UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended APRIL 3, 1999
-------------
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 number 1-8016
----
TULTEX CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 54-0367896
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
101 Commonwealth Boulevard, P. O. Box 5191, Martinsville, Virginia 24115
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 540-632-2961
------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
30,050,155 shares of Common Stock, $1 par value, as of May 14, 1999
- ---------- ------------
<PAGE>
2
PART I. FINANCIAL INFORMATION
ITEM 1.
TULTEX CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED - $000'S OMITTED EXCEPT IN
SHARES AND PER SHARE DATA) APRIL 3, 1999 (AND APRIL 4, 1998)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------
APRIL 3, 1999 April 4, 1998
--------------- ----------------
<S> <C> <C>
Net Sales $ 71,638 $ 99,874
Cost of Products Sold 65,697 80,823
--------------- ----------------
Gross Profit 5,941 19,051
Selling, General and Administrative 12,032 23,983
--------------- ----------------
Operating Income (Loss) (6,091) (4,932)
Other (Income) Expense:
Interest Expense 6,256 6,908
Interest Income and Other, Net (1,066) (635)
--------------- ----------------
Income (Loss) Before Income Taxes (11,281) (11,205)
Provision (Benefit) for Income Taxes (4,174) (4,370)
--------------- ----------------
NET INCOME (LOSS) (7,107) (6,835)
Preferred Dividend Requirement (Note 4) (31) (147)
--------------- ----------------
Balance Applicable to Common Stock $ (7,138) $ (6,982)
=============== ================
Weighted Average Common Shares Outstanding - Basic 30,050,155 29,881,290
Weighted Average Common Shares Outstanding - 30,050,155 29,881,290
Diluted
NET INCOME (LOSS) PER COMMON SHARE
BASIC $ (.24) $ (.23)
DILUTED $ (.24) $ (.23)
Dividends Per Common Share (Note 4) $ .00 $ .00
</TABLE>
<PAGE>
3
TULTEX CORPORATION
CONSOLIDATED BALANCE SHEET (UNAUDITED - $000'S OMITTED)
APRIL 3, 1999 (AND JANUARY 2, 1999)
<TABLE>
<CAPTION>
Assets APRIL 3, 1999 January 2, 1999
- ------ ----------------- --------------------
<S> <C> <C>
Current Assets:
Cash $ 8,533 $ 5,769
Accounts Receivable - Net of Allowance for Doubtful
Accounts $4,441 (1999) and $3,925 (1998) 58,911 74,599
Inventories (Note 2) 199,452 176,818
Prepaid Expenses 4,286 1,913
Income Taxes Refundable 5,070 8,782
Deferred Tax Assets 4,534 4,534
------------------- -----------------
Total Current Assets 280,786 272,415
Property, Plant and Equipment, Net of Depreciation 103,323 107,001
Intangible Assets 22,459 22,777
Deferred Tax Assets 2,419 2,419
Other Assets 40,046 42,716
=================== =================
Total Assets $ 449,033 $ 447,328
=================== =================
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts Payable $ 31,910 $ 23,448
Accrued Expenses 19,187 12,815
------------------- -----------------
Total Current Liabilities 51,097 36,263
Long-Term Debt (Notes 3, 8 and 10) 253,155 259,405
Other Liabilities 5,436 5,222
Stockholders' Equity:
5% Cumulative Preferred Stock (Note 4) 198 198
Series B, $7.50 Cumulative Convertible Preferred Stock (Note 4) 1,500 1,500
Common Stock (Note 4) 30,050 30,050
Capital in Excess of Par Value 7,095 7,095
Retained Earnings 105,941 113,079
Accumulated Other Comprehensive Income (5,085) (5,085)
Unearned Stock Compensation (31) (35)
------------------- -----------------
139,668 146,802
Less Notes Receivable - Stockholders 323 364
------------------- -----------------
Total Stockholders' Equity 139,345 146,438
------------------- -----------------
Total Liabilities and Stockholders' Equity $ 449,033 $ 447,328
=================== =================
</TABLE>
<PAGE>
4
TULTEX CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED - $000'S OMITTED)
THREE MONTHS ENDED APRIL 3, 1999 (AND APRIL 4, 1998)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------
APRIL 3, 1999 April 4, 1998
------------------ -----------------
<S> <C> <C>
Operations:
Net Income (Loss) $ (7,107) $ (6,835)
Items Not Requiring (Providing) Cash:
Depreciation 4,641 5,148
Amortization 1,294 750
Other Non-Cash Items (27) (70)
(Gain) Loss on Sale of Assets (239) -
Changes in Assets and Liabilities
Accounts Receivable 15,688 30,568
Inventories (22,634) (41,650)
Prepaid Expenses (2,373) 81
Accounts Payable and Accrued Expenses 14,834 2,371
Income Taxes Refundable 3,712 (5,151)
Other Long-Term Liabilities 214 (1,384)
-------- --------
Cash Provided (Used) by Operations 8,003 (16,172)
-------- --------
Investing Activities:
Capital Expenditures (2,091) (3,824)
Changes in Other Assets 2,305 (585)
Business Acquisition - (2,743)
Proceeds from Sale of Property and Equipment 756 -
-------- --------
Cash Provided (Used) by Investing Activities 970 (7,152)
-------- --------
Financing Activities:
Issuance (Payment) of Revolving Credit Facility Borrowings (6,250) 22,050
Payments on Long-Term Borrowings - (134)
Cash Dividends - (150)
Proceeds from Stock Plans 41 -
-------- --------
Cash Provided (Used) by Financing Activities (6,209) 21,766
-------- --------
Net Increase (Decrease) in Cash 2,764 (1,558)
Cash at End of Prior Year 5,769 2,507
-------- --------
Cash at End of Period $ 8,533 $ 949
======== ========
</TABLE>
TULTEX CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
<PAGE>
5
APRIL 3, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements furnished in this
quarterly 10-Q Report reflect all adjustments, consisting only of normal
recurring adjustments, which are, in the opinion of management, necessary for a
fair statement of the results of the interim periods. The unaudited consolidated
financial statements should be read in conjunction with the Company's annual
report on Form 10-K for the year ended January 2, 1999. The balance sheet,
statement of operations and statement of cash flows included in this 10-Q have
been prepared from the Company's records and are subject to audit and year-end
adjustments.
Certain prior year amounts have been reclassified to conform with current year
presentation.
NOTE 2 - INVENTORIES
A summary of inventories by component follows. (In thousands of dollars)
<TABLE>
<CAPTION>
APRIL 3, 1999 January 2, 1999
------------------------- --------------------------
<S> <C> <C>
Raw Materials $2,066 $2,952
Goods-in-Process 26,551 21,688
Finished Goods 160,541 143,506
Supplies 10,294 8,672
========================= ==========================
Total Inventory $199,452 $176,818
========================= ==========================
</TABLE>
NOTE 3 - LONG TERM DEBT
Total long-term debt at April 3, 1999 includes Senior Notes of $185 million,
$53.8 million outstanding under the revolving credit facility and $14.4 million
of convertible subordinated notes.
Subsequent to April 3, 1999, the Company replaced its existing revolving credit
facility with a $150 million asset-based lending facility. In addition, a
portion of the 10 5/8% and 9 5/8% senior notes were repurchased and retired as
part of the refinancing. Additional disclosure of these subsequent events is
described in Note 10.
Commencing on April 15, 1999, the holders of the $14.4 million of convertible
notes may convert, at their option, up to 20% per annum of the original
principle amount into the Company's common stock. The number of common shares
will be determined by dividing the principle amount of the notes to be converted
by the closing price of the Company's common stock on the business day prior to
the submission of shares for conversion.
NOTE 4 - STOCKHOLDERS' EQUITY
The 5% cumulative preferred stock is $100 par value, with 22,000 shares
authorized, and 1,975 shares issued and outstanding as of April 3, 1999 and
January 2, 1999. The stated quarterly dividend has not been paid since July 1,
1998 due to restrictions in the Company's bond indenture.
The Series B, $7.50 cumulative, convertible preferred stock is $100 stated
value, with 150,000 shares
<PAGE>
6
authorized, and 15,000 shares issued and outstanding as of April 3, 1999 and
January 2, 1999. The stated quarterly dividend has not been paid since July 1,
1998 due to restrictions in the Company's bond indenture.
The Common stock is $1 par value, 60,000,000 shares authorized, with shares
issued and outstanding of 30,050,155 as of April 3, 1999 and January 2, 1999.
There were no dividends declared on the Company's common stock for the three
month period ended April 3, 1999.
NOTE 5 - EARNINGS PER SHARE
Income (loss) per common share is computed using the weighted average common
shares outstanding. The weighted average common shares outstanding are the same
for both basic and diluted earnings per share.
NOTE 6 - COMPREHENSIVE INCOME
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS 130 requires that the Company report comprehensive income (loss)
components in a full set of general-purpose financial statements. Comprehensive
income (loss) represents the change in stockholders' equity during the period
from non-owner sources. Currently, other comprehensive income (loss) consists of
a minimum pension liability adjustment. The Company adopted SFAS 130 on January
4, 1998. Total comprehensive loss was $7.1 million for the quarter ended April
3, 1999 and $6.8 million for the quarter ended April 4, 1998.
Activity in Stockholders' Equity is as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
Capital Accumulated Unearned Notes Total
Current 5% Series B In Excess Other Stock Receivable-Stock-
Comprehensive Preferred Preferred Common of Par Retained Comprehensive Compen- Stock- holders'
Income (Loss) Stock Stock Stock Value Earnings Income (Loss) sation holders Equity
------------ -------- -------- ------- -------- -------- ------------ --------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of
January 2, 1999 $198 $1,500 $113,079 $(364) $146,438
$30,050 $7,095 $(5,085) $(35)
Collections -
Stockholders'
Notes receivable 41 41
Stock 4 4
Compensation
Dividends on
Preferred stock
(31) (31)
Comprehensive
Income (loss):
Net loss $(7,107) (7,107) (7,107)
------------ -------- -------- ------- -------- -------- ------------ --------- ---------- --------
Balance as of
April 3, 1999 $(7,107) $198 $1,500 $30,050 $7,095 $105,941 $(5,085) $(31) $(323) $139,345
============ ======== ======== ======= ======== ======== ============ ========= ========== ========
</TABLE>
NOTE 7 - SEGMENT REPORTING
The Company currently operates in a single business segment which designs,
manufactures and distributes
<PAGE>
7
fleece and jersey apparel. During the year ended January 2, 1999, the Company
exited its LogoAthletic, Inc. and LogoAthletic/Headwear, Inc. ("LogoAthletic")
licensed apparel business. The segment information reported below reflects the
operations of the Company's ongoing apparel segment separate from the
LogoAthletic business operations ("Other") through the date of sale (July 15,
1998). Management evaluates performance based upon operating earnings before
interest and income taxes.
<TABLE>
<CAPTION>
(in thousands of dollars) Apparel Other Consolidated
- ----------------------------------------------------------------------------------------
THREE MONTHS ENDED APRIL 3, 1999
<S> <C> <C> <C>
Net sales $ 71,638 $ - $71,638
Operating income (loss) (6,091) - (6,091)
........................................................................................
Three months ended April 4, 1998
Net sales $ 71,613 $ 28,261 $99,874
Operating income (loss)
(2,969) (1,963) (4,932)
- ----------------------------------------------------------------------------------------
</TABLE>
Reconciling information between reportable segments and the Company's
consolidated totals is shown in the following table:
Three Months Ended
---------------------------------
(in thousands) April 3, April 4,
1999 1998
- --------------------------------- -------------- ------------
Total operating income (loss)
for reportable segments $ (6,091) $(4,932)
Interest expense 6,256 6,908
Interest income and other, net (1,066) (635)
============== ============
Income (loss) before income $ (11,281) $(11,205)
taxes ============== ============
NOTE 8 - CONDENSED CONSOLIDATING FINANCIAL INFORMATION
The following financial information presents consolidated financial data which
includes (i) the parent company only ("Parent"), (ii) the wholly-owned guarantor
subsidiaries on a combined basis ("Wholly-owned Guarantor Subsidiaries"), (iii)
the wholly-owned non-guarantor subsidiaries on a combined basis ("Wholly-owned
Non-guarantor Subsidiaries"), (iv) the LogoAthletic subsidiaries whose assets
were sold during the
<PAGE>
8
third quarter of 1998 ("Subsidiaries Sold") and (v) the
Company on a consolidated basis.
<TABLE>
<CAPTION>
Wholly-owned Wholly-owned
Guarantor Non-guarantor Subsidiaries
(In thousands of Parent Sold
dollars) Subsidiaries Subsidiaries Eliminations Consolidated
---------- -------------- -------------- -------------- ------------ --------------
For the three months
ended
April 3, 1999
<S> <C> <C> <C> <C> <C> <C>
Net sales $60,833 $28,815 $14,794 $ - $ (32,804) $71,638
Cost and expenses 64,817 31,269 15,463 $ - (32,804) 78,745
------ ------ ------ ------------ -------- ------
Pretax income (loss) $(3,984) $(2,454) $ (669) $ - $ - $(7,107)
-------- -------- ----- ------------ ---------- --------
For the three months
ended
April 4, 1998
Net sales $54,581 $4,777 $38,021 $29,375 $(26,880) $ 99,874
Cost and expenses 62,635 4,032 35,979 30,943 (26,880) 106,709
------ ----- ------ ------ -------- -------
Pretax income (loss) $(8,054) $ 745 $ 2,042 $(1,568) $ - $ (6,835)
-------- ----- ------- -------- ---------
As of April 3, 1999
Current assets $246,645 $54,082 $34,803 $ - $ (54,744) $280,786
Noncurrent assets 183,538 15,012 10,818 - (41,121) 168,247
------- ------ ------ ----------- ------- -------
Total assets $430,183 $69,094 $45,621 $ - $ (95,865) $449,033
-------- ------- ------- ----------- ---------- --------
Current liabilities $ 37,345 $13,685 $31,926 $ - $ (31,859) $ 51,097
Noncurrent liabilities 263,415 (495) (438) - (3,891) 258,591
------- ----- ----- ----------- ------- -------
Total liabilities $300,760 $13,190 $31,488 $ - $ (35,750) $309,688
-------- ------- ------- ----------- ---------- --------
As of January 2, 1999
Current assets $232,075 $53,958 $29,638 $ - $(43,256) $272,415
Noncurrent assets 190,194 14,908 10,865 - (41,054) 174,913
------- ------ ------ ----------- -------- -------
Total assets $422,269 $68,866 $40,503 $ - $(84,310) $447,328
-------- ------- ------- ----------- --------- --------
Current liabilities $ 19,551 $11,002 $26,138 $ - $(20,428) $ 36,263
Noncurrent liabilities 269,288 (495) (438) - (3,728) 264,627
------- ----- ----- ----------- ------- -------
Total liabilities $288,839 $10,507 $25,700 $ - $(24,156) $300,890
-------- ------- ------- ----------- --------- --------
</TABLE>
NOTE 9 - NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 requires that an entity recognize
all derivative instruments in the balance sheet at fair value. The statement is
effective for fiscal years beginning after June 15, 1999. Management has not yet
made an assessment
<PAGE>
9
of the impact of the adoption of SFAS 133.
NOTE 10 - SUBSEQUENT EVENTS
Subsequent to April 3, 1999, the Company entered into a new, asset-based secured
credit facility which has a maximum borrowing availability of $150 million with
Bank of America Business Credit ("BABC"). Under the new facility, which closed
on May 10, 1999, BABC will lend funds subject to availability under a borrowing
base calculated as a percentage of eligible accounts receivable and inventories,
provided that the total amount advanced will not exceed $150 million. Proceeds
from this facility have been used to pay all outstanding amounts under the
Company's former $87.5 million unsecured revolving credit facility and fund a
partial tender offer for the 9 5/8% and 10 5/8% Senior Notes (see below). The
facility will also be used to provide working capital.
To obtain the required consents of noteholders to permit the Company to grant a
first security interest on accounts receivable, inventories and related assets
to secure the BABC credit facility, the Company initiated a consent
solicitation. In connection with the solicitation the Company also invited
noteholders to tender notes for purchase by the Company in a "modified dutch
auction" with a maximum purchase price of 65% of face value per note and agreed
to provide funding of $42 million (exclusive of accrued interest) for such
purchases. The Company has accepted tenders for $70 million face value of notes
and has received consents from holders of more than 51% of both note series as
required. As a result of the refinancing the Company has purchased $70 million
face value notes for $42 million and has retired the former revolving credit
facility borrowings and accrued interest of $54.5 million by a payment of $39.5
million in cash and the foregiveness of $15.0 million of borrowings by the
former lenders. In connection with the consent solicitation, interest payments
on these notes have been changed to quarterly instead of semiannually. Also, the
holders of notes not accepted for purchase by the Company who also consented
have received freely tradeable and registered warrants for 15,525,000 shares of
the Company's common stock. Two-thirds of these warrants have an exercise price
of $.8125 per share, and the remaining one-third have an exercise price of
$1.425 per share. The warrants have an 8-year term, and may be exercised by
payment of cash or by tender of notes for an amount equal to the exercise price
of the warrants.
The new facility has a maturity date of three years with an extension provision
for an additional two years, subject to lenders' approval. The Company has the
option of setting quarterly interest rates equal to either the Prime Rate or
London Interbank Offered Rate ("LIBOR") plus applicable margins. The applicable
margin is based on a funded debt / EBITDA ratio that will range from 0% to 1.75%
for Prime Rate or 1.75% to 3.75% for LIBOR based loans. The Company shall pay a
fee of .375% per year on any unused borrowings. A $10 million sublimit under the
facility is available for letters of credit.
In connection with this debt refinancing, the Company received waivers for
default of financial covenants under the former credit facility. The most
significant financial covenants of the new facility are the maintenance of a
minimum fixed charge coverage ratio on a quarterly basis and annual limitations
on capital expenditures. Other covenants place restrictions on the Company's
ability to incur additional indebtedness, pay dividends, create liens or other
encumbrances, to make certain payments, investments, loans and guarantees and to
sell or otherwise dispose of a substantial portion of its assets.
This debt refinancing will be reflected in the Company's financial statements in
the quarter ending July 3, 1999.
<PAGE>
10
ITEM 2
TULTEX CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS APRIL 3, 1999
RESULTS OF OPERATIONS
The following table presents the Company's consolidated statement of operations
as a percentage of net sales.
THREE MONTHS ENDED
-------------------------
4/3/99 4/4/98
----------- ----------
Net Sales 100.0% 100.0%
Cost of Products Sold 91.7 80.9
----------- ----------
Gross Profit 8.3 19.1
Selling, General and Administrative 16.8 24.0
----------- ----------
Operating Income (8.5) (4.9)
Interest Expense 8.7 6.9
Interest Income and Other, Net (1.5) (0.6)
----------- ----------
Income (Loss) Before Income Taxes (15.7) (11.2)
Benefit (Provision) for Income Taxes 5.8 4.4
----------- ----------
Net Income (Loss) (9.9)% (6.8)%
=========== ==========
Note: Certain items have been rounded to cause the columns to add to 100%.
THIS QUARTERLY REPORT ON FORM 10-Q MAY CONTAIN CERTAIN FORWARD-LOOKING
STATEMENTS REFLECTING THE COMPANY'S CURRENT EXPECTATIONS. ALTHOUGH THE COMPANY
BELIEVES THAT THE EXPECTATIONS REFLECTED IN ANY SUCH FORWARD-LOOKING STATEMENTS
ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL PROVE TO
HAVE BEEN CORRECT. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE COMPANY'S EXPECTATIONS INCLUDE THE FINANCIAL STRENGTH OF THE
RETAIL INDUSTRY, THE LEVEL OF CONSUMER SPENDING ON APPAREL, THE COMPANY'S
ABILITY TO PROFITABLY AND TIMELY SATISFY CUSTOMER DEMAND FOR ITS PRODUCTS, THE
COMPETITIVE PRICING ENVIRONMENT WITHIN THE APPAREL INDUSTRY, THE COMPANY'S
SUBSTANTIAL LEVERAGE AND THE RESTRICTIVE COVENANTS IN ITS BORROWING DOCUMENTS,
FLUCTUATIONS IN THE PRICE OF COTTON AND POLYESTER USED BY THE COMPANY IN THE
MANUFACTURE OF ITS PRODUCTS, THE COMPANY'S RELATIONSHIP WITH ITS PARTIALLY
UNIONIZED WORKFORCE, THE SEASONALITY AND CYCLICALITY OF THE FLEECEWEAR INDUSTRY,
AND REMEDIATION OF YEAR 2000 COMPUTER APPLICATIONS. SUCH STATEMENTS ARE PROVIDED
IN ACCORDANCE WITH THE SAFE HARBOR PROVISIONS OF THE PRIVATE LITIGATION REFORM
ACT OF 1995. INVESTORS SHOULD CONSIDER OTHER RISKS AND UNCERTAINTIES DISCUSSED
IN OTHER DOCUMENTS FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
Net sales for the three months ended April 3, 1999 were $71.6 million as
compared to $99.9 million in the comparable period of 1998. The 1998 amount
includes $28 million of revenues from LogoAthletic, Inc. and
LogoAthletic/Headwear, Inc. ("LogoAthletic") subsidiaries whose assets were sold
on July 15, 1998. Excluding LogoAthletic, sales revenues were relatively flat
for the quarter on a comparative basis. The higher volume of jersey products
sold was offset by lower fleece and jersey pricing due to competitive conditions
and aggressive selling by the Company to improve management of inventories.
Cost of products sold as a percentage of sales was 91.7% for the first quarter
of 1999 compared to 80.9% for the same period in 1998. The primary reason for
the decrease was lower prices in both fleece and jersey as a result of the
aforementioned competitive pricing and aggressive selling to manage inventories.
<PAGE>
11
The sale of LogoAthletic, whose licensed apparel business historically incurred
lower costs as a percent of sales than the Company's activewear business, also
contributed to the increase.
Selling, general and administrative expenses ("S,G&A") of $12.0 million
represent a decrease of $12.0 million as compared to the first quarter of 1998.
As a percentage of sales, S,G&A expenses were 16.8% compared to 24.0% for the
first quarter of 1998. The primary reason for the decrease was the sale of
LogoAthletic, which incurred proportionally higher advertising and marketing
costs than the Company's activewear business. Also contributing to the reduction
was a decrease of $1.0 million in advertising expenses in the activewear
business. Higher computer equipment and software amortization, resulting from
the partial implementation of an enterprise-wide management information system,
offset the reduction in advertising.
Interest expense for the first quarter of 1999 was $6.3 million compared to $6.9
million in the comparable period of 1998. The decrease for the first quarter
over the comparable period of 1998 is due to lower average borrowings, partially
offset by higher borrowing rates. First quarter 1999 working capital borrowings
averaged $54.2 million at an average rate of 8.2% compared to $94.7 million and
7.2%, respectively, for the comparable period of the prior year. The reduction
in average borrowings reflects the proceeds received from the sale of
LogoAthletic during the third quarter of 1998. The nature of the Company's
business requires extensive seasonal borrowings to support its working capital
needs.
Benefit (Provision) for income taxes reflects an effective rate for combined
federal and state income taxes of 37% for the first quarter of 1999 and 39% for
the comparable period of 1998.
YEAR 2000
The Year 2000 issue is the result of computer systems and other equipment with
embedded chips using two digits, rather than four, to define the applicable
year. If the Company's computer systems are not Year 2000 compliant, they may
recognize a date using "00" as the Year 1900 rather than the Year 2000. If not
corrected, computer applications could fail or create erroneous results which
could have a material adverse impact on the Company's business, operations or
financial condition in the future.
The Company began addressing the Year 2000 issue in 1995 with the formation of a
Y2K Team. The Company is in the process of addressing Year 2000 compliance, both
internally and with third parties. The Company's objective is to confirm
compliance by July 3, 1999. Third parties that are not compliant at that time
may delay compliance.
