or may foreclose, exercise
any power of sale, or exercise any other right available under this Mortgage
without first exercising or enforcing any of its rights and remedies under any
or all of the Other Loan Document. Such
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exercise of Mortgagee's rights and remedies under any or all of the Other Loan
Documents shall not in any manner impair the Indebtedness or lien of the
Mortgage, and any exercise of the rights or remedies of Mortgagee hereunder
shall not impair the lien of any of the Other Loan Documents or any of
Mortgagee's rights and remedies thereunder. Mortgagor specifically consents and
agrees that Mortgagee may exercise its rights and remedies hereunder and under
the Other Loan Documents separately or concurrently and in any order that
Mortgagee may deem appropriate.
Section 4.11. Prior Mortgage. With respect to the mortgages of
all or part of the Premises to which this Mortgage is subordinate as set forth
in Schedule B annexed hereto, (together with the note or notes secured thereby
and all other documents securing said note or notes, collectively, the "Prior
Mortgage"), the following terms, covenants, conditions, representations and
warranties shall apply.
(a) The Mortgagor hereby warrants and represents as follows:
(i) all interest payments, principal payments and other payments and
charges required thereby have been paid to the extent they are payable
to the date hereof; (ii) the Mortgagor is not in default under any of
the terms or provisions of the Prior Mortgage required to be observed
or performed; (iii) no term, covenant or provisions of the Prior
Mortgage prohibits or imposes a limitation upon the grant and demise of
this Mortgage; and (iv) the Mortgagor has, prior to its execution
hereof, delivered to the Mortgagee true and correct duplicate original
copies of the Prior Mortgage and of any and all amendments and
modifications thereof.
(b) The Mortgagor covenants and agrees as follows:
(i) to promptly pay when due, all payments, additional payments
and other sums or charges required to be paid by the Mortgagor
under the Prior Mortgage; (ii) to perform and observe all
covenants and conditions to be performed and/or observed by
the Mortgagor under the Prior Mortgage and shall promptly
deliver to the Mortgagee photocopies of all notices,
agreements and modifications (whether proposed or actual)
received by the Mortgagor from any holder or holders of the
Prior Mortgage (the "Prior Mortgagee") or counsel therefor
within three (3) days after receipt thereof by the Mortgagor;
(iii) not to do, permit, suffer or refrain from doing anything
as a result of which, there could be a default under or breach
of any of the terms of the Prior Mortgage; (iv) not to
surrender any of the property mortgaged under the Prior
Mortgage or to modify, amend or in any way alter or permit the
alteration of any of the terms of the Prior Mortgage or so as
to (A) increase the sums payable thereunder, whether
characterized as interest, debt service or otherwise, (B)
extend the term thereof, (C) increase the principal sums
secured thereby, (D) make materially more onerous to the
Mortgagor any term or provision of the Prior Mortgage and/or
(E) jeopardize, reduce or further subordinate either the
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<PAGE>
rights or remedies of the Mortgagee hereunder or the lien of this
Mortgage without the prior written consent of the Mortgagee in each
instance; (v) not to waive, excuse or discharge any of the obligations
and agreements of the Prior Mortgagee; (vi) to do all things necessary
to preserve unimpaired all of the Mortgagor's rights under the Prior
Mortgage; and (vii) to furnish to the Mortgagee such information and
evidence as the Mortgagee may reasonably request concerning the
Mortgagor's due observance, performance and compliance with the terms,
covenants and provisions of the Prior Mortgage. The Mortgagee shall
have the right upon the occurrence of any default, exercisable by
notice to the Mortgagor, to require the Mortgagor to make payments of
principal and interest under the Prior Mortgage through the Mortgagee
and, if the Mortgagee exercises such right, the Mortgagor shall deliver
to the Mortgagee a check in the amount of each installment of such
principal and interest, payable to the order of the holder of the Prior
Mortgage, not later than three (3) days prior to the due date thereof
and the Mortgagee shall promptly forward such check to said holder.
(c) In the event of any default beyond the applicable grace
period set forth in the Prior Mortgage by the Mortgagor in the
performance of any of its obligations under the Prior Mortgage,
including, without limitation, any default in the terms of repayment
thereunder, including, but not limited to, charges and impositions made
payable by the Prior Mortgagee thereunder, then, in each and every
case, the Mortgagee may, at its option and without notice, cause the
default or defaults to be remedied and otherwise exercise any and all
of the rights of the Mortgagor thereunder in the name of and on behalf
of the Mortgagor. The Mortgagor shall, on demand, reimburse the
Mortgagee for all advances made and reasonable expenses incurred by the
Mortgagee in curing any such default (including, without limitation,
reasonable attorney's fees), together with interest thereon computed at
the Default Rate from the date that an advance is made or expense is
incurred to and including the date the same is paid.
(d) The Mortgagor hereby irrevocably designates the Mortgagee
its agent and attorney-in-fact to perform or observe on behalf of the
Mortgagor any covenant or condition which the Mortgagor fails to
perform or observe under the Prior Mortgage within any applicable grace
period specified in the Prior Mortgage, including, but not limited to,
the payment of any principal and/or interest payable under the Prior
Mortgage, and any advances made by the Mortgagee in connection with
such performance or observance shall be repaid by the Mortgagor within
ten (10) days of demand with interest at the Default Rate and the
amount so advanced with interest, shall be a lien upon the Mortgaged
Property and shall be secured by this Mortgage. The performance or
observance of such covenant or condition by the Mortgagee shall not
prevent the Mortgagor's failure so to perform or observe from
constituting an Event of
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Default. In performing or observing any such covenant or condition, the
Mortgagee shall have the right to enter upon the Premises. Upon receipt
by the Mortgagee from the Mortgagor and/or the holder of the Prior
Mortgage of any notice of default under the Prior Mortgage, the
Mortgagee may rely thereon and take any action permitted by this
Section 4.11 to remedy such default notwithstanding that the existence
of such default or the nature thereof may be questioned or denied by
the Mortgagor. Nothing contained in this Section 4.11 shall be deemed
to create any duty or obligation on the part of the Mortgagee to take
any action with respect to the Prior Mortgage and/or the curing of any
defaults thereunder.
(e) The Mortgagor represents and warrants that neither the
Mortgagor nor any affiliate of the Mortgagor nor any person acting on
behalf of either the Mortgagor or any affiliate of the Mortgagor is the
holder of the Prior Mortgage or any participation therein or is the
owner of a legal or equitable interest in such holder (other than by
reason of being a shareholder in any one or more of the Term Loan
Lenders (as defined in the Loan Agreement).
(f) If the Mortgagor or any subsequent owner of the Premises
or any affiliate or agent or nominee of the Mortgagor or such
subsequent owner becomes the Prior Mortgagee then notwithstanding
anything to the contrary contained in any document, agreement or law
the lien of the Prior Mortgage shall merge with the fee ownership of
the Premises and the lien of this Mortgage shall automatically become a
first mortgage lien on the Premises.
(g) To the extent that the rights of the Prior Mortgagee
preclude or preempt the Mortgagee from exercising any of its rights
given the Mortgagee hereunder, then the rights of the Prior Mortgagee
shall control and to the extent that the terms of the Prior Mortgage
are inconsistent with the terms of this Mortgage then the Mortgagee
acknowledges that the terms provided for in this Mortgage are
subordinate to the terms of the Prior Mortgage for so long as the Prior
Mortgage remains a lien on the Premises prior to the lien of this
Mortgage.
Section 4.12. Receipt of Copy. The Mortgagor
acknowledges that it has received a true copy of this Mortgage,
provided without charge.
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Section 4.13. Loan Agreement Paramount. If and to the extent
that any provisions of this Mortgage conflict or are otherwise inconsistent with
any provisions of the Loan Agreement, the provisions of the Loan Agreement shall
prevail.
Section 4.14. Intercreditor Agreement. The rights of Mortgagee
to enforce its rights and remedies hereunder shall be subject to the terms and
conditions of that Intercreditor Agreement dated as of the date hereof by and
between Mortgagee, in its individual capacity, GECC and Mortgagee in its
capacity as administrative and collateral monitoring agent for the Lenders and
The Chase Manhattan Bank, N.A., Fleet National Bank and Chase Manhattan Bank,
N.A. as agent for itself and Fleet National Bank.
IN WITNESS WHEREOF, this Mortgage has been duly executed by
the Mortgagor as of the date first above written.
SWANK, INC.
By: ____________________________
Name: John A. Tulin
Title: President
By: ____________________________
Name: Andrew C. Corsini
Title: Treasurer
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OPEN END MORTGAGE, ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
Dated: As of May 24, 1996
in the aggregate maximum amount of
$25,000,000
SWANK, INC.
having an office at:
6 Hazel Street
Attleboro, Massachusetts 02703
the Mortgagor,
TO
IBJ SCHRODER BANK & TRUST COMPANY, AS ACM AGENT
for itself and as agent for the ratable benefit of the Lenders
having an office at:
One State Street
New York, New York 10004
the Mortgagee
LOCATION OF PREMISES:
Street Address: 345 Ely Avenue
Town of: Norwalk
County of: Fairfield
State of: Connecticut
After recording, please return by mail to:
HAHN & HESSEN LLP
350 Fifth Avenue
New York, New York 10118
Attention: Mark D. Graham
This instrument was prepared by Mark D. Graham, Esq.
762149.2/MDG/25254/061 5/24/96
<PAGE>
OPEN END MORTGAGE, ASSIGNMENT OF RENTS
AND SECURITY AGREEMENT
THIS OPEN END MORTGAGE, ASSIGNMENT OF RENTS AND SECURITY
AGREEMENT, made as of the day of May, 1996 by SWANK, INC., a Delaware
corporation having an office at 6 Hazel Street, Attleboro, Massachusetts 02703
(the "Mortgagor"), to IBJ SCHRODER BANK & TRUST COMPANY, as ACM Agent (as
hereinafter defined), having an office at One State Street, New York, New York
10004, for itself and as agent for the lenders now or hereafter named in the
Loan Agreement, as such term is hereinafter defined (the "Mortgagee").
WITNESSETH, pursuant to a certain Revolving Credit
and Security Agreement dated as of May 24, 1996, being a commercial revolving
loan agreement as described by ss.49-2(c) of the Connecticut General Statutes,
by and between the Mortgagor, as borrower, and IBJ Schroder Bank & Trust Company
("IBJS"), General Electric Capital Corporation ("GECC") and various other
financial institutions which now or hereafter become parties thereto, (IBJS,
GECC and such other financial institutions, individually, a "Lender" and,
collectively, the "Lenders"), IBJS and GECC as agents for the Lenders (IBJS and
GECC, in such capacity, the "Co-Agents") and IBJS as administrative and
collateral monitoring agent for the Lenders (IBJS, in such capacity, the "ACM
Agent") (the "Loan Agreement"), the Lenders have agreed to make and the
Mortgagor has agreed to accept the following certain loan in the maximum
aggregate principal amount of $25,000,000: a revolving credit loan in the
principal amount of up to $25,000,000 to be advanced, or advanced, repaid and
readvanced pursuant to the Loan Agreement and evidenced by (i) a Revolving
Credit Note dated of even date herewith payable to IBJS in the principal amount
of $12,500,000 and (ii) a Revolving Credit Note dated of even date herewith
payable to GECC in the principal amount of $12,500,000 (collectively, the
"Note"). Pursuant to the Loan Agreement, the Mortgagee has been designated as
the agent for the ratable benefit of the present or future holders of the
Indebtedness (as hereinafter defined) secured by this Mortgage. The Note shall
mature on April 30, 1999. A copy of the Note is annexed hereto and made a part
hereof as Exhibit "1".
WITNESSETH, that to secure the payment of the maximum
principal sum of TWENTY FIVE MILLION ($25,000,000) DOLLARS, together with
interest as set forth in said Note and with final maturity on April 30, 1999
lawful money of the United States, as evidenced by the Loan Agreement and the
Note, or so much as is outstanding from time to time, to be paid according to
the Loan Agreement and the Note, as said Loan Agreement and Note may be
hereinafter modified, amended, extended, renewed or substituted for, and any
judgments thereon or therefor, and any and all sums, amounts and expenses paid
hereunder or thereunder by the Mortgagee according to the terms hereof and all
other obligations and liabilities of the Mortgagor under this Mortgage, the Loan
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<PAGE>
Agreement and Note, together with all interests on the said indebtedness,
obligations, liabilities, sums, amounts and expenses and any and all other
obligations and liabilities now due and owing or to the extent allowed by law,
which may hereafter be or become due and owing by the Mortgagor to the Mortgagee
until paid, (all of the aforesaid are hereinafter collectively, the
"Indebtedness"). Subject to the Permitted Encumbrances (as defined in the Loan
Agreement) the Mortgagor, as hereinafter provided, does hereby give, grant,
bargain, sell and confirm unto the Mortgagee, its successors and assigns,
forever:
I. All of the right, title and interest of the Mortgagor in
and to that certain lot, piece or parcel of land (the "Real Property") more
particularly described as on Schedule "A" annexed hereto and made a part hereof,
TO HAVE AND TO HOLD the above granted and bargained premises with the
appurtenances thereto unto the said Mortgagee, its successors and assigns
forever to its and their own proper use and behoof and also said Mortgagor does
for itself, its successors and assign covenant with said Mortgagee, its
successors and assigns that at and until the ensealing of these presents it is
well seized of the Real Property in fee simple and has good right to bargain and
sell the same in the manner, form as herein written, the same are free from all
encumbrances except those mentioned herein and furthermore the said Mortgagor
does by these presents bind itself and its successors and assigns forever to
WARRANT AND DEFEND the above granted and bargained premises to the Mortgagee,
its successors and assigns against all claims and demands whatsoever except
those set forth herein; and
II. All of the right, title and interest of the Mortgagor in
and to the buildings and improvements (hereinafter, collectively, together with
all building equipment, the "Improvements") now or hereafter located on the Real
Property and all of its right, title and interest, if any, in and to the streets
and roads abutting the Real Property to the center lines thereof, and strips and
gores within or adjoining the Real Property, the air space and right to use said
air space above the Real Property, all rights of ingress and egress by motor
vehicles to parking facilities on or within the Real Property, all easements now
or hereafter affecting and benefiting the Real Property or the Improvements, all
royalties and all rights appertaining to the use and enjoyment of the Real
Property or the Improvements, including, without limitation, alley, drainage,
crop, timber, agricultural, horticultural, mineral, water, oil and gas rights;
and
III. All of the right, title and interest of the Mortgagor, if
any, in and to all fixtures and all of the Mortgagor's articles of personal
property and all appurtenances and additions thereto and substitutions or
replacements thereof, now or hereafter attached to, or contained in, the Real
Property and/or the Improvements or placed on any part thereof, though not
attached thereto, including, but not limited to, all screens, awnings, shades,
blinds, curtains, draperies, carpets, rugs, furniture and furnishings, heating,
lighting, plumbing, ventilating, air conditioning, refrigerating, incinerator
and/or compacting and elevator plants, stoves, ranges, vacuum cleaning systems,
call
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<PAGE>
systems, sprinkler systems and other fire prevention and extinguishing apparatus
and materials, motors, machinery, pipes, appliances, equipment, fittings and
fixtures, and the trade name, good will and books and records relating to the
business operated on the Real Property and/or the Improvements. Without limiting
the foregoing, the Mortgagor hereby grants to the Mortgagee a security interest
in all of its present and future "equipment" and "general intangibles" (as said
quoted terms are defined in the Uniform Commercial Code of the State wherein the
Real Property and/or the Improvements are located) and the Mortgagee shall have,
in addition to all rights and remedies provided herein, and in any other
agreements, commitments and undertakings made by the Mortgagor to the Mortgagee,
all of the rights and remedies of a "secured party" under the said Uniform
Commercial Code. To the extent permitted under applicable law, this Mortgage
shall be deemed to be a "security agreement" (as defined in the aforesaid
Uniform Commercial Code). If the lien of this Mortgage is subject to a security
interest covering any such personal property, then all of the right, title and
interest of the Mortgagor in and to any and all such property is hereby assigned
to the Mortgagee, together with the benefits of all deposits and payments now or
hereafter made thereon by the Mortgagor; and
IV. All of the right, title and interest of the Mortgagor in
and to all leases, lettings and licenses of the Real Property, the Improvements
and/or any other property or rights encumbered or conveyed hereby, or any part
thereof, now or hereafter entered into and all right, title and interest of the
Mortgagor thereunder, including, without limitation, cash and securities
deposited thereunder, the right to receive and collect the rents, issues and
profits payable thereunder and the right to enforce, whether by action at law or
in equity or by other means, all provisions, covenants and agreements thereof;
and
V. All right, title and interest of the Mortgagor in and to
all unearned premiums, accrued, accruing or to accrue under insurance policies
now or hereafter obtained by the Mortgagor and, subject to the terms and
conditions of the Loan Agreement, all proceeds of the conversion, voluntary or
involuntary, of the Real Property, the Improvements and/or any other property or
rights encumbered or conveyed hereby, or any part thereof, into cash or
liquidated claims, including, without limitation, proceeds of hazard and title
insurance and all awards and compensation heretofore and hereafter made to the
present and all subsequent owners of the Real Property, the Improvements and/or
any other property or rights encumbered or conveyed hereby by any governmental
or other lawful authority for the taking by eminent domain, condemnation or
otherwise, of all or any part of the Real Property, the Improvements and/or any
other property or rights encumbered or conveyed hereby or any easement therein,
including, but not limited to, awards for any change of grade of streets; and
VI. All right, title and interest of the Mortgagor in
and to all extensions, improvements, betterments, renewals,
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<PAGE>
substitutions and replacements of and all additions and appurtenances to the
Real Property, the Improvements and/or any other property or rights encumbered
or conveyed hereby, hereafter acquired by or released to the Mortgagor or
constructed, assembled or placed by the Mortgagor on the Real Property, the
Improvements and/or any other property or rights encumbered or conveyed hereby,
and all conversions of the security constituted thereby which, immediately upon
such acquisition, release, construction, assembling, placement or conversion as
the case may be, and in each such case without any further mortgage, conveyance,
assignment or other act by the Mortgagor, shall become subject to the lien of
this Mortgage as fully and completely, and with the same effect, as though now
owned by the Mortgagor and specifically described herein (the Real Property and
the Improvements, together with the fixtures and other property, rights,
privileges and interests encumbered or conveyed hereby hereinafter,
collectively, the "Premises").
TO HAVE AND TO HOLD the Premises unto the Mortgagee and its
successors and assigns until the Indebtedness is paid in full.
