Exhibit 10.5


 


HSBC


 


 


CONTINUING INDEMNITY AGREEMENT


 


 


Between


 


 


RAFAELLA APPAREL GROUP, INC.


 


 


and


 


 


HSBC Bank USA, National Association


 


 


Date June 20, 2005


 

















 


CONTINUING INDEMNITY AGREEMENT


 


In
connection with the issuance of Air Releases and Steamship Guarantees
(Indemnity) by HSBC Bank USA, National Association (Bank), pursuant to the
Financing Agreement (as defined below) covering the shipment of Goods
(Shipment), Applicant agrees as follows:


 


1.                                      Indemnification.


 


Applicant
agrees to indemnify Bank and hold Bank harmless from, and to pay to Bank on
demand for, any loss, liability, costs, expenses or damage incurred by Bank by
reason of Bank’s issuance of an Indemnity, or by reason of any action taken or
not taken by Bank with respect to any Indemnity or any transaction related
thereto. Applicant’s obligations under this Agreement shall constitute “Obligations”
under and as defined in the Financing Agreement dated the date hereof among
Applicant, Verrazano, Inc., each other subsidiary of Applicant that becomes
a guarantor of the Obligations, Bank and the other lenders now or hereafter a
party thereto, and Bank, as agent for such lenders (as amended, restated,
modified or supplemented from time to time, the “Financing Agreement”).


 


2.                                      Commission and
Costs.


 


Applicant
agrees to pay to Bank on demand Bank’s usual commission and all charges and
expenses incurred by Bank or its correspondents in connection with this
Agreement.


 


3.                                      Bank’s Ownership
of Property.


 


[Intentionally
omitted]


 


4.                                      Matters
Pertaining to Issuance of an Indemnity.


 


(a)                                  If
an Indemnity is issued for a Shipment that is financed by letter of credit
(Letter of Credit), Applicant authorizes Bank to honor any and all drafts under
such Letter of Credit covering the Shipment, even if the accompanying Documents
do not in all respects conform to the requirements of such Letter of
Credit or certain Documents do not accompany the draft or drafts. Applicant
agrees that any such discrepancy or omission in the accompanying Documents
shall in no way affect Bank’s rights against Applicant under this Agreement or
any other agreement between Bank and Applicant.


 


(b)                                 If
an Indemnity is issued for a Shipment that is not financed by Letter of Credit,
Applicant authorizes Bank to honor any drafts covering such Shipment, even if
the conditions for honor have not been complied with due to some deficiency or
variation in the Documents or Goods relating to such shipment.


 


(c)                                  Applicant
will, immediately on receipt of the original Bill(s) of Lading, arrange for the
prompt release or return to Bank of the Indemnity issued pursuant to this
Agreement, which relates to such Bill(s) of Lading. If an Indemnity is not
released within 60 days from the date of Applicant’s receipt of such Bill(s) of
Lading, or such shorter time as Bank may request, Applicant shall, at Bank’s
request, deliver to the carrier company or its agent a bond issued by an
independent surety company to replace the Indemnity, and shall request such 


 

















 


carrier company or its
agent to return such Indemnity or to confirm that it has been cancelled.
Notwithstanding any other provision of this Agreement, in order to obtain the
release of an Indemnity, Bank may send to a carrier company any documents
remitted to Bank directly from overseas.


 


(d)                                 Applicant
agrees that Bank and any of Bank’s correspondents may receive and accept,
as Bills of Lading, any Documents issued or purporting to be issued by or on
behalf of any carrier which acknowledge receipt of Goods for transportation,
whatever the specific provisions of such Documents. The date of each such
Document shall be deemed the date of shipment of the property mentioned
therein, each such Document shall be deemed in order if such date is within the
time limit fixed by the relevant agreement pursuant to which such Shipment was
financed.


 


(e)                                  Bank
is authorized to accept instructions from Applicant, relating to the issuance
of an Indemnity in writing or orally, including, without limitation, by
telephone. Each oral request for an Indemnity shall be conclusively presumed to
be made by a person authorized by Applicant to do so, and the issuance of an
Indemnity as herein provided shall conclusively establish Applicant’s
obligations hereunder.


 


(f)                                    If
Bank issues, or takes action respecting, an Indemnity pursuant to any communication
of any kind from Applicant, then the provisions of this Agreement shall apply
to such Indemnity or such action, notwithstanding any lack of reference to this
Agreement in such communications.


 


(g)                                 Neither
Bank, nor Bank’s correspondents, shall be responsible, and neither shall incur
liability, for any matter respecting any Goods or the Documents relating to
such Goods, issued in connection with this Agreement, including, without
limitation:  the existence, character,
quality, quantity, condition, packing, value, or delivery of the Goods released
to Applicant pursuant to this Agreement; any difference in character, quality,
quantity, condition, or value of the Goods from that expressed in Documents;
the validity, sufficiency or genuineness of Documents, even if such documents
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged; the time, place, manner or order in which any Shipment is
made; partial or incomplete Shipment, or failure or omission to ship any or all
of the Goods referred to in any Shipment; the character, adequacy, validity, or
genuineness of any insurance; the solvency or responsibility of any insurer, or
any other risk connected with insurance; a deviation or fraud by a carrier or
anyone else in connection with any Goods or the shipping thereof; the solvency
responsibility or relationship to the Goods of any party issuing any Documents
in connection with the Goods; delay in arrival or failure to arrive of either
the Goods or any of the Documents relating thereto; delay in giving or failure
to give notice of arrival or any other notice; any breach of contract between
the carriers or vendors and Applicant; failure of any draft to bear any
reference or adequate reference to the relevant Shipment; or failure to send
forward documents apart from drafts as required by the terms of any
Shipment, or to accompany the drafts by a certificate that Documents have been
sent.