The Year 2000 Project is comprised of four phases:
1. Inventory of all hardware, software, local area networks, personal
computers, telecommunications equipment and software (data and
voice), program logic controllers (PLC) and non-information
technology embedded software and equipment.
2. Assessment of the inventory through testing for Year 2000
compliance.
3. Remediation of all affected systems. Systems will be modified,
upgraded or replaced as appropriate for compliance. Contingency
plans will be established for areas of concern.
4. Testing of internal system compliance and testing with customers
and suppliers will be performed on an ongoing basis until project
completion.
The Company has completed the inventory phase. The assessment and remediation
phases are in process. The assessment phase is 90% complete and is scheduled for
completion by May 30, 1999. The
<PAGE>
12
remediation phase is scheduled for completion by July 3, 1999. The testing phase
will be ongoing as hardware and software are remedied, upgraded or replaced.
As part of the Year 2000 Project, the Company is implementing a new Enterprise
Resource Planning system (ERP), which has replaced 80% of the Company's Legacy
systems with Year 2000 compliant software. All major infrastructure, computers,
PC's and telecommunications equipment have been replaced with Year 2000
compliant hardware and software as part of the project. The Company has
implemented 95% of the system to date with the remaining 5% scheduled to be
implemented by June 5, 1999. Additionally, the Company has implemented the Year
2000 compliant versions of electronic data interchange (EDI) systems for testing
with the Company's customers. This testing commenced in the first quarter of
1999 and is scheduled for completion by June 5, 1999. The remaining Legacy
software has been identified, assessment is nearing completion and upgrades or
replacements are being ordered for non-compliant software and hardware. Updates
or modification to this software is scheduled for completion by June 5, 1999,
with testing scheduled for completion by July 3, 1999.
The Company relies on third party suppliers for raw materials, water, utilities,
transportation and other services. Interruption of supplier operations due to
Year 2000 issues could affect Company operations. The Company has initiated
efforts with all major suppliers to gauge compliance and exposure in these
areas. The Company has formally requested written confirmation of Year 2000
compliance from its major contractors and vendors. Approximately 70% have
responded to date. Specific testing will be requested where appropriate. Should
any vendor, supplier, equipment or process not be able to conform within the
prescribed timeframes, the Company will take appropriate action to ensure
continuity of its business. Contingency plans will be developed for any area not
able to conform within the prescribed timeframe. While approaches to reducing
risks of interruption due to supplier failures will vary by facility, options
include identifying of alternate suppliers, stockpiling raw materials and
adjusting operating schedules. Costs associated with any contingency will be
determined as this assessment continues.
Year 2000 Project costs are linked with the ERP implementation costs. Total
costs for both the Year 2000 Project and the ERP system implementation are
expected to be approximately $21.5 million. Of this total, $20.5 million has
been incurred and capitalized as part of the ERP implementation as of April 3,
1999. The remaining $1.0 million is specifically related to Year 2000 project
costs and will be expensed as incurred over the next nine months. These costs
will include external testing with banks, vendors and customers, as well as EDI
software upgrades. The Company believes the remaining costs relating to the Year
2000 issue will not have a material impact on the Company's consolidated
financial position, results of operations or cash flows.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the readiness of third-party suppliers and customers, the Company is
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the Company's results of operations, liquidity or
financial condition. The Year 2000 Project is expected to significantly reduce
the Company's level of uncertainty about the Year 2000 problem and about the
Year 2000 compliance of its major suppliers and customers. The Company believes
that, with the implementation of its new ERP systems and the completion of the
Year 2000 project as scheduled, the possibility of interruptions of normal
operations is reduced.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
<PAGE>
13
Net working capital at April 3, 1999 decreased $6.5 million from year-end 1998
due primarily to lower accounts receivable and higher accounts payable and
accrued expenses, partially offset by higher inventories. Compared to January 2,
1999, net accounts receivable decreased $15.7 million and accounts payable and
accrued expenses increased $14.8 million. Receivables normally build to a peak
in September and October and begin to decline in December as shipment volume
decreases and cash is collected. Inventories increased $22.6 million from
January 2, 1999 to April 3, 1999 as compared to an increase of $41.7 million in
the first quarter of 1998. Inventories traditionally increase during the first
half of the year to support second half shipments.
The current ratio at April 3, 1999 was 5.5 compared to 7.5 at January 2, 1999.
The decrease was due to the factors described above.
Total long-term debt at April 3, 1999 includes Senior Notes of $185 million,
$53.8 million outstanding under the revolving credit facility and $14.4 million
of convertible subordinated notes. Debt as a percentage of total capitalization
was 64.5% as of April 3, 1999 compared to 63.9% as of January 2, 1999.
Subsequent to April 3, 1999, the Company entered into a new, asset-based secured
credit facility which has a maximum borrowing availability of $150 million with
Bank of America Business Credit ("BABC"). Under the new facility, which closed
on May 10, 1999, BABC will lend funds subject to availability under a borrowing
base calculated as a percentage of eligible accounts receivable and inventories,
provided that the total amount advanced will not exceed $150 million. Proceeds
from this facility have been used to pay all outstanding amounts under the
Company's former $87.5 million unsecured revolving credit facility and fund a
partial tender offer for the 9 5/8% and 10 5/8% Senior Notes (see below). The
facility will also be used to provide working capital.
To obtain the required consents of noteholders to permit the Company to grant a
first security interest on accounts receivable, inventories and related assets
to secure the BABC credit facility, the Company initiated a consent
solicitation. In connection with the solicitation the Company also invited
noteholders to tender notes for purchase by the Company in a "modified dutch
auction" with a maximum purchase price of 65% of face value per note and agreed
to provide funding of $42 million (exclusive of accrued interest) for such
purchases. The Company has accepted tenders for $70 million face value of notes
and has received consents from holders of more than 51% of both note series as
required. As a result of the refinancing the Company has purchased $70 million
face value notes for $42 million and has retired the former revolving credit
facility borrowings and accrued interest of $54.5 million by a payment of $39.5
million in cash and the foregiveness of $15.0 million of borrowings by the
former lenders. In connection with the consent solicitation, interest payments
on these notes have been changed to quarterly instead of semiannually. Also, the
holders of notes not accepted for purchase by the Company who also consented
have received freely tradeable and registered warrants for 15,525,000 shares of
the Company's common stock. Two-thirds of these warrants have an exercise price
of $.8125 per share, and the remaining one-third have an exercise price of
$1.425 per share. The warrants have an 8-year term, and may be exercised by
payment of cash or by tender of notes for an amount equal to the exercise price
of the warrants.
The new facility has a maturity date of three years with an extension provision
for an additional two years, subject to lenders' approval. The Company has the
option of setting quarterly interest rates equal to either the Prime Rate or
London Interbank Offered Rate ("LIBOR") plus applicable margins. The applicable
margin is based on a funded debt / EBITDA ratio that will range from 0% to 1.75%
for Prime Rate or 1.75%
<PAGE>
14
to 3.75% for LIBOR based loans. The Company shall pay a fee of .375% per year on
any unused borrowings. A $10 million sublimit under the facility is available
for letters of credit.
In connection with this debt refinancing, the Company received waivers for
default of financial covenants under the former credit facility. The most
significant financial covenants of the new facility are the maintenance of a
minimum fixed charge coverage ratio on a quarterly basis and annual limitations
on capital expenditures. Other covenants place restrictions on the Company's
ability to incur additional indebtedness, pay dividends, create liens or other
encumbrances, to make certain payments, investments, loans and guarantees and to
sell or otherwise dispose of a substantial portion of its assets.
This debt refinancing will be reflected in the Company's financial statements in
the quarter ending July 3, 1999.
For the first three months of 1999, net cash provided by operations of $8.0
million reflects a decrease in accounts receivable, and an increase in accounts
payable and accrued expenses, partially offset by higher inventory levels. Cash
provided by investing activities was $1.0 million in 1999 compared to cash used
in the first three months of 1998 of $7.2 million. The cash provided in 1999
reflects the proceeds from the surrender of certain life insurance policies and
the sale of non-operating properties, and are partially offset by capital
expenditures. Capital expenditures for the first quarter of 1999 were $2.1
million as compared to $3.8 million for the first three months of 1998. Cash
used by financing activities of $6.2 million in 1999 reflects the reduction in
working capital requirements. Management believes current cash balances, cash
flows from operations and its new secured credit facility to be sufficient
during 1999 and the foreseeable future to fund its planned capital expenditures
and working capital needs.
TULTEX CORPORATION
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.15 Loan and Security Agreement dated May 7, 1999 between Tultex
Corporation and Nationsbank, N.A.
10.16 Second Supplemental Indenture dated May 7, 1999 between Tultex
Corporation and
<PAGE>
15
U.S. Bank National Association as Successor Trustee for $75,000,000
Senior Notes.
10.17 Second Supplemental Indenture dated May 7, 1999 between Tultex
Corporation and U.S. Bank National Association as Successor Trustee
for $110,000,000 Senior Notes.
10.18 Master Collateral and Security Agreement dated May 7, 1999 between
Tultex Corporation and U.S. Bank National Association, as Trustee
for the Senior Noteholders.
10.19 Warrant Agreement dated May 7, 1999 between Tultex Corporation and
First Union National Bank as Warrant Agent .
(b) Reports on Form 8-K
None
Items 1, 2, 3, 4 and 5 are inapplicable and are omitted.
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.
TULTEX CORPORATION
------------------
(Registrant)
<PAGE>
16
Date May 17, 1999 /s/ C. W. Davies, Jr.
------------ ---------------------
C. W. Davies, Jr., President and Chief
Executive Officer
Date May 17, 1999 /s/ P. W. Harris, Jr.
------------ ----------------------
P. Woolard Harris, Jr.,
Vice President and Chief Financial Officer
Exhibit 10.15
LOAN AND SECURITY AGREEMENT
Dated as of May 7, 1999
Between
TULTEX CORPORATION
and
CERTAIN SUBSIDIARIES PARTY HERETO
AS BORROWERS
(collectively, the Borrowers)
and
THE SUBSIDIARY GUARANTORS PARTY HERETO
(collectively, the Guarantors)
and
THE FINANCIAL INSTITUTIONS PARTY
HERETO FROM TIME TO TIME
(the Lenders)
and
NATIONSBANK, N.A.
(the Agent)
<PAGE>
TABLE OF CONTENTS(1)
<TABLE>
<CAPTION>
PAGE
ARTICLE 1
<S> <C>
DEFINITIONS..................................................................................2
SECTION 1.1. DEFINITIONS.................................................................2
SECTION 1.2. GENERAL....................................................................28
ARTICLE 2
REVOLVING CREDIT FACILITY...................................................................29
SECTION 2.1. REVOLVING CREDIT LOANS.....................................................29
----------------------
SECTION 2.2. MANNER OF BORROWING REVOLVING CREDIT LOANS.................................30
------------------------------------------
SECTION 2.3. REPAYMENT OF REVOLVING CREDIT LOANS........................................31
-----------------------------------
SECTION 2.4. REVOLVING CREDIT NOTE......................................................32
---------------------
SECTION 2.5. EXTENSION OF REVOLVING CREDIT FACILITY.....................................32
--------------------------------------
ARTICLE 3
LETTER OF CREDIT FACILITY...................................................................32
SECTION 3.1. AGREEMENT TO ISSUE.........................................................32
------------------
SECTION 3.2. AMOUNTS....................................................................32
-------
SECTION 3.3. CONDITIONS.................................................................33
----------
SECTION 3.4. ISSUANCE OF LETTERS OF CREDIT..............................................33
-----------------------------
SECTION 3.5. DUTIES OF THE ISSUING BANK.................................................34
--------------------------
SECTION 3.6. PAYMENT OF REIMBURSEMENT OBLIGATIONS.......................................34
------------------------------------
SECTION 3.7. PARTICIPATIONS.............................................................34
--------------
SECTION 3.8. INDEMNIFICATION, EXONERATION...............................................35
----------------------------
SECTION 3.9. SUPPORTING LETTER OF CREDIT; CASH COLLATERAL...............................36
--------------------------------------------
ARTICLE 4
GENERAL LOAN PROVISIONS.....................................................................37
SECTION 4.1. INTEREST...................................................................37
SECTION 4.2. CERTAIN FEES...............................................................38
SECTION 4.3. MANNER OF PAYMENT..........................................................39
SECTION 4.4. GENERAL....................................................................39
SECTION 4.5. LOAN ACCOUNTS; STATEMENTS OF ACCOUNT.......................................39
SECTION 4.6. TERMINATION OF AGREEMENT...................................................40
SECTION 4.7. MAKING OF LOANS............................................................40
SECTION 4.8. SETTLEMENT AMONG LENDERS...................................................42
SECTION 4.9. MANDATORY PREPAYMENTS......................................................46
SECTION 4.10. PAYMENTS NOT AT END OF INTEREST PERIOD; FAILURE TO BORROW.................47
SECTION 4.11. ASSUMPTIONS CONCERNING FUNDING OF LIBOR LOANS.............................47
SECTION 4.12. NOTICE OF CONVERSION OR CONTINUATION......................................47
SECTION 4.13. CONVERSION OR CONTINUATION................................................47
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(1) This Table of Contents is included for reference purposes only and does not
constitute part of the Loan and Security Agreement.
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SECTION 4.14. DURATION OF INTEREST PERIODS; MAXIMUM NUMBER OF LIBOR LOANS; MINIMUM
INCREMENTS...............................................................................48
SECTION 4.15. CHANGED CIRCUMSTANCES.....................................................48
SECTION 4.16. CASH COLLATERAL ACCOUNT...................................................50
SECTION 4.17. BORROWERS'AGENT...........................................................50
SECTION 4.18. JOINT AND SEVERAL LIABILITY...............................................51
SECTION 4.19. OBLIGATIONS ABSOLUTE......................................................51
SECTION 4.20. WAIVER OF SURETYSHIP DEFENSES.............................................52
ARTICLE 5
CONDITIONS PRECEDENT........................................................................52
SECTION 5.1. CONDITIONS PRECEDENT TO LOANS AND LETTERS OF CREDIT........................52
SECTION 5.2. ALL LOANS; LETTERS OF CREDIT...............................................56
SECTION 5.3. CONDITIONS AS COVENANTS....................................................56
ARTICLE 6
REPRESENTATIONS AND WARRANTIES..............................................................56
SECTION 6.1. REPRESENTATIONS AND WARRANTIES.............................................56
SECTION 6.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC............................66
ARTICLE 7
SECURITY INTEREST...........................................................................67
SECTION 7.1. SECURITY INTEREST..........................................................67
SECTION 7.2. CONTINUED PRIORITY OF SECURITY INTEREST....................................67
ARTICLE 8
COLLATERAL COVENANTS........................................................................68
SECTION 8.1. COLLECTION OF RECEIVABLES..................................................68
SECTION 8.2. VERIFICATION AND NOTIFICATION..............................................69
SECTION 8.3. DISPUTES, RETURNS AND ADJUSTMENTS..........................................70
SECTION 8.4. INVOICES...................................................................70
SECTION 8.5. DELIVERY OF INSTRUMENTS....................................................70
SECTION 8.6. SALES OF INVENTORY.........................................................70
SECTION 8.7. OWNERSHIP AND DEFENSE OF TITLE.............................................70
SECTION 8.8. INSURANCE..................................................................71
SECTION 8.9. LOCATION OF OFFICES AND COLLATERAL.........................................71
SECTION 8.10. RECORDS RELATING TO COLLATERAL............................................72
SECTION 8.11. INSPECTION................................................................72
SECTION 8.12. INFORMATION AND REPORTS...................................................72
SECTION 8.13. POWER OF ATTORNEY.........................................................73
SECTION 8.14. ADDITIONAL REAL ESTATE AND LEASES.........................................74
SECTION 8.15. ASSIGNMENT OF CLAIMS ACT..................................................74
ARTICLE 9
AFFIRMATIVE COVENANTS.......................................................................74
SECTION 9.1. PRESERVATION OF CORPORATE EXISTENCE AND SIMILAR MATTERS....................74
SECTION 9.2. COMPLIANCE WITH APPLICABLE LAW.............................................74
SECTION 9.3. MAINTENANCE OF PROPERTY....................................................74
SECTION 9.4. CONDUCT OF BUSINESS........................................................75
SECTION 9.5. INSURANCE..................................................................75
SECTION 9.6. PAYMENT OF TAXES AND CLAIMS................................................75
</TABLE>
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SECTION 9.7. ACCOUNTING METHODS AND FINANCIAL RECORDS...................................75
SECTION 9.8. USE OF PROCEEDS............................................................75
SECTION 9.9. HAZARDOUS WASTE AND SUBSTANCES; ENVIRONMENTAL REQUIREMENTS.................75
SECTION 9.10. YEAR 2000 COMPLIANCE......................................................76
SECTION 9.11. ADDITIONAL BORROWERS......................................................76
SECTION 9.12. ADDITIONAL GUARANTORS.....................................................76
SECTION 9.13. SYNDICATION...............................................................77
SECTION9.14. INDENTURE TRUSTEES.........................................................77
SECTION9.15. STANDARD INVENTORY COSTING SYSTEM..........................................77
SECTION9.16. PBGC AGREEMENT.............................................................77
ARTICLE 10
INFORMATION.................................................................................77
SECTION 10.1. FINANCIAL STATEMENTS......................................................77
--------------------
SECTION 10.2. ACCOUNTANTS'CERTIFICATE...................................................78
-----------------------
SECTION 10.3. OFFICER'S CERTIFICATE.....................................................78
---------------------
SECTION 10.4. COPIES OF OTHER REPORTS...................................................78
-----------------------
SECTION 10.5. NOTICE OF LITIGATION AND OTHER MATTERS....................................79
--------------------------------------
SECTION 10.6. ERISA.....................................................................79
-----
SECTION 10.7. ACCURACY OF INFORMATION...................................................80
-----------------------
SECTION 10.8. REVISIONS OR UPDATES TO SCHEDULES.........................................80
---------------------------------
SECTION 10.9. SUBORDINATED INDEBTEDNESS CERTIFICATE.....................................80
-------------------------------------
ARTICLE 11
NEGATIVE COVENANTS..........................................................................80
SECTION 11.1. FINANCIAL RATIOS..........................................................80
SECTION 11.2. INDEBTEDNESS FOR MONEY BORROWED...........................................81
SECTION 11.3. GUARANTIES................................................................81
SECTION 11.4. INVESTMENTS...............................................................81
SECTION 11.5. CAPITAL EXPENDITURES......................................................82
SECTION 11.6. RESTRICTED DIVIDEND PAYMENTS AND PURCHASES, ETC...........................82
SECTION 11.7. MERGER, CONSOLIDATION AND SALE OF ASSETS..................................82
SECTION 11.8. TRANSACTIONS WITH AFFILIATES..............................................82
SECTION 11.9. LIENS.....................................................................83
SECTION 11.10. CAPITALIZED LEASE OBLIGATIONS............................................83
SECTION 11.11. OPERATING LEASES.........................................................83
SECTION 11.12. LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES.......................83
SECTION 11.13. PLANS....................................................................83
SECTION 11.14. SALES AND LEASEBACKS.....................................................83
SECTION 11.15. AMENDMENTS OF OTHER AGREEMENTS...........................................83
SECTION 11.16. MINIMUM AVAILABILITY.....................................................83
SECTION 11.17. FISCAL YEAR..............................................................84
ARTICLE 12
DEFAULT.....................................................................................84
SECTION 12.1. EVENTS OF DEFAULT.........................................................84
-----------------
SECTION 12.2. REMEDIES..................................................................87
--------
SECTION 12.3. APPLICATION OF PROCEEDS...................................................89
-----------------------
SECTION 12.4. POWER OF ATTORNEY.........................................................89
-----------------
SECTION 12.5. MISCELLANEOUS PROVISIONS CONCERNING REMEDIES..............................90
--------------------------------------------
ARTICLE 13
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ASSIGNMENTS.................................................................................91
SECTION 13.1. SUCCESSORS AND ASSIGNS; PARTICIPATIONS....................................91
SECTION 13.2. REPRESENTATION OF LENDERS.................................................93
ARTICLE 14
AGENT.......................................................................................93
SECTION 14.1. APPOINTMENT OF AGENT......................................................93
SECTION 14.2. DELEGATION OF DUTIES......................................................93
SECTION 14.3. EXCULPATORY PROVISIONS....................................................94
SECTION 14.4. RELIANCE BY AGENT.........................................................94
SECTION 14.5. NOTICE OF DEFAULT.........................................................94
SECTION 14.6. NON-RELIANCE ON AGENT AND OTHER LENDERS...................................95
SECTION 14.7. INDEMNIFICATION...........................................................95
SECTION 14.8. AGENT IN ITS INDIVIDUAL CAPACITY..........................................95
SECTION 14.9. SUCCESSOR AGENT...........................................................96
SECTION 14.10. NOTICES FROM AGENT TO LENDERS............................................96
SECTION 14.11. FIELD EXAMINATION REPORTS; DISCLAIMER BY LENDERS.........................96
ARTICLE 15
GUARANTEE...................................................................................97
SECTION 15.1. GUARANTEE.................................................................97
---------
SECTION 15.2. OBLIGATIONS UNCONDITIONAL.................................................97
-------------------------
SECTION 15.3. WAIVER OF SURETYSHIP DEFENSES.............................................97
-----------------------------
SECTION 15.4. REINSTATEMENT.............................................................98
-------------
SECTION 15.5. REMEDIES..................................................................98
--------
SECTION 15.6. CONTINUING GUARANTY.......................................................98
-------------------
ARTICLE 16
MISCELLANEOUS...............................................................................99
SECTION 16.1. NOTICES...................................................................99
SECTION 16.2. EXPENSES.................................................................100
SECTION 16.3. STAMP AND OTHER TAXES....................................................101
SECTION 16.4. SETOFF...................................................................101
SECTION 16.5. LITIGATION...............................................................101
SECTION 16.6. WAIVER OF RIGHTS.........................................................102
SECTION 16.7. CONSENT TO ADVERTISING AND PUBLICITY.....................................102
SECTION 16.8. REVERSAL OF PAYMENTS.....................................................102
SECTION 16.9. INJUNCTIVE RELIEF........................................................103
SECTION 16.10. ACCOUNTING MATTERS......................................................103
SECTION 16.11. AMENDMENTS..............................................................103
SECTION 16.12. ASSIGNMENT..............................................................104
SECTION 16.13. PERFORMANCE OF OBLIGORS'DUTIES..........................................104
SECTION 16.14. INDEMNIFICATION.........................................................104
SECTION 16.15. ALL POWERS COUPLED WITH INTEREST........................................105
SECTION 16.16. SURVIVAL................................................................105
SECTION 16.17. TITLES AND CAPTIONS.....................................................105
SECTION 16.18. SEVERABILITY OF PROVISIONS..............................................105
SECTION 16.19. GOVERNING LAW...........................................................105
SECTION 16.20. COUNTERPARTS............................................................105
SECTION 16.21. REPRODUCTION OF DOCUMENTS...............................................106
SECTION 16.22. TERM OF AGREEMENT.......................................................106
</TABLE>
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SECTION 16.23. CONTRIBUTION AND INDEMNIFICATION AMONG THE OBLIGORS.....................106
SECTION 16.24. RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.................106
SECTION 16.25. AGENCY FOR PERFECTION...................................................107
SECTION 16.26. TAXES...................................................................107
SECTION 16.27. FINAL AGREEMENT.........................................................108
SECTION 16.28. WAIVER OF CONSEQUENTIAL DAMAGES, ETC....................................108
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ANNEXES, EXHIBITS AND SCHEDULES
<S> <C>
ANNEX I COMMITMENTS
ANNEX II PERFORMANCE PRICING MATRIX
EXHIBIT A FORM OF REVOLVING CREDIT NOTE
EXHIBIT B FORM OF BORROWING BASE CERTIFICATE
EXHIBIT C FORM OF OPINION OF COUNSEL
EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT E FORM OF SETTLEMENT REPORT
EXHIBIT F FORM OF JOINDER AGREEMENT
EXHIBIT G FORM OF COMPLIANCE CERTIFICATE
Schedule 1.1A Mortgaged Real Estate
Schedule 6.1(a) Organization
Schedule 6.1(b) Capitalization
Schedule 6.1(c) Subsidiaries
Schedule 6.1(e) Compliance with Laws
Schedule 6.1(f) Principal Business
Schedule 6.1(g) Governmental Approvals
Schedule 6.1(h) Title to Properties
Schedule 6.1(i) Liens
Schedule 6.1(j) Indebtedness and Guaranties
Schedule 6.1(k) Litigation
Schedule 6.1(l) Tax Matters
Schedule 6.1(p) ERISA
Schedule 6.1(t) Location of Offices and Receivables
Schedule 6.1(u) Location of Inventory
Schedule 6.1(v) Equipment
Schedule 6.1(w) Real Estate
Schedule 6.1(x) Corporate and Fictitious Names
Schedule 6.1(aa) Employee Relations
Schedule 6.1(bb) Proprietary Rights
Schedule 6.1(cc) Trade Names
Schedule 6.1(ee) Bank Accounts
Schedule 9.8 Use of Proceeds
</TABLE>
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<PAGE>
LOAN AND SECURITY AGREEMENT
Dated as of May 7, 1999
Tultex Corporation, a Virginia corporation ("Tultex"), CALIFORNIA SHIRT
SALES, INC., a Virginia corporation, DOMINION STORES, INC., a Virginia
corporation, TULTEX/T-SHIRT CITY, INC., a Virginia corporation, and TRACK GEAR,
INC., a Virginia corporation (collectively, the "Borrowers"), AKOM, LTD., a
Cayman Islands, B.W.I. corporation, DOMINION DISTRIBUTION, INC., a Virginia
corporation, LIGA MAYOR DE MEXICO S.A. DE C.V., a Mexican corporation, TULTEX
SUBSIDIARY (VA) INC., a Virginia corporation, TULTEX SUBSIDIARY (MASS) INC., a
Massachusetts corporation, TULTEX CANADA, INC., a Canadian corporation, SWEATJET
INCORPORATED, a Virginia corporation, and TULTEX INTERNATIONAL, INC., a Virginia
corporation (collectively, the "Guarantors"), the financial institutions party
to this Agreement from time to time (the "Lenders"), and NATIONSBANK, N.A., a
national banking association, as agent for the Lenders (the "Agent"), agree as
follows:
W I T N E S S E T H :
WHEREAS, Tultex is the 100% owner of all of the capital stock of each
other Borrower and each Guarantor; and
WHEREAS, the Borrowers and Guarantors desire to obtain financing for
their mutual and collective enterprise as marketers and manufacturers of
activewear apparel; and
WHEREAS, in order to utilize the financial powers of each Obligor (as
hereinafter defined) in the most efficient and economical manner, and in order
to facilitate the financing of each Obligor's working capital needs, the Lenders
will, at the request of the Borrowers' Agent (as hereinafter defined), extend
financial accommodations to all Borrowers on a combined basis in accordance with
the provisions set forth in this Agreement; and
WHEREAS, the Obligors' business is a mutual and collective enterprise
and the Obligors believe that the consolidation of all loans and other financial
accommodations under this Agreement will enhance the aggregate borrowing powers
of the Obligors and facilitate the administration of their loan relationship
with the Agent and the Lenders, all to the mutual advantage of the Obligors; and
WHEREAS, each Obligor acknowledges that it will receive substantial
direct and indirect benefits by reason of the making of loans and other
financial accommodations to the other Obligors as provided in this Agreement, by
virtue of the Obligors' various inter-relationships as joint guarantors or joint
obligors and the beneficiaries thereof, as lessors and lessees, as suppliers and
customers, and as joint venturers; and
WHEREAS, the Agent's and the Lenders' willingness to extend financial
accommodations to the Obligors, and to administer each Obligor's collateral
security therefor, on a combined basis as more fully
<PAGE>
set forth in this Agreement, is done solely as an accommodation to the Obligors
and at the Obligors' request and in furtherance of the Obligors' mutual and
collective enterprise.