AND the Mortgagor covenants and agrees with the Mortgagee as
follows:
ARTICLE I
Representations and Warranties of the Mortgagor
The Mortgagor represents and warrants to the Mortgagee as
follows:
Section 1.01. Title to the Premises. (i) The right, title and
interest of the Mortgagor constitutes good and insurable title to the Premises,
subject only to those exceptions to title in respect of the Real Property and
the Improvements set forth in the title insurance policy issued by Lawyers Title
Insurance Company insuring the lien of this Mortgage (the "Title Binder") and to
other Permitted Encumbrances; (ii) the Mortgagor has full power and lawful
authority to encumber the Premises in the manner and form set forth hereunder;
(iii) the Mortgagor owns all fixtures and articles of personal property now or
hereafter comprising part of the Premises, subject to the rights of space
tenants in and to any such fixtures, personal property or installations,
including any substitutions or replacements thereof free and clear of all liens
and claims other than the matters set forth in this Section including, but not
limited to, the Permitted Encumbrances; (iv) this Mortgage is and will remain a
valid and enforceable second lien on the Premises subject only to the title
exceptions set forth in clause (i) of this Section and the lien of the Prior
Mortgage (as hereinafter defined); and (v) the Mortgagor will preserve such
title, and will forever warrant and defend the validity and priority of the lien
hereof against the claims of all persons and parties whatsoever.
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<PAGE>
Section 1.02. Intentionally Omitted.
Section 1.03. Flood Insurance Status. The Premises are not
located in an area identified by the Secretary of Housing and Urban Development
as an area having special flood hazards pursuant to the terms of the National
Flood Insurance Act of 1968, or the Flood Disaster Protection Act of 1973, as
same may have been amended to date.
Section 1.04. Operation of the Premises. (i) The Mortgagor has
all necessary certificates, licenses, authorizations, registrations, permits
and/or approvals necessary for the operation of the Premises or any part
thereof, and all required environmental permits, all of which as of the date of
the signing hereof are in full force and effect and not, to the knowledge of the
Mortgagor, subject to any revocation, amendment, release, suspension, forfeiture
or the like, (ii) the present use and/or occupancy of the Premises and/or
Improvements does not conflict with or violate any such certificate, license,
authorization, registration, permit and/or approval, or any applicable law,
ordinance, statute, rule, order, requirement or regulation and (iii) the
Mortgagor has delivered to the Mortgagee, prior to the signing hereof, duplicate
originals or appropriately certified copies of all such certificates, licenses,
authorizations, registrations, permits and/or approvals.
Section 1.05. Use of Proceeds of the Note. All the proceeds of
the Note shall be used for business or commercial purposes, and none of the
proceeds of the Note shall be used for personal, family or household purposes.
ARTICLE II
Covenants of the Mortgagor
Section 2.01. Payment of the Indebtedness. The Mortgagor will
punctually pay the Indebtedness in accordance with the terms and conditions of
the Loan Agreement.
Section 2.02. Maintenance of the Improvements. (i) The
Mortgagor shall maintain the Improvements in good repair, shall comply with the
requirements of any governmental authority claiming jurisdiction over the
Premises within the lesser of thirty (30) days after an order (an "Order")
containing such requirement has been issued by any such authority (unless such
requirement cannot be complied with within such thirty (30) day period, in which
event Mortgagor shall have such longer period as necessary to cause compliance
provided, however, that Mortgagor shall promptly commence and diligently
prosecute to completion such compliance and provided, further, that such period
shall not exceed the time required pursuant to the terms of such Order, as such
time may be extended from time to time by any such authority) or the time
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<PAGE>
required pursuant to the terms of such Order, as such time may be extended from
time to time by any such authority and shall permit the Mortgagee to enter upon
the Improvements and inspect the Improvements at all reasonable hours and
without prior notice. The Mortgagor shall not, without the prior written consent
of the Mortgagee, threaten, commit, permit or suffer to occur any waste or
except as may be expressly permitted under the terms of the Loan Agreement, the
material alteration, demolition or removal of the Improvements or any part
thereof; provided, however, that fixtures and articles of personal property
owned by Mortgagor may be removed from the Improvements if the Mortgagor
concurrently therewith replaces same with equivalent items which do not reduce
the value of the Premises or the Improvements, free of any lien, charge or claim
superior to the lien and/or security interest created hereby, except as
otherwise provided for in the Loan Agreement.
(ii) Nothing in this Section 2.02 shall require the
compliance by the Mortgagor with any Order so long as (a) the failure so to do
shall not be a default or event of default under any other mortgage or security
agreement affecting the Premises, any part thereof or interest therein, (b) the
failure so to do shall not result in the voiding, rescission or invalidation of
the certificate of occupancy or any other license, certificate, permit or
registration in respect of the Premises, (c) the failure so to do shall not
prevent, hinder or interfere with the lawful use and occupancy of the entirety
of the Improvements for their present use and occupancy, (d) the failure so to
do shall not void or invalidate any insurance maintained by the Mortgagor in
respect of the Premises, or result in a material increase of any premium
therefor or a material decrease in any coverage provided thereby, and (e) the
Mortgagor in good faith and at its own expense shall contest the Order or the
validity thereof by appropriate legal proceedings, which proceedings must
operate to prevent (1) the occurrence of any of the events described in the
preceding clauses (a) through (d) of this paragraph (ii) and (2) the collection
or other realization on any sums due or payable as a consequence of the Order,
and/or the sale or forfeiture of the Premises, any part thereof or interest
therein; provided that during such contest the Mortgagor shall, at the option of
the Mortgagee and only to the extent required under the Loan Agreement, provide
security reasonably satisfactory to the Mortgagee assuring the discharge of the
Mortgagor's obligations hereunder and of any interest, charge, fine, penalty,
fee or expense arising from or incurred as a result of such contest; and
provided further if at any time compliance with any obligation imposed upon the
Mortgagor by the Order shall become necessary to prevent (1) the occurrence of
any of the events described in clauses (a) through (d) of this paragraph (ii) or
(2) the delivery of a deed conveying the Premises or any portion thereof or
interest therein because of noncompliance, or (3) the imposition of any penalty,
fine, charge, fee, cost or expense on the Mortgagee, then the Mortgagor shall
comply with the Order in sufficient time to prevent the occurrence of any such
events, the delivery of such deed, or the imposition of such penalty, fine,
charge, fee, cost or expense on the Mortgagee.
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<PAGE>
Section 2.03. Insurance; Coverage. The Mortgagor shall keep
the Improvements insured in accordance with the terms of the Loan Agreement. The
Mortgagor shall additionally keep the Improvements insured against loss by flood
if the Premises are located in an area identified by the Secretary of Housing
and Urban Development as an area having special flood hazards and in which the
Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as
the same may have been or may hereafter be amended or modified (and any
successor acts thereto) in an amount at least equal to the outstanding
Indebtedness or the maximum limit of coverage available with respect to the
Improvements under said Act, whichever is less, and in a company or companies to
be approved by the Mortgagee, which approval shall not be unreasonably withheld
or delayed.
Section 2.04. Insurance; Proceeds. The Mortgagor shall give
the Mortgagee prompt notice of any loss covered by insurance and the Mortgagee
shall have the right to join the Mortgagor in adjusting any loss in excess of
$100,000. Except as otherwise provided in this Mortgage, the Mortgagee shall
have the option, in its sole discretion, to apply any insurance proceeds it may
receive pursuant to Section 2.03, or otherwise, to the payment of the
Indebtedness or to allow all or a portion of such proceeds to be used for the
restoration of the Improvements, subject, however, to the provisions of Section
2.06 hereof. In the event any such insurance proceeds shall be used to reduce
the Indebtedness, the same shall be applied in accordance with the terms of the
Loan Agreement. In the event that the Mortgagee elects or has agreed herein to
allow the use of such proceeds for the restoration of the Improvements, then
such use of the proceeds shall be governed as hereinafter provided in Section
2.06.
Section 2.05. Restoration of the Improvements. In the event of
damage or destruction of the Improvements, or any part thereof, as a result of
casualty, condemnation, taking or other cause, the Mortgagor shall give prompt
written notice thereof to the Mortgagee and (except in the event of
impossibility of restoration or repair in the event of condemnation or other
taking), provided that the insurance proceeds (if any) (or in the event of
condemnation or taking, the award (if any) arising out of such condemnation or
taking) recovered by the Mortgagee as herein provided are made available to
Mortgagor by Mortgagee, the Mortgagor shall promptly commence and diligently
continue to perform the repair, restoration and rebuilding of that portion of
the Improvements so damaged or destroyed (hereinafter, the "Work") so as to
restore the Improvements in full compliance with all legal requirements and so
that the Improvements shall have substantially the same value and general
utility as they were prior to the damage or destruction, and if the cost of the
Work, as reasonably estimated by the Mortgagee, shall exceed One Hundred
Thousand ($100,000) Dollars (hereinafter, collectively, "Major Work"), the
Mortgagor shall, prior to the commencement of the Major Work, furnish to the
Mortgagee for its approval: (i) complete plans and specifications for the Major
Work, with satisfactory
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<PAGE>
evidence of the approval thereof (a) by all governmental authorities whose
approval is required, (b) by all parties to or having an interest in the leases,
if any, of any portion of the Premises whose approval is required, and (c) by an
architect reasonably satisfactory to the Mortgagee (hereinafter, the
"Architect") and which shall be accompanied by the Architect's signed estimate,
bearing the Architect's seal, of the entire cost of completing the Major Work;
and (ii) certified or photostatic copies of all permits and approvals required
by law in connection with the commencement of the Major Work and as and when
obtainable, the conduct of the Major Work.
The Mortgagor shall not commence any of the Major Work until
the Mortgagor shall have complied with the applicable requirements referred to
in this Section, and after commencing the Major Work the Mortgagor shall perform
the Major Work diligently and in good faith substantially in accordance with the
plans and specifications referred to in this Section 2.05, if applicable.
Section 2.06. Restoration; Advances. So long as no Event of
Default (as hereinafter defined) has occurred and is continuing, the insurance
proceeds recovered by the Mortgagee on account of damage or destruction to the
Improvements (if any) less the reasonable cost, if any, to the Mortgagee of such
recovery and of paying out such proceeds (including reasonable attorneys' fees
and reasonable costs allocable to inspecting the Work and the plans and
specifications therefor), shall be applied by the Mortgagee to the payment of
the cost of the Work and shall be paid out from time to time to the Mortgagor
and/or, at the Mortgagee's option exercised from time to time, directly to the
contractor, subcontractors, materialmen, laborers, engineers, architects and
other persons rendering services or materials for the Work, as said Work
progresses except as otherwise hereinafter provided, but subject to the
following conditions, any of which the Mortgagee may waive:
(i) if the Work to be done is Major Work, as
determined by the Mortgagee, the Architect shall be in charge of
the Work;
(ii) each request for payment shall be made on three
(3) days' prior notice to the Mortgagee and shall be accompanied by (a) a
certificate of an officer of the Mortgagor specifying the party to whom (and for
the account of which) such payment is to be made and (b) a certificate of the
Architect if one be required under Section 2.05 above, otherwise by a
certificate of an officer of the Mortgagor stating (a) that all of the Work
completed has been done in substantial compliance with the approved plans and
specifications, if any be required under said Section 2.05, and in accordance
with all material provisions of law; (b) the sum requested is justly required to
reimburse the Mortgagor for payments by the Mortgagor to, or is justly due to,
the contractor, subcontractors, materialmen, laborers, engineers, architects or
other persons rendering services or materials for the Work (giving
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a brief description of such services and materials), and that when added to all
sums, if any, previously paid out by the Mortgagee does not exceed the value of
the Work done to the date of such certificate, and (c) that the amount of such
proceeds remaining in the hands of the Mortgagee, together with any sums made
available by the Mortgagor, will be sufficient on completion of the Work to pay
for the same in full (giving in such reasonable detail as the Mortgagee may
require an estimate of the cost of such completion);
(iii) each request shall be accompanied by sworn
statements and waivers of liens, or if unavailable, lien bonds, satisfactory to
the Mortgagee covering that part of the Work previously paid for, if any, and by
a evidence satisfactory to the Mortgagee, that there has not been filed with
respect to the Premises any mechanic's lien or other lien or instrument for the
retention of title in respect of any part of the Work not discharged of record
or bonded and that there exist no encumbrances on or affecting the Premises (or
any part thereof) other than encumbrances, if any, existing as of the date
hereof and which have been approved by the Mortgagee;
(iv) no event shall have occurred and be continuing
which with the passage of time or the giving of notice, or both,
would constitute an Event of Default;
(v) the request for any payment after the Work has
been completed shall be accompanied by certified copies of all certificates,
permits, licenses, waivers and/or other documents required by law (or pursuant
to any agreement binding upon the Mortgagor or affecting the Premises or any
part thereof) to render occupancy of the Premises legal; and
(vi) the Work can be completed not later than one
(1) month prior to the expiration of the Term as defined in the
Loan Agreement; and
(vii) the Mortgagor, prior to the commencement of
the Work, shall have either (i) deposited with the Mortgagee an amount equal to
the difference between the cost of the Work, as estimated by the Architect, and
the net insurance proceeds (or condemnation award, as the case may be) after the
deduction therefrom of the cost, if any, to the Mortgagee of the recovery and
paying out of such proceeds (including reasonable attorneys' fees and costs
allocable to inspecting the Work and the plans and specifications therefor); or
(ii) provided Mortgagee with evidence reasonably satisfactory to Mortgagee that
adequate funds are available to Mortgagor to complete the Work and that adequate
funds will be so applied by Mortgagor; provided, however, that the amount of
such deposit required hereunder (if any) shall be reduced by an amount of any
deposit which is held by the Prior Mortgagee (as defined in Section 4.11 hereof)
under the Prior Mortgage (as defined in Section 4.11 hereof) as a similar
assurance for the completion of the Work.
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Upon completion of the Work and payment in full therefor, or
upon failure on the part of the Mortgagor promptly to commence or diligently to
continue the Work, or at any time upon request by the Mortgagor, the Mortgagee
may, at its option, apply the amount of any such proceeds then or thereafter in
the hands of the Mortgagee to the payment of the Indebtedness, provided ,
however, that nothing herein contained shall prevent the Mortgagee from applying
at any time the whole or any part of such proceeds to the curing of any Event of
Default.
In the event the Work to be done is not Major Work, as
determined by the Mortgagee, then the net insurance proceeds held by the
Mortgagee for application thereto shall be paid to the Mortgagor by the
Mortgagee from time to time upon submission to the Mortgagee of bills and/or
invoices showing costs incurred in connection with the Work, subject, however,
to the foregoing provisions of this Section 2.06, except those which are
applicable only if the Work to be done is Major Work, as determined by the
Mortgagee.
Section 2.07. Restoration by the Mortgagee. Provided that the
Mortgagee shall make available to the Mortgagor, or is required herein to make
available to Mortgagor, the insurance proceeds (if any) recovered by the
Mortgagee as herein provided, if within one hundred eighty (180) days after the
occurrence of any damage or destruction to the Improvements requiring Major Work
in order to restore the Improvements, the Mortgagor shall not have submitted to
Mortgagee plans and specifications for the repair, restoration and rebuilding of
the Improvements so damaged or destroyed (approved by the Architect and by all
governmental authorities and other persons or entities, if any, whose approval
is required), or if, after such plans and specifications are approved by all
such governmental authorities and other persons or entities, if any, and the
Mortgagee, the Mortgagor shall fail to commence promptly such repair,
restoration and rebuilding (except by reason of force majeure), or if thereafter
the Mortgagor fails diligently to continue such repair, restoration and
rebuilding or is delinquent in the payment to mechanics, materialmen or others
of the costs incurred in connection with such Major Work, or, in the case of any
damage or destruction not requiring Major Work, as determined by the Mortgagee,
in order to restore the Improvements, if the Mortgagor shall fail to repair,
restore and rebuild promptly the Improvements so damaged or destroyed, then, in
addition to all other rights herein set forth, and after giving the Mortgagor
ten (10) days' written notice of the nonfulfillment of one or more of the
foregoing conditions, the Mortgagee, or any lawfully appointed receiver of the
Premises, may at their respective options, perform or cause to be performed such
repair, restoration and rebuilding, and may take such other steps as they deem
advisable to perform such repair, restoration and rebuilding, and upon
twenty-four (24) hours' prior written notice to the Mortgagor, the Mortgagee may
enter upon the Improvements to the extent reasonably necessary or appropriate
for any of the foregoing purposes, and the Mortgagor hereby waives, for the
Mortgagor and all others holding under the
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Mortgagor, any claim against the Mortgagee and such receiver arising out of
anything done by the Mortgagee or such receiver pursuant hereto (except for any
claim arising out of the gross negligence, but not mere negligence, or willful
misconduct of Mortgagee or any receiver), and the Mortgagee may, at its option,
apply insurance proceeds (without the need by the Mortgagee to fulfill any other
requirements of this Mortgage) to reimburse the Mortgagee, and/or such receiver
for all reasonable amounts expended or incurred by them, respectively, in
connection with the performance of such Work, and any excess costs shall be paid
by the Mortgagor to the Mortgagee upon demand, and such payment of excess costs
shall be deemed part of the Indebtedness and shall be secured by the lien of
this Mortgage.
Section 2.08. Intentionally Omitted.
Section 2.09. Intentionally Omitted.
Section 2.10. Mechanics' and Other Liens.
(i) The Mortgagor shall pay, bond or discharge of
record, from time to time, forthwith, all liens (and all claims and demands of
mechanics, materialmen, laborers or others, which, if unpaid, might result in or
permit the creation of a lien) on or affecting the Premises or any part thereof,
or on or affecting the revenues, rents, issues, income or profits arising
therefrom and, in general, the Mortgagor forthwith shall do, at the cost of the
Mortgagor and without expense to the Mortgagee, everything necessary to fully
preserve the lien of this Mortgage. In the event that the Mortgagor fails in a
timely manner to make payment in full of, bond or discharge, such liens the
Mortgagee may, but shall not be obligated to, make payment, bond or discharge
such liens, upon notice to the Mortgagor if practicable in order fully to
preserve the lien of this Mortgage and the collateral value of the Premises, and
the Mortgagor shall, on demand, reimburse the Mortgagee for all sums so expended
and such sums shall bear interest at the rate provided for under the Loan
Agreement.