 


(h)                                 In
furtherance and extension and not in limitation of the specific provisions set
forth in this section, Applicant agrees that Bank and Bank’s correspondents
shall incur no liability with respect to any action taken or not taken in good
faith by Bank or by any of 


 

















 


Bank’s correspondents
under, or in connection with any Shipment, or the relevant drafts, Documents or
Goods, and that any such action taken or not taken shall be binding on
Applicant, except for any action constituting gross negligence or willful
misconduct.


 


5.                                      Covenants.


 


(a)                                  Applicant
will pay to Bank, on demand all costs and expenses of every kind paid or
incurred by Bank or any of Bank’s correspondents in connection with this
Agreement, in enforcing this Agreement, or in realizing upon or protecting any
Collateral. “Costs and expenses” as used in the preceding sentence shall
include, without limitation, the actual and reasonable attorneys’ fees incurred
by Bank in retaining counsel for advice, suit, appeal, any insolvency or other
proceedings under the Federal Bankruptcy Code or otherwise, or for any purpose
specified in the preceding sentence. Payment of all sums referred to in this
paragraph is secured by all Collateral under and as defined in the Financing
Agreement.


 


(b)                                 Applicant
will execute and deliver to Bank such trust receipts, security agreements,
financing statements, assignments and other documents and do such other things
relating to any security interest as Bank may request.


 


6.                                      Events of Default
and Remedies.


 


[Intentionally
Omitted]


 


7.                                      Miscellaneous.


 


(a)                                  (i) As
further security for payment of the obligations arising under this Agreement,
Applicant hereby grants to Bank a security interest in and lien on any and all
property of Applicant which is or may hereafter be in the possession or
control of Bank in any capacity or of any third party acting on its behalf,
including, without limitation, all deposit and other accounts and all moneys
owed or to be owed by Bank to Applicant; and with respect to all of such
property, Bank shall have the same rights hereunder as it has with respect to
the Collateral; (ii) without limiting any other right of Bank, whenever
Bank has the right to declare any of the obligations under this Agreement to be
immediately due and payable (whether or not it has so declared), Bank at its
sole election may set off against the obligations any and all moneys then
or thereafter owed to Applicant by Bank in any capacity, whether or not the
obligation to pay such moneys owed by Bank is then due, and Bank shall be
deemed to have exercised such right of set off immediately at the time of such
election even though any charge therefor is made or entered on Bank’s records
subsequent thereto.


 


(b)                                 All
payments to be made to Bank under this Agreement shall be in immediately
available funds.


 


(c)                                  No
course of dealing between Applicant and Bank and no delay or omission by Bank
in exercising any right or remedy hereunder or with respect to any obligation
arising under this Agreement shall operate as a waiver thereof or of any other
right or remedy, and no single or partial exercise thereof shall preclude any
other or further exercise thereof or the exercise of any other right or remedy.
Bank may remedy any default by Applicant hereunder or with respect to any
obligation in any reasonable manner without waiving the default remedied 


 

















 


and without waiving any
other prior or subsequent default by Applicant. All of Bank’s rights and
remedies hereunder are cumulative.


 


(d)                                 The
rights and remedies of Bank hereunder shall, if Bank so directs, inure to any
party acquiring any interest in all or any part of this Agreement.


 


(e)                                  Bank
and Applicant as used herein shall include the heirs, executors or
administrators, or successors or assigns, of those parties.


 


(f)                                    If
more than one party executes this Agreement, the term “Applicant” shall include
each as well as all of them, and their obligations hereunder shall be joint and
several.


 


(g)                                 Bank
shall have no obligation to issue any Indemnity, issuance of any Indemnity
being in Bank’s sole and absolute discretion.


 


(h)                                 The
obligations hereunder shall continue in force, notwithstanding any change in
the membership of Applicant, if a partnership, whether arising from the death
or retirement of one or more partners or the accession of one or more new
partners.


 


(i)                                     Applicant
hereby authorizes Bank, at Applicant’s expense, to file any financing
statements, trust receipts or other statements relating to any security
interest herein specified without Applicant’s signature thereon as Bank at its
option may deem appropriate, and appoints Bank as Applicant’s
attorney-in-fact (without requiring Bank) to execute any such trust receipt,
financing statement or statements in Applicant’s name and to perform all
other acts which Bank deems appropriate to perfect and continue such security
interest and to protect, preserve and realize upon any collateral. This power
of attorney shall not be affected by Applicant’s subsequent disability or
incompetence.


 


(j)                                     No
modification, rescission, waiver, release or amendment of any provision of this
Agreement shall be made, except by a written agreement subscribed by Applicant
and a duly authorized officer of Bank.


 


(k)                                  Captions
of the paragraphs of this Agreement are for the convenience of Bank and
Applicant, and are not an aid in the interpretation of this Agreement.


 


(l)                                     This
Agreement and the transactions evidenced thereby shall be construed under the
laws of New York State, as the same may from time to time be in effect.


 


*                                         *                                         *


 

















 


(m)                               All
terms, unless otherwise defined in this Agreement, shall have the definitions
set forth in the Uniform Commercial Code adopted in New York State, as the
same may from time to time be in effect.


 


	
   

  	
  Applicant:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  RAFAELLA APPAREL GROUP,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Glenn Palmer

  
	
   

  	
  Name: Glenn Palmer

  
	
   

  	
  Title: Chief Executive
  Officer