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. For the purposes of this Agreement:
"Account Debtor" means a Person who is obligated on a Receivable.
"Acquire" or "Acquisition", as applied to any Business Unit or
Investment, means the acquiring or acquisition of such Business Unit or
Investment by purchase, exchange, issuance of stock or other securities, or by
merger, reorganization or any other method.
"Affiliate" means, with respect to a Person, (a) any partner,
officer, shareholder (if holding more than 10% of the outstanding shares of
capital stock of such Person), director, employee or managing agent of such
Person, (b) any other Person (other than a Subsidiary) that, (i) directly or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such given Person, (ii) directly or indirectly
beneficially owns or holds 10% or more of any class of voting stock or
partnership or other voting interest of such Person or any Subsidiary of such
Person, or (iii) 10% or more of the voting stock or partnership or other voting
interest of which is directly or indirectly beneficially owned or held by such
Person or a Subsidiary of such Person. The term "control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through ownership of voting
securities or partnership or other voting interest, by contract or otherwise.
"Agency Account" means an account of an Obligor maintained by it
with a Clearing Bank pursuant to an Agency Account Agreement.
"Agency Account Agreement" means an agreement among an Obligor,
the Agent and a Clearing Bank, in form and substance satisfactory to the Agent,
concerning the collection of payments which represent the proceeds of
Receivables or of any other Collateral.
"Agent" means NationsBank, N.A., a national banking association,
and any successor agent appointed pursuant to SECTION 14.9.
"Agent's Office" means the office of the Agent specified in or
determined in accordance with the provisions of SECTION 16.1.
"Agreement" means and includes this Agreement, including all
Annexes, Schedules, Exhibits and other attachments hereto, and all amendments,
modifications and supplements hereto and thereto.
"Agreement Date" means the date as of which this Agreement is
dated.
"AKOM" means AKOM, Ltd., a Cayman Islands, B.W.I. corporation.
-2-
<PAGE>
"Applicable Law" means all applicable provisions of
constitutions, statutes, rules, regulations and orders of all governmental
bodies and of all orders and decrees of all courts and arbitrators, including
Environmental Laws.
"Applicable Margin" means, as to (a) Prime Rate Loans, 0.75%, and
(b) LIBOR Loans, 2.75%, as adjusted in accordance with the performance pricing
matrix set forth on ANNEX II attached hereto based upon the ratio of
Consolidated Funded Indebtedness as of the date of determination to Consolidated
EBITDA for the preceding four fiscal quarters. Adjustments to the Applicable
Margin shall be effective as of (i) the first day of the calendar month which
begins at least 10 days after the Agent's receipt of the Obligors' audited
financial statements as of each fiscal year end (commencing with the financial
statements for the fiscal year ending on January 1, 2000) in conformance with
SECTION 10.1(a), together with the accountant's certificate described in SECTION
10.2 setting forth the calculations necessary to determine the ratio referred to
above, and (ii) the first day of the calendar month which begins at least 10
days after the Agent's receipt of the Obligors' financial statements as of the
last day of each subsequent fiscal quarter in conformance with SECTION 10.1(B),
together with the officer's certificate described in SECTION 10.3 setting forth
the calculations necessary to determine the ratio referred to above; PROVIDED no
decrease in the Applicable Margin shall be made if a Default or Event of Default
exists as of the effective date of such scheduled adjustment. In the event the
Obligors fail to provide in a timely manner the financial statements and
certificates referred to above, and without prejudice to any additional rights
under SECTIONS 4.1(D) and 12.2, the maximum Applicable Margin shall apply to all
LIBOR Loans and Prime Rate Loans until the first day of the calendar month which
begins at least 10 days after the Agent's receipt of such financial statements
and certificates.
"Asset Disposition" means the disposition of any asset of any
Obligor or any of its Subsidiaries, other than sales of Inventory in the
ordinary course of business.
"Assignment and Acceptance" means an assignment and acceptance in
the form attached hereto as EXHIBIT D assigning all or a portion of a Lender's
interests, rights and obligations under this Agreement pursuant to SECTION 13.1.
"Availability" means at any time (a) the Borrowing Base at such
time MINUS (b) the aggregate principal amount of Revolving Credit Loans
outstanding at such time.
"Bank Priority Collateral" means (a) all Receivables and
Receivables Related Collateral (as defined in the Intercreditor Agreement); (b)
all Inventory; (c) all Contract Rights relating to or arising out of Receivables
or Inventory; (d) all General Intangibles, including all Proprietary Rights; (e)
all Tax Refund Claims; (f) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and instruments
evidencing or pertaining to any and all items of Bank Priority Collateral
identified in the other clauses of this definition; (g) all of the Obligors'
demand, time, savings, passbook, money market or like depository accounts, and
certificates of deposit, maintained with a bank, savings and loan association,
credit union or like organization; and (h) any and all products and proceeds of
the foregoing (including any claim to any item referred to in this definition,
and any claim against any third party for loss of, damage to or destruction of
any or all of the Bank Priority Collateral, or for proceeds payable under, or
unearned premiums with respect to, policies of insurance with respect to Bank
Priority Collateral) in whatever form, including cash, negotiable instruments
and other instruments for the payment of money, investment property, chattel
paper, security agreements and other documents
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"Banking Relationship" means (a) checking and operating account
relationships between any Obligor and any Lender (or any Affiliate of a Lender)
and (b) Hedge Agreements between any Obligor and any Lender (or any Affiliate of
a Lender).
"Benefit Plan" means an "employee pension benefit plan" as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) in respect of
which an Obligor or any Related Company is, or within the immediately preceding
six years was, an "employer" as defined in Section 3(5) of ERISA, including such
plans as may be established after the Agreement Date.
"Bonds" means, collectively, (a) the $110,000,000 aggregate
original principal amount of 10 5/8% Senior Notes due 2005 of Tultex, and (b)
the $75,000,000 aggregate original principal amount of Senior Notes due 2007 of
Tultex, in each case issued pursuant to an Indenture.
"Borrower" means each of California Shirt, Dominion Stores, Track
Gear, T-Shirt City and Tultex, and each other Subsidiary of Tultex that becomes
a Borrower pursuant to SECTION 9.11, and "Borrowers" means all of such entities
collectively.
"Borrowers' Agent" means Tultex, acting in its capacity as agent
for the other Borrowers and Obligors, pursuant to SECTION 4.17.
"Borrowing" means a borrowing of Revolving Credit Loans bearing
interest at the same rate, made by all Lenders on the same date and, in the case
of LIBOR Loans, having a single Interest Period, and the continuation or
conversion of an existing Loan or Loans in whole or in part.
"Borrowing Base" means at any time an amount equal to the lesser
of:
(a) the Revolving Credit Facility MINUS the sum of
(i) the Letter of Credit Reserve, PLUS
(ii) such other reserves as the Agent in its reasonable
discretion may establish from time to time, and
(b) an amount equal to
(i) 85% (or such lesser percentage as the Agent may in its
reasonable discretion determine from time to time) of the face
value of Eligible Receivables due and owing at such time, PLUS
(ii) 60% (or such lesser percentage as the Agent may in
its reasonable discretion determine from time to time) of the
face value of Eligible Bill and Hold Receivables due and owing at
such time, PLUS
(iii) THE LESSER OF
(A) the Applicable Inventory Advance Percentage of
the lesser of cost (determined on a first-in-first-out
accounting basis and as adjusted, until Tultex has updated
its standard inventory costing systems in accordance with
SECTION 9.15, in the case of raw materials and finished
goods, for the applicable
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Capitalized Variance set forth below) and fair market
value of Eligible Inventory, net of reserves for
obsolescence, at such time, PROVIDED that no more than
$4,000,000 shall be included in the Borrowing Base with
respect to inventory located at retail stores, AND
(B) 85% of the median orderly liquidation value of
finished goods, greige goods and raw material Inventory of
the Obligors included in the most recent Inventory
Appraisal, as determined by the Inventory Appraiser
pursuant to such Inventory Appraisal, AND
(C) the Inventory Sublimit, MINUS
(iv) the sum of
(A) the Letter of Credit Reserve, PLUS
(B) such other reserves as the Agent in its
reasonable discretion may establish from time to time.
As used herein, "Applicable Inventory Advance Percentage" means (x) 50% in the
case of Eligible Inventory consisting of raw materials, (y) 40% in the case of
Eligible Inventory consisting of greige goods, and (z) 60% in the case of
Eligible Inventory consisting of finished goods, or, in any such case, such
lesser percentage as the Agent may in its reasonable discretion determine from
time to time. As used herein, "Inventory Sublimit" means (i) $100,000,000 at all
times prior to the first anniversary of the Agreement Date, (2) $90,000,000 at
all times on or after the first anniversary of the Agreement Date but prior to
the second anniversary of the Agreement Date, and (3) $70,000,000 at all times
thereafter. As used herein, "Capitalized Variance" means, (A) in the case of raw
materials, a reduction equal to 5.5% of the amount of Eligible Inventory
consisting of raw materials, and (B) in the case of finished goods, an increase
equal to the lesser of $13,000,000 and 10% of the amount of Eligible Inventory
consisting of finished goods.
"Borrowing Base Certificate" means a certificate in the form
attached hereto as EXHIBIT B.
"Business Day" means (a) any day other than a Saturday, Sunday or
other day on which banks in Atlanta, Georgia are authorized or required to close
and (b) in respect of any determination with respect to a LIBOR Loan, any day
referred to in CLAUSE (A) that is also a day on which tradings are conducted in
the London interbank eurodollar market.
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any Person.
"California Shirt" means California Shirt Sales, Inc., a Virginia
corporation.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than assets which constitute a Business Unit) which are not, in accordance with
GAAP, treated as expense items for such Person in the year made or incurred or
as a prepaid expense applicable to a future year or years.
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"Capitalized Lease" means a lease that is required to be
capitalized for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Cash Collateral" means collateral consisting of cash or Cash
Equivalents on which the Agent, for the benefit of the Secured Creditors, has a
first priority Lien.
"Cash Collateral Account" means a special interest-bearing
deposit account consisting of cash maintained at the Agent's Office and under
the sole dominion and control of the Agent, for the benefit of the Secured
Creditors, established pursuant to the provisions of SECTION 4.16 for the
purposes set forth therein.
"Cash Equivalents" means: (a) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one year from the date of acquisition
thereof; (b) commercial paper maturing no more than one year from the date
issued and, at the time of acquisition thereof, having a rating of at least A-1
from Standard & Poor's Corporation or at least P-1 from Moody's Investors
Service, Inc.; (c) certificates of deposit or bankers' acceptances issued in
Dollar denominations and maturing within one year from the date of issuance
thereof issued by any commercial bank organized under the laws of the United
States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $100,000,000 and, unless issued by
the Agent or a Lender, not subject to setoff or offset rights in favor of such
bank arising from any banking relationship with such bank; and (d) repurchase
agreements in form and substance and for amounts satisfactory to the Agent.
"Clearing Bank" means NationsBank and any other banking
institution with which an Agency Account has been established pursuant to an
Agency Account Agreement.
"Collateral" means and includes, collectively, all of the
collateral referred to in each of the Security Documents and all of each
Obligor's right, title and interest in and to each of the following, wherever
located and whether now or hereafter existing or now owned or hereafter acquired
or arising:
(a) all Receivables,
(b) all Inventory,
(c) all Contract Rights,
(d) all General Intangibles,
(e) all Tax Refund Claims,
(f) all Equipment,
(g) all Real Estate,
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(h) all goods and other property, whether or not delivered, (i)
the sale or lease of which gives or purports to give rise to any
Receivable, including all merchandise returned or rejected by or
repossessed from customers, or (ii) securing any Receivable, including
all rights as an unpaid vendor or lienor (including stoppage in transit,
replevin and reclamation) with respect to such goods and other property,
(i) all mortgages, deeds to secure debt and deeds of trust on
real or personal property, guaranties, leases, security agreements, and
other agreements and property which secure or relate to any Receivable
or other Collateral, or are acquired for the purpose of securing and
enforcing any item thereof,
(j) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and instruments
evidencing or pertaining to any and all items of Collateral,
(k) all files, correspondence, computer programs, tapes, discs
and related data processing software which contain information
identifying or pertaining to any Tax Refund Claim or any of the
Receivables or any Account Debtor, or showing the amounts thereof or
payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof,
(l) any demand, time, savings, passbook, money market or like
depository account, and all certificates of deposit, maintained with a
bank, savings and loan association, credit union or like organization,
(m) all cash deposited with the Agent or any Lender or any
Affiliate of the Agent or any Lender or which the Agent, for the benefit
of the Secured Creditors, or any Lender or such Affiliate is entitled to
retain or otherwise possess as collateral pursuant to the provisions of
this Agreement or any of the Security Documents or any agreement
relating to any Letters of Credit, and
(n) any and all products and proceeds of the foregoing (including
any claim to any item referred to in this definition, and any claim
against any third party for loss of, damage to or destruction of any or
all of, the Collateral or for proceeds payable under, or unearned
premiums with respect to, policies of insurance) in whatever form,
including cash, negotiable instruments and other instruments for the
payment of money, investment property, chattel paper, security
agreements and other documents.
"Commitment" means, as to each Lender, the amount set forth (a)
opposite such Lender's name on ANNEX I, representing such Lender's obligation,
upon and subject to the terms and conditions of this Agreement (including the
applicable provisions of SECTION 13.1), to make Revolving Credit Loans and to
purchase participations in Letters of Credit or, (b) from and after the date
hereof, in the Register (as defined in SECTION 13.1), representing such Lender's
obligation to make Revolving Credit Loans and to purchase participations in
Letters of Credit.
"Commitment Percentage" means, as to any Lender, the percentage
of the Total Commitment obtained by dividing such Lender's Commitment by the
Total Commitment.
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"Consolidated" means, when used with reference to any accounting
term used herein, the sum of the applicable accounting term for Tultex and its
Consolidated Subsidiaries, as consolidated after the elimination of intercompany
items and, in the case of Net Income and Tangible Net Worth, after appropriate
deductions for any minority interests in any Subsidiaries.
"Consolidated Subsidiaries" means, as to Tultex, the Subsidiaries
of Tultex whose accounts are at the time in question, in accordance with GAAP
and pursuant to the written consent of the Required Lenders, which consent may
be withheld in their discretion conditioned upon, among other things, the
execution and delivery of guaranties, security agreements, mortgages and other
documents required by the Required Lenders in their discretion, consolidated
with those of Tultex.
"Contaminant" means any waste, pollutant, hazardous substance,
toxic substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
"Contract Rights" means any rights under contracts not yet earned
by performance and not evidenced by an instrument or chattel paper, which
contracts relate to or arise out of any of the Receivables or Inventory.
"Convertible Subordinated Notes" means, collectively, (a)
Tultex's 10% Convertible Subordinated Note due 2007, in the original principal
amount of $2,715,000, payable to California Shirt Sales, Inc., a California
corporation, (b) Tultex's 10% Convertible Subordinated Note due 2007, in the
original principal amount of $6,000,000, payable to California Shirt Sales,
Inc., a California corporation, (c) Tultex's 10% Convertible Subordinated Note
due 2007, in the original principal amount of $1,000,000, payable to Signet
Trust Company, as Escrow Agent pursuant to the Escrow Agreement dated April 16,
1997, and (d) Tultex's 9% Convertible Subordinated Note due 2007, in the
original principal amount of $4,690,000, payable to California Shirt Sales,
Inc., a California corporation.
"Copyrights" means and includes, in each case whether now
existing or hereafter arising, all of each Obligor's right, title and interest
in and to: (a) all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations and copyright applications;
(b) all renewals of any of the foregoing; (c) all income, royalties, damages and
payments now or hereafter due and/or payable under any of the foregoing,
including damages or payments for past or future infringements of any of the
foregoing; (d) the right to sue for past, present and future infringements of
any of the foregoing; and (e) all rights corresponding to any of the foregoing
throughout the world.
"Default" means any of the events specified in SECTION 12.1 which
with the passage of time or giving of notice or both would constitute an Event
of Default.
"Default Margin" means 3%.
"Disbursement Account" means one or more accounts maintained by
and in the name of Tultex or any other Borrower with a Disbursing Bank for the
purposes of disbursing Revolving Credit Loan proceeds and amounts deposited
thereto.
"Disbursing Bank" means any commercial bank with which a
Disbursement Account is maintained.
"Dollar" and "$" mean freely transferable United States dollars.
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"Dominion Distribution" means Dominion Distribution, Inc., a
Virginia corporation.
"Dominion Stores" means Dominion Stores, Inc., a Virginia
corporation.
"EBITDA" means Net Income before provision for interest expense,
income taxes, depreciation expense and amortization. All calculations of EBITDA
shall exclude the results of Tultex Virginia and Tultex Massachusetts for all
periods on or prior to July 15, 1998.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"Effective Date" means the later of (a) the Agreement Date, and
(b) the first date on which all of the conditions set forth in ARTICLE 5 shall
have been fulfilled or waived.
"Effective Interest Rate" means each rate of interest per annum
on the Revolving Credit Loans in effect from time to time pursuant to the
provisions of SECTIONS 4.1(A), (B) and (D).
"Eligible Assignee" means: (a) a commercial bank, commercial
finance company or other asset based lender, having total assets in excess of
$1,000,000,000; (b) any Lender listed on the signature page of this Agreement;
(c) any Affiliate of any Lender; and (d) if an Event of Default exists, any
Person reasonably acceptable to the Agent; PROVIDED in each case that the
representation contained in SECTION 13.2 hereof shall be true with respect to
such Person.
"Eligible Bill and Hold Receivables" means a Receivable that
consists of the unpaid portion of the obligation stated on the invoice issued to
Trau & Loevner with respect to Inventory sold to Trau & Loevner in the ordinary
course of business on a bill and hold basis, net of any credits or rebates owned
by any Obligor to Trau & Loevner, PROVIDED that (a) such Receivable would
constitute an Eligible Receivable (and all of the eligibility requirements set
forth in the definition of Eligible Receivables would be satisfied) except for
the fact that the goods giving rise to such Receivable have not yet been shipped
or delivered to Trau & Loevner, and (b) the aggregate face value of Eligible
Bill and Hold Receivables shall not at any time exceed $2,000,000.
"Eligible In-Transit Inventory" means (a) Inventory being
imported to the United States or Canada by an Obligor under a documentary Letter
of Credit, PROVIDED that all documents of title with respect thereto have been
consigned with the Agent or its representative on terms acceptable to the Agent,
and (b) up to $5,000,000 (computed at the lesser of cost (determined on a
first-in-first-out accounting basis) and fair market value) in the aggregate at
any time of (i) finished goods Inventory in transit between the Obligors'
locations in the United States and Canada and (ii) Inventory in transit from a
foreign manufacturing or processing facility of Tultex or any of its
Subsidiaries to an Obligor's locations in the United States and Canada, PROVIDED
such Inventory described in CLAUSE (II) is located in the United States (or is
on an ocean-going vessel destined for a United States port and is covered by an
ocean cargo insurance policy, naming the Agent as loss payee, that is acceptable
to the Agent); FURTHER PROVIDED, in each case, such Inventory meets all of the
requirements set forth under Eligible Inventory.