(ii) Nothing in this Section 2.10 shall require the
payment or discharge of any obligation imposed upon the Mortgagor by subsection
(i) of this Section 2.10 so long as the Mortgagor shall bond or discharge any
lien on the Premises arising from such obligation or in good faith and at its
own expense contest the same or the validity thereof by appropriate legal
proceedings which proceedings must operate to prevent the collection thereof or
other realization thereon, the sale of the lien thereof and the sale or
forfeiture of the Premises or any part thereof, to satisfy the same; provided
that during such contest the Mortgagor shall, at the option of the Mortgagee,
provide security reasonably satisfactory to the Mortgagee, assuring the
discharge of the Mortgagor's obligation hereunder and of any additional interest
charge, penalty or expense arising from or incurred as a result of such contest;
and provided, further, that if at any time payment of any obligation imposed
upon the Mortgagor by subsection (i) of this
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Section 2.10 shall become necessary (a) to prevent the sale or forfeiture of the
Premises or any portion thereof because of non-payment, or (b) to protect the
lien of this Mortgage, then the Mortgagor shall pay the same in sufficient time
to prevent the sale or forfeiture of the Premises or to protect the lien of this
Mortgage, as the case may be.
Section 2.11. Condemnation Awards. The Mortgagor, promptly
after obtaining knowledge of the institution of any proceedings for the
condemnation of the Premises or any portion thereof, will notify the Mortgagee
of the pendency of such proceedings. The Mortgagee may participate in any such
proceedings, and the Mortgagor from time to time will deliver to the Mortgagee
all instruments requested by it to permit such participation. All awards and
compensation payable to the Mortgagor as a result of any condemnation or other
taking or purchase in lieu thereof, of the Premises or any part thereof, are
hereby assigned to and shall be paid to the Mortgagee. The Mortgagor hereby
authorizes the Mortgagee to collect and receive such awards and compensation, to
give proper receipts and acquittances therefor and, in the Mortgagee's sole
discretion, to apply the same toward the payment of the Indebtedness in
accordance with the terms of the Loan Agreement. Notwithstanding the foregoing,
so long as no Event of Default has occurred and is continuing, any awards
recovered by Mortgagee, less the reasonable cost, if any, to Mortgagee of such
recovery and of paying out such proceeds shall be applied by the Mortgagee to
the restoration of the Improvements. The Mortgagor, upon request by the
Mortgagee, shall make, execute and deliver any and all instruments requested for
the purpose of confirming the assignment of the aforesaid awards and
compensation to the Mortgagee free and clear of any liens, charges or
encumbrances of any kind or nature whatsoever, except for the Permitted
Encumbrances. The Mortgagee shall not be limited to the interest paid on the
proceeds of any award or compensation, but shall be entitled to the payment by
the Mortgagor of interest at the applicable rate provided for in the Loan
Agreement.
Notwithstanding the voiding of the original sale(s) or
leasing(s) of all or any portion of the Premises, the Mortgagor shall continue
to pay the Indebtedness at the time and in the manner provided for its payment
in the Loan Agreement. The Mortgagee may apply any such payment to the discharge
of the Indebtedness whether or not then due and payable in such priority and
proportions as the Mortgagee in its discretion shall deem to be proper. If the
Premises are sold, through foreclosure or otherwise, prior to the receipt by the
Mortgagee of such payment, the Mortgagee shall have the right, whether or not a
deficiency judgment on the Note shall have been sought, recovered or denied, to
receive said payment, or a portion thereof sufficient to pay the Indebtedness,
whichever is less. The Mortgagor, after obtaining the prior written consent of
the Mortgagee, shall file and prosecute its claim or claims for any such payment
in good faith and with due diligence and cause the same to be collected and paid
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over to the Mortgagee, and hereby irrevocably authorizes and empowers the
Mortgagee, in the name of the Mortgagor or otherwise, to collect and receipt for
any such payment and to file and prosecute such claim or claims, and although it
is hereby expressly agreed that the same shall not be necessary in any event,
the Mortgagor shall, upon demand of the Mortgagee, make, execute and deliver any
and all assignments and other instruments sufficient for the purpose of
assigning any such payment to the Mortgagee, free and clear of any encumbrances
of any kind or nature whatsoever, except for the Permitted Encumbrances and the
rights of the holder of the Prior Mortgage.
Section 2.12. Costs of Defending and Upholding the Lien. If
any action or proceeding is commenced with respect to the Premises to which
action or proceeding the Mortgagee is made a party or in which it becomes
necessary to defend or uphold the lien of this Mortgage, the Mortgagor shall, on
demand, reimburse the Mortgagee for all reasonable expenses (including, without
limitation, reasonable attorneys' fees and disbursements and reasonable
appellate attorneys' fees and disbursements) incurred by the Mortgagee in any
such action or proceeding and such expenses shall bear interest at the rate
provided for in the Loan Agreement until reimbursed. In any action or proceeding
to foreclose this Mortgage or to recover or collect the Indebtedness, the
provisions of law relating to the recovering of costs, disbursements and
allowances shall prevail unaffected by this covenant.
Section 2.13. Additional Advances and Disbursements. The
Mortgagor shall pay by the last day payable without premium or penalty all
payments and charges on all liens, encumbrances, ground and other leases and
security interests which affect or may affect or attach or may attach to the
Premises, or any part thereof, and in default thereof, the Mortgagee shall have
the right, but shall not be obligated, to pay, without prior notice to the
Mortgagor, such payments and charges and the Mortgagor shall, on demand,
reimburse the Mortgagee for amounts so paid. In addition, upon default of the
Mortgagor in the performance of any other terms, covenants, conditions or
obligations by it to be performed hereunder or under any such lien, encumbrance,
lease or security interest, the Mortgagee shall have the right, but shall not be
obligated, to cure such default in the name and on behalf of the Mortgagor. All
sums advanced and reasonable expenses incurred at any time by the Mortgagee
pursuant to this Section 2.13 or as otherwise provided under the terms and
provisions of this Mortgage or under applicable law shall bear interest from the
date that such sum is advanced or expenses incurred, to and including the date
of reimbursement, computed at a rate set forth in the Loan Agreement (the
"Default Rate"). All interest payable hereunder shall be computed on the basis
of a 360-day year over the actual number of days elapsed. Any such amounts
advanced or incurred by the Mortgagee, together with the interest thereon, shall
be payable on demand, shall, until paid, be secured by this Mortgage as a lien
on the Premises and shall be part of the Indebtedness.
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Section 2.14. Costs of Enforcement. The Mortgagor agrees to
bear and pay all expenses (including, without limitation, reasonable attorneys'
fees and disbursements and reasonable appellate attorneys' fees and
disbursements for legal services of every kind) of or incidental to the
enforcement of any provision hereof, by litigation or otherwise, or the
enforcement, compromise of settlement of this Mortgage, the Loan Agreement, the
Note or the Indebtedness, and for the curing thereof, or for defending or
asserting the rights and claims of the Mortgagee in respect thereof, by
litigation or otherwise. All rights and remedies of the Mortgagee shall be
cumulative and may be exercised singly or concurrently. Notwithstanding anything
herein contained to the contrary, the Mortgagor: (i) hereby irrevocably and
unconditionally waives any and all rights to trial by jury in any action, suit
or counterclaim arising in connection with, out of or otherwise relating to the
Note, this Mortgage or any other document or instrument now or hereafter
executed and delivered in connection therewith or the loan secured by this
Mortgage; and (ii) will not (a) at any time insist upon, or plead, or in any
manner whatever claim or take any benefit or advantage of any stay or extension
or moratorium law, any exemption from execution or sale of the Premises or any
part thereof, wherever enacted, now or at any time hereafter in force, which may
affect the covenants and terms of performance of this Mortgage, nor (b) claim,
take or insist upon any benefit or advantage of any law now or hereafter in
force providing for the valuation or appraisal of the Premises, or any part
thereof, prior to any sale or sales thereof which may be made pursuant to any
provision hereof, or pursuant to the decree, judgment or order of any court of
competent jurisdiction; nor (c) after any such sale or sales, claim or exercise
any right under any statute heretofore or hereafter enacted to redeem the
property so sold or any part thereof; (iii) hereby expressly waives all benefit
or advantage of any such law or laws; and (iv) covenants not to hinder, delay or
impede the execution of any power herein granted or delegated to the Mortgagee,
but to suffer and permit the execution of every power as though no such law or
laws had been made or enacted. The Mortgagor, for itself and all who may claim
under it, waives, to the extent that it lawfully may, all right to have the
Premises (or any part thereof) marshalled upon any foreclosure hereof.
Section 2.15. Filing Charges, Recording Fees, Taxes, etc. The
Mortgagor shall pay any and all taxes, charges, filing, registration and
recording fees, excises and levies imposed upon the Mortgagee by reason of its
ownership of the Note or this Mortgage or any mortgage supplemental hereto, any
security instrument with respect to any interest of the Mortgagor in and to any
fixture or personal property at the Premises or any instrument of further
assurance, other than income, franchise, succession, inheritance, business and
similar taxes, and shall pay all other taxes, if any, required to be paid on the
debt evidenced by the Note. In the event the Mortgagor fails to make such
payment within ten (10) days after written notice thereof to the Mortgagor, then
the Mortgagee shall have the right, but shall not be obligated, to
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pay the amount due, and the Mortgagor shall, on demand, reimburse the Mortgagee
for said amount, together with interest thereon computed at the Default Rate.
Section 2.16. Restrictive Covenants and Leasing Requirements.
Without the prior written consent of the Mortgagee, the Mortgagor shall not: (i)
execute or permit to exist any lease or occupancy of all or substantially all of
the Premises except for the actual use and occupancy of the tenant thereof; (ii)
modify, renew or amend in any material respect any lease or occupancy agreement
affecting the Premises; (iii) grant rent concessions, or discount any rents, or
collect any rents for a period of more than one month in advance; (iv) execute
any conditional bill of sale, chattel mortgage or other security instruments
covering any furniture, furnishings, fixtures and equipment, intended to be
incorporated in the Premises or the appurtenances thereto, or covering articles
of personal property placed in the Premises or purchase any of such furniture,
furnishings, fixtures and equipment so that ownership of the same will not vest
unconditionally in the Mortgagor, free from encumbrances on delivery to the
Premises except as otherwise provided in the Loan Agreement; (v) further assign
the leases and rents affecting the Premises, except in connection with the Prior
Mortgage; (vi) sell, transfer, alienate, grant, convey or assign any interest in
the Premises or any part thereof except as otherwise provided in the Loan
Agreement; (vii) further mortgage, encumber, alienate, hypothecate, grant a
security interest in or grant any other interest whatsoever in the Premises or
any part thereof, or interest therein except as otherwise provided in the Loan
Agreement; or (viii) if the Premises are now or should at any time in the future
be subject to the terms of any rent control or rent stabilization statute,
ordinance, rule or regulation, fail to comply and/or cause the Premises to
comply with the terms and requirements of such statute, ordinance, rule or
regulation, so and in such fashion as to insure that the Premises shall be
subject to the terms and provisions, and receive the benefits, of said statute,
ordinance, rule or regulation.
Section 2.17. Assignment of Rents. Subject to the Permitted
Encumbrances and the assignment of rents granted in connection with the Prior
Mortgage, the Mortgagor hereby assigns to the Mortgagee, as further security for
the payment of the Indebtedness, its interest in the rents, issues and profits
of the Premises, together with its interest in all leases and other documents
evidencing such rents, issues and profits now or hereafter in effect and its
interest in any and all deposits held as security under said leases, and shall,
upon demand, deliver to the Mortgagee a copy of each lease or other document to
which it is a party and which affects the Premises. Nothing contained in the
foregoing sentence shall be construed to bind the Mortgagee to the performance
of any of the covenants, conditions or provisions contained in any such lease or
other document or otherwise to impose any obligation on the Mortgagee
(including, without limitation, any liability under the covenant of quiet
enjoyment contained in any lease or in any law of the State in which the
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Premises are located in the event that any tenant shall have been joined as a
party defendant in any action to foreclose this Mortgage and shall have been
barred and foreclosed thereby of all right, title and interest and equity of
redemption in the Premises), except that the Mortgagee shall be accountable for
any money actually received pursuant to such assignment. The Mortgagor hereby
further grants to the Mortgagee the right (i) to enter upon and take possession
of the Premises for the purpose of collecting the said rents, issues and
profits, (ii) to dispossess by the usual summary proceedings (or any other
proceedings of the Mortgagee's selection) any tenant defaulting in the payment
thereof to the Mortgagee, (iii) to let the Premises, or any part thereof, and
(iv) to apply said rents, issues and profits, after payment of all necessary
charges and expenses on account of said Indebtedness. Such assignment and grant
shall continue in effect until the Indebtedness is paid, the execution of this
Mortgage constituting and evidencing the irrevocable consent of the Mortgagor to
the entry upon and taking possession of the Premises by the Mortgagee pursuant
to such grant, whether foreclosure has been instituted or not and without
applying for a receiver. Until the occurrence of an Event of Default, the
Mortgagor shall have a revocable license to receive said rents, issues and
profits and otherwise manage the Premises. The Mortgagor agrees to hold said
rents, issues and profits in trust and to use the same first, in payment of the
cost of the improvement and second, in payment of the Indebtedness to the extent
the same is then due and owing. Such license of the Mortgagor to collect and
receive said rents, issues and profits may be revoked by the Mortgagee upon the
occurrence of an Event of Default by giving not less than five (5) days' written
notice of such revocation, served personally upon or sent by registered mail to
the record owner of the Premises. The Mortgagor hereby appoints the Mortgagee as
its attorney-in-fact, coupled with an interest, to receive and collect all rent,
additional rent and other sums due under the terms of each lease to which the
Mortgagor is a party and to direct any such tenant, by written notice or
otherwise, to forward such rent, additional rent or other sums by mail or in
person to the Mortgagee.
Section 2.18. Indemnity. The Mortgagor agrees that it shall
indemnify, defend and hold harmless the Mortgagee from and against all loss,
liability, obligation, claim, damage, penalty, cause or action, cost and
expense, including without limitation any assessments, levies, impositions,
judgments, reasonable attorneys' fees and disbursements, cost of appeal bonds
and printing costs, imposed upon or incurred by or asserted against the
Mortgagee (other than those arising from the gross negligence, but not mere
negligence, or willful misconduct of Mortgagee) by reason of (a) ownership of
this Mortgage; (b) any accident, injury to or death of persons or loss of or
damage to property occurring on or about the Premises; (c) any use, non-use or
condition of the Premises; (d) any failure on the part of the Mortgagor to
perform or comply with any of the terms of this Mortgage; (e) performance of any
labor or services or the furnishing of any materials or other property in
respect of the Premises or any part for maintenance or otherwise;
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(f) the imposition of any mortgage, real estate or governmental tax incurred as
a result of this Mortgage or the Note, other than income tax payable by, or
other taxes personal to, the Mortgagee; or (g) any violation or alleged
violation by the Mortgagor of any law. Any amounts payable under this Section
2.18 shall be due and payable on demand and until paid shall bear interest at
the Default Rate. If any action is brought against the Mortgagee by reason of
any of the foregoing occurrences, the Mortgagor will, upon the Mortgagee's
request, defend and resist such action, suit or proceeding, at the Mortgagor's
sole cost and expense by counsel approved by the Mortgagee.
ARTICLE III
Default and Remedies
Section 3.01. Events of Default. The following shall
constitute "Events of Default" under this Mortgage: the occurrence
of any Event of Default under the Loan Agreement.
Section 3.02. Remedies.
(i) Upon the occurrence of an Event of Default
under Section 10.7 of the Loan Agreement, the entire unpaid Indebtedness shall
be immediately due and payable and the Mortgagee may exercise any of the rights
and remedies described in this Section 3.02(i). Upon the occurrence of any Event
of Default, the Mortgagee may, in addition to any rights or remedies available
to it hereunder, take such action as it deems advisable to protect and enforce
its rights against the Mortgagor and in and to the Premises, including, but not
limited to, the following actions, each of which may be pursued concurrently or
otherwise, at such time and in such order as the Mortgagee may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of the Mortgagee: (1) declare the entire unpaid Indebtedness to be
immediately due and payable; or (2) enter into or upon the Premises, either
personally or by its agents, nominees or attorneys and dispossess the Mortgagor
and its agents and servants therefrom, and thereupon the Mortgagee may (a) use,
operate, manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of the Premises and conduct the business thereat; (b)
complete any construction on the Premises in such manner and form as the
Mortgagee deems advisable; (c) make alterations, additions, renewals,
replacements and improvements to or on the Improvements and the balance of the
Premises; (d) exercise all rights and powers of the Mortgagor with respect to
the Premises, whether in the name of the Mortgagor or otherwise, including,
without limitation, the right to make, cancel, enforce or modify leases, obtain
and evict tenants, and sue for, collect and receive all earnings, revenues,
rents, issues, profits and other income of the Premises and every part thereof;
and (e) apply the receipts from the Premises to the payment of the Indebtedness,
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after deducting therefrom all expenses (including reasonable attorneys' fees and
disbursements) incurred in connection with the aforesaid operations and all
amounts necessary to pay the taxes, assessments, insurance and other charges in
connection with the Premises, as well as just and reasonable compensation for
the services of the Mortgagee, its counsel, agents and employees; or (3) if
allowed under applicable law, institute proceedings for the complete foreclosure
of this Mortgage in which case the Premises may be sold for cash or credit in
one or more parcels; or (4) with or without entry and, to the extent permitted,
and pursuant to the procedures provided by applicable law, institute proceedings
for the partial foreclosure of this Mortgage for the portion of the Indebtedness
then due and payable, subject to the lien of this Mortgage continuing unimpaired
and without loss of priority so as to secure the balance of the Indebtedness not
then due; or (5) institute an action, suit or proceeding in equity for the
specific performance of any covenants, condition or agreement contained herein,
in the Loan Agreement or in the Note; or (6) recover judgment on the Note, the
Loan Agreement or any guaranty either before, during or after or in lieu of any
proceedings for the enforcement of this Mortgage; or (7) apply for the
appointment of a trustee, receiver, liquidator or conservator of the Premises,
without regard for the adequacy of the security for the Indebtedness and without
regard for the solvency of the Mortgagor, any guarantor or of any person, firm
or other entity liable for the payment of the Indebtedness to which appointment
the Mortgagor does hereby consent; or (8) sell the Premises, or any part
thereof, to the extent permitted and pursuant to the procedures provided by the
laws of the State in which the Premises are located, and all estate, right,
title and interest, claim and demand therein, and right of redemption thereat,
at one or more sales, as an entity or in parcels, and at such time and place,
upon such terms and after such notice thereof as may be required by applicable
law; or (9) pursue such other remedies as the Mortgagee may have under
applicable law, including, without limitation, the remedy of strict foreclosure
and the seeking and obtaining of a deficiency judgment.
(ii) The purchase money proceeds or avails of any
sale made under or by virtue of this Article III, together with any other sums
which then may be held by the Mortgagee under this Mortgage, whether under the
provisions of this Article III or otherwise, shall be applied as follows:
First: To the payment of the costs and
expenses of any such sale, or the costs and
expenses of entering upon, taking possession of,
removal from, holding, operating and managing the
Premises or any part thereof, as the case may be,
including reasonable compensation to the
Mortgagee, its agents and counsel, and of any
judicial proceedings wherein the same may be made,
and of all expenses, liabilities and advances made
or incurred by the Mortgagee under this Mortgage,
together with interest as provided
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herein on all advances made by the Mortgagee and
all taxes or assessments, except any taxes,
assessments or other charges subject to which the
Premises shall have been sold.
Second: To the payment of the whole amount
then due, owing or unpaid upon the Note for
principal and interest with interest on the unpaid
principal at the rate herein specified from and
after the happening of any Event of Default from
the due date of any such payment of principal
until the same is paid.
Third: To the payment of any other sums
required to be paid by the Mortgagor pursuant to
any provision of this Mortgage, the Loan Agreement
or of the Note.
Fourth:To the payment of the surplus, if any,
to whomsoever may be lawfully entitled to receive
the same.
The Mortgagee and any receiver of the Premises or any part thereof shall be
liable to account for only those rents, issues and profits actually received by
it.
(iii) The Mortgagee may adjourn from time to
time any sale by it to be made under or by virtue of this Mortgage by
announcement at the time and place appointed for such sale or for such adjourned
sale or sales; and except as otherwise provided by any applicable provision of
law, the Mortgagee, without further notice or publication, may make such sale at
the time and place to which the same shall be so adjourned.
(iv) Upon the completion of any sale or sales made
by the Mortgagee under or by virtue of this Article III, the Mortgagee, or an
officer of any court empowered to do so, shall execute and deliver to the
accepted purchaser or purchasers a good and sufficient instrument, or good and
sufficient instruments, granting, conveying, assigning and transferring all
estate, right, title and interest in and to the property and rights sold. The
Mortgagee is hereby irrevocably appointed the true and lawful attorney of the
Mortgagor (coupled with an interest), in its name and stead, to make all
necessary conveyances, assignments, transfers and deliveries of the Premises and
rights so sold and for that purpose the Mortgagee may execute all necessary
instruments of conveyance, assignment, transfer and delivery, and may substitute
one or more persons with like power, the Mortgagor hereby ratifying and
confirming all that said attorney or such substitute or substitutes shall
lawfully do by virtue hereof. Nevertheless, the Mortgagor, if so requested by
the Mortgagee, shall ratify and confirm any such sale or sales by executing and
delivering to the Mortgagee or to such purchaser or purchasers all such
instruments as may be advisable, in the judgment of the
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Mortgagee, for the purpose, and as may be designated in such request. Any such
sale or sales made under or by virtue of this Article III, whether made under
the power of sale herein granted or under or by virtue of judicial proceedings
or of a judgment or decree of foreclosure and sale, shall operate to divest all
the estate, right, title, interest, claim and demand whatsoever, whether at law
or in equity, of the Mortgagor in and to the properties and rights so sold, and
shall be a perpetual bar both at law and in equity against the Mortgagor and
against any and all persons claiming or who may claim the same, or any part
thereof from, through or under the Mortgagor.
(v) In the event of any sale made under or by
virtue of this Article III (whether made by virtue of judicial proceedings or of
a judgment or decree of foreclosure and sale), the entire Indebtedness, if not
previously due and payable, immediately thereupon shall, anything in the Note,
the Loan Agreement or in this Mortgage to the contrary notwithstanding, become
due and payable.
(vi) Upon any sale made under or by virtue of this
Article III (whether made by virtue of judicial proceedings or of a judgment or
decree of foreclosure and sale), the Mortgagee may bid for and acquire the
Premises or any part thereof or interest therein and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the
Indebtedness of the Mortgagor secured by this Mortgage the net sales price after
deducting therefrom the expenses of the sale and the costs of the action and any
other sums which the Mortgagee is authorized to deduct under this Mortgage.
(vii) No recovery of any judgment by the
Mortgagee and no levy of an execution under any judgment upon the Premises or
upon any other property of the Mortgagor shall affect in any manner or to any
extent, the lien of this Mortgage upon the Premises or any part thereof, or any
liens, rights, powers or remedies of the Mortgagee hereunder, but such liens,
rights, powers and remedies of the Mortgagee shall continue unimpaired as
before.
Section 3.03. Payment of Indebtedness After Default. Upon the
occurrence of any Event of Default and the acceleration of the maturity hereof,
if, at any time prior to foreclosure sale, the Mortgagor or any other person
tenders payment of the amount necessary to satisfy the Indebtedness, the same
shall constitute an evasion of the payment terms hereof and/or of the Note
and/or the Loan Agreement and shall be deemed to be a voluntary prepayment
hereunder, in which case such payment must include the premium and/or fee
required under the prepayment provision, if any, contained herein or in the
Note. This provision shall be of no force or effect if at the time that such
tender of payment is made, the Mortgagor has the right under this Mortgage, the
Loan Agreement or the Note to prepay the Indebtedness without penalty or
premium.
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Section 3.04. Possession of the Premises. Upon the occurrence
of any Event of Default hereunder, it is agreed that the Mortgagor, if it is the
occupant of the Premises or any part thereof, shall immediately surrender
possession of the Premises so occupied to the Mortgagee, and if the Mortgagor is
permitted to remain in possession, the possession shall be as a tenant of the
Mortgagee and, on demand, Mortgagor shall pay to the Mortgagee monthly, in
advance, a reasonable rental for the space so occupied and in default thereof
Mortgagor may be dispossessed by the usual summary proceedings. The covenants
herein contained may be enforced by a receiver of the Premises or any part
thereof. Nothing in this Section 3.04 shall be deemed to be a waiver of the
provisions of this Mortgage prohibiting the sale or other disposition of the
Premises without the Mortgagee's prior written consent.
Section 3.05. Interest After Default. All unpaid and accrued
interest, including any interest accruing after an Event of Default, shall be
secured by this Mortgage as a part of the Indebtedness. Nothing in this Section
3.05 or in any other provision of this Mortgage shall constitute an extension of
the time of payment of the Indebtedness.
Section 3.06. Mortgagor's Actions After Default. After the
happening of any Event of Default and immediately upon the commencement of any
action, suit or other legal proceedings by the Mortgagee to obtain judgment for
the Indebtedness, or of any other nature in aid of the enforcement of the Note,
the Loan Agreement or of this Mortgage, the Mortgagor will (i) waive the
issuance and service of process and enter its voluntary appearance in such
action, suit or proceeding and (ii) if required by the Mortgagee, consent to the
appointment of a receiver or receivers of the Premises and of all the earnings,
revenues, rents, issues, profits and income thereof.
Section 3.07. Control by Mortgagee After Default.
Notwithstanding the appointment of any receiver, liquidator or trustee of the
Mortgagor, or of any of its property, or of the Premises or any part thereof,
the Mortgagee shall be entitled to retain possession and control of all property
now and hereafter covered by this Mortgage.
ARTICLE IV
Miscellaneous
Section 4.01. Credits Waived. The Mortgagor will not claim nor
demand nor be entitled to any credit or credits against the Indebtedness for so
much of the taxes assessed against the Premises or any part thereof, as is equal
to the tax rate applied to the amount due on this Mortgage or any part thereof,
and no deductions shall otherwise be made or claimed from the taxable
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<PAGE>
value of the Premises or any part thereof by reason of this Mortgage or the
Indebtedness secured hereby.
Section 4.02. No Releases. The Mortgagor agrees, that in the
event the Premises (or any part thereof or interest therein) are sold and the
Mortgagee enters into any agreement with the then owner of the Premises
extending the time of payment of the Indebtedness, or otherwise modifying the
terms hereof, the Mortgagor shall continue to be liable to pay the Indebtedness
according to the tenor of any such agreement unless expressly released and
discharged in writing by the Mortgagee.
Section 4.03. Notices. All notices hereunder shall be in
writing and shall be deemed to have been sufficiently given or served for all
purposes when sent to any party hereto in accordance with the terms and
conditions of the Loan Agreement.
Section 4.04. Binding Obligations. The provisions and
covenants of this Mortgage shall run with the land, shall be binding upon the
Mortgagor and shall inure to the benefit of the Mortgagee, subsequent holders of
this Mortgage, and the respective successors and assigns of the foregoing. For
the purpose of this Mortgage, the term "Mortgagor" shall include and refer to
the Mortgagor named herein, any subsequent owners of the Premises (or any part
thereof or interest therein), and their respective heirs, executors, legal
representatives, successors and assigns. If there is more than one Mortgagor,
all their undertakings hereunder shall be deemed joint and several.
Section 4.05. Legal Construction. The creation of this
Mortgage, the perfection of the lien or security interest in the Premises, and
the rights and remedies of the Mortgagee with respect to the Premises, as
provided herein and by the laws of the State wherein the Real Property is
located, shall be governed by and construed in accordance with the internal laws
of the state wherein the Real Property is located without regard to principles
of conflict of law. Otherwise, to the extent permitted by applicable law, this
Mortgage, the Note, the Loan Agreement and all other obligations of Mortgagor
(including the liability of Mortgagor for any deficiency following a foreclosure
of all or any part of the Premises) shall be governed by and construed in
accordance with the internal laws of the State of New York without regard to
principles of conflicts of laws, such state being the state where such documents
were executed and delivered. Nothing in this Mortgage, the Loan Agreement, the
Note or in any other agreement between the Mortgagor and the Mortgagee shall
require the Mortgagor to pay, or the Mortgagee to accept, interest in an amount
which would subject the Mortgagee to any penalty or forfeiture under applicable
law. In the event that the payment of any charges, fees or other sums due
hereunder or under the Note, the Loan Agreement or any such other agreement
which are or could be held to be in the nature of interest and which would
subject the Mortgagee to any penalty or forfeiture under applicable law, then
ipso facto the obligations of the Mortgagor to make such payment shall be
reduced to the highest
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rate authorized under applicable law. Should the Mortgagee receive any payment
which is or would be in excess of the highest rate authorized under law, such
payment shall have been, and shall be deemed to have been, made in error and
shall automatically be held by the Mortgagee as additional cash collateral for
the Indebtedness.
Section 4.06. Captions. The captions of the Sections of this
Mortgage are for the purpose of convenience only and are not intended to be a
part of this Mortgage and shall not be deemed to modify, explain, enlarge or
restrict any of the provisions hereof.
Section 4.07. Further Assurances. The Mortgagor shall do,
execute, acknowledge and deliver, at the sole cost and expense of the Mortgagor,
all and ever such further acts, deeds, conveyances, mortgages, assignments,
estoppel certificates, notices of assignment, transfers and assurances as the
Mortgagee may require from time to time in order to better assure, convey,
grant, assign, transfer and confirm unto the Mortgagee, the rights now or
hereafter intended to be granted to the Mortgagee under this Mortgage, any other
instrument executed in connection with this Mortgage or any other instrument
under which the Mortgagor may be or may hereafter become bound to convey,
mortgage or assign to the Mortgagee for carrying out the intention of
facilitating the performance of the terms of this Mortgage. The Mortgagor hereby
appoints the Mortgagee its attorney-in-fact to execute, acknowledge and deliver
for and in the name of the Mortgagor any and all of the instruments mentioned in
this Section 4.07 and this power, being coupled with an interest, shall be,
irrevocable as long as any part of the Indebtedness remains unpaid.
Section 4.08. Severability. Any provision of this Mortgage
which is prohibited or unenforceable in any jurisdiction or prohibited or
unenforceable as to any person or entity shall, as to such jurisdiction, person
or entity or circumstance be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provisions in any other
jurisdiction or as to any other person or entity or circumstance.
Section 4.09. General Conditions.
(i) All covenants hereof shall be construed as
affording to the Mortgagee rights additional to and not exclusive of the rights
conferred under the provisions of any other applicable law.
(ii) This Mortgage cannot be altered, amended,
modified or discharged orally and no executory agreement shall be effective to
modify or discharge it in whole or in part, unless it is in writing and signed
by the party against whom enforcement of the modification, alteration, amendment
or discharge is sought.
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(iii) No remedy herein conferred upon or
reserved to the Mortgagee is intended to be exclusive of any other remedy or
remedies, and each and every such remedy shall be cumulative, and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute. No delay or omission of the Mortgagee in
exercising any right or power accruing upon any Event of Default shall impair
any such right or power, or shall be construed to be a waiver of any such Event
of Default, or any acquiescence therein. Acceptance of any payment (other than a
monetary payment in cure of a monetary default) after the occurrence of an Event
of Default shall not be deemed a waiver of or a cure of such Event of Default
and every power and remedy given by this Mortgage to the Mortgagee may be
exercised from time to time as often as may be deemed expedient by the
Mortgagee. Nothing in this Mortgage, the Loan Agreement or in the Note shall
limit or diminish the obligation of the Mortgagor to pay the Indebtedness in the
manner and at the time and place therein respectively expressed.
(iv) No waiver by the Mortgagee will be effective
unless it is in writing and then only to the extent specifically stated. Without
limiting the generality of the foregoing, any payment made by the Mortgagee for
insurance premiums, taxes, assessments, water rates, sewer rentals, levies, fees
or any other charges affecting the Premises, shall not constitute a waiver of
the Mortgagor's default in making such payments and shall not obligate the
Mortgagee to make any further payments.
(v) The Mortgagee shall have the right to appear in
and defend any action or proceeding, in the name and on behalf of the Mortgagor
which the Mortgagee, in its reasonable discretion, feels may adversely affect
the Premises or this Mortgage. The Mortgagee shall also have the right to
institute any action or proceeding which the Mortgagee, in its discretion, feels
should be brought to protect its interest in the Premises or its rights
hereunder. All costs and expenses incurred by the Mortgagee in connection with
such actions or proceedings, including, without limitation, reasonable
attorneys' fees and expenses and appellate attorneys' fees and expenses, shall
be paid by the Mortgagor on demand and shall be secured by this Mortgage.
(vi) In the event of the passage after the date of
this Mortgage of any law of any governmental authority having jurisdiction
hereof or the Premises, deducting from the value of land for the purpose of
taxation, affecting any lien thereon or changing in any way the laws for the
taxation of mortgages or debts secured by mortgages for federal, state or local
purposes, or the manner of the collection of any such taxes, so as to affect
this Mortgage, the Mortgagor shall promptly pay to the Mortgagee, on demand, all
taxes, costs and charges for which the Mortgagee is or may be liable as a result
thereof; provided that if said payment shall be prohibited by law, render the
Note usurious or subject the Mortgagee to any penalty or forfeiture, then and in
such event the
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Indebtedness shall, at the option of the Mortgagee, be immediately due and
payable.
(vii) The Mortgagor hereby appoints the Mortgagee
as its attorney-in-fact in connection with the personal property and fixtures
covered by this Mortgage, where permitted by law, to file on its behalf any
financing statements or other statements in connection therewith with the
appropriate public office signed by the Mortgagee, as secured party. This power,
being coupled with an interest, shall be irrevocable so long as any part of the
Indebtedness remains unpaid.
Section 4.10. Multisite Real Estate Transaction. Mortgagor
acknowledges that this Mortgage is one of a number of other mortgages, deeds of
trust and assignments of leases and rents and other security documents
(hereinafter collectively the "Other Loan Documents") which secure the
Indebtedness in whole or in part. Mortgagor agrees that the lien of this
Mortgage shall be absolute and unconditional and shall not in any manner be
affected or impaired by any acts or omissions whatsoever of Mortgagee and,
without limiting the generality of the foregoing, the lien hereof shall not be
impaired by any acceptance by Mortgagee of any security for or guarantors upon
any of the Indebtedness or by any failure, neglect or omission on the part of
Mortgagee to realize upon or protect any of the Indebtedness or any collateral
security therefor including the Other Loan Documents. The lien hereof shall not
in any manner be impaired or affected by any release (except as to the property
released), sale, pledge, surrender, compromise, settlement, renewal, extension,
indulgence, alteration, changing, modification or any disposition of any of the
Indebtedness or of any of the collateral security therefor, including the Other
Loan Documents or any guarantee thereof. Mortgagee may, at its discretion,
foreclose, exercise any power of sale or exercise any other remedy available to
it under any or all of the Other Loan Documents without first exercising or
enforcing any of its rights and remedies hereunder, or may foreclose, exercise
any power of sale, or exercise any other right available under this Mortgage
without first exercising or enforcing any of its rights and remedies under any
or all of the Other Loan Document. Such exercise of Mortgagee's rights and
remedies under any or all of the Other Loan Documents shall not in any manner
impair the Indebtedness or lien of the Mortgage, and any exercise of the rights
or remedies of Mortgagee hereunder shall not impair the lien of any of the Other
Loan Documents or any of Mortgagee's rights and remedies thereunder. Mortgagor
specifically consents and agrees that Mortgagee may exercise its rights and
remedies hereunder and under the Other Loan Documents separately or concurrently
and in any order that Mortgagee may deem appropriate.
Section 4.11. Prior Mortgage. With respect to the mortgages of
all or part of the Premises to which this Mortgage is subordinate as set forth
in Schedule B annexed hereto, (together with the note or notes secured thereby
and all other documents securing said note or notes, collectively, the "Prior
Mortgage"),
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the following terms, covenants, conditions, representations and
warranties shall apply.
(a) The Mortgagor hereby warrants and represents as follows:
(i) all interest payments, principal payments and other payments and
charges required thereby have been paid to the extent they are payable
to the date hereof; (ii) the Mortgagor is not in default under any of
the terms or provisions of the Prior Mortgage required to be observed
or performed; (iii) no term, covenant or provisions of the Prior
Mortgage prohibits or imposes a limitation upon the grant and demise of
this Mortgage; and (iv) the Mortgagor has, prior to its execution
hereof, delivered to the Mortgagee true and correct duplicate original
copies of the Prior Mortgage and of any and all amendments and
modifications thereof.