"Eligible Inventory" means Inventory which the Agent, in its
reasonable discretion, determines to meet all of the following requirements:
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(a) such Inventory is owned by an Obligor which is organized or
incorporated under the laws of the United States or Canada (or, in
either case, any state or province thereof) and which has its principal
place of business and chief executive office in the United States or
Canada,
(b) such inventory is stored at a location listed on SCHEDULE
6.1(U) or is Eligible In-Transit Inventory,
(c) such Inventory is subject to the Security Interest, which is
perfected as to such Inventory, and is subject to no other Lien
whatsoever other than a Permitted Lien,
(d) such Inventory consists of finished goods, greige goods or
raw materials,
(e) such Inventory does not consist of work-in-process,
chemicals, supplies, or packing and shipping materials,
(f) such Inventory is in good condition and meets all standards
imposed by any governmental agency, or department or division thereof,
having regulatory authority over such goods, their use or sale,
(g) such Inventory is currently either usable or salable, at
prices approximating at least cost, in the normal course of the
applicable Obligor's business, and is not slow moving or stale,
(h) such Inventory is not obsolete or returned or repossessed or
used goods taken in trade,
(i) unless such Inventory is Eligible In-Transit Inventory, such
Inventory is located within the United States or Canada at one of the
locations set forth in the most recent Schedule of Inventory delivered
to the Agent,
(j) such Inventory is in the possession and control of an Obligor
and not any third party or if the Inventory is held by a third party
bailee and a negotiable instrument has not been issued with respect to
it (i) a financing statement (or the equivalent) which names the third
party bailee as the debtor/bailee, names such Obligor as the secured
party/bailor, names the Agent as assignee of the secured party/bailor,
and contains a description of such Inventory acceptable to the Agent and
otherwise in compliance with the requirements of Sections 2-326 and
9-114 of the Uniform Commercial Code (or the equivalent) has been filed
in the appropriate filing office and (ii) such other steps as the Agent
may reasonably require in order to establish and preserve the priority
of the Security Interest against secured creditors of such third party
bailee or such Obligor shall have been taken,
(k) if such Inventory is located in a warehouse or other facility
leased by an Obligor, the lessor has delivered to the Agent, on behalf
of the Secured Creditors, a waiver and consent in form and substance
satisfactory to the Agent,
(l) if such Inventory contains or bears any Proprietary Rights
licensed to an Obligor by any Person, the Agent shall be satisfied that
it may sell or otherwise dispose of such Inventory in accordance with
ARTICLE 12 without infringing the rights of the licensor of such
Proprietary
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Rights or violating any contract with such licensor (and without payment
of any royalties other than any royalties due with respect to the sale
or disposition of such Inventory pursuant to the existing license
agreement), and, if the Agent deems it necessary, the applicable Obligor
shall deliver to the Agent a consent or sublicense agreement from such
licensor in form and substance acceptable to the Agent, and
(m) such Inventory is not determined by the Agent, on behalf of
the Secured Creditors, in its reasonable discretion, to be ineligible
for any other reason.
"Eligible Receivable" means a Receivable that consists of the
unpaid portion of the obligation stated on the invoice issued to an Account
Debtor with respect to Inventory sold and shipped to or services performed for
such Account Debtor in the ordinary course of business, net of any credits or
rebates owed by any Obligor to the Account Debtor, and that the Agent, in its
reasonable discretion, determines to meet all of the following requirements:
(a) such Receivable is owned by an Obligor which is organized or
incorporated under the laws of the United States or Canada (or, in
either case, any state or province thereof) and which has its principal
place of business and chief executive office in the United States or
Canada,
(b) such Receivable represents a complete bona fide transaction
which requires no further act under any circumstances on the part of
such Obligor to make such Receivable payable by the Account Debtor,
(c) such Receivable shall not be more than 60 days past due,
(d) no more than 120 days shall have elapsed from the date of the
original invoice,
(e) the goods the sale of which gave rise to such Receivable were
shipped or delivered to the Account Debtor on an absolute sale basis and
not on a bill and hold sale basis, a consignment sale basis, a
guaranteed sale basis, a sale or return basis, or on the basis of any
other similar understanding, and no material part of such goods shall
have been returned or rejected,
(f) such Receivable is not evidenced by chattel paper or an
instrument of any kind, or if such Receivable is evidenced by chattel
paper or an instrument, such chattel paper or instrument has been
collaterally assigned to the Agent, for the benefit of the Secured
Creditors, pursuant to an assignment in form and substance satisfactory
to the Agent, and is in the possession of the Agent,
(g) the Account Debtor with respect to such Receivable is not
insolvent or the subject of any bankruptcy or insolvency proceedings of
any kind or of any other proceeding or action, threatened or pending,
which might, in the Agent's reasonable discretion, have a materially
adverse effect on such Account Debtor, and is not, in the reasonable
discretion of the Agent, deemed ineligible for credit or other reasons,
(h) such Receivable is not owing by an Account Debtor having 50%
or more in face value of its then-existing accounts owing to the
Obligors which are in dispute or ineligible under CLAUSE (B) or (C)
above,
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(i) such Receivable is not owing by an Account Debtor whose
then-existing accounts owing to the Obligors exceed in face amount 15%
(20% in the case of Sears) of total Eligible Receivables, PROVIDED this
restriction shall only exclude the amount in excess of such
concentration limit,
(j) if such Receivable arises from the performance of services,
such services have been fully rendered and do not relate to any warranty
claim or obligation,
(k) if such Receivable is owing by an Account Debtor that is
located outside of the United States or Canada, the goods which gave
rise to such Receivable were shipped after receipt by the applicable
Obligor from the Account Debtor of an irrevocable letter of credit that
has been confirmed by a financial institution acceptable to the Agent,
is in form and substance acceptable to the Agent, payable in the full
face amount of the face value of the Receivable at a place of payment
located within the United States or Canada and has, if requested by the
Agent, been duly assigned to the Agent, PROVIDED that no supporting
letter of credit will be required with respect to up to $2,000,000 in
face value of Receivables owing from Nissan Trading Co. at any time,
(l) such Receivable is a valid, legally enforceable obligation of
the Account Debtor with respect thereto,
(m) such Receivable is not subject to any present or contingent
(and no facts exist which are the basis for any future) offset,
deduction, counterclaim, dispute or other defense on the part of the
Account Debtor with respect thereto, PROVIDED this restriction shall
only exclude the amount of such Receivable that is subject to offset,
deduction, counterclaim, dispute or defense,
(n) such Receivable is subject to the Security Interest, which is
perfected as to such Receivable, and is subject to no other Lien
whatsoever,
(o) such Receivable is evidenced by an invoice or other
documentation in form acceptable to the Agent,
(p) such Receivable is not subject to the Assignment of Claims
Act of 1940, as amended from time to time, or any Applicable Law now or
hereafter existing similar in effect thereto, or to any other
prohibition (under Applicable Law, by contract or otherwise) against its
assignment or requiring notice of or consent to such assignment, unless
all such required notices have been given, all such required consents
have been received and all other procedures have been complied with such
that such Receivable shall have been duly and validly assigned to the
Agent, for the benefit of the Secured Creditors,
(q) the goods giving rise to such Receivable were not, at the
time of the sale thereof, subject to any Lien, except the Security
Interest and Permitted Liens,
(r) no Obligor is in breach of any express or implied
representation or warranty with respect to the goods the sale of which
gave rise to such Receivable nor in breach of any representation or
warranty, covenant or other agreement contained in the Loan Documents
with respect to such Receivable,
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(s) such Receivable does not arise out of any transaction with
any Subsidiary, Affiliate, creditor, tenant, lessor or supplier of any
Obligor,
(t) such Receivable does not arise out of finance or similar
charges by any Obligor or other fees for the time value of money,
(u) the Account Debtor with respect to such Receivable is not
located in any state or jurisdiction denying creditors access to its
courts in the absence of qualification to transact business in such
state or the filing of a Notice of Business Activities Report or other
similar filing, unless the applicable Obligor has either qualified as a
foreign corporation authorized to transact business in such state or
jurisdiction or has filed a Notice of Business Activities Report or
similar filing with the applicable state or jurisdiction agency for the
then current year, and
(v) neither the Account Debtor with respect to such Receivable,
nor such Receivable, is determined by the Agent in its reasonable
discretion to be ineligible for any other reason.
"Environmental Laws" means all federal, state, local and foreign
laws now or hereafter in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals, or industrial, toxic
or hazardous substances or wastes into the environment (including ambient air,
surface water, ground water, or land), or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, removal, transport,
or handling of pollutants, Contaminants, chemicals, or industrial, toxic or
hazardous substances or wastes, and any and all regulations, notices or demand
letters issued, entered, promulgated or approved thereunder; such laws and
regulations include but are not limited to the Resource Conservation and
Recovery Act, 42 U.S.C. ss. 6901 et seq., as amended; the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 et
seq., as amended; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq.,
as amended; the Clean Air Act, 46 U.S.C. ss. 7401 et seq., as amended; and all
federal, state, local and foreign lien and environmental cleanup programs.
"Environmental Lien" means a Lien in favor of any governmental
entity for (a) any liability under Environmental Laws or (b) damages arising
from, or costs incurred by such governmental entity in response to, a Release or
threatened Release of Contaminant into the environment.
"Equipment" means all machinery, apparatus, equipment, motor
vehicles, tractors, trailers, rolling stock, fittings and fixtures and other
tangible personal property (other than Inventory) of every kind and description
used in the Obligors' business operations or owned by an Obligor or in which an
Obligor has an interest, and all parts, accessories and special tools and all
increases and accessions thereto and substitutions and replacements therefor.
"Event of Default" means any of the events specified in SECTION
12.1, PROVIDED that any requirement for notice or lapse of time or any other
condition has been satisfied.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve system arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of Atlanta, or, if such rate
is not so published for any day which is a Business Day,
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the average of the quotations for such day on such transactions received by the
Agent from three federal funds brokers of recognized standing selected by the
Agent.
"Fee Letter" means, collectively, the February 23, 1999 fee
letter between NationsBank and Tultex, and any other letter agreement between
Tultex and NationsBank with respect to fees payable by the Obligors in
connection with this Agreement.
"Financial Officer" means the Chief Financial Officer, Treasurer
or Controller of Tultex.
"Financing Statements" means any and all Uniform Commercial Code
financing statements (or other similar documents), in form and substance
satisfactory to the Agent, executed and delivered by the Obligors to the Agent,
naming the Agent, for the benefit of the Secured Creditors, as secured party,
and the Obligors as debtor, in connection with this Agreement.
"Funded Indebtedness" means (a) all Indebtedness under this
Agreement and (b) all other Indebtedness for Money Borrowed, including all
Subordinated Indebtedness.
"GAAP" means generally accepted accounting principles
consistently applied and maintained throughout the period indicated and, when
used with reference to Tultex or any Subsidiary of Tultex, consistent with the
prior financial practice of Tultex, as reflected on the financial statements
referred to in SECTION 6.1(N); PROVIDED, HOWEVER, that, in the event that
changes shall be mandated by the Financial Accounting Standards Board or any
similar accounting authority of comparable standing, or shall be recommended by
Tultex's independent public accountants, such changes shall be included in GAAP
as applicable to Tultex and its Subsidiaries only from and after such date as
the Borrowers' Agent, the Required Lenders and the Agent shall have amended this
Agreement to the extent necessary to reflect any such changes in the financial
covenants set forth in ARTICLE 11.
"General Intangibles" means all of the Obligors' now owned or
hereafter acquired general intangibles and other intangible personal property of
every kind and nature which relate to or arise out of any of the Receivables or
Inventory, including all of the following which relate to or arise out of any of
the Receivables or Inventory: all Proprietary Rights, corporate or other
business records, inventions, designs, blueprints, plans, specifications,
goodwill, computer software, customer lists, registrations, licenses,
franchises, rights and claims against carriers and shippers, rights to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof, and any
letter of credit, guarantee, claims, security interest or other security held by
or granted to any Obligor to secure payment by an Account Debtor of any of the
Receivables.
"Governmental Approvals" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with, and
reports to, all governmental bodies, whether federal, state, local or foreign
national or provincial and all agencies thereof.
"Guarantor" means each of AKOM, Dominion Distribution, Liga
Mayor, Tultex Virginia, Tultex Massachusetts, Tultex Canada, Sweatjet and Tultex
International, and each other Subsidiary of Tultex that becomes a Guarantor
pursuant to SECTION 9.12, and "Guarantors" shall mean all of such entities
collectively.
"Guaranty", "Guaranteed" or to "Guarantee" as applied to any
obligation of another Person shall mean and include (a) a guaranty (other than
by endorsement of negotiable instruments for
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collection in the ordinary course of business), directly or indirectly, in any
manner, of any part or all of such obligation of such other Person, and (b) an
agreement, direct or indirect, contingent or otherwise, and whether or not
constituting a guaranty, the practical effect of which is to assure the payment
or performance (or payment of damages in the event of nonperformance) of any
part or all of such obligation of such other Person whether by (i) the purchase
of securities or obligations, (ii) the purchase, sale or lease (as lessee or
lessor) of property or the purchase or sale of services primarily for the
purpose of enabling the guarantor with respect to such obligation to make any
payment or performance (or payment of damages in the event of nonperformance) of
or on account of any part or all of such obligation, or to assure the owner of
such obligation against loss, (iii) the supplying of funds to or in any other
manner investing in the guarantor with respect to such obligation, (iv)
repayment of amounts drawn down by beneficiaries of letters of credit, or (v)
the supplying of funds to or investing in a Person on account of all or any part
of such Person's obligation under a Guaranty of any obligation or indemnifying
or holding harmless, in any way, such Person against any part or all of such
obligation, excluding, in any event, indemnification obligations arising in the
ordinary course of business.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap agreements,
currency future or option contracts, and other similar agreements.
"Indebtedness" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following: (a) all obligations for Money Borrowed or for the
deferred purchase price of property or services, (b) all obligations (including,
during the noncancellable term of any lease in the nature of a title retention
agreement, all future payment obligations under such lease discounted to their
present value in accordance with GAAP) secured by any Lien to which any property
or asset owned or held by such Person is subject, whether or not the obligation
secured thereby shall have been assumed by such Person, (c) all obligations of
other Persons which such Person has Guaranteed, including all obligations of
such Person consisting of recourse liability with respect to accounts receivable
sold or otherwise disposed of by such Person, (d) all obligations of such Person
in respect of Hedge Agreements, and (e) in the case of the Borrowers (without
duplication), all obligations under the Revolving Credit Loans.
"Indentures" means, collectively, (a) the Indenture dated as of
March 15, 1995 pursuant to which the Bonds of Tultex due 2005 were issued, as
supplemented on or prior to the Effective Date in connection with the
transactions contemplated by this Agreement, and (b) the Indenture dated as of
April 15, 1997 pursuant to which the Bonds of Tultex due 2007 were issued, as
supplemented on or prior to the Effective Date in connection with the
transactions contemplated by this Agreement.
"Indenture Trustees" means, collectively, the trustees under each
of the Indentures.
"Initial Loans" means the Revolving Credit Loans made to the
Borrowers on the Effective Date pursuant to the Initial Notice of Borrowing.
"Initial Notice of Borrowing" means the Notice of Borrowing given
by the Borrowers with respect to the Initial Loans which shall also specify the
method of disbursement.
"Interbank Offered Rate" means, with respect to any LIBOR Loan
for the Interest Period applicable thereto, the per annum rate of interest
determined by the Agent (each such determination to be conclusive and binding
absent manifest error) as of two Business Days prior to the first day of such
Interest Period as the effective rate at which deposits in immediately available
funds in Dollars are being offered or quoted to major banks in the London
interbank market for deposits for a term comparable to
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such Interest Period and in the amount of such LIBOR Loan, which rate shall be
determined from the display designated as Page 3750 of Dow Services, Inc. In the
event Page 3750 shall be unavailable for any reason or the Agent in good faith
elects to no longer use such service for determining such rate under this
Agreement, such rate may be determined by the Agent from any other interest rate
reporting service of recognized standing that the Agent shall select.
"Intercreditor Agreement" means the Intercreditor Agreement,
dated as of the Agreement Date, between the Agent and the Indenture Trustees.
"Interest Payment Date" means the first day of each calendar
month commencing on June 1, 1999 and continuing on the first day of each month
thereafter until the Secured Obligations have been irrevocably paid in full.
"Interest Period" means, with respect to each LIBOR Loan, the
period commencing on the date of the making or continuation of or conversion to
such LIBOR Loan and ending one, two, three, four or six months thereafter, as
the Borrowers may elect in the applicable Notice of Borrowing or Notice of
Conversion or Continuation; PROVIDED, that: (a) any Interest Period that would
otherwise end on a day that is not a Business Day shall, subject to the
provisions of CLAUSE (C) below, be extended to the next succeeding Business Day
unless such Business Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day; (b) any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall, subject to CLAUSE (C) below, end on
the last Business Day of a calendar month; (c) any Interest Period that would
otherwise end after the Termination Date shall end on the Termination Date; and
(d) notwithstanding CLAUSE (C) above, no Interest Period shall have a duration
of less than one month and if any applicable Interest Period would be for a
shorter period, such Interest Period shall not be available hereunder.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended from time to time.
"Inventory" means all inventory as such term is defined in the
Uniform Commercial Code and shall include, without limitation, (a) all goods
intended for sale or lease by the Obligors, or for display or demonstration, (b)
all work in process, (c) all raw materials and other materials and supplies of
every nature and description used or which might be used in connection with the
manufacture, packing, shipping, advertising, selling, leasing or furnishing of
such goods or otherwise used or consumed in the Obligors' business, and (d) all
documents evidencing and general intangibles relating to any of the foregoing.
"Inventory Appraisal" means the inventory appraisal prepared by
the Buxbaum Group and delivered to the Agent prior to the Agreement Date and
each other inventory appraisal delivered to the Agent pursuant to SECTION
8.12(F).
"Inventory Appraiser" has the meaning set forth in SECTION
8.12(F).
"Investment" means, with respect to any Person, (a) the
acquisition or ownership by such Person of any share of capital stock, evidence
of Indebtedness or other security issued by any other Person, (b) any loan,
advance or extension of credit to, or contribution to the capital of, any other
Person, excluding advances to employees in the ordinary course of business for
business expenses, (c) any
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Guaranty of the obligations of any other Person, and (d) any other investment
(other than the Acquisition of a Business Unit) in any other Person.
"Invitation and Consent Solicitation" means the Invitation and
Consent Solicitation, dated April 12, 1999, issued by Tultex and soliciting
offers to sell Bonds and soliciting consents to certain amendments to the
Indentures.
"IRS" means the Internal Revenue Service.
"Issuing Bank" means NationsBank, in its capacity as issuer of
any Letter of Credit, or any successor thereto.
"Lender" means at any time any financial institution party to
this Agreement at such time, including any such Person becoming a party hereto
pursuant to the provisions of ARTICLE 13, and its successors and assigns, and
"Lenders" means at any time all of the financial institutions party to this
Agreement at such time, including any such Persons becoming parties hereto
pursuant to the provisions of ARTICLE 13, and their successors and assigns.
"Letter of Credit" means any Letter of Credit issued by the
Issuing Bank for the account of the Borrowers pursuant to ARTICLE 3.
"Letter of Credit Amount" means, with respect to any Letter of
Credit, the aggregate maximum amount at any time available for drawing under
such Letter of Credit.
"Letter of Credit Facility" means the amount of $12,000,000.
"Letter of Credit Obligations" means, at any time, the sum of (a)
the Reimbursement Obligations of the Borrowers at such time, PLUS (b) the
aggregate Letter of Credit Amount of Letters of Credit outstanding at such time,
PLUS (c) the aggregate Letter of Credit Amount of Letters of Credit the issuance
of which has been authorized by the Agent and the Issuing Bank pursuant to
SECTION 3.4(B) but that have not yet been issued, in each case as determined by
the Agent.
"Letter of Credit Reserve" means, at any time, the aggregate
Letter of Credit Obligations at such time, other than Letter of Credit
Obligations that are fully secured by Cash Collateral.
"Liabilities" of any Person means all items (except for items of
capital stock, additional paid-in capital or retained earnings, or of general
contingency or deferred tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which Liabilities are to be
determined.
"LIBOR" means, with respect to any LIBOR Loan for the Interest
Period applicable thereto, a simple per annum interest rate determined pursuant
to the following formula:
LIBOR = Interbank Offered Rate
----------------------------
1 - LIBOR Reserve Percentage
LIBOR shall be adjusted automatically as of the effective date of any change in
the LIBOR Reserve Percentage.
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"LIBOR Loan" means any Loan bearing interest at a rate determined
by reference to LIBOR, including any such Loans continued as or converted into a
LIBOR Loan on the same day by the Lenders for the same Interest Period.
"LIBOR Reserve Percentage" means that percentage (expressed as a
decimal) which is in effect from time to time under Regulation D of the Board of
Governors of the Federal Reserve System, as such regulation may be amended from
time to time, or any successor regulation, as the maximum reserve requirement
(including any basic, supplemental, emergency, special, or marginal reserves)
applicable with respect to Eurocurrency liabilities as that term is defined in
Regulation D (or against any other category of liabilities that includes
deposits by reference to which the interest rate of LIBOR Loans is determined),
whether or not any Lender has any Eurocurrency liabilities subject to such
reserve requirement at that time. LIBOR Loans shall be deemed to constitute
Eurocurrency liabilities and as such shall be deemed subject to reserve
requirements without benefit of credits for proration, exceptions or offsets
that may be available from time to time to any Lender.
"LIBOR Revolving Credit Loan" means a LIBOR Loan outstanding
under the Revolving Credit Facility.
"Lien" means, as applied to the property of any Person: (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge, lease
constituting a Capitalized Lease Obligation, conditional sale or other title
retention agreement, or other security interest, security title or encumbrance
of any kind in respect of any property of such Person, or upon the income or
profits therefrom, (b) any arrangement, express or implied, under which any
property of such Person is transferred, sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other obligation in priority to the payment of the general, unsecured
creditors of such Person, (c) any Indebtedness which is unpaid more than 60 days
after the same shall have become due and payable and which if unpaid might by
law (including bankruptcy and insolvency laws), or otherwise, be given any
priority whatsoever over the claims of general unsecured creditors of such
Person, and (d) the filing of, or any agreement to give, any financing statement
under the Uniform Commercial Code or its equivalent in any jurisdiction,
excluding informational financing statements relating to leased property.
"Liga Mayor" means Liga Mayor de Mexico S.A. de C.V., a Mexican
corporation.
"Loan" means any Revolving Credit Loan, as well as all such loans
collectively, as the context requires.
"Loan Account" and "Loan Accounts" shall have the meanings
ascribed thereto in SECTION 4.5.
"Loan Documents" means collectively this Agreement, the Notes,
the Security Documents, the Fee Letter, and each other instrument, agreement or
document executed by any Obligor, or any Affiliate or Subsidiary of any Obligor,
in connection with this Agreement, whether prior to, on or after the Effective
Date, and each other instrument, agreement or document referred to herein or
contemplated hereby.
"Lockbox" means each post office box specified in a Lockbox
Agreement.
"Lockbox Agreement" means each agreement between an Obligor and a
Clearing Bank concerning the establishment of a Lockbox for the collection of
Receivables.
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"Logo Athletic Note" means, collectively, (a) the Non-Negotiable
Subordinated Promissory Note of TKS Acquisition, Inc., dated July 15, 1998,
payable to Tultex in the principal amount of $5,000,000, (b) the Non-Negotiable
Subordinated Promissory Note of TKS Acquisition, Inc., dated July 15, 1998,
payable to Tultex in the principal amount of $2,500,000, and (c) the
Non-Negotiable Subordinated Promissory Note of TKS Acquisition, Inc., dated July
15, 1998, payable to Tultex in the principal amount of $5,000,000.
"Materially Adverse Effect" means any act, omission, situation,
circumstance, event or undertaking which would, singly or in any combination
with one or more other acts, omissions, situations, circumstances, events or
undertakings have, or reasonably be expected by the Agent to have, a materially
adverse effect upon (a) the business, assets, properties, liabilities, condition
(financial or otherwise), results of operations or business prospects of Tultex
and its Consolidated Subsidiaries taken as a whole, (b) the value of the
Collateral, (c) the Security Interest or the priority of the Security Interest,
(d) the respective ability of any Obligor or any of their Subsidiaries to
perform any material obligations under this Agreement or any other Loan Document
to which it is a party, or (e) the legality, validity, binding effect,
enforceability or admissibility into evidence of any Loan Document or the
ability of the Agent or any Lender to enforce any rights or remedies under or in
connection with any Loan Document.
"Minimum Commitment" means $10,000,000.