(b) The Mortgagor covenants and agrees as follows: (i)
to promptly pay when due, all payments, additional payments
and other sums or charges required to be paid by the Mortgagor
under the Prior Mortgage; (ii) to perform and observe all
covenants and conditions to be performed and/or observed by
the Mortgagor under the Prior Mortgage and shall promptly
deliver to the Mortgagee photocopies of all notices,
agreements and modifications (whether proposed or actual)
received by the Mortgagor from any holder or holders of the
Prior Mortgage (the "Prior Mortgagee") or counsel therefor
within three (3) days after receipt thereof by the Mortgagor;
(iii) not to do, permit, suffer or refrain from doing anything
as a result of which, there could be a default under or breach
of any of the terms of the Prior Mortgage; (iv) not to
surrender any of the property mortgaged under the Prior
Mortgage or to modify, amend or in any way alter or permit the
alteration of any of the terms of the Prior Mortgage or so as
to (A) increase the sums payable thereunder, whether
characterized as interest, debt service or otherwise, (B)
extend the term thereof, (C) increase the principal sums
secured thereby, (D) make materially more onerous to the
Mortgagor any term or provision of the Prior Mortgage and/or
(E) jeopardize, reduce or further subordinate either the
rights or remedies of the Mortgagee hereunder or the lien of
this Mortgage without the prior written consent of the
Mortgagee in each instance; (v) not to waive, excuse or
discharge any of the obligations and agreements of the Prior
Mortgagee; (vi) to do all things necessary to preserve
unimpaired all of the Mortgagor's rights under the Prior
Mortgage; and (vii) to furnish to the Mortgagee such
information and evidence as the Mortgagee may reasonably
request concerning the Mortgagor's due observance, performance
and compliance with the terms, covenants and provisions of the
Prior Mortgage. The Mortgagee shall have the right upon the
occurrence of any default, exercisable by notice to the
Mortgagor, to require the Mortgagor to make payments of
principal and interest under the Prior Mortgage through the
Mortgagee and, if the Mortgagee exercises such right, the
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Mortgagor shall deliver to the Mortgagee a check in the amount of each
installment of such principal and interest, payable to the order of the
holder of the Prior Mortgage, not later than three (3) days prior to
the due date thereof and the Mortgagee shall promptly forward such
check to said holder.
(c) In the event of any default beyond the applicable grace
period set forth in the Prior Mortgage by the Mortgagor in the
performance of any of its obligations under the Prior Mortgage,
including, without limitation, any default in the terms of repayment
thereunder, including, but not limited to, charges and impositions made
payable by the Prior Mortgagee thereunder, then, in each and every
case, the Mortgagee may, at its option and without notice, cause the
default or defaults to be remedied and otherwise exercise any and all
of the rights of the Mortgagor thereunder in the name of and on behalf
of the Mortgagor. The Mortgagor shall, on demand, reimburse the
Mortgagee for all advances made and reasonable expenses incurred by the
Mortgagee in curing any such default (including, without limitation,
reasonable attorney's fees), together with interest thereon computed at
the Default Rate from the date that an advance is made or expense is
incurred to and including the date the same is paid.
(d) The Mortgagor hereby irrevocably designates the Mortgagee
its agent and attorney-in-fact to perform or observe on behalf of the
Mortgagor any covenant or condition which the Mortgagor fails to
perform or observe under the Prior Mortgage within any applicable grace
period specified in the Prior Mortgage, including, but not limited to,
the payment of any principal and/or interest payable under the Prior
Mortgage, and any advances made by the Mortgagee in connection with
such performance or observance shall be repaid by the Mortgagor within
ten (10) days of demand with interest at the Default Rate and the
amount so advanced with interest, shall be a lien upon the Mortgaged
Property and shall be secured by this Mortgage. The performance or
observance of such covenant or condition by the Mortgagee shall not
prevent the Mortgagor's failure so to perform or observe from
constituting an Event of Default. In performing or observing any such
covenant or condition, the Mortgagee shall have the right to enter upon
the Premises. Upon receipt by the Mortgagee from the Mortgagor and/or
the holder of the Prior Mortgage of any notice of default under the
Prior Mortgage, the Mortgagee may rely thereon and take any action
permitted by this Section 4.11 to remedy such default notwithstanding
that the existence of such default or the nature thereof may be
questioned or denied by the Mortgagor. Nothing contained in this
Section 4.11 shall be deemed to create any duty or obligation on the
part of the Mortgagee to take any action with respect to the Prior
Mortgage and/or the curing of any defaults thereunder.
(e) The Mortgagor represents and warrants that neither
the Mortgagor nor any affiliate of the Mortgagor nor any
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<PAGE>
person acting on behalf of either the Mortgagor or any affiliate of the
Mortgagor is the holder of the Prior Mortgage or any participation
therein or is the owner of a legal or equitable interest in such holder
(other than by reason of being a shareholder in any one or more of the
Term Loan Lenders (as defined in the Loan Agreement).
(f) If the Mortgagor or any subsequent owner of the Premises
or any affiliate or agent or nominee of the Mortgagor or such
subsequent owner becomes the Prior Mortgagee then notwithstanding
anything to the contrary contained in any document, agreement or law
the lien of the Prior Mortgage shall merge with the fee ownership of
the Premises and the lien of this Mortgage shall automatically become a
first mortgage lien on the Premises.
(g) To the extent that the rights of the Prior Mortgagee
preclude or preempt the Mortgagee from exercising any of its rights
given the Mortgagee hereunder, then the rights of the Prior Mortgagee
shall control and to the extent that the terms of the Prior Mortgage
are inconsistent with the terms of this Mortgage then the Mortgagee
acknowledges that the terms provided for in this Mortgage are
subordinate to the terms of the Prior Mortgage for so long as the Prior
Mortgage remains a lien on the Premises prior to the lien of this
Mortgage.
Section 4.12. THE UNDERSIGNED ACKNOWLEDGES THAT THIS LOAN IS A
COMMERCIAL TRANSACTION, AND HEREBY WAIVES ITS RIGHT TO NOTICE AND HEARING UNDER
CHAPTER 903A OF THE CONNECTICUT GENERAL STATUTES, OR AS OTHERWISE ALLOWED BY ANY
STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT REMEDY WHICH MORTGAGEE OR
ITS SUCCESSORS OR ASSIGNS MAY DESIRE TO USE.
Section 4.13. This Mortgage is an open end mortgage pursuant
to Section 49-2(c) of the Connecticut General Statutes. Mortgagee shall have the
right under this Mortgage to make future advances pursuant to the
above-referenced Loan Agreement, and to make further advances from time to time
pursuant to the above-referenced Loan Agreement. The full amount of the loan
authorized is $25,000,000 of which $14,297,461.74 has been advanced as of the
date hereof, and $10,702,538.26 may be advanced from time to time. The foregoing
notwithstanding, nothing in this Mortgage shall obligate Mortgagee to make
advances except in accordance with the terms of the Loan Agreement, and the
provisions of this paragraph shall not be construed by Mortgagor as Mortgagee's
agreement to make loan advances in any other manner.
Section 4.14. Receipt of Copy. The Mortgagor
acknowledges that it has received a true copy of this Mortgage,
provided without charge.
Section 4.15. Loan Agreement Paramount. If and to the extent
that any provisions of this Mortgage conflict or are otherwise inconsistent with
any provisions of the Loan Agreement, the provisions of the Loan Agreement shall
prevail.
Section 4.16. Intercreditor Agreement. The rights of Mortgagee
to enforce its rights and remedies hereunder shall be subject to the terms and
conditions of that Intercreditor Agreement dated as of the date hereof by and
between Mortgagee, in its individual capacity, GECC and Mortgagee in its
capacity as administrative and collateral monitoring agent for the Lenders and
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<PAGE>
The Chase Manhattan Bank, N.A., Fleet National Bank and Chase
Manhattan Bank, N.A. as agent for itself and Fleet National Bank.
IN WITNESS WHEREOF, this Mortgage has been duly executed by
the Mortgagor as of the date first above written.
ATTEST: SWANK, INC.
____________________________ By: ____________________________
Name: Andrew C. Corsini Name: John A. Tulin
Title: Secretary Title: President
WITNESS:
- ---------------------------
Name:
- ---------------------------
Name:
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FSC SECURITY AGREEMENT
FSC SECURITY AGREEMENT dated as of May 24, 1996, between SWANK
SALES INTERNATIONAL (V.I.), INC., a corporation duly organized and validly
existing under the laws of the Virgin Islands of the United States ("FSC"), and
IBJ SCHRODER BANK & TRUST COMPANY, as agent for the Lenders referred to below
(in such capacity, the "Agent").
Concurrently with the execution and delivery of this FSC
Security Agreement, (i) Swank, Inc., a Delaware corporation ("Swank"), the
financial institutions which are or which become party thereto (the "Lenders")
and the Agent are entering into a Revolving Credit and Security Agreement (as
modified and supplemented and in effect from time to time, being herein called
the "Credit Agreement").
To induce the Agent and Lenders to enter into the Credit
Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the FSC and the Agent have agreed
as follows:
Section 1. Definitions. Except as expressly provided
herein, terms defined in the Credit Agreement are used herein as
defined therein. The following terms shall have the following
respective meanings:
"Accounts" shall have the meaning ascribed thereto in
Section 4(a).
"Collateral" shall have the meaning ascribed thereto in
Section 4.
"Guaranteed Obligations" shall have the meaning
ascribed thereto in Section 3.
"Instruments" shall have the meaning ascribed thereto
in Section 4(b).
"Letter of Indemnity Obligations" shall mean all obligations
of Swank at any time outstanding to IBJ Schroder Bank & Trust Company
arising in respect of letters of indemnity, steamship guaranties,
airway releases and similar undertakings issued by IBJ Schroder Bank &
Trust Company (without any obligation on the part of IBJ Schroder Bank
& Trust Company to do so other than in compliance with and pursuant to
the Credit Agreement) to enable Swank to obtain delivery of goods in
the possession or control of air, marine, or other carriers in the
absence of required documents.
"Secured Obligations" shall mean, collectively, (i) the
principal of and interest on the Advances and all other amounts owing
to the Agent and to the Lenders by Swank under the Credit Agreement,
and (ii) Letter of Indemnity Obligations.
762637.2/SJS/25254/061 5/24/96
<PAGE>
"Swank Security Agreement" shall mean the Amended and
Restated Security Agreement between Swank and The Chase
Manhattan Bank, N.A., as agent.
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in the State of New York from time to time.
Section 2. Representations and Warranties. FSC
represents and warrants to the Lenders and the Agent that:
2.01 Corporate Existence. FSC (a) is a corporation duly
organized and validly existing under the laws of the Virgin Islands of the
United States of America; (b) has all requisite corporate power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary and
where failure so to qualify would have a material adverse effect on its
financial condition, operations, prospects or business.
2.02 No Breach. None of the execution and delivery of this
Agreement, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of FSC, or any
applicable law or regulation, or any order, writ, injunction or decree of any
court or governmental authority or agency, or any agreement or instrument to
which FSC is a party or by which it is bound or to which it is subject, or
constitute a default under any such agreement or instrument, or result in the
creation or imposition of any Lien (except as contemplated hereby) upon any of
the revenues or assets of FSC pursuant to the terms of any such agreement or
instrument.
2.03 Corporate Action. FSC has all necessary corporate power
and authority to execute, deliver and perform its obligations under this
Agreement; and the execution, delivery and performance by FSC of this Agreement
has been duly authorized by all necessary corporate action on its part; and this
Agreement has been duly and validly executed and delivered by FSC and
constitutes the legal, valid and binding obligation of FSC, enforceable in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or moratorium or other similar laws
relating to the enforcement of creditors' rights generally and by general
equitable principles.
2.04 Approvals. FSC has obtained all authorizations, approvals
and consents of, and all filings and registrations with, any governmental or
regulatory authority or agency necessary for the execution, delivery or
performance by FSC of this Agreement, or for the validity or enforceability
hereof, except for filings and recordings of the Liens created pursuant hereto.
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<PAGE>
2.05 Title. FSC is, and so long as any of the Secured
Obligations remain outstanding FSC will at all times be, the sole beneficial
owner of the Collateral and no Lien exists or will exist upon any Collateral at
any time, except for (i) the pledge and security interest in favor of the Agent
for the benefit of itself and the Lenders created or provided for herein and
(ii) the pledge and security interest in favor of Term Loan Agent. The pledge
and security interest in favor of the Agent constitutes a first priority
perfected pledge and security interest in and to all of the Collateral (as
provided by the terms of the Intercreditor Agreement).
2.06 Foreign Sales Corporation. FSC is a "FSC" within
the meaning of Section 922 of the Internal Revenue Code.
Section 3. Guarantee.
3.01 Guarantee. FSC hereby guarantees to each Lender and the
Agent and their respective successors and assigns the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on the Advances and the Note held by each Lender, and
all other amounts from time to time owing to the Lender or the Agent by Swank
under the Credit Agreement, under the Notes and under any of the Other
Documents, and all Letter of Indemnity Obligations, in each case strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "Guaranteed Obligations"). FSC hereby further agrees that if Swank
shall fail to pay in full when due (whether at stated maturity, by acceleration
or otherwise) any of the Guaranteed Obligations, FSC will promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Guaranteed Obligations, the same
will be promptly paid in full when due (whether, at such extended maturity, by
acceleration or otherwise) strictly in accordance with the terms of such
extension or renewal.
3.02 Obligations Unconditional. The obligations of FSC under
Section 3.01 hereof are absolute and unconditional, irrespective of the value,
genuineness, validity, regularity or enforceability of this Agreement, the Notes
or any of the Other Documents, or any substitution, release or exchange of any
other guarantee of or security for any of the Guaranteed Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 3.02 that the obligations of FSC hereunder shall be absolute and
unconditional under any and all circumstances. Without limiting the generality
of the foregoing, it is agreed that the occurrence of any one or more of the
following shall not affect the liability of FSC hereunder:
(i) at any time or from time to time, without notice to FSC,
the time for performance of or compliance with any of the Guaranteed
Obligations shall be extended, or such performance or compliance shall
be waived;
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(ii) any of the acts mentioned in any of the provisions
of the Other Documents shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under the Other
Documents shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of, the
Agent or any Lender or Lenders as security for any of the Guaranteed
Obligations shall fail to be perfected.
FSC hereby expressly waives diligence, presentment, demand of payment, protest
and all notices whatsoever, and any requirement that the Agent or any Lender
exhaust any right, power or remedy or proceed against Swank under the Other
Documents, or against any other Person under any other guarantee of, or security
for, any of the Guaranteed Obligations.
3.03 Reinstatement. The obligations of FSC under this Section
3 shall be automatically reinstated if and to the extent that for any reason any
payment by or on behalf of Swank in respect of the Guaranteed Obligations is
rescinded or must be otherwise restored by any holder of any of the Guaranteed
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise and FSC agrees that it will indemnify the Agent and
each Lender on demand for all reasonable costs and expenses (including, without
limitation, fees of counsel) incurred by the Agent or such Lender in connection
with such rescission or restoration.
3.04 Subrogation. FSC hereby waives all rights of subrogation
or contribution, whether arising by contract or operation of law (including,
without limitation, any such right arising under the Bankruptcy Code) or
otherwise by reason of any payment by it pursuant to the provisions of this
Section 3 and further agrees with Swank for the benefit of each of its creditors
(including, without limitation, each Lender and the Agent) that any such payment
by it shall constitute a contribution of capital by FSC to Swank, or investment
by FSC in the equity capital of Swank.
3.05 Remedies. FSC agrees that, as between FSC and the
Lenders, the obligations of Swank under the Credit Agreement and the Notes may
be declared to be forthwith due and payable as provided in Article 11 of the
Credit Agreement for purposes of Section 3.01 hereof notwithstanding any stay,
injunction or other prohibition preventing such declaration as against Swank and
that, in the event of such declaration, such obligations (whether or not due and
payable by Swank) shall forthwith become due and payable by FSC for purposes of
said Section 3.01.
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<PAGE>
3.06 Continuing Guarantee. The guarantee in this
Section 3 is a continuing guarantee and shall apply to all
Guaranteed Obligations whenever arising.
Section 4. Collateral. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Secured Obligations, FSC hereby pledges and grants to the
Agent, for the benefit of itself and the Lenders, a security interest in all of
its right, title and interest in the following property, whether now owned by
FSC or hereafter acquired and whether now existing or hereafter coming into
existence (all being collectively referred to herein as "Collateral"):
(a) all accounts and general intangibles (each as defined in
the Uniform Commercial Code) of FSC constituting any right to the
payment of money, including (but not limited to) all moneys due and to
become due to FSC in respect of any loans or advances or for inventory
or other goods sold or leased or for services rendered, all moneys due
and to become due to FSC under any guarantee (including a letter of
credit) of the purchase price of inventory sold and all tax refunds
(such accounts, general intangibles and moneys due and to become due
being herein called collectively "Accounts");
(b) all instruments, chattel paper or letters of credit (each
as defined in the Uniform Commercial Code) evidencing, representing,
arising from or existing in respect of, relating to, securing or
otherwise supporting the payment of, any of the Accounts, including
(but not limited to) promissory notes, drafts, bills of exchange and
trade acceptances (herein collectively called "Instruments");
(c) the balance from time to time in the Collateral
Account referred to in Section 5; and
(d) all proceeds, products and accessions of and to any of the
property described in clauses (a) through (c) above in this Section 4
(including, without limitation, any proceeds of insurance thereon),
and, to the extent related to any property described in said clauses or
above in this clause (d), all books, correspondence, credit files,
records, invoices and other papers, including without limitation all
tapes, cards, computer runs and other papers and documents in the
possession or under the control of FSC or any computer bureau or
service company from time to time acting for FSC.
Section 5. Collateral Account. FSC shall, commencing with the
Collateral Account Date (as that term is defined in the Swank Security
Agreement), instruct all account debtors and other Persons obligated in respect
of all Accounts to make all payments in respect of the Accounts either (i)
directly to the Agent (by instructing that such payments be remitted to a post
office box which shall be in the name and under the control of the Agent) or
(ii) to one or more other banks in any state in the United States
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<PAGE>
of America (by instructing that such payments be remitted to a post office box
which shall be in the name and under the control of the Agent) under
arrangements, in form and substance satisfactory to the Agent, pursuant to which
FSC shall have irrevocably instructed such other bank (and such other bank shall
have agreed) to remit all proceeds of such payments directly to the Agent for
deposit into the Collateral Account (to the extent such proceeds constitute
Collateral). All payments made to the Agent, as provided in the preceding
sentence, shall be immediately deposited in the Collateral Account. In addition
to the foregoing, FSC agrees that if after the Collateral Account Date the
proceeds of any Collateral hereunder (including the payments made in respect of
Accounts) shall be received by it, FSC shall as promptly as possible deposit
such proceeds into the Collateral Account. Until so deposited, all such proceeds
shall be held in trust by FSC for and as the property of the Agent and shall not
be commingled with any other funds or property of FSC. The proceeds of
Collateral deposited into such Collateral Account pursuant to this Section 5
shall be subject to the provisions (including provisions relating to withdrawal,
investment and application) of the Credit Agreement applicable to the cash
collateral account described in Section 2.10(e) thereof.