"Money Borrowed" means, as applied to Indebtedness, (a)
Indebtedness for money borrowed, (b) Indebtedness, whether or not in any such
case the same was for money borrowed, (i) represented by notes payable, and
drafts accepted, that represent extensions of credit, (ii) constituting
obligations evidenced by bonds, debentures, notes or similar instruments, or
(iii) upon which interest charges are customarily paid or that was issued or
assumed as full or partial payment for property (other than trade credit that is
incurred in the ordinary course of business), (c) Indebtedness that constitutes
a Capitalized Lease Obligation, (d) Indebtedness under Hedge Agreements, and (e)
Indebtedness that is such by virtue of CLAUSE (C) of the definition thereof, but
only to the extent that the obligations Guaranteed are obligations that would
constitute Indebtedness for Money Borrowed.
"Mortgaged Real Estate" means all of the Real Estate described on
SCHEDULE 1.1A, together with all Real Estate with respect to which the Obligors
are required to deliver a Mortgage to the Agent pursuant to SECTION 8.14.
"Mortgages" means and includes any and all of the mortgages,
deeds of trust, deeds to secure debt, assignments and other instruments executed
and delivered by the Obligors pursuant to which the Obligors grant to the Agent,
for the benefit of the Secured Creditors, a Lien on all Mortgaged Real Estate,
and all amendments, modifications and supplements thereto.
"Multiemployer Plan" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA to which an Obligor or a Related Company is required
to contribute or has contributed within the immediately preceding six years.
"NationsBank" means NationsBank, N.A., and its successors and
assigns.
"Net Income" means, as applied to any Person, the net income (or
net loss) of such Person for the period in question after giving effect to
deduction of or provision for all operating expenses, all taxes and reserves
(including reserves for deferred taxes) and all other proper deductions,
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all determined in accordance with GAAP, PROVIDED that there shall be excluded:
(a) the net income (or net loss) of any Person accrued prior to the date it
becomes a Subsidiary of, or is merged into or consolidated with, the Person
whose Net Income is being determined or a Subsidiary of such Person, (b) the net
income (or net loss) of any Person in which the Person whose Net Income is being
determined or any Subsidiary of such Person has an ownership interest, except,
in the case of net income, to the extent that any such income has actually been
received by such Person or such Subsidiary in the form of cash dividends or
similar distributions, (c) any restoration of any contingency reserve, except to
the extent that provision for such reserve was made out of income during such
period, (d) any net gains or losses on the sale or other disposition, not in the
ordinary course of business, of Investments, Business Units and other capital
assets, PROVIDED that there shall also be excluded any related charges for taxes
thereon, (e) any net gain arising from the collection of the proceeds of any
insurance policy, (f) any write-up of any asset, and (g) any other extraordinary
item.
"Net Outstandings" of any Lender means, at any time, the sum of
(a) all amounts paid by such Lender (other than pursuant to SECTION 14.7) to the
Agent in respect of Revolving Credit Loans or otherwise under this Agreement,
MINUS (b) all amounts paid by the Agent to such Lender which are received by the
Agent and which, pursuant to this Agreement, are paid over to such Lender for
application in reduction of the outstanding principal balance of the Revolving
Credit Loans.
"Net Proceeds" means proceeds received by any Obligor in cash
from any Asset Disposition (including payments under notes or other debt
securities received in connection with any Asset Disposition), net of: (a) the
transaction costs of such sale, lease, transfer or other disposition; (b) any
tax liability arising from such transaction; and (c) amounts applied to
repayment of Indebtedness (other than the Secured Obligations and Indebtedness
under the Bonds and Indentures) secured by a Lien on the asset or property
disposed.
"Net Worth" means, with respect to any Person, such Person's
total shareholder's equity (including capital stock, additional paid-in capital
and retained earnings, after deducting treasury stock) which would appear as
such on a balance sheet of such Person prepared in accordance with GAAP.
"Non-Ratable Loan" means a Revolving Credit Loan made by
NationsBank in accordance with the provisions of SECTION 4.8(B).
"Note" means any of the Revolving Credit Notes and "Notes" means
more than one such Note.
"Notice of Borrowing" means a written notice, or telephonic
notice followed by a confirming same-day written notice, requesting a Borrowing
of either a Prime Rate Revolving Credit Loan or a LIBOR Revolving Credit Loan,
which is given by telex or facsimile transmission in accordance with the
applicable provisions of SECTION 2.2 and which specifies (i) the amount of the
requested Borrowing, (ii) the date of the requested Borrowing, and (iii) if the
requested Borrowing is of a LIBOR Revolving Credit Loan, the duration of the
applicable Interest Period.
"Notice of Conversion or Continuation" has the meaning specified
in SECTION 4.12.
"Obligor" means any Borrower, any Guarantor and any other Person
liable with respect to the Secured Obligations, whether as maker, endorser,
guarantor, pledgor or otherwise, and whether such liability is direct, indirect,
primary or secondary, and "Obligors" means all of such Persons collectively.
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"Operating Lease" means any lease (other than a lease
constituting a Capitalized Lease Obligation) of real or personal property.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor agency.
"PBGC Agreement" has the meaning set forth in SECTION 9.16.
"PBGC Memorandum of Understanding" has the meaning set forth in
SECTION 5.1(N).
"Patent Assignment" means the Conditional Assignment and Patent
Security Agreement, dated on or about the Effective Date, made by the Obligors
to the Agent, for the benefit of the Secured Creditors.
"Patents" means and includes, in each case whether now existing
or hereafter arising, all of the Obligors' right, title and interest in and to
(a) any and all patents and patent applications, (b) inventions and improvements
described and claimed therein, (c) reissues, divisions, continuations, renewals,
extensions and continuations-in-part thereof, (d) income, royalties, damages,
claims and payments now or hereafter due and/or payable under and with respect
thereto, including damages and payments for past and future infringements
thereof, (e) rights to sue for past, present and future infringements thereof,
and (f) all rights corresponding to any of the foregoing throughout the world.
"Permitted Investments" means Investments in: (a) negotiable
certificates of deposit and time deposits issued by NationsBank or by any United
States bank or trust company having capital, surplus and undivided profits in
excess of $100,000,000, (b) any direct obligation of the United States of
America or any agency or instrumentality thereof which has a remaining maturity
at the time of purchase of not more than one year and repurchase agreements
relating to the same, (c) sales of inventory on credit in the ordinary course of
business, (d) shares of capital stock, evidence of Indebtedness or other
security acquired in consideration for or as evidence of past-due or
restructured Receivables in an aggregate face amount of such Receivables at any
time not to exceed $500,000, (e) Guaranties permitted pursuant to SECTION 11.3,
(f) loans and advances to Subsidiaries of any Obligor existing on the Agreement
Date, for the purpose of providing working capital in the ordinary course of
business, (g) loans and advances to Subsidiaries of Tultex formed after the
Agreement Date, provided the Borrowers have complied with all of the provisions
of SECTION 9.11 with respect thereto, and any such Subsidiary is located in and
organized under the laws of the United States, (h) up to $500,000 in aggregate
outstanding principal amount of loans to employees for the purpose of enabling
employees to exercise their stock options in Tultex and recruiting and hiring
new employees, and (i) other Investments of up to $50,000 in the aggregate at
any time.
"Permitted Liens" means: (a) Liens securing taxes, assessments
and other governmental charges or levies (excluding any Lien imposed pursuant to
any of the provisions of ERISA or the Federal Tax Lien Act of 1966) or the
claims of materialmen, mechanics, carriers, warehousemen or landlords for labor,
materials, supplies or rentals incurred in the ordinary course of business, but
(i) in all cases only if payment shall not at the time be required to be made in
accordance with SECTION 9.6, and (ii) in the case of warehousemen or landlords,
only if such liens are junior to the Security Interest in any of the Collateral,
(b) Liens consisting of deposits or pledges made in the ordinary course of
business in connection with, or to secure payment of, obligations under workers'
compensation, unemployment insurance or similar legislation or under payment or
performance bonds, (c) Liens constituting encumbrances in the nature of zoning
restrictions, easements, and rights or restrictions of record on the
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use of real property, which do not materially detract from the value of such
property or impair the use thereof in the business of the Obligors or their
Subsidiaries, (d) Purchase Money Liens, (e) Liens of the Agent, for the benefit
of the Secured Creditors, arising under this Agreement and the other Loan
Documents, and (f) Liens in favor of the holders of the Bonds on the Collateral
as security for the obligations evidenced by the Bonds, PROVIDED that such Liens
are subject to the Intercreditor Agreement and, with respect to the Bank
Priority Collateral, are junior to the Lien of the Agent therein.
"Permitted Purchase Money Indebtedness" means Purchase Money
Indebtedness incurred after the Agreement Date (a) which is secured by a
Purchase Money Lien, (b) the aggregate principal amount of which does not exceed
an amount equal to the lesser of (i) the cost (including the principal amount of
such Indebtedness, whether or not assumed) of the property (other than
Inventory) subject to such Lien, and (ii) the fair value of such property (other
than Inventory) at the time of its acquisition, and (c) which, when aggregated
with the principal amount of all other such Indebtedness and Capitalized Lease
Obligations at the time outstanding, does not exceed $1,000,000. For the
purposes of this definition, the principal amount of any Purchase Money
Indebtedness consisting of Capitalized Leases shall be computed as a Capitalized
Lease Obligation.
"Person" means an individual, limited liability company,
corporation, partnership, association, trust or unincorporated organization,
joint venture or other entity or a government or any agency or political
subdivision thereof.
"Plan" means any employee benefit plan as defined in Section 3(3)
of ERISA in respect of which an Obligor or any Related Company is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA.
"Prime Rate" means on any day the interest rate per annum equal
to the rate of interest publicly announced by the Agent at its head office in
Atlanta, Georgia as its "prime" rate, as in effect on the last Business Day of
the calendar month immediately preceding the month in which such day falls. The
Agent lends at rates above and below the Prime Rate.
"Prime Rate Loan" means any Prime Rate Revolving Credit Loan, and
"Prime Rate Loans" means more than one such Loan.
"Prime Rate Revolving Credit Loan" means each Borrowing of Prime
Rate Loans under the Revolving Credit Facility on the same day, a specified
principal amount of Prime Rate Loans outstanding under the Revolving Credit
Facility, and any Non-Ratable Loan.
"Pro Forma" means the pro forma balance sheet of Tultex and its
Consolidated Subsidiaries as at the Effective Date, immediately after giving
effect to the transactions contemplated by this Agreement, including the
repurchase or redemption of Bonds on the Effective Date as contemplated by the
Invitation and Consent Solicitation.
"Projections" means the forecasted (a) balance sheets, (b) income
statements and (c) cash flow statements of Tultex and its Consolidated
Subsidiaries for the 1999 through 2004 fiscal years, prepared on a monthly basis
for the 1999 and 2000 fiscal years and on an annual basis for each fiscal year
thereafter, together with appropriate supporting details and a statement of
underlying assumptions.
"Proportionate Share" or "Ratable", as applied to a Lender, means
such Lender's share of an amount in Dollars or other property at the time of
determination equal to (i) the Commitment Percentage
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of such Lender, or (ii) if the Commitments are terminated, the percentage of the
total principal amount of Loans (plus Letter of Credit Obligations) outstanding
at such time obtained by dividing the principal amount of the Loans (plus Letter
of Credit Obligations) then owing to such Lender by the total principal amount
of all Loans (plus Letter of Credit Obligations) then owing to all Lenders.
"Proprietary Rights" means all of the Obligors' now owned and
hereafter arising or acquired Patents, Copyrights, and Trademarks, including
those Proprietary Rights set forth on SCHEDULE 6.1(BB) hereto, and all other
rights under any of the foregoing, all extensions, renewals, reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, and
all rights to sue for past, present and future infringement of any of the
foregoing.
"Purchase Money Indebtedness" means (a) Indebtedness created to
secure the payment of all or any part of the purchase price of any property
(other than Inventory), (b) any Indebtedness incurred at the time of or within
30 days prior to or after the acquisition of any property (other than Inventory)
for the purpose of financing all or any part of the purchase price thereof, and
(c) any renewals, extensions or refinancings thereof, but not any increases in
the principal amounts thereof outstanding at the time of any such renewal,
extension or refinancing.
"Purchase Money Lien" means any Lien securing Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
property (other than Inventory) the purchase price of which was financed through
the incurrence of the Purchase Money Indebtedness secured by such Lien.
"Real Estate" means all of the Obligors' now or hereafter owned
or leased estates in real property, including the real property described on
SCHEDULE 6.1(W).
"Receivables" means and includes, as to each Obligor, (a) any and
all rights to the payment of money or other forms of consideration of any kind
(whether classified under the Uniform Commercial Code as accounts, contract
rights, chattel paper, general intangibles, or otherwise) including accounts
receivable, letters of credit and the right to receive payment thereunder,
chattel paper, tax refunds, insurance proceeds, Contract Rights, notes, drafts,
instruments, documents, acceptances, and all other debts, obligations and
liabilities in whatever form from any Person, but excluding the Logo Athletic
Note and the Vendor Note, (b) all guarantees, security and Liens for payment
thereof, (c) all goods, whether now owned or hereafter acquired, and whether
sold, delivered, undelivered, in transit or returned, which may be represented
by, or the sale or lease of which may have given rise to, any such right to
payment or other debt, obligation or liability, and (d) all proceeds of any of
the foregoing.
"Reimbursement Agreement" means, with respect to a Letter of
Credit, such form of application therefor and form of reimbursement agreement
therefor (whether in a single document or several documents) as the Issuing Bank
may employ in the ordinary course of business for its own account, with such
modifications thereto as may be agreed upon by the Issuing Bank and the
Borrowers, PROVIDED that such application and agreement and any modifications
thereto are not inconsistent with the terms of this Agreement.
"Reimbursement Obligations" means the reimbursement or repayment
obligations of the Borrowers to the Issuing Bank pursuant to SECTION 3.6 or
pursuant to a Reimbursement Agreement with respect to amounts that have been
drawn under Letters of Credit.
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"Related Company" means any (a) corporation which is a member of
the same controlled group of corporations (within the meaning of Section 414(b)
of the Internal Revenue Code) as any Obligor; (b) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with any Obligor; or (c) member
of the same affiliated service group (within the meaning of Section 414(m) of
the Internal Revenue Code) as any Obligor, any corporation described in CLAUSE
(A) above or any partnership, trade or business described in CLAUSE (B) above.
"Release" means release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment or into or out of any property, including the
movement of Contaminants through or in the air, soil, surface water or
groundwater.
"Remedial Action" means actions required to (i) clean up, remove,
treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants so they do not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment; or
(iii) perform pre-remedial studies and investigations and post-remedial
monitoring and care.
"Reportable Event" has the meaning set forth in Section 4043(b)
of ERISA, but shall not include a Reportable Event as to which the provision for
30 days notice to the PBGC is waived under applicable regulations.
"Required Lenders" means, at any time, any combination of Lenders
whose Commitment Percentages at such time aggregate in excess of 50%; PROVIDED,
HOWEVER, that if any Lender shall have failed to fund its Proportionate Share of
any Loan in accordance with the terms of this Agreement, then, for so long as
such failure continues, the term "Required Lenders" shall mean Lenders
(excluding such Lender whose failure to fund its Proportionate Share of any Loan
has not been cured) whose Commitment Percentages (computed after excluding the
defaulting Lender's Commitment from the Total Commitment) at such time aggregate
in excess of 50%; PROVIDED FURTHER, HOWEVER, that if the Commitments have been
terminated, the term "Required Lenders" shall mean Lenders (excluding each
Lender whose failure to fund its Proportionate Share of any Loan has not been
cured) holding Loans (plus Letter of Credit Obligations) representing in excess
of 50% of the aggregate principal amount of Loans and Letter of Credit
Obligations (excluding the Loans and Letter of Credit Obligations owing to the
defaulting Lender) outstanding at such time
"Restricted Dividend Payment" means any dividend, distribution or
payment on or with respect to (a) any shares of a Person's capital stock (other
than dividends payable solely in shares of its capital stock) or (b) any
partnership or other ownership interest in a Person, excluding, however, any
such dividend, distribution or payment to Tultex by any Subsidiary of Tultex.
"Restricted Payment" means (a) any redemption or prepayment or
other retirement, prior to the stated maturity thereof or prior to the due date
of any regularly scheduled installment or amortization payment with respect
thereto, of any Indebtedness for Money Borrowed, (b) any redemption, retirement
or payment with respect to Subordinated Indebtedness other than in accordance
with the subordination agreement or provisions applicable thereto, (c) the
payment by any Person of the principal amount of or interest on any Indebtedness
(other than trade debt) owing to a shareholder, partner or equity holder of such
Person or to any Affiliate of any such shareholder, partner or equity holder,
other than any payment of interest on the Convertible Subordinated Notes in
accordance with the
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terms thereof, (d) the payment of any management, consulting or similar fee by
any Person to any Affiliate of such Person.
"Restricted Purchase" means any payment on account of the
purchase, redemption or other acquisition or retirement by a Person of any (a)
shares of such Person's capital stock (except shares acquired on the conversion
thereof into other shares of capital stock of such Person), (b) a partnership
interest in such Person, if such Person is a partnership, or (c) a membership
interest in such Person, if such Person is a limited liability company.
"Revolving Credit Facility" means the principal amount of
$150,000,000 or such lesser or greater amount as shall be agreed upon from time
to time in writing by the Agent, the Lenders and the Borrowers.
"Revolving Credit Loans" means loans made to the Borrowers
pursuant to SECTION 2.1.
"Revolving Credit Note" means each Revolving Credit Note made by
the Borrowers payable to the order of a Lender evidencing the joint and several
obligation of the Borrowers to pay the aggregate unpaid principal amount of the
Revolving Credit Loans made to them by such Lender (and any promissory note or
notes that may be issued from time to time in substitution, renewal, extension,
replacement or exchange therefor, whether payable to such Lender or to a
different Lender in connection with a Person becoming a Lender after the
Effective Date or otherwise), substantially in the form of EXHIBIT A hereto,
with all blanks properly completed, either as originally executed or as the same
may from time to time be supplemented, modified, amended, renewed, extended or
refinanced.
"Schedule of Inventory" means a schedule delivered by the
Borrowers' Agent to the Agent pursuant to the provisions of SECTION 8.12(B).
"Schedule of Receivables" means a schedule delivered by the
Borrowers' Agent to the Agent pursuant to the provisions of SECTION 8.12(A).
"Secured Creditors" means, collectively, the Agent, the Issuing
Bank, the Lenders, and each Affiliate of each of the foregoing.
"Secured Obligations" means, in each case whether now in
existence or hereafter arising, (a) the principal of, and interest and premium,
if any, on, the Loans, and any fees payable in connection with the Loans or this
Agreement, (b) the Reimbursement Obligations and all other obligations of the
Borrowers to the Issuing Bank, the Agent or any Lender arising in connection
with the issuance of Letters of Credit, and (c) all indebtedness, liabilities,
obligations, covenants and duties of the Obligors to the Agent, the Lenders or
any other Secured Creditor of every kind, nature and description arising under
or in respect of this Agreement, the Notes or any of the other Loan Documents or
the Banking Relationship, whether direct or indirect, absolute or contingent,
due or not due, contractual or tortious, liquidated or unliquidated, and whether
or not evidenced by any note, and whether or not for the payment of money,
including fees required to be paid pursuant to ARTICLE 4 and expenses required
to be paid or reimbursed pursuant to SECTION 16.2.
"Security Documents" means this Agreement, the Financing
Statements, the Patent Assignment, the Trademark Assignment, the Mortgages, and
each other writing executed and delivered by an Obligor securing the Secured
Obligations.
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"Security Interest" means the Liens of the Agent, for the benefit
of the Secured Creditors, on and in the Collateral effected hereby or by any of
the Security Documents or pursuant to the terms hereof or thereof.
"Settlement Date" means each Business Day after the Effective
Date selected by the Agent in its sole discretion subject to and in accordance
with the provisions of SECTION 4.8(B) as of which a Settlement Report is
delivered by the Agent and on which settlement is to be made among the Lenders
in accordance with the provisions of SECTION 4.8.
"Settlement Report" means each report, substantially in the form
attached hereto as EXHIBIT E, prepared by the Agent and delivered to each Lender
and setting forth, among other things, as of the Settlement Date indicated
thereon and as of the next preceding Settlement Date, the aggregate principal
balance of all Revolving Credit Loans outstanding, each Lender's Commitment
Percentage thereof, each Lender's Net Outstandings and all Non-Ratable Loans
made, and all payments of principal, interest and fees received by the Agent
from the Borrowers during the period beginning on such next preceding Settlement
Date and ending on such Settlement Date.
"Subordinated Indebtedness" means (a) the Indebtedness of Tultex
evidenced by the Convertible Subordinated Notes, including principal thereof and
interest and premium, if any, thereon, together with any and all Indebtedness
related thereto, and (b) any other Indebtedness for Money Borrowed which is in
an amount, and is expressly subordinated to the Secured Obligations on terms and
conditions, acceptable to the Agent and the Required Lenders in their
discretion.
"Subsidiary" (a) when used to determine the relationship of a
Person to another Person, means a Person of which an aggregate of 50% or more of
the stock of any class or classes or 50% or more of other ownership interests is
owned of record or beneficially by such other Person, or by one or more
Subsidiaries of such other Person, or by such other Person and one or more
Subsidiaries of such Person, (i) if the holders of such stock, or other
ownership interests, (A) are ordinarily, in the absence of contingencies,
entitled to vote for the election of a majority of the directors (or other
individuals performing similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency, or (B) are
entitled, as such holders, to vote for the election of a majority of the
directors (or individuals performing similar functions) of such Person, whether
or not the right so to vote exists by reason of the happening of a contingency,
or (ii) in the case of such other ownership interests, if such ownership
interests constitute a majority voting interest, and (b) when used with respect
to a Plan, ERISA or a provision of the Internal Revenue Code pertaining to
employee benefit plans, also means any corporation, trade or business (whether
or not incorporated) which is under common control with any Obligor and is
treated as a single employer with such Obligor under Section 414(b) or (c) of
the Internal Revenue Code and the regulations thereunder.
"Supporting Letter of Credit" has the meaning specified in
SECTION 3.9.
"Sweatjet" means Sweatjet Incorporated, a Virginia corporation.
"Tangible Net Worth" means the Net Worth of Tultex and its
Consolidated Subsidiaries at the time in question, after excluding therefrom all
amounts due from Affiliates and the amount of all intangible items reflected
therein, including all unamortized debt discount and expense, unamortized
research and development expense, unamortized deferred charges, goodwill,
patents, trademarks, service marks, trade names, copyrights, unamortized excess
cost of investment in non-Consolidated Subsidiaries
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over equity at dates of acquisition, and all similar items which should properly
be treated as intangibles in accordance with GAAP.
"Tax Refund Claims" means all tax refund claims and all rights
with respect thereto, including all rights to settle or compromise the amount of
such claims, to file amendments and other documents with respect thereto, and to
receive the proceeds thereof.
"Termination Date" means May 7, 2002, such earlier date to which
the Secured Obligations shall have been accelerated pursuant to the provisions
of SECTION 12.2, such earlier date as all Secured Obligations shall have been
irrevocably paid in full and the Revolving Credit Facility shall have been
terminated, or such later date as to which the same may be extended pursuant to
the provisions of SECTION 2.5.
"Termination Event" means (a) a Reportable Event, (b) the filing
of a notice of intent to terminate a Plan or the treatment of a Plan amendment
as a termination under Section 4041 of ERISA, or (c) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA, or the
appointment of a trustee to administer any Plan.
"Total Commitment" means the sum of the Commitments.
"Track Gear" means Track Gear, Inc., a Virginia corporation.
"Trademark Assignment" means the Conditional Assignment and
Trademark Security Agreement, dated on or about the Effective Date, made by the
Obligors to the Agent, for the benefit of the Secured Creditors.