Section 6. Further Assurances; Remedies. In
furtherance of the grant of security in Section 4 hereof, FSC
hereby agrees with the Agent as follows:
6.01 Delivery and Other Perfection. FSC shall:
(i) deliver and pledge to the Agent any and all Instruments,
endorsed and/or accompanied by such instruments of assignment and
transfer in such form and substance as the Agent may request; provided,
that so long as no Event of Default shall have occurred and be
continuing, FSC may retain for collection in the ordinary course any
Instruments received by it in the ordinary course of business and the
Agent shall, promptly upon request of FSC, make appropriate
arrangements for making any other Instrument pledged by FSC available
to it for purposes of presentation, collection or renewal (any such
arrangement to be effected, to the extent deemed appropriate by the
Agent, against trust receipt or like document);
(ii) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers that
may be necessary or desirable (in the judgment of the Agent) to create,
preserve, perfect or validate any security interest granted pursuant
hereto or to enable the Agent to exercise and enforce its rights
hereunder with respect to such security interest, provided that notices
to account debtors in respect of any Accounts or Instruments shall be
subject to the provisions of clause (v) below;
(iii) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as the Agent may reasonably
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<PAGE>
require in order to reflect the security interests granted
by this Agreement;
(iv) permit representatives of the Agent at any time during normal
business hours to inspect and make abstracts from its books and records
pertaining to the Collateral, and permit representatives of the Agent
to be present at the places of business of FSC to receive copies of all
communications and remittances relating to the Collateral, all in such
manner as the Agent may require; and
(v) upon the occurrence and during the continuance of any
Event of Default, upon request of the Agent, promptly notify (and FSC
hereby authorizes the Agent so to notify) each account debtor in
respect of any Accounts or Instruments that such Collateral has been
assigned to the Agent hereunder, and that any payments due or to become
due in respect of such Collateral are to be made directly to the Agent.
6.02 Other Financing Statements and Liens. Without the prior
written consent of the Agent, FSC shall not file or suffer to be on file, or
authorize or permit to be filed or to be on file, in any jurisdiction, any
financing statement or like instrument with respect to the Collateral in which
the Agent or the Term Loan Agent are not named as the sole secured party.
6.03 Preservation of Rights. The Agent shall not be required
to take steps necessary to preserve any rights against prior parties to any of
the Collateral.
6.04 Events of Default, etc. During the period an
Event of Default shall have occurred and be continuing:
(i) FSC shall, at the request of the Agent, assemble the
Collateral owned by it at such place or places, reasonably convenient
to both the Agent and FSC, designated in its request;
(ii) the Agent may make any reasonable compromise or settlement
deemed desirable with respect to any of the Collateral and may extend
the time of payment, arrange for payment in installments, or otherwise
modify the terms of, any of the Collateral;
(iii) the Agent shall have all of the rights and remedies with
respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted);
(iv) the Agent in its discretion may, in its name or in the name of
FSC or otherwise, demand, sue for, collect or receive any money or
property at any time payable or receivable on account of or in exchange
for any of the Collateral, but shall be under no obligation to do so;
and
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<PAGE>
(v) the Agent may, upon 10 Business Days' prior written notice
to FSC of the time and place, with respect to the Collateral owned by
it or any part thereof which shall then be or shall thereafter come
into the possession, custody or control of the Agent, any of the
Lenders or any of their respective agents, sell, lease, assign or
otherwise dispose of all or any of such Collateral, at such place or
places as the Agent deems best, and for cash or on credit or for future
delivery (without thereby assuming any credit risk), at public or
private sale, without demand of performance or notice of intention to
effect any such disposition or of time or place thereof (except such
notice as is required above or by applicable statute and cannot be
waived) and the Agent or any Lender or anyone else may be the
purchaser, lessee, assignee or recipient of any or all of the
Collateral so disposed of at any public sale (or, to the extent
permitted by law, at any private sale), and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including
any equity of redemption, of FSC, any such demand, notice or right and
equity being hereby expressly waived and released. The proceeds of each
collection, sale or other disposition under this Section 6.04 shall be
applied in accordance with Section 6.07.
6.05 Removals, etc. Without 15 days' prior written notice to
the Agent, FSC shall not maintain any of its books or records with respect to
the Accounts at any office or maintain its chief executive office or its
principal place of business at any place, or permit any Collateral to be located
anywhere other than at the address indicated beneath the signature of FSC to
this Security Agreement or at the address of Swank specified in the Swank
Security Agreement.
6.06 Private Sale. The Agent and the Lenders shall incur no
liability as a result of the sale of the Collateral, or any part thereof, at any
private sale conducted in a commercially reasonable manner. FSC hereby waives
any claims against the Agent or any Lender arising by reason of the fact that
the price at which the Collateral may have been sold at such a private sale was
less than the price which might have been obtained at a public sale or was less
than the aggregate amount of the Secured Obligations, even if the Agent accepts
the first offer received and does not offer the Collateral to more than one
offeree, unless the related sale was not conducted in a commercially reasonable
manner.
6.07 Application of Proceeds. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization of
all or any part of the Collateral, and any other cash at the time held by the
Agent under this Section 6, shall be applied by the Agent:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
compensation to the Agent and its agents and counsel, and all expenses,
and advances made or incurred by the Agent in connection therewith;
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<PAGE>
Second, to the payment in full of the Secured Obligations
(other than Letter of Indemnity Obligations in excess of $1,000,000 in
the aggregate), in each case equally and ratably in accordance with the
respective amounts thereof then due and owing or as the Lenders holding
the same may otherwise agree;
Third, to the payment in full of Letter of Indemnity
Obligations in excess of $1,000,000 in the aggregate; and
Finally, to the payment to FSC, or its successors or assigns,
or as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
As used in this Section 6, "proceeds" of Collateral shall mean cash, securities
and other property realized in respect of, and distributions in kind of,
Collateral, including any thereof received under any reorganization, liquidation
or adjustment of debt of FSC or any issuer of or obligor on any of the
Collateral.
6.08 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Agent while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Agent is hereby appointed the attorney-in-fact of FSC for the
purpose of carrying out the provisions of this Section 6 and taking any action
and executing any instruments which the Agent may deem necessary or advisable to
accomplish the purposes hereof, which appointment as attorney-in-fact is
irrevocable and coupled with an interest, provided that the Agent shall not take
any action pursuant to the authority granted to it in this Section 6.08 without
first notifying FSC thereof. Without limiting the generality of the foregoing,
so long as the Agent shall be entitled under this Section 6 to make collections
in respect of the Collateral, the Agent shall have the right and power to
receive, endorse and collect all checks made payable to the order of FSC
representing any dividend, payment, or other distribution in respect of the
Collateral or any part thereof and to give full discharge for the same.
6.09 No Waiver. No failure on the part of the Agent or any of
its agents to exercise, and no course of dealing with respect to, and no delay
in exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by the Agent or any of its
agents of any right, power or remedy hereunder preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. The
remedies herein are cumulative and are not exclusive of any remedies provided by
law.
6.10 Termination. When all Secured Obligations under and as
defined in the Credit Agreement shall have been paid in full and all commitments
to lend have been terminated, this Agreement shall terminate as to the
Collateral, and the Agent shall forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or representation
whatsoever, the Collateral and the money received in respect thereof, to or on
the order of FSC entitled thereto.
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<PAGE>
6.11 Expenses. FSC agrees to pay to the Agent all reasonable
out-of-pocket expenses (including reasonable expenses for legal services of
every kind) of, or incident to, the enforcement of any of the provisions of this
Section 6, or performance by the Agent of any obligations of FSC in respect of
the Collateral which FSC has failed or refused to perform, or any actual or
attempted sale, or any exchange, enforcement, collection, compromise or
settlement in respect of any of the Collateral, and for the care of the
Collateral and defending or asserting rights and claims of the Agent in respect
thereof, by litigation or otherwise, including expenses of insurance, and all
such expenses shall be Secured Obligations entitled to the benefits of the
collateral accounts under Section 4.
6.12 Further Assurances. FSC agrees that, from time to time
upon the written request of the Agent, FSC will execute and deliver such further
documents and do such other acts and things as the Agent may reasonably request
in order fully to effect the purposes of this Agreement.
Section 7. Miscellaneous.
7.01 Financing Statements. Prior to or concurrently with the
execution and delivery of this Agreement, FSC shall file such financing
statements and other documents in such offices, and give notice to such Persons,
as the Agent may request to perfect the security interests granted by Section 4
of this Agreement.
7.02 Taxes. FSC agrees to pay before delinquency any tax or
other governmental charge which is or can become through assessment, distraint
or otherwise a lien on the Collateral and to pay any tax or other governmental
charge which may be levied on the transactions hereunder.
7.03 Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York, provided that as
to Collateral located in any jurisdiction other than New York, the Agent shall
have all the rights to which a secured party under the laws of such jurisdiction
is entitled.
7.04 Notices. All notices and other communications provided
for herein (including, without limitation, any modifications of, or waivers or
consents under, this Agreement) shall be given or mailed or delivered to the
intended recipient at the "Address for Notices" specified below its name on the
signature pages hereto; or as to either party, at such other address as shall be
designated by such party in a notice to the other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when personally delivered or, in the case of a mailed notice, upon
receipt, in each case given or addressed as aforesaid.
7.05 Waivers, etc. The terms of this Agreement may be waived,
altered or amended only by an instrument in writing duly executed by FSC and the
Agent (with the consent of the Required Lenders). Any such amendment or waiver
shall be binding upon FSC
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<PAGE>
and the Agent, each Lender and each subsequent holder of any
Secured Obligation.
7.06 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of FSC,
the Agent, the Lenders and each subsequent holder of the Secured Obligations
(provided, however, that FSC shall not assign or transfer its rights hereunder
without the prior written consent of the Agent).
7.07 Counterparts. This Agreement may be executed in one or
more counterparts and all of such counterparts taken together shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Security Agreement to be duly executed as of the day and year first above
written.
SWANK SALES INTERNATIONAL
(V.I.), INC.
By_________________________
Title:
Address for Notices:
Swank Sales International
(V.I.), Inc.
c/o Swank, Inc.
6 Hazel Street
Attleboro, Massachusetts 02703
IBJ SCHRODER BANK & TRUST COMPANY,
as Agent
By_________________________
Title:
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<PAGE>
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT, made this 24 th day
May, 1996 between IBJ SCHRODER BANK & TRUST COMPANY, as administrative and
collateral monitoring agent ("ACM Agent") for each of the financial institutions
named in or which hereafter become parties to the Loan Agreement (as hereinafter
defined) ("Lenders") and SWANK, INC. ("Pledgor").
BACKGROUND
ACM Agent, Lenders and Pledgor, are entering into a Revolving
Credit and Security Agreement dated as of May 24, 1996, 1996 (as amended,
modified, restated and supplemented from time to time, the "Loan Agreement")
pursuant to which Lenders will provide certain financial accommodations to
Borrower.
In order to induce Lenders to provide the financial
accommodations described in the Loan Agreement Pledgor has agreed to pledge and
grant a security interest in collateral described herein to ACM Agent on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration the receipt of which is hereby acknowledged, the
parties hereto agree as follows:
1. Definitions. All capitalized terms used herein which
are not defined shall have the meanings given to them in the Loan
Agreement.
2. Pledge and Grant of Security Interest.
To secure the full and punctual payment and
performance of the Obligations, Pledgor hereby assigns, transfers and pledges,
assigns, hypothecates, transfers and grants to ACM Agent a security interest in
the personal property described on Schedule A annexed hereto and all interest,
dividends, options, warrants, increases, profits and income received therefrom,
in all substitutions therefor and in all proceeds thereof in any form
(collectively, the "Collateral").
3. Representations and Warranties of Pledgor. Pledgor
represents and warrants to ACM Agent (which representations and warranties shall
be deemed to continue to be made until all of the Obligations has been paid in
full and the Loan Agreement has been irrevocably terminated) that:
(a) The execution, delivery and performance by
Pledgor of this Agreement and the pledge of the Collateral hereunder do not and
will not result in any violation of any agreement, indenture, instrument,
license, judgment, decree, order, law,
762759.2/LCB/25254/061 5/24/96
<PAGE>
statute, ordinance or other governmental rule or regulation
applicable to Pledgor.
(b) This Agreement constitutes the legal, valid, and
binding obligation of Pledgor enforceable against Pledgor in
accordance with its terms.
(c) No consent or approval of any person,
corporation, governmental body, regulatory authority or other entity, is or will
be necessary for the execution, delivery and performance of this Agreement or,
the exercise by ACM Agent of any rights with respect to the Collateral or for
the pledge and assignment of, and the grant of a security interest in, the
Collateral hereunder.
(d) There are no pending or, to the best of Pledgor's
knowledge, threatened actions or proceedings before any court, judicial body,
administrative agency or arbitrator which may materially adversely affect the
Collateral.
(e) Pledgor has the requisite power and authority to
enter into this Agreement and to pledge and assign the Collateral to ACM Agent
in accordance with the terms of this Agreement.
(f) Pledgor owns each item of the Collateral and
except for the pledge and security interest granted to ACM Agent hereunder, the
Collateral is free and clear of any other security interest, pledge, claim,
lien, charge, hypothecation, assignment, offset or encumbrance whatsoever other
than Permitted Encumbrances.
(g) The pledge and assignment of the Collateral and
the grant of a security interest under this Agreement vest in ACM Agent all
rights of Pledgor in the Collateral as contemplated by this Agreement.
4. Affirmative Covenants. Until such time as all of the
Obligations have been paid in full and the Loan Agreement has been
irrevocable terminated, Pledgor shall:
(a) Defend the Collateral against the claims and
demands of all other parties and keep the Collateral free from all security
interests and other encumbrances, except for the security interest granted to
ACM Agent under this Agreement and for Permitted Encumbrances.
(b) In the event Pledgor comes into possession of any
portion of the Collateral, hold the same in trust for ACM Agent and deliver to
ACM Agent such Collateral in the form received no later than one (1) Business
Day following Pledgor's receipt thereof.
(c) In the event any portion of the Collateral is
held by a third party, take all action that ACM Agent may reasonably request so
as to maintain the validity, enforceability, perfection and priority of ACM
Agent's security interest in the Collateral.
(d) Within two (2) Business Days of receipt thereof
by Pledgor, deliver to ACM Agent all notices and statements relating
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<PAGE>
to the Collateral received by Pledgor or any third party holding the
Collateral.
(e) Notify ACM Agent promptly of any adverse event
relating to the Collateral or any adverse change in the value of the
Collateral.
(f) At the written request of ACM Agent at any time
and from time to time, at Pledgor's sole expense, promptly take such action and
execute and deliver such financing statements and further instruments and
documents as ACM Agent may reasonably request in order to more fully perfect,
evidence or effectuate the pledge and assignment hereunder and the security
interest granted hereby and to enable ACM Agent to exercise and enforce its
rights and remedies hereunder. Pledgor authorizes ACM Agent to file without the
signature of Pledgor one or more financing statements under the Uniform
Commercial Code of the State of New York (the "UCC") relating to the Collateral,
naming ACM Agent as "secured party" in accordance with the provisions of the
Loan Agreement.
(g) Furnish to ACM Agent such other information
relating to the Collateral as ACM Agent may from time to time
reasonably request.
5. Negative Covenants. Until such time as the Obligations have
been paid in full and the Loan Agreement has been irrevocably terminated,
Pledgor shall not sell, convey, or otherwise dispose of any of the Collateral or
any interest therein or incur or permit to exist any pledge, mortgage, lien,
charge, encumbrance or any security interest whatsoever with respect to any of
the Collateral or the proceeds thereof other than that created hereby and those
constituting Permitted Encumbrances.
6. Events of Default.
The term "Event of Default" wherever used herein shall
mean the occurrence of any one of the following events:
(a) An "Event of Default" as such term is defined in
the Loan Agreement shall have occurred;
(b) Pledgor's failure to comply with or perform any
of its undertakings or obligations under this Agreement;
(c) Any representation, warranty, statement or
covenant made or furnished to ACM Agent by or on behalf of Pledgor in connection
with this Agreement proves to have been false in any material respect when made
or furnished or is breached, violated or not complied with;
(d) Pledgor shall (i) apply for, consent to, or
suffer to exist the appointment of, or the taking of possession by, a receiver,
custodian, trustee, liquidator or other fiduciary of itself or of all or a
substantial part of its property, (ii) make a general
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<PAGE>
assignment for the benefit of creditors, (iii) commence a voluntary case under
any state or federal bankruptcy laws (as now or hereafter in effect), (iv) be
adjudicated a bankrupt or insolvent, (v) file a petition seeking to take
advantage of any other law providing for the relief of debtors, (vi) acquiesce
to, or fail to have dismissed, within forty (40) days, any petition filed
against it in any involuntary case under such bankruptcy laws, or (vii) take any
action for the purpose of effecting any of the foregoing; or
(e) The Collateral is subjected to levy of execution,
attachment, distraint or other judicial process which is not stayed or lifted
within forty (40) days; or the Collateral is the subject of a claim (other than
by Lender) of a lien, security interest or other right or interest in or to the
Collateral other than with respect to a Permitted Encumbrance.
7. Remedies.
Upon the occurrence and during the continuance of an
Event of Default, ACM Agent may:
(i) Demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral pledged to
it by Pledgor hereunder (or any part thereof), as ACM Agent may determine in its
sole discretion;
(ii) Transfer the Collateral into its name or
into the name of its nominee or nominees;
(iii)Require that all interest and dividends paid
with respect to the Collateral be delivered to ACM Agent as
additional collateral security for the Obligations;
(iv) Subject to the requirements of applicable
law, sell, assign and deliver the whole or, from time to time any part of the
Collateral, with or without demand, advertisement or notice of the time or place
of sale or adjournment thereof or otherwise (all of which are hereby waived,
except such notice as is required by applicable law and cannot be waived), for
such price or prices and on such terms as ACM Agent in its sole discretion may
determine.
Pledgor acknowledges and agrees that five (5) days'
prior written notice of the time and place of any public sale of any of the
Collateral or any other intended disposition thereof shall be reasonable and
sufficient notice to Pledgor within the meaning of the UCC. Pledgor hereby
waives and releases any and all right or equity of redemption, whether before or
after sale hereunder. In addition to the foregoing, ACM Agent shall have all of
the rights and remedies of a secured party under applicable law and the UCC.
8. Proceeds of Collateral Agreement. The proceeds of any
disposition under this Agreement of the Collateral pledged to it by
Pledgor shall be applied as follows:
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<PAGE>
(a) First, to the payment of all costs, expenses and
charges of ACM Agent and to the reimbursement of ACM Agent for the prior payment
of such costs, expenses and charges incurred in connection with the care and
safekeeping of the Collateral (including, without limitation, the expenses of
any sale or any other disposition of any of the Collateral), the expenses of any
taking, reasonable attorneys' fees and expenses, court costs, any other expenses
incurred or expenditures or advances made by ACM Agent in the protection,
enforcement or exercise of its rights, powers or remedies hereunder, with
interest on any such reimbursement at the rate prescribed in the Loan Agreement
as the Default Rate from the date of payment;
(b) Second, to the payment of the Obligations, in
whole or in part, in such order as ACM Agent may elect, whether or
not such Obligations are then due;
(c) Third, to such persons, firms, corporations or
other entities as required by applicable law including, without
limitation, Section 9-504(1)(c) of the UCC; and
(d) Fourth, to the extent of any surplus to Pledgor
or as a court of competent jurisdiction may direct.
In the event that the proceeds of any collection,
recovery, receipt, appropriation, realization or sale are insufficient to
satisfy the Obligations, Pledgor shall be liable for the deficiency together
with interest thereon at the rate prescribed in the Loan Agreement as the
Default Rate plus the reasonable fees of any attorneys employed by ACM Agent to
collect such deficiency.
9. Waiver of Marshaling. Pledgor hereby waives any right
to compel any marshaling of any of the Collateral.
10. No Waiver. Any and all of ACM Agent's rights with respect
to the pledge, assignment and security interest granted hereunder shall continue
unimpaired, and Pledgor shall be and remain obligated in accordance with the
terms hereof, notwithstanding (a) the bankruptcy, insolvency or reorganization
of Pledgor, (b) the release or substitution of any item of the Collateral at any
time, or of any rights or interests therein, or (c) any delay, extension of
time, renewal, compromise or other indulgence granted by ACM Agent in reference
to any of the Obligations. Pledgor hereby waives all notice of any such delay,
extension, release, substitution, renewal, compromise or other indulgence, and
hereby consents to be bound hereby as fully and effectively as if Pledgor had
expressly agreed thereto in advance. No delay or extension of time by ACM Agent
in exercising any power of sale, option or other right or remedy hereunder, and
no failure by ACM Agent to give notice or make demand, shall constitute a waiver
thereof, or limit, impair or prejudice ACM Agent's right to take any action
against Pledgor or to exercise any other power of sale, option or any other
right or remedy.
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<PAGE>
11. Expenses. The Collateral shall secure, and Pledgor shall
pay to ACM Agent on demand, from time to time, all expenses, (including but not
limited to, attorneys' fees and costs, taxes, and all transfer, recording,
filing and other charges) of, or incidental to, the custody, care, transfer,
administration of the Collateral or any other collateral, or in any way relating
to the enforcement, protection or preservation of the rights or remedies of ACM
Agent under this Agreement or with respect to any of the Obligations.
12. Lender Appointed Attorney-In-Fact and Performance by ACM
Agent. Pledgor hereby irrevocably constitutes and appoints ACM Agent as
Pledgor's true and lawful attorney-in-fact, with full power of substitution, to
execute, acknowledge and deliver any instruments and to do in Pledgor's name,
place and stead, all such acts, things and deeds for and on behalf of and in the
name of Pledgor, which Pledgor could or might do or which ACM Agent may deem
necessary, desirable or convenient to accomplish the purposes of this Agreement,
including, without limitation, to execute such instruments of assignment or
transfer or orders and to register, convey or otherwise transfer title to the
Collateral into ACM Agent's name. Pledgor hereby ratifies and confirms all that
said attorney-in-fact may so do and hereby declare this power of attorney to be
coupled with an interest and irrevocable. ACM Agent shall not exercise this
power until an Event of Default has occurred and is continuing. If Pledgor fails
to perform any agreement herein contained, ACM Agent may itself perform or cause
performance thereof, and any expenses of ACM Agent incurred in connection
therewith shall be paid by Pledgor as provided in Section 11 hereof.
13. Dividends and Interest. Unless an Event of Default
shall have occurred, Pledgor shall be entitled to collect and receive
for Pledgor's own use dividends or interest paid with respect to the
Collateral.
14. Captions. All captions in this Agreement are included
herein for convenience of reference only and shall not constitute
part of this Agreement for any other purpose.
15. Miscellaneous.
(a) This Agreement constitutes the entire and final
agreement among the parties with respect to the subject matter hereof and may
not be changed, terminated or otherwise varied except by a writing duly executed
by the parties.
(b) No waiver of any term or condition of this
Agreement, whether by delay, omission or otherwise, shall be effective unless in
writing and signed by the party sought to be charged, and then such waiver shall
be effective only in the specific instance and for the purpose for which given.
(c) In the event that any provision of this Agreement
or the application thereof to Pledgor or any circumstance in any
jurisdiction governing this Agreement shall, to any extent, be
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<PAGE>
invalid or unenforceable under any applicable statute, regulation, or rule of
law, such provision shall be deemed inoperative to the extent that it may
conflict therewith and shall be deemed modified to conform to such statute,
regulation or rule of law, and the remainder of this Agreement and the
application of any such invalid or unenforceable provision to parties,
jurisdictions, or circumstances other than to whom or to which it is held
invalid or unenforceable, shall not be affected thereby nor shall same affect
the validity or enforceability of any other provision of this Agreement.
(d)This Agreement shall be binding upon Pledgor, and
Pledgor's heirs, executors, administrators, successors and assigns, and shall
inure to the benefit of Lender and its successors and assigns.
(e) Any notice or request hereunder may be given to
Pledgor or to ACM Agent at their respective addresses set forth below or at such
other address as may hereafter be specified in a notice designated as a notice
of change or address under this Section. Any notice or request hereunder shall
be given by (a) hand delivery, (b) registered or certified mail, return receipt
requested, (c) telex or telegram, subsequently confirmed by registered or
certified mail, or (d) telecopy to the number set out below (or such other
number as may hereafter be specified in a notice designated as a notice of
change of address) with telephone communication to a duly authorized officer of
the recipient confirming its receipt as subsequently confirmed by registered or
certified mail. Any notice or other communication required or permitted pursuant
to this Agreement shall be deemed given (a) when personally delivered to any
officer of the party to whom it is addressed, (b) on the earlier of actual
receipt thereof or three (3) days following posting thereof by certified or
registered mail, postage prepaid, or (c) upon actual receipt thereof when sent
by a recognized overnight delivery service or (d) upon actual receipt thereof
when sent by telecopier or the number set forth below with telephone
communication confirming receipt and subsequently confirmed by registered,
certified or overnight mail to the address set forth below, in each case
addressed to each party at its address set forth below or at such other address
as has been furnished in writing by a party to the other by like notice:
(A) If to the ACM Agent: IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Wing Louie
Telephone: (212) 858-2939
Telecopier: (212) 858-2151
with a copy to: Hahn & Hessen, LLP
350 Fifth Avenue
New York, New York 10118-0075
Attention: Steven J. Seif, Esq.
Telephone: (212) 736-1000
Telecopier: (212) 594-7167
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<PAGE>
(B) If to Pledgor: Swank, Inc.
90 Park Avenue
New York, New York 10016
Attention: John Tulin
Telephone: (212) 867-2600
Telecopier: (212) 370-1039
with a copy to: Parker Chapin Flattau & Klimpl LLP
1211 Avenue of the Americas
New York, New York 10036
Attention: William Freedman, Esq.
Telephone: (212) 704-6193
Telecopier: (212) 704-6288
(f) This Agreement shall be governed by and
construed and enforced in all respects in accordance with the laws of the State
of New York applied to contracts to be performed wholly within the State of New
York.
(g) PLEDGOR AND ACM AGENT EACH HEREBY EXPRESSLY
WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING
OUT OF THIS AGREEMENT OR IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO
THE DEALINGS OF THE PARTIES HERETO OR ANY OTHER AGREEMENT EXECUTED OR DELIVERED
IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATING HERETO OR THERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER SOUNDING IN CONTRACT,
TORT OR OTHERWISE; AND PLEDGOR AND ACM AGENT EACH HEREBY AGREE AND CONSENT THAT
ANY SUCH ACTIONS OR PROCEEDINGS SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY
AND THAT EITHER PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE OTHER PARTY TO THE
WAIVER OF ITS RIGHT BY TRIAL BY JURY.
(h) PLEDGOR EXPRESSLY CONSENTS TO THE JURISDICTION
AND VENUE OF THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK, AND
OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR
ALL PURPOSES IN CONNECTION WITH THIS AGREEMENT. ANY JUDICIAL PROCEEDING BY
PLEDGOR AGAINST ACM AGENT INVOLVING, DIRECTLY OR INDIRECTLY ANY MATTER OR CLAIM
IN ANY WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT SHALL BE
BROUGHT ONLY IN THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK
OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK.
PLEDGOR FURTHER CONSENTS THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS
(INCLUDING, WITHOUT LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO
EITHER OF THE AFOREMENTIONED COURTS OR A JUDGE THEREOF) OR ANY NOTICE IN
CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED INSIDE OR OUTSIDE OF
THE STATE OF NEW YORK OR THE SOUTHERN DISTRICT OF NEW YORK BY REGISTERED OR
CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE PROVIDED A
REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE
PERMISSIBLE UNDER THE RULES OF SAID COURTS. PLEDGOR WAIVES ANY OBJECTION TO
JURISDICTION AND VENUE OF ANY ACTION INSTITUTED HEREON AND SHALL NOT ASSERT ANY
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<PAGE>
DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS.
(i) This Agreement may be executed in one or more
counterparts, each of which taken together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the parties have duly executed
this Agreement as of the day and year first above written.
SWANK, INC., Pledgor
By:________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY, as
ACM Agent
By:________________________________
Name:
Title:
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762759.2/LCB/25254/061 5/24/96
Exhibit 10.07
AGREEMENT
AGREEMENT effective as of January 1, 1996 between SWANK, INC., a
Delaware corporation having its principal office at 90 Park Avenue, New York,
New York (the "Company"), and _______________________ ("Employee").
W I T N E S S E T H :
WHEREAS, in consideration of the contribution that has been, and can
continue to be, made by Employee toward the success of the business of the
Company, the Company desires to enter into this Agreement;
NOW, THEREFORE, it is agreed as follows:
1. Term and Operation of Agreement. This Agreement shall be effective
for a term (the "Term") commencing as of the date hereof and ending on the
earlier of December 31, 1998 or the termination of Employee's employment prior
to a Change in Control of the Company (as hereafter defined); provided, however,
that if there is a Change in Control subsequent to December 31, 1995 but prior
to the termination of this Agreement in accordance with the foregoing, then the
Term shall be automatically extended for a period ending on the second
anniversary of the date of such Change in Control.
For purposes of this Agreement, Employee's employment by the Company
shall be deemed to be continuing (i) for any period during which, in accordance
with any contract between him and the Company ("Employment Agreement"),
provision shall be made for Employee to perform services as an employee of the
Company and Employee shall be entitled to compensation from the Company for
same, or (ii) if there is no Employment Agreement, for any period during which
Employee is in fact performing services as an
<PAGE>
employee of the Company and receiving compensation from the Company for
same.
Anything in this Agreement to the contrary notwithstanding, neither
this Agreement nor any provision hereof shall be operative until a Change in
Control has occurred, at which time this agreement and all of its provisions
shall become operative immediately.
2. Change in Control-Termination of Employment and Compensation in
Event of Termination.
(a) After a Change in Control has occurred, Employee may
terminate his employment within two years after he has obtained actual knowledge
of the occurrence of any of the following events:
(i) Failure to elect or appoint, or re-elect or re-
appoint, Employee to, or removal of Employee from, his office and/or position
with the Company as constituted immediately prior to the Change in Control,
except in connection with the termination of Employee's employment pursuant to
subparagraph 3(a) hereof.
(ii)A reduction in Employee's overall compensation
(including any reduction in pension or other benefit programs or perquisites) or
a significant change in the nature or scope of the authorities, powers,
functions or duties normally attached to Employee's position with the Company as
referred to in clause (i) of subparagraph 2(a) hereof.
(iii)A determination by Employee made in good faith that,
as a result of a Change in Control, he is unable effectively to carry out the
authorities, powers, functions or duties attached to his position with the
Company as referred to in clause (i) of subparagraph 2(a) hereof, and the
situation is not remedied within thirty (30) calendar days after receipt by the
Company of written notice from Employee of such
2
<PAGE>
determination.
(iv) A breach by the Company of any provision of this
Agreement not covered by clauses (i), (ii) or (iii) of this subparagraph 2(a),
which is not remedied within thirty (30) calendar days after receipt by the
Company of written notice from Employee of such breach.
(v) A change in the location at which substantially all
of Employee's duties with the Company are to be performed to a location which is
not within a 20-mile radius of the address of the place where Employee is
performing services immediately prior to the Change in Control.
(vi) A failure by the Company to obtain the assumption of,
and the agreement to perform, this Agreement by any successor (within the
meaning of paragraph 8).
An election by Employee to terminate his employment under the
provisions of this subparagraph 2(a) shall not be deemed a voluntary termination
of employment by Employee for the purpose of interpreting the provisions of any
of the Company's employee benefit plans, programs or policies. Employee's right
to terminate his employment for good reason shall not be affected by his illness
or incapacity, whether physical or mental, unless the Company shall at the time
be entitled to terminate his employment under paragraph 3(a)(ii) of this
Agreement. Employee's continued employment with the Company for any period of
time less than two years after a Change in Control shall not be considered a
waiver of any right he may have to terminate his employment pursuant to this
paragraph 2(a).
(b) After a Change in Control has occurred, if Employee
terminates his employment with the Company pursuant to subparagraph 2(a) hereof
or if Employee's employment is terminated by the Company for any reason other
than pursuant to paragraph 3(a) hereof, Employee (i) shall
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<PAGE>
be entitled to his salary, bonuses, awards, perquisites and benefits, including,
without limitation, benefits and awards under the Company's stock option plans
and the Company's pension and retirement plans and programs, through the
Termination Date (as hereafter defined) and, in addition thereto, (ii) shall be
entitled to be paid in a lump-sum, on the Termination Date, an amount of cash
(to be computed, at the expense of the Company, by the partner of Coopers &
Lybrand, independent certified public accountants to the Company or such other
independent certified accountants regularly employed by the Company (the
"Accountants"), in charge of the Company's account immediately prior to the
Change in Control, whose computation shall be conclusive and binding upon
Employee and the Company) equal to 2.99 times Employee's "base amount" as
defined in Section 280G(b)(3) of the Internal Revenue Code of 1986, as amended
(the "Code"). Such lump-sum payment is hereinafter referred to as the
"Termination Compensation." Upon payment of the Termination Compensation and all
amounts to which Employee may be entitled under subparagraph 2(b)(i), any
Employment Agreement between Employee and the Company shall terminate and be of
no further force or effect; provided, however that (x) if Employee shall, in
terminating his employment with the Company pursuant to paragraph 2(a), include
in his Notice of Termination (as hereafter defined) his election to enforce his
rights under the provisions of his Employment Agreement and not under the
provisions of this Agreement or (y) if Employee shall, within thirty (30)
calendar days after he has obtained actual knowledge of the termination of his
employment by the Company other than pursuant to paragraph 3(a) of this
Agreement, notify the Company that he intends to enforce his rights under the
Employment Agreement, then, in each such case, any Employment Agreement between
Employee and the Company shall remain in full force and
4
<PAGE>
effect and the provisions of this Agreement shall terminate and be of no further
force or effect and Employee shall hold, for the benefit of the Company, any
payment on account of the Termination Compensation theretofore received by him
hereunder, pending the satisfaction of the Company's obligations to Employee
under the provisions of any Employment Agreement between Employee and the
Company (whereupon Employee shall return any such Termination Compensation to
the Company).
(c) For purposes hereof, a Change in Control shall be deemed
to have occurred if there has occurred a change in control as the term "control"
is defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934
as in effect on the date hereof (the "Act"); (ii) when any "person" (as such
term is defined in Sections 3(a)(9) and 13(d)(3) of the Act), except for an
employee stock ownership trust (or any of the trustees thereof) of the Company,
becomes a beneficial owner, directly or indirectly, of securities of the Company
representing twenty-five (25%) percent or more of the Company's then outstanding
securities having the right to vote on the election of directors; (iii) during
any period of not more than two (2) consecutive years (not including any period
prior to the execution of this agreement), individuals who at the beginning of
such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to
effect a transaction described in clauses (i), (ii), (iv), (v), (vi) or (vii) of
this subparagraph 2(c)) whose election by the Board or nomination for executive
by the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who were either directors at the
beginning of the period or whose election or nomination for election was
previously approved, cease for any reason to constitute at least seventy-five
(75%)
5
<PAGE>
percent of the entire Board of Directors; (iv) when a majority of the directors
elected at any annual or special meeting of stockholders (or by written consent
in lieu of a meeting) are not individuals nominated by the Company's incumbent
Board of Directors; (v) if the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the holders of voting securities of the
Company outstanding immediately prior thereto being the holders of at least
eighty (80%) percent of the voting securities of the surviving entity
outstanding immediately after such merger or consolidation; (vi) if the
shareholders of the Company approve a plan of complete liquidation of the
Company; or (vii) if the shareholders of the Company approve an agreement for
the sale or disposition of all or substantially all of the Company's assets.
However, the foregoing notwithstanding, no Change in Control shall be deemed to
have occurred as a result of any event specified in clauses (i)-(vii) of this
paragraph 2(c) if Marshall Tulin or John Tulin remains the chief executive
officer of the Company following such event.
(d) Notwithstanding anything in this Agreement to the
contrary, Employee shall have the right, prior to the receipt by him of any
amounts due hereunder on amounts referred to in subparagraph 2(b)(i), to waive
the receipt thereof or, subsequent to the receipt by him of any amounts due
hereunder, to treat some or all of such amounts as a loan from the Company which
Employee shall repay to the Company, within ninety (90) days from the date of
receipt, with interest at the rate provided in Section 7872 of the Code. Notice
of any such waiver or treatment of amounts received as a loan shall be given by
Employee to the Company in writing and shall be binding upon the Company.