"Trademarks" means and includes in each case whether now existing
or hereafter arising, all of the Obligors' right, title and interest in and to
(a) trademarks (including service marks), trade names and trade styles and the
registrations and applications for registration thereof and the goodwill of the
business symbolized by the trademarks, (b) licenses of the foregoing, whether as
licensee or licensor, (c) renewals thereof, (d) income, royalties, damages and
payments now or hereafter due and/or payable with respect thereto, including
damages, claims and payments for past and future infringements thereof, (e)
rights to sue for past, present and future infringements thereof, including the
right to settle suits involving claims and demands for royalties owing, and (f)
all rights corresponding to any of the foregoing throughout the world.
"T-Shirt City" means Tultex/T-Shirt City, Inc., a Virginia
corporation.
"Tultex" means Tultex Corporation, a Virginia corporation.
"Tultex Canada" means Tultex Canada, Inc., a Canadian
corporation.
"Tultex International" means Tultex International, Inc., a
Virginia corporation.
"Tultex Massachusetts" means Tultex Subsidiary (Mass), Inc., a
Massachusetts corporation formerly known as Logo Athletic/Headwear, Inc.
"Tultex Virginia" means Tultex Subsidiary (Va), Inc., a Virginia
corporation formerly known as Logo Athletic, Inc.
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"Type" means, when used in respect of any Loan or Borrowing, the
rate by reference to which interest on such Loan or on the Loans comprising such
Borrowing is determined.
"Unfunded Vested Accrued Benefits" means with respect to any Plan
at any time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (b) the fair market value of all
Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan.
"Unfunded Capital Expenditures" means Capital Expenditures which
are paid for other than with the proceeds of Indebtedness for Money Borrowed
(other than the Loans) incurred to finance such Capital Expenditures and other
than those represented by Capitalized Lease Obligations.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect from time to time in the State of Georgia or in any other state the laws
of which are required by Section 9-103 thereof to be applied in connection with
the issue of perfection of security interests.
"Vendor Note" means, collectively, (a) the promissory note dated
July 1, 1997 of Textiles Arco Iris, SA. De CV, as amended, payable to Tultex in
the amount of $198,000 as of April 3, 1999, and (b) the contract obligations due
from Overseas Manufacturing Systems of America, Inc. and related parties under
the agreement dated October 11, 1995, as amended on July 1, 1997, payable to
Tultex in the amount of $4,354,000 as of April 3, 1999.
SECTION 1.2. General.
(a) All terms of an accounting nature not specifically defined
herein shall have the meaning ascribed thereto by GAAP.
(b) The terms accounts, chattel paper, contract rights,
documents, equipment, instruments, general intangibles, investment property and
inventory, as and when used in this Agreement or the Security Documents, shall
have the meanings given those terms in the Uniform Commercial Code.
(c) Unless otherwise specified, a reference in this Agreement to
a particular section or subsection is a reference to that section or subsection
of this Agreement, and the words "hereof," "herein," "hereunder" and words of
similar import, when used in this Agreement, refer to this Agreement as a whole
and not to any particular provision, section or subsection of this Agreement.
(d) Wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and plural,
and pronouns stated in the masculine, feminine or neuter gender shall include
the masculine, the feminine and the neuter.
(e) Words denoting individuals include corporations and vice
versa.
(f) Unless otherwise specified, the word "including" means
"including but not limited to".
(g) References to any legislation or statute or code, or to any
provisions of any legislation or statute or code, shall include any modification
or reenactment of, or any legislative, statutory or code provision substituted
for, such legislation, statute or code or provision thereof.
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(h) References to any document or agreement (including this
Agreement) shall include references to such document or agreement as amended,
novated, supplemented, modified, reissued or replaced from time to time, so long
as and to the extent that such amendment, novation, supplement, modification,
reissuance or replacement is either not prohibited by the terms of this
Agreement or is consented to by the Required Lenders (or Lenders, as the case
may be) and the Agent.
(i) References to any Person include its successor or permitted
substitutes and assigns.
(j) Each reference to a time of day shall refer to Atlanta,
Georgia time.
ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1. Revolving Credit Loans. Upon the terms and subject
to the conditions of, and in reliance upon the representations and warranties
made under, this Agreement, each Lender agrees, severally, but not jointly, to
make Revolving Credit Loans to the Borrowers from time to time from the
Effective Date to but not including the Termination Date, as requested or deemed
requested by the Borrowers in accordance with the terms of SECTION 2.2, in
amounts equal to such Lender's Commitment Percentage of each such Loan requested
or deemed requested hereunder up to an aggregate amount at any one time
outstanding equal to such Lender's Commitment Percentage of the Borrowing Base;
PROVIDED, HOWEVER, that the aggregate principal amount of all outstanding
Revolving Credit Loans (after giving effect to the Loans requested) shall not
exceed the Borrowing Base. It is expressly understood and agreed that the
Lenders may and at present intend to use the Borrowing Base as a maximum ceiling
on Revolving Credit Loans to the Borrowers; PROVIDED, HOWEVER, that it is agreed
that should the Revolving Credit Loans exceed the ceiling so determined or any
other limitation set forth in this Agreement, such Revolving Credit Loans shall
nevertheless constitute Secured Obligations and, as such, shall be entitled to
all benefits thereof and security therefor. The principal amount of any
Revolving Credit Loan which is repaid pursuant to SECTION 2.3(C) may be
reborrowed by the Borrowers, subject to the terms and conditions of this
Agreement, in accordance with the terms of this SECTION 2.1. The Agent's and
each Lender's books and records reflecting the date and the amount of each
Revolving Credit Loan and each repayment of principal thereof shall constitute
PRIMA FACIE evidence of the accuracy of the information contained therein,
subject to the provisions of SECTION 4.5.
SECTION 2.2. Manner of Borrowing Revolving Credit Loans.
Borrowings under the Revolving Credit Facility shall be made as follows:
(a) Requests for Borrowing.
(i) Prime Rate Revolving Credit Loans. A request for a
Borrowing of a Prime Rate Revolving Credit Loan shall be made, or
shall be deemed to be made, in the following manner:
(A) with respect to the initial Borrowing to be
made on the Effective Date, the Borrowers shall give the
Agent an Initial Notice of Borrowing at least two Business
Days prior to the proposed date of the Borrowing, and, as
to
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subsequent Prime Rate Revolving Credit Loans, the
Borrowers shall give the Agent a Notice of Borrowing
before 11:00 a.m. on the proposed Borrowing date, all of
which notices shall be irrevocable,
(B) whenever a check or other item is presented to
a Disbursing Bank for payment against a Disbursement
Account in an amount greater than the then available
balance in such account, such Disbursing Bank shall, and
is hereby irrevocably authorized by the Borrowers to, give
the Agent notice thereof, which notice shall be deemed to
be an irrevocable request for a Prime Rate Revolving
Credit Loan on the date of such notice in an amount equal
to the excess of such check or other item over such
available balance,
(C) unless payment is otherwise made by the
Obligors, the becoming due of any amount required to be
paid under this Agreement or any of the Notes as interest
shall be deemed to be an irrevocable request for a Prime
Rate Revolving Credit Loan on the due date in the amount
required to pay such interest,
(D) unless payment is otherwise made by the
Obligors, the becoming due of any other Secured Obligation
shall be deemed to be an irrevocable request for a Prime
Rate Revolving Credit Loan on the due date in the amount
then so due, and such request shall be irrevocable, and
(E) the receipt by the Agent of notification from
the Issuing Bank to the effect that a drawing has been
made under a Letter of Credit and that the Borrowers have
failed to reimburse the Issuing Bank therefor in
accordance with the terms of the Letter of Credit, the
Reimbursement Agreement and ARTICLE 3, shall be deemed to
be an irrevocable request for a Prime Rate Revolving
Credit Loan on the date such notification is received in
the amount of such drawing which is so unreimbursed.
(ii) LIBOR Revolving Credit Loans. The Borrowers may
request a LIBOR Loan under the Revolving Credit Facility by
giving the Agent a Notice of Borrowing (which notice shall be
irrevocable) not later than 11:00 a.m. on the date three Business
Days before the date on which the requested LIBOR Revolving
Credit Loan is to be made; PROVIDED the Borrowers shall not be
permitted to request, and the Lenders shall not be required to
make, LIBOR Revolving Credit Loans at any time during the
existence of an Event of Default.
(iii) Notification of Lenders. Unless the Agent has
elected periodic settlements pursuant to SECTION 4.8, the Agent
shall promptly notify the Lenders of any Notice of Borrowing
given or deemed given pursuant to this SECTION 2.2(A) by 12:00
noon on the proposed Borrowing date (in the case of Prime Rate
Revolving Credit Loans) or by 3:00 p.m. three Business Days
before the proposed Borrowing date (in the case of LIBOR
Revolving Credit Loans). Not later than 1:00 p.m. on the proposed
Borrowing date, each Lender will make available to the Agent, for
the account of the Borrowers, at the Agent's Office in funds
immediately available to the Agent, an amount equal to such
Lender's Commitment Percentage of such Prime Rate Revolving
Credit Loan or LIBOR Revolving Credit Loan, as the case may be.
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(b) Disbursement of Loans. Each Borrower hereby irrevocably
authorizes the Agent to disburse the proceeds of each Borrowing
requested, or deemed to be requested, pursuant to this SECTION 2.2 as
follows:
(i) the proceeds of each Borrowing requested under SECTION
2.2(A)(I)(A) (other than the Borrowing of the Initial Loans),
2.2(A)(I)(B) or 2.2(A)(II) shall be disbursed by the Agent in
Dollars in immediately available funds by wire transfer to a
Disbursement Account or, in the absence of a Disbursement
Account, by wire transfer to such other account as may be agreed
upon by the Borrowers and the Agent from time to time, and the
proceeds of the Initial Loans under SECTION 2.2(A)(I)(A) shall be
disbursed in accordance with the Initial Notice of Borrowing;
(ii) the proceeds of each Borrowing deemed requested under
SECTION 2.2(A)(I)(C) or (D) shall be disbursed by the Agent by
way of direct payment of the relevant interest or Secured
Obligation; and
(iii) the proceeds of each Borrowing deemed requested
under SECTION 2.2(A)(I)(E) shall be disbursed by the Agent
directly to the Issuing Bank on behalf of the Borrowers.
SECTION 2.3. Repayment of Revolving Credit Loans. The Revolving
Credit Loans will be repaid as follows:
(a) Whether or not any Default or Event of Default has occurred,
the outstanding principal amount of all the Revolving Credit Loans is
due and payable, and shall be repaid by the Borrowers in full, not later
than the Termination Date;
(b) If at any time the aggregate outstanding unpaid principal
amount of the Revolving Credit Loans exceeds the Borrowing Base in
effect at such time, the Borrowers shall repay the Revolving Credit
Loans in an amount sufficient to reduce the aggregate unpaid principal
amount of such Revolving Credit Loans by an amount equal to such excess,
together with accrued and unpaid interest on the amount so repaid to the
date of repayment;
(c) Each Borrower hereby instructs the Agent to repay the
Revolving Credit Loans outstanding on any day in an amount equal to the
amount, if any, received by the Agent on such day pursuant to SECTION
8.1(B); PROVIDED that payments received in excess of outstanding
Revolving Credit Loans or payments received on account of LIBOR Loans
which would otherwise result in prepayment of such Loans prior to the
end of the Interest Period applicable thereto may (in the absence of an
Event of Default), upon the instruction of the Borrowers to the Agent
not later than 1:00 p.m. on any Business Day, be applied to the Cash
Collateral Account; and
(d) Each LIBOR Loan is due and payable on the last day of the
Interest Period applicable thereto, except to the extent converted or
continued in accordance with SECTIONS 4.12 and 4.13.
Repayments pursuant to SECTION 2.3(B) or (C) shall be applied first to the Prime
Rate Revolving Credit Loans and then, subject to the provisions of SECTION
2.3(C), to LIBOR Revolving Credit Loans.
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SECTION 2.4. Revolving Credit Note. Each Lender's Revolving
Credit Loans and the joint and several obligation of the Borrowers to repay such
Revolving Credit Loans shall also be evidenced by a Revolving Credit Note
payable to the order of such Lender. Each Revolving Credit Note shall be dated
the Effective Date (or the later "effective date" under any Assignment and
Acceptance) and shall be duly and validly executed and delivered by the
Borrowers.
SECTION 2.5. Extension of Revolving Credit Facility. Upon the
request of the Borrowers, the Lenders may, in their sole discretion, agree to
extend the Revolving Credit Facility for a period of up to two years beyond the
then effective Termination Date. Each such extension shall be effected by the
Borrowers' and Lenders' execution and delivery of a written agreement evidencing
such extension.
ARTICLE 3
LETTER OF CREDIT FACILITY
SECTION 3.1. Agreement to Issue. Upon the terms and subject to
the conditions of, and in reliance upon the representations and warranties made
under, this Agreement, the Issuing Bank agrees to issue for the account of the
Borrowers one or more Letters of Credit in accordance with this ARTICLE 3, from
time to time during the period commencing on the Effective Date and ending on
the Termination Date.
SECTION 3.2. Amounts. The Issuing Bank shall not have any
obligation to issue any Letter of Credit at any time: (a) if, after giving
effect to the issuance of the requested Letter of Credit, (i) the aggregate
Letter of Credit Obligations of the Borrowers would exceed the Letter of Credit
Facility then in effect or (ii) the aggregate principal amount of the Revolving
Credit Loans outstanding would exceed the Borrowing Base (after reduction for
the Letter of Credit Reserve in respect of such Letter of Credit); or (b) which
has a term longer than one calendar year or an expiration date after the last
Business Day that is more than 10 days prior to the Termination Date.
SECTION 3.3. Conditions. The obligation of the Issuing Bank to
issue any Letter of Credit is subject to the satisfaction of (a) the conditions
precedent contained in ARTICLE 5 and (b) the following additional conditions
precedent in a manner satisfactory to the Agent and the Issuing Bank: (i) the
Borrowers shall have delivered to the Issuing Bank and the Agent at such times
and in such manner as the Issuing Bank or the Agent may prescribe an application
in form and substance satisfactory to the Issuing Bank and the Agent for the
issuance of the Letter of Credit, a Reimbursement Agreement and such other
documents as may be required pursuant to the terms thereof, and the form and
terms of the proposed Letter of Credit shall be satisfactory to the Issuing Bank
and the Agent; and (ii) as of the date of issuance, no order of any court,
arbitrator or governmental authority having jurisdiction or authority over the
Issuing Bank shall purport by its terms to enjoin or restrain banks generally
from issuing letters of credit of the type and in the amount of the proposed
Letter of Credit, and no law, rule or regulation applicable to banks generally
and no request or directive (whether or not having the force of law) from any
governmental authority with jurisdiction over banks generally shall prohibit, or
request that the Issuing Bank refrain from, the issuance of letters of credit
generally or the issuance of such Letter of Credit.
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SECTION 3.4. Issuance of Letters of Credit.
(a) Request for Issuance. The Borrowers shall give the Issuing
Bank and the Agent written notice of the Borrowers' request for the issuance of
a Letter of Credit no later than three Business Days prior to the proposed date
of issuance of the Letter of Credit. Such notice shall be irrevocable and shall
specify the original face amount of the Letter of Credit requested, the
effective date (which date shall be a Business Day) of issuance of such
requested Letter of Credit, whether such Letter of Credit may be drawn in a
single or in multiple draws, the date on which such requested Letter of Credit
is to expire (which date shall be a Business Day more than 10 days prior to the
Termination Date), the purpose for which such Letter of Credit is to be issued,
and the beneficiary of the requested Letter of Credit. The Borrowers shall
attach to such notice the form of the Letter of Credit that the Borrowers
request to be issued.
(b) Responsibilities of the Agent; Issuance. The Agent shall
determine, as of the Business Day immediately preceding the requested effective
date of issuance of the Letter of Credit set forth in the notice from the
Borrowers pursuant to SECTION 3.4(A), the amount of the unused Letter of Credit
Facility and the Borrowing Base. If (i) the form of the Letter of Credit
delivered by the Borrowers to the Agent is acceptable to the Issuing Bank and
the Agent in their sole discretion, (ii) the undrawn face amount of the
requested Letter of Credit is less than or equal to the lesser of (A) the unused
Letter of Credit Facility and (B) the unused Borrowing Base, and (iii) if
requested by the Agent, the Agent has received a certificate or other assurance
from the Borrowers stating that the applicable conditions set forth in ARTICLE 5
have been satisfied, then the Issuing Bank will cause the Letter of Credit to be
issued.
(c) Notice of Issuance. Promptly after the issuance of any Letter
of Credit, the Issuing Bank shall give the Agent written or facsimile notice, or
telephonic notice confirmed promptly thereafter in writing, of the issuance of
such Letter of Credit, and the Agent shall give each Lender written or facsimile
notice, or telephonic notice confirmed promptly thereafter in writing, of the
issuance of such Letter of Credit.
(d) No Extension or Amendment. No Letter of Credit shall be
extended or amended unless the requirements of this SECTION 3.4 are met as
though a new Letter of Credit were being requested and issued.
SECTION 3.5. Duties of the Issuing Bank. Any action taken or
omitted to be taken by the Issuing Bank under or in connection with any Letter
of Credit, if taken or omitted in the absence of gross negligence or willful
misconduct, shall not result in any liability of the Issuing Bank to any Lender
or relieve any Lender of its obligations hereunder to the Issuing Bank. In
determining whether to pay under any Letter of Credit, the Issuing Bank shall
have no obligation to any Lender other than to confirm that any documents
required to be delivered under such Letter of Credit in connection with such
drawing have been presented and appear on their face to comply with the
requirements of such Letter of Credit.
SECTION 3.6. Payment of Reimbursement Obligations.
(a) Payment to Issuer. Notwithstanding any provisions to the
contrary in any Reimbursement Agreement, the Borrowers jointly and severally
agree to reimburse the Issuing Bank for any drawings (whether partial or full)
under each Letter of Credit issued by the Issuing Bank and agree to pay to the
Issuing Bank the amount of all other Reimbursement Obligations and other amounts
payable to the Issuing Bank under or in connection with such Letter of Credit
immediately when due, irrespective of
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any claim, setoff, defense or other right which the Borrowers may have at any
time against the Issuing Bank or any other Person.
(b) Recovery or Avoidance of Payments. In the event any payment
by or on behalf of the Borrowers with respect to any Letter of Credit (or any
Reimbursement Obligation relating thereto) received by the Issuing Bank, or by
the Agent and distributed by the Agent to the Lenders on account of their
respective participations therein, is thereafter set aside, avoided or recovered
from the Issuing Bank or the Agent in connection with any receivership,
liquidation or bankruptcy proceeding, the Lenders shall, upon demand by the
Agent, pay to the Agent, for the account of the Agent or the Issuing Bank, their
respective Commitment Percentages of such amount set aside, avoided or recovered
together with interest at the rate required to be paid by the Agent upon the
amount required to be repaid by it.
SECTION 3.7. Participations.
(a) Purchase of Participations. Immediately upon issuance by the
Issuing Bank of a Letter of Credit, each Lender shall be deemed to have
irrevocably and unconditionally purchased and received, without recourse or
warranty, an undivided interest and participation in such Letter of Credit equal
to such Lender's Commitment Percentage of the face amount thereof (including all
obligations of the Borrowers with respect thereto, other than amounts owing to
the Issuing Bank under SECTION 4.2(D), and any security therefor or guaranty
pertaining thereto).
(b) Sharing of Letter of Credit Payments. In the event that the
Issuing Bank makes a payment under any Letter of Credit and the Issuing Bank
shall not have been repaid such amount pursuant to SECTION 3.6, then the Issuing
Bank shall be deemed to have made a Non-Ratable Loan in the amount of such
payment, and notwithstanding the occurrence or continuance of a Default or Event
of Default at the time of such payment, such Non-Ratable Loan shall be subject
to the provisions of SECTION 4.8 and the absolute obligations of the Lenders to
pay for their respective participation interests therein.
(c) Sharing of Reimbursement Obligation Payments. Whenever the
Issuing Bank receives a payment from or on behalf of the Borrowers on account of
a Reimbursement Obligation as to which the Agent has previously received for the
account of the Issuing Bank payment from a Lender pursuant to this SECTION 3.7,
the Issuing Bank shall promptly pay to the Agent, for the benefit of such
Lender, such Lender's Commitment Percentage of the amount of such payment from
the Borrowers in Dollars. Each such payment shall be made by the Issuing Bank on
the Business Day on which the Issuing Bank receives immediately available funds
pursuant to the immediately preceding sentence, if received prior to 11:00 a.m.
on such Business Day and otherwise on the next succeeding Business Day.
(d) Documentation. Upon the request of any Lender, the Agent
shall furnish to such Lender copies of any Letter of Credit, Reimbursement
Agreement or application for any Letter of Credit and such other documentation
as may reasonably be requested by such Lender.
(e) Obligations Irrevocable. Notwithstanding the occurrence or
continuance of a Default or Event of Default or other failure of any condition
to the issuance of Letters of Credit hereunder subsequent to the Letters of
Credit to be issued on the Effective Date, unless the Issuing Bank shall have
received notice from the Required Lenders (which notice shall become effective
on the third Business Day after receipt of such notice by the Issuing Bank
unless otherwise agreed by the Issuing Bank) prior to a proposed issuance date
of any Letter of Credit that such Lenders will not participate in any Letter of
Credit to be issued on such date, the Issuing Bank may assume that each Lender
will participate in such Letter of Credit in accordance with this SECTION 3.7,
and the Issuing Bank may, in
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reliance upon such assumption, issue such Letter of Credit for the account of
the Borrowers. The obligations of each Lender to make payments to the Agent with
respect to any Letter of Credit and their participations therein pursuant to the
provisions of SECTION 4.8 hereof or otherwise and the obligations of the
Borrowers to make payments to the Issuing Bank or to the Agent, for the account
of Lenders, shall be irrevocable, shall not be subject to any qualification or
exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement (assuming, in the case of the obligations of the
Lenders to make such payments, that the Letter of Credit has been issued in
accordance with this ARTICLE 3), including any of the following circumstances:
(i) any lack of validity or enforceability of this Agreement or any of the other
Loan Documents; (ii) the existence of any claim, setoff, defense or other right
which the Borrowers may have at any time against a beneficiary named in a Letter
of Credit or any transferee of any Letter of Credit (or any Person for whom any
such transferee may be acting), any Lender, the Issuing Bank or any other
Person, whether in connection with this Agreement, any Letter of Credit, the
transactions contemplated herein or any unrelated transactions (including any
underlying transactions between the Borrowers or any other Person and the
beneficiary named in any Letter of Credit); (iii) any draft, certificate or any
other document presented under the Letter of Credit upon which payment has been
made in good faith and according to its terms proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect; (iv) the surrender or impairment of any Collateral or
any other security for the Secured Obligations or the performance or observance
of any of the terms of any of the Loan Documents; (v) the occurrence of any
Default or Event of Default; or (vi) the Agent's failure to deliver to the
Lenders the notice provided for in SECTION 3.4(C).
SECTION 3.8. Indemnification, Exoneration.
(a) Indemnification. In addition to amounts payable as elsewhere
provided in this ARTICLE 3, the Borrowers jointly and severally agree to
protect, indemnify, pay and save the Issuing Bank, the Lenders and the Agent
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees) which
the Issuing Bank, any Lender or the Agent may incur or be subject to as a
consequence, directly or indirectly, of (i) the issuance of any Letter of
Credit, other than as a result of its gross negligence or willful misconduct, as
determined by a court of competent jurisdiction, or (ii) the failure of the
Issuing Bank to honor a drawing under any Letter of Credit as a result of any
act or omission, whether rightful or wrongful, of any present or future de jure
or de facto governmental authority (all such acts or omissions being hereinafter
referred to collectively as "Government Acts").
(b) Assumption of Risk by the Borrowers. As among the Borrowers,
the Issuing Bank, the Lenders and the Agent, the Borrowers assume all risks of
the acts and omissions of, or misuse of any of the Letters of Credit by, the
respective beneficiaries of such Letters of Credit. In furtherance and not in
limitation of the foregoing, subject to the provisions of the applications for
the issuance of Letters of Credit, the Issuing Bank, the Lenders and the Agent
shall not be responsible for: (i) the form, validity, sufficiency, accuracy,
genuineness or legal effect of any document submitted by any Person in
connection with the application for and issuance of and presentation of drafts
with respect to any of the Letters of Credit, even if it should prove to be in
any or all respects invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the validity or sufficiency of any instrument transferring or assigning or
purporting to transfer or assign any Letter of Credit or the rights or benefits
thereunder or proceeds thereof, in whole or in part, which may prove to be
invalid or ineffective for any reason; (iii) the failure of the beneficiary of
any Letter of Credit to comply duly with conditions required in order to draw
upon such Letter of Credit; (iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph, telex or
otherwise, whether or not they be in cipher; (v) errors in
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interpretation of technical terms; (vi) any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under any Letter
of Credit or of the proceeds thereof; (vii) the misapplication by the
beneficiary of any Letter of Credit of the proceeds of any drawing under such
Letter of Credit; or (viii) any consequences arising from causes beyond the
control of the Lenders or the Agent, including any Government Acts. None of the
foregoing shall affect, impair or prevent the vesting of any of the Issuing
Bank's or the Agent's rights or powers under this SECTION 3.8.
(c) Exoneration. In furtherance and extension, and not in
limitation, of the specific provisions set forth above, any action taken or
omitted by the Agent, the Issuing Bank or any Lender under or in connection with
any of the Letters of Credit or any related certificates, if taken or omitted in
good faith, shall not result in any liability of the Issuing Bank, any Lender or
the Agent to the Borrowers or relieve the Borrowers of any of their obligations
hereunder to any such Person.
SECTION 3.9. Supporting Letter of Credit; Cash Collateral. If,
notwithstanding the provisions of SECTION 3.2(B), any Letter of Credit is
outstanding on the Termination Date, then on or prior to the Termination Date,
or in any case upon the occurrence of an Event of Default, the Borrowers shall,
promptly on demand by the Agent, deposit with the Agent, for the Ratable benefit
of the Lenders, with respect to each Letter of Credit then outstanding, as the
Agent shall specify, either (a) a standby letter of credit (a "Supporting Letter
of Credit") in form and substance satisfactory to the Agent and the Issuing
Bank, issued by an issuer reasonably satisfactory to the Agent and the Issuing
Bank in an amount equal to the greatest amount for which such Letter of Credit
may be drawn, under which Supporting Letter of Credit the Agent is entitled to
draw amounts necessary to reimburse the Agent, the Issuing Bank and the Lenders
for payments made by the Agent, the Issuing Bank and the Lenders under such
Letter of Credit or under any reimbursement or guaranty agreement with respect
thereto, or (b) Cash Collateral in an amount necessary to reimburse the Agent,
the Issuing Bank and the Lenders for payments made by the Agent, the Issuing
Bank and the Lenders under such Letter of Credit or under any reimbursement or
guaranty agreement with respect thereto. Such Supporting Letter of Credit or
Cash Collateral shall be held by the Agent for the benefit of the Issuing Bank
and the Lenders, as security for, and to provide for the payment of, the
Reimbursement Obligations. In addition, the Agent may at any time after the
Termination Date apply any or all of such Cash Collateral to the payment of any
or all of the Secured Obligations then due and payable. At the Borrowers'
request, but subject to the Agent's reasonable approval, the Agent shall invest
any Cash Collateral consisting of cash or any proceeds of Cash Collateral
consisting of cash in Cash Equivalents, and any commissions, expenses and
penalties incurred by the Agent in connection with any investment and redemption
of such Cash Collateral shall be Secured Obligations hereunder secured by the
Collateral, shall bear interest at the rates provided herein for Prime Rate
Revolving Credit Loans, and shall be charged to the Borrowers' Loan Accounts,
or, at the Agent's option, shall be paid out of the proceeds of any earnings
received by the Agent from the investment of such Cash Collateral as provided
herein or out of such cash itself. The Agent makes no representation or warranty
as to, and shall not be responsible for, the rate of return, if any, earned on
any Cash Collateral. Any earnings on Cash Collateral shall be held as additional
Cash Collateral on the terms set forth in this SECTION 3.9.
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ARTICLE 4
GENERAL LOAN PROVISIONS
SECTION 4.1. Interest.
(a) Prime Rate Loans. Subject to the provisions of SECTION
4.1(D), the Borrowers will pay interest on the unpaid principal amount of each
Prime Rate Loan, for each day from the day such Loan is made until such Loan is
paid (whether at maturity, by reason of acceleration, or otherwise) or is
converted to a Loan of a different Type, at a rate per annum equal to the sum of
(i) the Applicable Margin and (ii) the Prime Rate, payable monthly in arrears as
it accrues on each Interest Payment Date and when such Prime Rate Loan is due
(whether at maturity, by reason of acceleration or otherwise).
(b) LIBOR Loans. Subject to the provisions of SECTION 4.1(D), the
Borrowers will pay interest on the unpaid principal amount of each LIBOR Loan
for the applicable Interest Period at a rate per annum equal to the sum of (i)
the Applicable Margin and (ii) LIBOR, payable in arrears as it accrues on each
Interest Payment Date, and when such LIBOR Loan is due (whether at maturity, by
reason of acceleration or otherwise).
(c) Other Secured Obligations. The Borrowers will, to the extent
permitted by Applicable Law, pay interest on the unpaid principal amount of any
Secured Obligation that is due and payable, other than the Loans, in accordance
with SECTIONS 4.1(A) or (D), as applicable, as if such Secured Obligation were a
Prime Rate Loan.
(d) Default Rate. If there shall occur and be continuing an Event
of Default, at the election of the Required Lenders, the unpaid principal amount
of the Loans and other Secured Obligations shall no longer bear interest in
accordance with the terms of SECTION 4.1(A), (B) or (C), but shall bear interest
for each day from the date of such Event of Default until such Event of Default
shall have been cured or waived at a rate per annum equal to the sum of (i) the
Default Margin and (ii) the rate otherwise applicable to such Loan or other
Secured Obligation, payable on demand. The interest rate provided for in the
preceding sentence shall, to the extent permitted by Applicable Law, apply to
and accrue on the amount of any judgment entered with respect to any Secured
Obligation and shall continue to accrue at such rate during any proceeding
described in SECTION 12.1(G) or (H).
(e) Calculation of Interest. The interest rates provided for in
SECTIONS 4.1(A), (B), (C) and (D) shall be computed on the basis of a year of
360 days and the actual number of days elapsed.
(f) Maximum Rate. It is not intended by the Lenders, and nothing
contained in this Agreement or the Notes shall be deemed, to establish or
require the payment of a rate of interest in excess of the maximum rate
permitted by Applicable Law (the "Maximum Rate"). If, in any month, the
Effective Interest Rate, absent such limitation, would have exceeded the Maximum
Rate, then the Effective Interest Rate for that month shall be the Maximum Rate,
and, if in future months, the Effective Interest Rate would otherwise be less
than the Maximum Rate, then the Effective Interest Rate shall remain at the
Maximum Rate until such time as the amount of interest paid hereunder equals the
amount of interest which would have been paid if the same had not been limited
by the Maximum Rate. In the event, upon payment in full of the Secured
Obligations, the total amount of interest paid or accrued under the terms of
this Agreement is less than the total amount of interest which would have been
paid or accrued if the Effective Interest Rate had at all times been in effect,
then the Borrowers shall, to the extent permitted by Applicable Law, pay to the
Lenders an amount equal to the excess, if any, of (i) the
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lesser of (A) the amount of interest which would have been charged if the
Maximum Rate had, at all times, been in effect and (B) the amount of interest
which would have accrued had the Effective Interest Rate, at all times, been in
effect and (ii) the amount of interest actually paid or accrued under this
Agreement. In the event the Lenders receive, collect or apply as interest any
sum in excess of the Maximum Rate, such excess amount shall be applied to the
reduction of the principal balance of the Secured Obligations, and if no such
principal is then outstanding, such excess or part thereof remaining, shall be
paid to the Borrowers.
SECTION 4.2. Certain Fees.
(a) Closing Fee. On the Effective Date, as additional
consideration for the extensions of credit provided for hereunder, the Borrowers
shall pay to the Agent a closing fee in accordance with the terms of the Fee
Letter, which closing fee shall be shared with the Lenders in accordance with
the terms of the separate letter(s) between the Agent and the Lenders. The
closing fee provided for herein shall compensate the Agent and the Lenders for
the internal costs associated with the origination, structuring, processing,
approving and closing of the transactions contemplated by this Agreement,
including administrative, general overhead and lost opportunity costs, but not
including any out-of-pocket expenses for which the Borrowers have agreed to
reimburse the Agent, including the Agent's out-of-pocket expenses incurred (and
per diem charges accrued) in connection with its due diligence examination of
the Obligors and the closing of the transactions contemplated by this Agreement.
The closing fee shall be fully earned on the Effective Date and shall not be
subject to refund or rebate.
(b) Agent Fee; Field Exam Fee. For administration and other
services performed by the Agent in connection with its continuing administration
of this Agreement, the Borrowers shall pay to the Agent, for its own account,
and not for the account of the Lenders, the annual Agent and field examination
fees in accordance with the terms of the Fee Letter. The fees payable pursuant
to this SECTION 4.2(B) shall be fully earned by the Agent on the date payment
thereof is due and shall not be subject to refund or rebate.
(c) Unused Line Fee. In connection with and as consideration for
the holding available for the use of the Borrowers hereunder the full amount of
the Revolving Credit Facility, the Borrowers will pay a fee to the Agent, for
the Ratable benefit of the Lenders, for each day from the Effective Date until
the Termination Date, in an amount equal to 0.375% per annum of the unused
portion of the Revolving Credit Facility for such day. Such fee shall be payable
monthly in arrears on each Interest Payment Date, shall be fully earned when due
and payable and shall not be subject to refund or rebate, and shall be
calculated based on a year of 360 days and the actual number of days elapsed.
(d) Letter of Credit Fees.
(i) The Borrowers shall pay to the Agent, for the Ratable
benefit of the Lenders, Letter of Credit fees on a per annum basis equal
to the Applicable Margin for LIBOR Loans multiplied by the average daily
aggregate Letter of Credit Amount of all Letters of Credit from time to
time outstanding during the term of this Agreement. Such fees shall be
payable to the Agent, for the Ratable benefit of the Lenders in
accordance with their respective Commitment Percentages, monthly in
arrears on each Interest Payment Date, and shall be calculated based on
a year of 360 days and the actual number of days elapsed.
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(ii) The Borrowers shall pay to the Agent, for the account
of the Issuing Bank, (A) the standard fees and charges of the Issuing
Bank for issuing, administering, amending, renewing, paying and
canceling letters of credit, as and when assessed, and (B) a facing fee
equal to 0.125% of the face amount of each Letter of Credit, due upon
issuance.
(e) Collection Fee. During the period from and including the
Effective Date to and including the Termination Date, the Borrowers will pay to
the Agent for its own account on the first day of each month an amount of
interest computed at the Effective Interest Rate applicable to Prime Rate
Revolving Credit Loans on each remittance received by the Agent against
Receivables (as contemplated by SECTION 8.1 hereof) during the preceding month,
from the close of business on the date of receipt of each such remittance until
the close of business on the second Business Day following the receipt of the
remittance, as compensation for delays in the collection and clearance of checks
and other remittances.
(f) General. All fees shall be fully earned by the identified
recipient thereof when due and payable and, except as otherwise set forth herein
or required by applicable law, shall not be subject to refund or rebate. All
fees provided for in this SECTION 4.2 are for compensation for services and are
not, and shall not be deemed to be, interest or a charge for the use of money.
The Borrowers acknowledge that all of the terms of the Fee Letter shall survive
the execution, delivery and closing of this Agreement.
SECTION 4.3. Manner of Payment.
(a) Except as otherwise expressly provided in SECTION 8.1(B),
each payment (including prepayments) by the Borrowers on account of the
principal of or interest on the Loans or of any other amounts payable to the
Lenders under this Agreement or any Note shall be made not later than 12:00 noon
on the date specified for payment under this Agreement to the Agent, for the
account of the Lenders, at the Agent's Office, in Dollars, in immediately
available funds and shall be made without any setoff, counterclaim or deduction
whatsoever. Any payment received after such time but before 1:00 p.m. on such
day shall be deemed a payment on such date for the purposes of SECTION 12.1, but
for all other purposes shall be deemed to have been made on the next succeeding
Business Day.
(b) The Borrowers hereby irrevocably authorize each Lender and
each Affiliate of such Lender and each participant herein to charge any account
of the Borrowers maintained with such Lender or such Affiliate or participant
with such amounts as may be necessary from time to time to pay any Secured
Obligations (whether or not owed to such Lender, Affiliate or participant) which
are not paid when due.
SECTION 4.4. General. If any payment under this Agreement or any
Note shall be specified to be made upon a day which is not a Business Day, it
shall be made on the next succeeding day which is a Business Day and such
extension of time shall in such case be included in computing interest, if any,
in accordance with such payment.
SECTION 4.5. Loan Accounts; Statements of Account.
(a) Each Lender shall open and maintain on its books a loan
account in the Borrowers' name (each, a "Loan Account" and collectively, the
"Loan Accounts"). Each such Loan Account shall show as debits thereto each Loan
made under this Agreement by such Lender to the Borrowers and as credits thereto
all payments received by such Lender and applied to principal of such
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Loan, so that the balance of the loan account at all times reflects the
principal amount due such Lender from the Borrowers.
(b) The Agent shall maintain on its books a control account for
the Borrowers in which shall be recorded (i) the amount of each disbursement
made hereunder, (ii) the amount of any principal or interest due or to become
due from the Borrowers hereunder, and (iii) the amount of any sum received by
the Agent hereunder from the Borrowers and each Lender's Ratable share therein.
(c) The entries made in the accounts pursuant to SUBSECTIONS (A)
and (B) shall be prima facie evidence, in the absence of manifest error, of the
existence and amounts of the obligations of the Borrowers therein recorded and
in case of discrepancy between such accounts, in the absence of manifest error,
the accounts maintained pursuant to SUBSECTION (B) shall be controlling.
(d) The Agent will account separately to the Borrowers monthly
with a statement of Loans, charges and payments made to and by the Borrowers
pursuant to this Agreement, and such accounts rendered by the Agent shall be
deemed final, binding and conclusive, save for manifest error, unless the Agent
is notified by the Borrowers in writing to the contrary within 30 days of the
date the account to the Borrowers was so rendered. Such notice by the Borrowers
shall be deemed an objection to only those items specifically objected to
therein. Failure of the Agent to render such account shall in no way affect the
rights of the Agent or of the Lenders hereunder.
SECTION 4.6. Termination of Agreement. The Borrowers shall have
the right, at any time, to terminate this Agreement upon not less than 60 days
prior written notice to the Agent of their intention to terminate this
Agreement, which notice shall specify the effective date of such termination.
Upon receipt of such notice, the Agent shall promptly notify each Lender
thereof. On the date specified in such notice, such termination shall be
effected, PROVIDED, that the Borrowers shall, on or prior to such date, pay to
the Agent, for itself and the account of the Secured Creditors, in same day
funds, an amount equal to all Secured Obligations then outstanding, including
all (a) accrued interest thereon, (b) all accrued fees provided for hereunder,
(c) any amounts payable to the Lenders pursuant to this ARTICLE 4 or SECTIONS
16.2, 16.3 and 16.14, and (d) any other amounts payable to the Agent or any
Secured Creditor under any other Loan Document. In addition thereto, the
Borrowers shall deliver to the Agent (i) an indemnity or Cash Collateral in form
and substance acceptable to the Agent with respect to any checks or other
instruments received by the Agent and credited to the Borrowers in calculating
the payoff amount, and (ii) in respect of each outstanding Letter of Credit,
either a Supporting Letter of Credit or Cash Collateral as provided in SECTION
3.9. Following a notice of termination as provided for in this SECTION 4.6 and
upon payment in full of the amounts specified in this SECTION 4.6, this
Agreement shall be terminated and the Agent, the Issuing Bank, the Lenders and
the Obligors shall have no further obligations to any other party hereto, except
for any indemnity obligations which expressly survive the termination of this
Agreement.
SECTION 4.7. Making of Loans.
(a) Nature of Obligations of Lenders to Make Loans. The
obligations of the Lenders under this Agreement to make the Loans are several
and are not joint or joint and several.
(b) Assumption by Agent. Subject to the provisions of SECTION 4.8
and notwithstanding the occurrence or continuance of a Default or Event of
Default or other failure of any condition to the making of Loans hereunder
subsequent to the Loans to be made on the Effective Date, unless the Agent shall
have received notice from the Required Lenders in accordance with the provisions
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of SECTION 4.7(C) (and such notice shall have become effective) prior to a
proposed borrowing date that such Lenders will not make available to the Agent
such Lenders' Ratable portion of the amount to be borrowed on such date, the
Agent may assume that each Lender will make such portion available to the Agent
in accordance with SECTION 2.2(A), and the Agent may, in reliance upon such
assumption, make available to the Borrowers on such date a corresponding amount.
If and to the extent any Lender shall not make such Ratable portion available to
the Agent, such Lender and the Borrowers severally agree to repay to the Agent
forthwith on demand such corresponding amount, together with interest thereon
for each day from the date such amount is made available to the Borrowers until
the date such amount is repaid to the Agent at the Effective Interest Rate or,
if lower, subject to SECTION 4.1(F), the Maximum Rate. If such Lender shall
repay to the Agent such corresponding amount, the amount so repaid shall
constitute such Lender's Commitment Percentage of the Loan made on such
borrowing date for purposes of this Agreement. The failure of any Lender to make
its Commitment Percentage of any Loan available shall not (without regard to
whether the Borrowers shall have returned the amount thereof to the Agent in
accordance with this SECTION 4.7) relieve it or any other Lender of its
obligation, if any, hereunder to make its Commitment Percentage of such Loan
available on such borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Commitment Percentage of such Loan
available on the borrowing date.
(c) Delegation of Authority to Agent. Without limiting the
generality of SECTION 14.1, each Lender expressly authorizes the Agent to
determine on behalf of such Lender (i) any reduction or increase of advance
rates applicable to the Borrowing Base, so long as such advance rates do not at
any time exceed the rates set forth in the Borrowing Base definition, (ii) the
creation or elimination of any reserves (other than the Letter of Credit
Reserve) against the Revolving Credit Facility and the Borrowing Base, and (iii)
whether or not Inventory or Receivables shall be deemed to constitute Eligible
Inventory, Eligible In-Transit Inventory, Eligible Receivables or Eligible Bill
and Hold Receivables. Such authorization may be withdrawn by the Required
Lenders by giving the Agent written notice of such withdrawal signed by the
Required Lenders; PROVIDED, HOWEVER, that unless otherwise agreed by the Agent
such withdrawal of authorization shall not become effective until the thirtieth
Business Day after receipt of such notice by the Agent. Thereafter, the Required
Lenders shall jointly instruct the Agent in writing regarding such matters with
such frequency as the Required Lenders shall jointly determine. Unless and until
the Agent shall have received written notice from the Required Lenders as to the
existence of a Default, an Event of Default or some other circumstance which
would relieve the Lenders of their respective obligations to make Loans
hereunder, which notice shall be in writing and shall be signed by the Required
Lenders and shall expressly state that the Required Lenders do not intend to
make available to the Agent such Lenders' Ratable share of Loans made after the
effective date of such notice, the Agent shall be entitled to continue to make
the assumptions described in SECTION 4.7(B). The notice described in the
preceding sentence shall become effective on the third Business Day after
receipt of such notice by the Agent unless otherwise agreed by the Agent. The
Agent shall not be required to make any Loan as to which it shall have received
notice by a Lender of such Lender's intention not to make its Ratable portion of
such Loan available to the Agent. Any withdrawal of authorization under this
SECTION 4.7(C) shall not affect the validity of any Loans made (or Letters of
Credit issued) prior to the effectiveness thereof.
(d) Agent Advances. The Agent is hereby authorized by the Borrowers and
the Lenders, from time to time in the Agent's sole discretion, (i) after the
occurrence of a Default or an Event of Default, or (ii) at any time that any of
the other applicable conditions precedent set forth in ARTICLE 5 have not been
satisfied, to make Revolving Credit Loans to the Borrowers on behalf of the
Lenders which the Agent, in its reasonable business judgment, deems necessary or
desirable (A) to preserve or protect the Collateral, or any portion thereof, (B)
to enhance the likelihood of, or maximize the amount
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of, repayment of the Loans and other Secured Obligations, or (C) to pay any
other amount chargeable to the Obligors pursuant to the terms of this Agreement,
including costs, fees and expenses as described in SECTION 16.2 (any of the
advances described in this SECTION 4.7(D) being hereinafter referred to as
"Agent Advances"); PROVIDED that the Required Lenders may at any time revoke the
Agent's authorization contained in this SECTION 4.7(D) to make Agent Advances,
any such revocation to be in writing and to become effective on the third
Business Day after the Agent's receipt thereof. All Agent Advances shall be
repayable by the Borrowers on demand and secured by the Collateral, shall
constitute Revolving Credit Loans and Secured Obligations hereunder, and shall
bear interest at the rate applicable to Prime Rate Revolving Credit Loans from
time to time. The Agent shall notify each Lender in writing of each such Agent
Advance. All Agent Advances shall constitute Non-Ratable Loans, as defined in
SECTION 4.8(B), and shall be subject to the provisions thereof.
(e) Replacement of Certain Lenders. If a Lender (the "Affected Lender")
shall have failed to fund its Proportionate Share of any Loan requested (or
deemed requested) by the Borrowers which such Lender is obligated to fund under
the terms of this Agreement and which failure has not been cured, then, in any
such case and in addition to any other rights and remedies that the Agent, any
other Lender or the Borrowers may have against such Affected Lender, the Agent
or the Borrowers' Agent may make written demand on such Affected Lender (with a
copy to the Borrowers' Agent, in case of demand by the Agent, and with a copy to
the Agent, in the case of demand by the Borrowers' Agent) for the Affected
Lender to assign, and such Affected Lender shall assign pursuant to one or more
duly executed Assignment and Acceptances within 5 Business Days after the date
of such demand, to one or more Lenders willing to accept such assignment or
assignments, or to one or more Eligible Assignees (to the extent willing to
accept such assignment or assignments) designated by the Agent or the Borrowers'
Agent (provided such Eligible Assignee is reasonably acceptable to the Agent
and, if no Event of Default exists, the Borrowers' Agent), all of such Affected
Lender's rights and obligations under this Agreement (including its Commitments
and all Loans owing to it) in accordance with ARTICLE 13. The Affected Lender
shall be entitled to receive, in cash and concurrently with the execution and
delivery of each such Assignment and Acceptance, all amounts owed to the
Affected Lender hereunder or under any other Loan Document, including the
aggregate outstanding principal amount of the Loans owed to such Lender,
together with accrued interest thereon through the date of such assignment. Upon
the replacement of any Affected Lender pursuant to this SECTION 4.7(E), such
Affected Lender shall cease to have any participation in, entitlement to, or
other right to share in the Security Interest or any other Lien of the Agent in
any Collateral and such Affected Lender shall have no further liability to the
Agent, any Lender or any other Person under any of the Loan Documents (except as
provided in SECTION 14.7 and elsewhere in this Agreement as to events or
transactions which occur prior to the replacement of such Affected Lender).
SECTION 4.8. Settlement Among Lenders.
(a) Revolving Credit Loans. It is agreed that each Lender's Net
Outstandings are intended by the Lenders to be equal at all times to such
Lender's Commitment Percentage of the aggregate principal amount of all
Revolving Credit Loans outstanding. Notwithstanding such agreement, the several
and not joint obligation of each Lender to fund Revolving Credit Loans made in
accordance with the terms of this Agreement ratably in accordance with such
Lender's Commitment Percentage and each Lender's right to receive its Ratable
share of principal payments on Revolving Credit Loans in accordance with its
Commitment Percentage, the Lenders agree that in order to facilitate the
administration of this Agreement and the other Loan Documents that settlement
among them may take place on a periodic basis in accordance with the provisions
of this SECTION 4.8.