(e) It is intended that the "present value" of the payments
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<PAGE>
and benefits to Employee, whether under this Agreement or otherwise, which are
includable in the computation of "parachute payments" shall not, in the
aggregate, exceed 2.99 times the "base amount" (the terms "present value",
"parachute payments" and "base amount" being determined in accordance with
Section 280G of the Code). Accordingly, if Employee receives payments or
benefits from the Company prior to payment of the Termination Compensation
which, when added to the Termination Compensation and any other payments or
benefits which are required to be included in the computation of parachute
payments which have not been waived or treated as a loan (as contemplated by
subparagraph 2(d)), would, in the opinion of the Accountants, subject any of the
payments or benefits to Employee to the excise tax imposed by Section 4999 of
the Code, the Termination Compensation shall be reduced by the smallest amount
necessary, in the opinion of the Accountants, to avoid such tax. In addition,
the Company shall have no obligation to make any payment or provide any benefit
to Employee subsequent to payment of the Termination Compensation which, in the
opinion of the Accountants, would subject any of the payments or benefits to
Employee to the excise tax imposed by Section 4999 of the Code. No reduction in
Termination Compensation or release of the Company from any payment or benefit
obligation in reliance upon any aforesaid opinion of the Accountants shall be
permitted unless the Company shall have provided to Employee a copy of any such
opinion, specifically entitling Employee to rely thereon, no later than the date
otherwise required for payment of the Termination Compensation or any such later
payment or benefit.
(f) Promptly after a Change in Control occurs, or before a
Change in Control occurs if there is a high degree of probability that a Change
in Control will occur in the immediate future, as determined by
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<PAGE>
the Chief Executive Officer of the Company, the Company shall deliver to a bank,
or other institution approved by Employee, as escrow agent, an amount of cash
funds or short term investments necessary to fund the Termination Compensation
and instruct such escrow agent to make the payments of such employee benefits
due Employee in the amounts and at the time provided in paragraph 2(b). The
amount to be delivered to such escrow agent hereunder shall be sufficient to
fund such payments from principal, and all income on the escrowed funds shall be
paid to the Company at the time the principal is paid to the Employee; provided
however, that any income earned after the Termination Date on principal not paid
to Employee at the time provided in paragraph 2(b) shall be paid to Employee at
reasonable intervals.
3. Termination by the Company
(a) Except as otherwise provided in any other agreement
between Employee and the Company, Employee's employment may be terminated by the
Company without any further liability under this Agreement if Employee shall (i)
die; (ii) be totally unable to perform the duties and services attached to his
position with the Company for a period of not less than 365 consecutive days due
to illness or incapacity, whether physical or mental; (iii) violate any written
contractual covenant of Employee then in effect in favor of the Company
prohibiting Employee from competing with the Company in any manner materially
detrimental to the Company; or (iv) be convicted of a felony involving an act
against the Company, and said conviction shall not have been reversed or be
subject to further appeal, it being expressly understood, however, that
conviction for violation of a criminal statute by reason of actions taken in the
course of performance of Employee's duties as an executive of the Company shall
not be deemed to involve an act against the Company for
8
<PAGE>
purposes hereof unless involving a theft, embezzlement or other fraud against
the Company or any of its officers, directors or employees, or unless involving
an act of physical harm to any of such persons.
(b) After a Change in Control has occurred, if Employee's
employment is terminated by the Company pursuant to subparagraph 3(a) hereof,
Employee (or his widow, or if she shall not survive him, any party designated by
Employee by notice to the Company, or Employee's estate, in the absence of such
notice) shall receive the sums (if any) Employee would otherwise have received
if a Change in Control had not occurred.
4. Notice of Termination and Termination Date.
(a) Any termination of Employee's employment by the Company or
by Employee shall be communicated by a Notice of Termination to the other party
hereto. For purposes hereof, a "Notice of Termination" shall mean a notice which
shall state the "Termination Date" (as hereafter defined) and the specific
reasons, and shall set forth in reasonable detail the facts and circumstances,
for such determination and, in the case of Employee's termination of employment
pursuant to paragraph 2(a)(iii) hereof, shall state that Employee has made the
good faith termination required by that subparagraph.
(b) "Termination Date" shall mean the date specified in the
Notice of Termination as the last day of Employee's employment by the Company,
which date shall not be sooner than the date on which the Notice of Termination
is given.
(c) If within thirty (30) calendar days after any Notice of
Termination is given, or, if later, prior to the Termination Date (as determined
without regard to this paragraph 4(c)), the party hereto receiving such Notice
of Termination notifies the other party hereto that
9
<PAGE>
a dispute exists concerning the termination, the Termination Date shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties hereto, by a binding arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided, however, that the Termination Date
shall be extended by a notice of dispute only if such notice is given in good
faith and the party hereto giving such notice pursues the resolution of such
dispute with reasonable diligence. Notwithstanding the pendency if such dispute,
the Company will continue to pay to Employee his full compensation (including
perquisites and other benefits) in effect when the notice of dispute was given
and continue Employee as a participant in all employee benefit plans and
programs in which he was participating when the notice of dispute was given,
until the dispute is finally resolved as hereinabove provided.
5. Mitigation. Employee shall not be required to use his best
efforts to mitigate the payment of the Termination Compensation by
seeking other employment. To the extent that Employee shall, during or
after the Term, receive compensation from any other employment, the
payment of Termination Compensation shall not be adjusted.
6. Arbitration. In the event any dispute arises between the parties
hereto, Employee and the Company shall each have the right to seek arbitration
in New York, New York under the rules of the American Arbitration Association by
giving written notice of intention to arbitrate to the other party. Any award
rendered in any such arbitration proceeding shall be non-appealable and final
and binding upon the parties hereto, and judgment thereon may be entered in any
court of competent
10
<PAGE>
jurisdiction. If Employee prevails in any litigation or arbitration proceeding
brought in accordance herewith, or if any such litigation or arbitration
proceeding is settled, Employee shall be entitled, to the extent not prohibited
by applicable law, to reimbursement from the Company for his reasonable
attorneys' fees and expenses incurred in connection with such litigation or
arbitration proceeding.
7. Indemnification.
(a) The Company agrees that all rights to indemnification
existing immediately prior to a Change in Control and all rights to
indemnification existing immediately prior to the Termination Date in favor of
Employee as provided in the respective corporate charters and by-laws of the
Company and its subsidiaries shall survive the Termination Date and shall
continue in full force and effect for a period of not less than ten (10) years
after the Termination Date. Until the expiration of such period, the Company
shall also indemnify Employee to the fullest extent permitted by the Delaware
General Corporation Law; provided that, in the event that any claim shall be
asserted or made within such ten-year period, all rights to indemnification in
respect of any such claim shall continue until disposition of such claim.
Without limiting the foregoing, in the event that Employee becomes involved in
any capacity in any action, proceeding or investigation in connection with any
activities involving the Company occurring on or prior to the Termination Date,
the Company will, subject to paragraph 7(b), advance to Employee his reasonable
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith.
(b) Employee shall give prompt written notice to the Company
of any claim and the commencement of any action, suit or proceeding for which
indemnification may be sought under this paragraph 7, and the
11
<PAGE>
Company, through counsel reasonably satisfactory to Employee, may assume the
defense thereof; provided, however, that Employee shall be entitled to
participate in any such action, suit or proceeding with counsel of his own
choice but at his own expense; and provided further, the Employee shall be
entitled to participate in any such action, suit or proceeding with counsel of
his own choice at the expense of the Company if, in the good faith judgment of
Employee's counsel, representation by the Company's counsel may present a
conflict of interest or there may be defenses available to Employee which are
different from or in addition to those available to the Company. In any event,
if the Company fails to assume the defense within a reasonable time, Employee
may assume such defense and the reasonable fees and expenses of his attorneys
shall be borne by the Company. No action, suit or proceeding for which
indemnification may be sought shall be compromised or settled in any manner
which might adversely affect the interest of the Company without the prior
written consent of the Company. Notwithstanding anything in this Agreement to
the contrary, the Company shall not, without the written consent of Employee,
(i) settle or compromise any action, suit or proceeding or consent to the entry
of any judgment which does not include as an unconditional term thereof the
delivery by the claimant or plaintiff to Employee of a written release from all
liability in respect of such action, suit or proceeding or (ii) settle or
compromise any action, suit or proceeding in any manner that may materially and
adversely affect Employee other than as a result of money damages or other money
payments for which the Company fully pays.
(c) The Company shall cause to be maintained in effect, for
not less than two (2) years after the Termination Date, the then current
policies of the directors' and officers' liability insurance maintained
12
<PAGE>
by the Company and the Company's subsidiaries provided that the Company may
substitute therefor policies of at least the same coverage containing terms and
conditions which are no less advantageous so long as no lapse in coverage occurs
as a result of such substitution, and shall use its best efforts to provide such
insurance for an additional three (3) years after the expiration of such
two-year period, the availability of such insurance at commercially reasonable
rates (or, if not available at reasonable rates, then the Company shall purchase
similar insurance but with such lower limits of liability, without change in
retention amounts, as may be available for a premium comparable to that paid by
the Company for the last year of such two-year period), with respect to all
matters occurring prior to and including the Termination Date; provided that, in
the event that any claim shall be asserted or made within such period during
which insurance has been or is to be provided, such insurance shall be continued
in respect of any such claim until final disposition of any and all such claims.
The Company shall pay all expenses, including reasonable attorneys' fees, that
may be incurred by Employee in enforcing the indemnity and other obligations
provided for in this paragraph 7. The covenant in this paragraph 7 shall survive
the Termination Date and shall continue without time limit (except as expressly
provided in this paragraph 7).
8. Assignability. This Agreement may not be assigned by Employee
and all of its terms and conditions shall be binding upon and enure to
the benefit of Employee and his heirs, legatees and legal representatives
and the Company and its successors and assignees. Successors of the
Company shall include, without limitation, any corporation or corporations
acquiring directly or indirectly all or substantially all of the assets of the
Company, whether by merger, consolidation, purchase or
13
<PAGE>
otherwise, and such successor shall thereafter be deemed the "Company"
for purposes hereof.
9. Notices. All notices, requests, demands and other communications
provided for hereby shall be in writing and shall be deemed to have been duly
given when delivered personally when received, or sent by registered or
certified mail, return receipt requested, or by Federal Express or other
equivalent overnight courier, in each case with the cost of delivery prepaid, to
the party entitled thereto at the address first above written (in the case of
the Company) or to such address as contained in the Company's records (in the
case of Employee) or to such other address as may be designated by notice
pursuant to this paragraph.
10. Modification. This Agreement may be modified or amended only
by an instrument in writing signed by Employee and the Company and any
provision hereof may be waived only by an instrument in writing signed by
the party hereto against whom any such waiver is sought to be enforced.
11. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of
any other provision contained herein.
12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
13. Captions. The captioned headings herein are for convenience of
reference only and are not intended and shall not be construed to have
any substantive effect.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SWANK, INC.
By:
John Tulin
President
15
Exhibit 10.15.5
SWANK, INC.
1994 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the 12th
day of December 1995, between Swank, Inc., a Delaware corporation (the
"Company"), and John J. Macht (the "Optionee").
W I T N E S S E T H
1. The Company, in accordance with the terms and conditions of the 1994
Non-Employee Director Stock Option Plan of the Company (the "Plan"), grants as
of December 12, 1995 to the Optionee an option to purchase an aggregate of 5,000
shares of the Common Stock, $.10 par value per share, of the Company ("Common
Stock"), at $.8046875 per share, being 100% of the fair market value of such
shares of Common Stock on such date.
2. The term of this option shall be 5 years from December 12, 1995,
subject to earlier termination as provided in this Contract and in the Plan.
This option shall be immediately exercisable as to 100% of the number of shares
of Common Stock subject hereto.
3. This option shall be exercised by giving written notice to the
Company at its principal office, presently 6 Hazel Street, Attleboro,
Massachusetts 02703-0962, Attention: Treasurer, stating that the Optionee is
exercising this stock option, specifying the number of shares being purchased
and accompanied by payment in full of the aggregate purchase price thereof in
cash or by check. In no event may a fraction of a share of Common Stock be
purchased under this option.
4. Notwithstanding the foregoing, and without limiting the provisions
of paragraph 11 of the Plan, this option shall not be exercisable by the
Optionee unless (a) a registration statement under the Securities Act of 1933,
as amended (the "Securities Act") with respect to the shares of Common stock to
be received upon the exercise of the option shall be effective and current at
the time of exercise or (b) there is an exemption from registration under the
Securities Act for the issuance of the shares of Common Stock upon exercise. At
the request of the Board of Directors, the Optionee shall execute and deliver to
the Company his representation and warranty, in form and substance satisfactory
to the Board of Directors, that the shares of Common Stock to be issued upon the
exercise of the option are being acquired by the Optionee for his own account,
for investment only and not with a view to the resale or distribution thereof
without the meaning of the Securities Act. Nothing herein shall be construed so
as to obligate the Company to register the shares subject to the option under
the Securities Act.
3
<PAGE>
5. Notwithstanding anything herein to the contrary, if at any time the
Board of Directors shall determine, in its discretion, that the listing or
qualification of the shares of Common Stock subject to this option on any
securities exchange or under any applicable law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of,
or in connection with, the granting of an option, or the issue of shares of
Common Stock thereunder, this option may not be exercised in whole or in part
unless such listing, qualification, consent or approval shall have been effected
or obtained free of any conditions not acceptable to the Board of Directors, in
its discretion.
6. Nothing in the Plan or herein shall confer upon the
Optionee any right to continue as a director of the Company.
7. The Company may endorse or affix appropriate legends upon the
certificates for shares of Common Stock issued upon exercise of this option and
may issue such "stop transfer" instructions to its transfer agent in respect of
such shares as it determines, in its discretion, to be necessary or appropriate
to (a) prevent a violation of, or to perfect an exemption from, the registration
requirement of the Securities Act, or (b) implement the provisions of the Plan
or any agreement between the Company and the Optionee with respect to such
shares of Common Stock.
8. The Company and the Optionee agree that they will both be subject to
and bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made part hereof. In the event the Optionee is no longer a
director of the Company or in the event of his death or disability (as defined
in the Plan), his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
9. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and the grant and exercise of the option
and the disposition of the shares of Common Stock acquired upon exercise of the
option, including without limitation, federal state securities and "blue sky"
laws.
10. This option is not transferrable otherwise than by will or the laws
of descent and distribution and may be exercised, during the lifetime of the
Optionee, only by him or his legal representatives.
11. This Contract shall be binding upon and inure to the benefit of any
successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled under the Plan and by law to the
Optionee's rights hereunder.
<PAGE>
12. This Contract shall be governed by and construed in
accordance with the laws of the State of Delaware.
13. The invalidity or illegality of any provision herein
shall not affect the validity of any other provision.
14. The Optionee agrees that the Company may amend the Plan
and the options granted to the Optionee under the Plan, subject to
the limitations contained in the Plan
IN WITNESS WHEREOF, the parties hereto have executed this contract as
of the day and year first above written.
SWANK, INC.
By: /s/ John Tulin
Its: President
/s/ John J. Macht
Optionee
The Macht Group
176 Federal St. 5th Floor
Address
Boston, MA 02110
Exhibit 11.01
SWANK, INC.
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
(dollars in thousands except share and per share data)
Year Ended December 31,
1995 1994 1993
==== ==== ====
(Loss) income before cumulative
effect of a change in
accounting for income taxes $(8,944) $5,572 $2,793
Cumulative effect of a change in
accounting for income taxes 477
------ ----- -----
Net (loss) income (8,944) 5,572 3,270
====== ===== =====
Primary
Weighted average common shares
outstanding 16,499,808 16,470,636 16,435,636
Effect of excluding unallocated
shares held in ESOP (364,440) (538,127) 0
Common shares issuable in respect
to common equivalents with a
dilutive effect 0 274,174 823,292
---------- ---------- ----------
Total common and common
equivalent shares 16,135,368 16,206,683 17,258,928
========== ========== ==========
Primary income per share before
cumulative effect of a change
in accounting for income taxes ($.55) $.34 $0.16
Cumulative effect of a change in
accounting for income taxes per
share 0.00 0.00 0.03
----- ---- -----
Primary net income per share (1) ($.55) $.34 $0.19
===== ==== ====
Fully Diluted
Weighted average common shares
outstanding 16,499,808 16,470,636 16,435,636
Effect of excluding unallocated
shares held in ESOP (364,440) (538,127)
Common shares issuable in respect
to common stock equivalents
with a dilutive effect. 0 274,174 1,045,349
---------- ---------- ----------
Total common and common
equivalent shares 16,135,368 16,206,683 17,480,985
========== ========== ==========
Fully diluted income per share
before cumulative effect of a
change in accounting for
income taxes ($.55) $.34 $0.16
Cumulative effect of a change in
accounting for income taxes per
share 0.00 0.00 0.03
Fully diluted net income per ----- ---- -----
share (1) ($.55) $.34 $0.19
===== ==== =====
(1) Net income per common share is computed by dividing net income by total
common and common equivalent shares.
EXHIBIT 23.01
Consent of Independent Accountants
To the Stockholders of Swank, Inc.
Attleboro, Massachusetts:
We consent to the incorporation by reference in the Registration Statements
relating to the Swank, Inc. 1981 Incentive Stock Option Plan (File No.
2-83629) and the 1987 Incentive Stock Option Plan (File No. 33-23913) on Form
S-8, of our report dated February 22, 1996 (except as to the information
presented in Note C, for which the date is May 24, 1996) on our audits of the
consolidated financial statements and financial statement schedule of Swank,
Inc. as of December 31, 1995 and 1994 and for the years ended December 31,
1995, 1994 and 1993 which report is included in this Annual Report on Form
10-K.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
May 24, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Dec-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,121
<SECURITIES> 0
<RECEIVABLES> 19,801
<ALLOWANCES> 9,097
<INVENTORY> 29,170
<CURRENT-ASSETS> 45,768
<PP&E> 23,938
<DEPRECIATION> 16,481
<TOTAL-ASSETS> 57,324
<CURRENT-LIABILITIES> 31,009
<BONDS> 0
0
0
<COMMON> 1,684
<OTHER-SE> 852
<TOTAL-LIABILITY-AND-EQUITY> 57,324
<SALES> 140,102
<TOTAL-REVENUES> 140,102
<CGS> 85,774
<TOTAL-COSTS> 85,774
<OTHER-EXPENSES> 60,168
<LOSS-PROVISION> 805
<INTEREST-EXPENSE> 2,110
<INCOME-PRETAX> (7,950)
<INCOME-TAX> 994
<INCOME-CONTINUING> (8,944)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,944)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