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(b) Settlement Procedures as to Revolving Credit Loans. To the
extent and in the manner hereinafter provided in this SECTION 4.8, settlement
among the Lenders as to Revolving Credit Loans may occur periodically on
Settlement Dates determined from time to time by the Agent, which may occur
before or after the occurrence or during the continuance of a Default or Event
of Default and whether or not all of the conditions set forth in SECTION 5.2
have been met. On each Settlement Date payments shall be made by or to
NationsBank and the other Lenders in the manner provided in this SECTION 4.8 in
accordance with the Settlement Report delivered by the Agent pursuant to the
provisions of this SECTION 4.8 in respect of such Settlement Date so that as of
each Settlement Date, and after giving effect to the transactions to take place
on such Settlement Date, each Lender's Net Outstandings shall equal such
Lender's Commitment Percentage of the Revolving Credit Loans outstanding.
(i) Selection of Settlement Dates. If the Agent elects, in
its discretion, but subject to the consent of NationsBank, to settle
accounts among the Lenders with respect to principal amounts of
Revolving Credit Loans less frequently than each Business Day, then the
Agent shall designate periodic Settlement Dates which may occur on any
Business Day after the Effective Date; PROVIDED, HOWEVER, that the Agent
shall designate as a Settlement Date any Business Day which is an
Interest Payment Date; and PROVIDED FURTHER, that a Settlement Date
shall occur at least once during each seven-day period. The Agent shall
designate a Settlement Date by delivering to each Lender a Settlement
Report not later than 12:00 noon on the proposed Settlement Date, which
Settlement Report will be in the form of EXHIBIT E hereto and shall be
with respect to the period beginning on the next preceding Settlement
Date and ending on such designated Settlement Date.
(ii) Non-Ratable Loans and Payments. Between Settlement
Dates, the Agent shall request and NationsBank may (but shall not be
obligated to) advance to the Borrowers out of NationsBank's own funds,
the entire principal amount of any Revolving Credit Loan requested or
deemed requested pursuant to SECTION 2.2(A) or any Agent Advance made
pursuant to SECTION 4.7(D) (any such Revolving Credit Loan or Agent
Advance being referred to as a "Non-Ratable Loan"). The making of each
Non-Ratable Loan by NationsBank shall be deemed to be a purchase by
NationsBank of a 100% participation in each other Lender's Commitment
Percentage of the amount of such Non-Ratable Loan. All payments of
principal, interest and any other amount with respect to such
Non-Ratable Loan shall be payable to and received by the Agent for the
account of NationsBank. Upon demand by NationsBank, with notice thereof
to the Agent, each other Lender shall pay to NationsBank, as the
repurchase of such participation, an amount equal to 100% of such
Lender's Commitment Percentage of the principal amount of such
Non-Ratable Loan. Any payments received by the Agent between Settlement
Dates which in accordance with the terms of this Agreement are to be
applied to the reduction of the outstanding principal balance of
Revolving Credit Loans, shall be paid over to and retained by
NationsBank for such application, and such payment to and retention by
NationsBank shall be deemed, to the extent of each other Lender's
Commitment Percentage of such payment, to be a purchase by each such
other Lender of a participation in the Revolving Credit Loans (including
the repurchase of participations in Non-Ratable Loans) held by
NationsBank. Upon demand by another Lender, with notice thereof to the
Agent, NationsBank shall pay to the Agent, for the account of such other
Lender, as a repurchase of such participation, an amount equal to such
other Lender's Commitment Percentage of any such amounts (after
application thereof to the repurchase of any participations of
NationsBank in such other Lender's Commitment Percentage of any
Non-Ratable Loans) paid only to NationsBank by the Agent.
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(iii) Net Decrease in Outstandings. If on any Settlement
Date the increase, if any, in the dollar amount of any Lender's Net
Outstandings which is required to comply with the first sentence of
SECTION 4.8(A) is less than such Lender's Commitment Percentage of
amounts received by the Agent but paid only to NationsBank since the
next preceding Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment Percentage of
such amounts to the increase in such Lender's Net Outstandings, and
NationsBank shall pay to the Agent, for the account of such Lender, the
excess allocable to such Lender.
(iv) Net Increase in Outstandings. If on any Settlement
Date the increase, if any, in the dollar amount of any Lender's Net
Outstandings which is required to comply with the first sentence of
SECTION 4.8(A) exceeds such Lender's Commitment Percentage of amounts
received by the Agent but paid only to NationsBank since the next
preceding Settlement Date, such Lender and the Agent, in their
respective records, shall apply such Lender's Commitment Percentage of
such amounts to the increase in such Lender's Net Outstandings, and such
Lender shall pay to the Agent, for the account of NationsBank, any
excess.
(v) No Change in Outstandings. If a Settlement Report
indicates that no Revolving Credit Loans have been made during the
period since the next preceding Settlement Date, then such Lender's
Commitment Percentage of any amounts received by the Agent but paid only
to NationsBank shall be paid by NationsBank to the Agent, for the
account of such Lender. If a Settlement Report indicates that the
increase in the dollar amount of a Lender's Net Outstandings which is
required to comply with the first sentence of SECTION 4.8(A) is exactly
equal to such Lender's Commitment Percentage of amounts received by the
Agent but paid only to NationsBank since the next preceding Settlement
Date, such Lender and the Agent, in their respective records, shall
apply such Lender's Commitment Percentage of such amounts to the
increase in such Lender's Net Outstandings.
(vi) Return of Payments. If any amounts received by
NationsBank in respect of the Secured Obligations are later required to
be returned or repaid by NationsBank to the Borrowers or their
respective representatives or successors in interest, whether by court
order, settlement or otherwise, in excess of NationsBank's Commitment
Percentage of all such amounts required to be returned by all Lenders,
each other Lender shall, upon demand by NationsBank with notice to the
Agent, pay to the Agent for the account of NationsBank, an amount equal
to the excess of such Lender's Commitment Percentage of all such amounts
required to be returned by all Lenders over the amount, if any, returned
directly by such Lender.
(vii) Payments to Agent, Lenders.
(A) Payment by any Lender to the Agent shall be
made not later than 1:00 p.m. on the Business Day such payment is
due, PROVIDED that if such payment is due on demand by another
Lender, such demand is made on the paying Lender not later than
10:00 a.m. on such Business Day. Payment by the Agent to any
Lender shall be made by wire transfer, promptly following the
Agent's receipt of funds for the account of such Lender and in
the type of funds received by the Agent, PROVIDED that if the
Agent receives such funds at or prior to 1:00 p.m., the Agent
shall pay such funds to such Lender by 2:00 p.m. on such Business
Day. If a demand for payment is made after the applicable time
set forth above, the payment due shall be made by 2:00 p.m. on
the first Business Day following the date of such demand.
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(B) If a Lender shall, at any time, fail to make
any payment to the Agent required hereunder, the Agent may, but
shall not be required to, retain payments that would otherwise be
made to such Lender hereunder and apply such payments to such
Lender's defaulted obligations hereunder, at such time, and in
such order, as the Agent may elect in its sole discretion.
(C) With respect to the payment of any funds under
this SECTION 4.8(B), whether from the Agent to a Lender or from a
Lender to the Agent, the party failing to make full payment when
due pursuant to the terms hereof shall, upon demand by the other
party, pay such amount together with interest on such amount at
the Federal Funds Effective Rate.
(c) Settlement of Other Secured Obligations. All other amounts
received by the Agent on account of, or applied by the Agent to the payment of,
any Secured Obligation owed to the Lenders (including fees payable to the
Lenders pursuant to SECTIONS 4.2(C) and (D) and proceeds from the sale of, or
other realization upon, all or any part of the Collateral following an Event of
Default) that are received by the Agent on or prior to 1:00 p.m. on a Business
Day will be paid by the Agent to each Lender on the same Business Day, and any
such amounts that are received by the Agent after 1:00 p.m. will be paid by the
Agent to each Lender on the following Business Day. Unless otherwise stated
herein, the Agent shall distribute fees payable to the Lenders pursuant to
SECTIONS 4.2(C) and (D) ratably to the Lenders based on each Lender's Commitment
Percentage and shall distribute proceeds from the sale of, or other realization
upon, all or any part of the Collateral following an Event of Default ratably to
the Lenders based on the amount of the Secured Obligations then owing to each
Lender.
(d) Allocation of Payments. All monies to be applied to the
Secured Obligations, whether such monies represent voluntary payments by the
Obligors or are received pursuant to demand for payment or realized from any
disposition of Collateral, shall be allocated among the Agent and such of the
Lenders and other holders of the Secured Obligations as are entitled thereto
(and, with respect to monies allocated to the Lenders, on a Ratable basis unless
otherwise provided in this SECTION 4.8(D)): (i) first, to NationsBank to pay
principal and accrued interest on any portion of any Non-Ratable Loan which
NationsBank may have advanced on behalf of any Lender (other than itself) and
for which NationsBank has not been reimbursed by such Lender or the Obligors;
(ii) second, to the Agent to pay the amount of expenses that have not been
reimbursed to the Agent by the Obligors or the Lenders, together with interest
accrued thereon; (iii) third, to the Agent to pay any indemnified amount that
has not been paid to the Agent by the Obligors or the Lenders, together with
interest accrued thereon; (iv) fourth, to the Agent to pay any fees due and
payable to the Agent under this Agreement; (v) fifth, to the Lenders for any
indemnified amount that they have paid to the Agent and for any expenses that
they have reimbursed to the Agent; (vi) sixth, to the Lenders in payment of the
unpaid principal and accrued interest in respect of the Loans and any other
Secured Obligations then outstanding and held by any Lender to be shared among
the Lenders on a Ratable basis, or on such other basis as may be agreed upon in
writing by all of the Lenders (which agreement or agreements may be entered into
without notice to or the consent or approval of the Obligors), and (vii)
seventh, to the holders of the other Secured Obligations who are not Lenders on
a pro rata basis. The allocations set forth in this SECTION 4.8(D) are solely to
determine the rights and priorities of the Agent and the Lenders as among
themselves and may be changed by the Agent and the Lenders without notice to, or
the consent or approval of, the Obligors or any other Person. Whenever
allocation is made pursuant to this SECTION 4.8(D) to the holder of Secured
Obligations in which another Lender acquires a participation, the monies
received by such holder shall be shared as between such holder and such
participants on a Ratable basis.
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SECTION 4.9. Mandatory Prepayments.
(a) Prepayments from Asset Dispositions. Without limiting the
restrictions set forth in SECTIONS 8.7 and 11.7, the Obligors agree that (i)
immediately upon the receipt by any Obligor of the proceeds of any Asset
Disposition of Bank Priority Collateral, the Obligors shall apply such proceeds
as provided in SECTION 4.9(C), and (ii) within 10 days after the receipt by any
Obligor of the Net Proceeds of any Asset Disposition of assets other than Bank
Priority Collateral, the Obligors shall apply such Net Proceeds as provided in
SECTION 4.9(C) or to the redemption or repurchase of outstanding Bonds,
PROVIDED, however, that the Obligors shall not be required to make such
application pursuant to CLAUSE (II) above to the extent that the Net Proceeds
from Asset Dispositions during any fiscal year of the Obligors do not exceed, in
the aggregate, $200,000. Concurrently with the making of any such application,
the Borrowers' Agent shall deliver to the Agent a certificate of the Financial
Officer demonstrating the calculations of the amount required to be applied and,
in the case of the application of the Net Proceeds from Asset Dispositions of
assets other than Bank Priority Collateral pursuant to CLAUSE (II) above, the
amount of such Net Proceeds to be applied as provided in SECTION 4.9(C) and the
amount of such Net Proceeds to be applied to the redemption or repurchase of
outstanding Bonds. Notwithstanding the foregoing, to the extent that the gross
proceeds from Asset Dispositions of assets other than Bank Priority Collateral
during any fiscal year of the Obligors do not exceed, in the aggregate,
$2,000,000, if the Obligors reasonably expect such proceeds to be reinvested
within six months in productive assets of a kind then used or useable in the
business of the Obligors and that are not subject to any Lien other than
Permitted Liens, then the Obligors shall not be required to make the application
of Net Proceeds as provided in CLAUSE (II) above, PROVIDED that (A) within 10
days after the receipt by any Obligor of such gross proceeds, the Borrowers'
Agent shall deliver to the Agent a certificate of the Financial Officer
certifying that the Obligors reasonably expect to reinvest such proceeds within
six months as provided above, and (B) to the extent that the Obligors fail to
reinvest such proceeds within six months as provided above, (x) the Obligors
shall immediately apply the unreinvested amount as provided in SECTION 4.9(C) or
to the redemption or repurchase of outstanding Bonds and (y) the Borrowers'
Agent shall deliver to the Agent a certificate of the Financial Officer
demonstrating the calculations of the amount required to be applied and the
amount of such Net Proceeds to be applied as provided in SECTION 4.9(c) and the
amount of such Net Proceeds to be applied to the redemption or repurchase of
outstanding Bonds.
(b) Prepayments from Equity Offerings. In the event that, at any
time after the Effective Date, Tultex or any of its Subsidiaries issues capital
stock or other securities or receives an additional capital contribution in
respect of existing capital stock or other securities (excluding any such
issuance to, or receipt from, another Obligor or a Consolidated Subsidiary of
Tultex), no later than the second Business Day following the date of receipt of
the proceeds from such issuance, the Obligors shall (i) apply such proceeds, net
of underwriting discounts and commissions and other reasonable costs associated
therewith, as provided in SECTION 4.9(C) or to the redemption or repurchase of
outstanding Bonds, and (ii) the Borrowers' Agent shall deliver to the Agent a
certificate of the Financial Officer demonstrating the calculations of the
amount required to be applied and the amount of such net proceeds to be applied
as provided in SECTION 4.9(C) and the amount of such net proceeds to be applied
to the redemption or repurchase of outstanding Bonds.
(c) Application of Proceeds of Prepayments. All prepayments of
the Secured Obligations pursuant to this SECTION 4.9 shall be applied to the
outstanding Revolving Credit Loans, to the extent thereof, then to the other
Secured Obligations, PROVIDED that payments shall be first applied to Prime Rate
Loans to the extent thereof and then to LIBOR Loans and any payments received
which would otherwise result in the prepayment of LIBOR Loans prior to the end
of the Interest Period applicable thereto
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may, upon the request of the Borrowers' Agent, in the absence of an Event of
Default, be applied to the Cash Collateral Account, with any excess to be
deposited with the Agent to be held as Cash Collateral for the Secured
Obligations and applied by the Agent from time to time to outstanding Revolving
Credit Loans promptly upon the making of such Revolving Credit Loans or, after
the Termination Date, to any of the Secured Obligations in such manner as the
Agent shall determine in its sole discretion.
SECTION 4.10. Payments Not at End of Interest Period; Failure to
Borrow. If for any reason any payment of principal with respect to any LIBOR
Loan is made on any day prior to the last day of the Interest Period applicable
to such LIBOR Loan or, after having given a Notice of Borrowing with respect to
any LIBOR Revolving Credit Loan or a Notice of Conversion or Continuation with
respect to any Loan to be continued as or converted into a LIBOR Loan, such Loan
is not made or is not continued as or converted into a LIBOR Loan due to the
Borrowers' failure to borrow or to fulfill the applicable conditions set forth
in ARTICLE 5, the Borrowers shall pay to each Lender upon the request of the
Agent or such Lender an amount sufficient to compensate the Agent and such
Lender for any and all losses or expenses which the Agent or such Lender has
sustained or incurred as a consequence thereof. The Borrowers shall pay such
amount upon presentation by the Agent (or as to any Lender, by such Lender) of a
statement setting forth the amount and the Agent's (or such Lender's)
calculation thereof pursuant hereto, which statement shall be deemed true and
correct absent manifest error.
SECTION 4.11. Assumptions Concerning Funding of LIBOR Loans.
Calculation of all amounts payable to the Lenders under this ARTICLE 4 shall be
made as though each Lender had actually funded or committed to fund its LIBOR
Loans through the purchase of an underlying deposit in an amount equal to the
amount of its Ratable share thereof and having a maturity comparable to the
relevant Interest Period for such LIBOR Loan; PROVIDED, however, each Lender may
fund its LIBOR Loans in any manner it deems fit and the foregoing assumption
shall be utilized only for the calculation of amounts payable under this Article
4.
SECTION 4.12. Notice of Conversion or Continuation. Whenever the
Borrowers desire, subject to the provisions of SECTION 4.13, to convert an
outstanding Loan into a Loan or Loans of a different Type or to continue all or
a portion of an outstanding LIBOR Loan for a subsequent Interest Period, the
Borrowers shall notify the Agent by telephone or in writing by telex or
facsimile transmission (which notice shall be irrevocable) not later than 11:00
a.m. on the date three Business Days before the day on which such proposed
conversion or continuation is to be effective (and such effective date of any
continuation shall be the last day of the Interest Period for the applicable
LIBOR Loan), PROVIDED the Borrowers shall not be permitted to convert Loans into
(or continue Loans as) LIBOR Loans at any time during the existence of an Event
of Default. Each such notice (a "Notice of Conversion or Continuation") shall
(a) identify the Loan to be converted or continued, the aggregate outstanding
principal balance thereof and, if a LIBOR Loan, the last day of the Interest
Period applicable to such Loan, (b) specify the effective date of such
conversion or continuation, (c) specify the principal amount of such Loan to be
converted or continued and, if converted, the Type or Types into which the same
is to be converted, and (d) the Interest Period to be applicable to the LIBOR
Loan as converted or continued, and shall, if notice thereof was originally
given by telephone, be immediately followed by a signed, written confirmation
thereof by the Borrowers in a form acceptable to the Agent, PROVIDED that if
such written confirmation differs in any respect from the action taken by the
Lenders, the records of the Agent shall control absent manifest error.
SECTION 4.13. Conversion or Continuation. Provided that no Event
of Default shall have occurred and be continuing (but subject to the provisions
of SECTIONS 4.12 and 4.15), the Borrowers may request that all or any part of
any outstanding Loan be converted into a Loan or Loans of a different Type or be
continued as a Loan or Loans of the same Type, in the same aggregate principal
amount, on any Business
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Day (which, in the case of continuation of a LIBOR Loan, shall be the last day
of the Interest Period applicable to such Loan), upon notice (which notice shall
be irrevocable) given in accordance with SECTION 4.12.
SECTION 4.14. Duration of Interest Periods; Maximum Number of
LIBOR Loans; Minimum Increments.
(a) Subject to the provisions of the definition of "Interest
Period", the duration of each Interest Period applicable to a LIBOR Loan shall
be as specified in the applicable Notice of Borrowing or Notice of Conversion or
Continuation. The Borrowers may elect a subsequent Interest Period to be
applicable to any LIBOR Loan by giving a Notice of Conversion or Continuation
with respect to such Loan in accordance with SECTION 4.12.
(b) If the Agent does not receive a notice of election in
accordance with SECTION 4.12 with respect to the continuation of a LIBOR Loan
within the applicable time limits specified in said SECTION 4.12, or if, when
such notice must be given, an Event of Default exists or such Type of Loan is
not available, the Borrowers shall be deemed to have elected to convert such
LIBOR Loan in whole into a Prime Rate Loan on the last day of the Interest
Period therefor.
(c) Notwithstanding the foregoing, the Borrowers may not select
an Interest Period that would end, but for the provisions of the definition of
"Interest Period," after the Termination Date.
(d) In no event shall there be more than five LIBOR Loans
outstanding hereunder at any time. For the purpose of this SUBSECTION (D), each
LIBOR Loan having a distinct Interest Period shall be deemed to be a separate
Loan hereunder.
(e) Each LIBOR Loan shall be in a minimum amount of $5,000,000
and increments of $500,000 in excess thereof.
SECTION 4.15. Changed Circumstances.
(a) If the introduction of or any change in or in the
interpretation of (in each case, after the date hereof) any law or regulation
makes it unlawful, or any governmental authority asserts, after the date hereof,
that it is unlawful, for any Lender to perform its obligations hereunder to make
LIBOR Loans or to fund or maintain LIBOR Loans hereunder, such Lender shall
notify the Agent of such event and the Agent shall notify the Borrowers of such
event, and the right of the Borrowers to select LIBOR Loans for any subsequent
Interest Period or in connection with any subsequent conversion of any Loan
shall be suspended until the Agent shall notify the Borrowers that the
circumstances causing such suspension no longer exist, and the Borrowers shall
forthwith prepay in full all LIBOR Loans then outstanding, and shall pay all
interest accrued thereon through the date of such prepayment or conversion,
unless the Borrowers, within three Business Days after such notice from the
Agent, request the conversion of all LIBOR Loans then outstanding into Prime
Rate Loans; PROVIDED, that if the date of such repayment or proposed conversion
is not the last day of the Interest Period applicable to such LIBOR Loan, the
Borrowers shall also pay any amount due pursuant to SECTION 4.10.
(b) If the Agent shall, at least one Business Day before the date
of any requested Loan or the effective date of any conversion or continuation of
an existing Loan to be made or continued as or converted into a LIBOR Loan (each
such requested Loan made and Loan to be converted or continued, a "Pending
Loan"), notify the Borrowers that LIBOR will not adequately reflect the cost to
the Lenders of
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making or funding such Pending Loan as a LIBOR Loan or that the Interbank
Offered Rate is not reasonably determinable, including from any interest rate
reporting service of recognized standing, then the right of the Borrowers to
select LIBOR Loans for such Pending Loan, any subsequent Loan or in connection
with any subsequent conversion or continuation of any Loan shall be suspended
until the Agent shall notify the Borrowers that the circumstances causing such
suspension no longer exist, and each Pending Loan and each such subsequent Loan
requested to be made, continued or converted shall be made or continued as or
converted into a Prime Rate Loan.
(c) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve requirements
included in the LIBOR Reserve Percentage) in or in the interpretation of, in
each case after the date hereof, any law or regulation (except to the extent
such introduction, change or interpretation affects taxes measured by net
income), or (ii) the compliance with a guideline or request (except to the
extent such guideline or request affects taxes measured by net income) from any
central bank or other governmental authority (whether nor not having the force
of law) made after the date hereof, there shall be any increase in the cost to
any Lender of agreeing to make or making, funding or maintaining LIBOR Loans
(other than as separately provided for in SECTION 4.15(D)), then the Borrowers
shall from time to time, within 30 days after demand by such Lender (with a copy
of such demand to the Agent), pay to the Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost.
(d) If (i) the adoption of or change in, after the date hereof,
any law, rule, regulation or guideline regarding capital requirements for banks
or bank holding companies, or any change, after the date hereof, in the
interpretation or application thereof by any governmental authority charged with
the interpretation or administration thereof, or (ii) compliance by such Lender
with any guideline, request or directive, made or promulgated after the date
hereof, of any such entity regarding capital adequacy (whether or not having the
force of law), has the effect of reducing the return on a Lender's capital as a
consequence of its maintaining its Loans or commitment to make Loans hereunder
to a level below that which such Lender could have achieved but for such
adoption, change or compliance (taking into consideration such Lender's policies
with respect to capital adequacy immediately before such adoption, change or
compliance and assuming the full utilization of such Lender's capital
immediately before such adoption, change or compliance) or if any change in law,
regulation, treaty or official directive or the interpretation or application
thereof by any court or by any governmental authority charged with the
administration thereof or the compliance with any guideline or request of any
central bank or other governmental authority (whether or not having the force of
law) subjects a Lender to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by the Borrowers or otherwise
with respect to the transactions contemplated hereby (except for taxes on the
overall net income of such Lender imposed by the United States of America or any
political subdivision thereof), in each case by any amount deemed by such Lender
to be material, then such Lender shall promptly after its determination of such
occurrence notify the Borrowers and the Agent thereof. The Borrowers agree to
pay to the Agent, for the account of such Lender, as an additional fee from time
to time, within 30 days after demand by such Lender, such amount as such Lender
certifies to be the amount that will compensate it for such reduction or tax.
(e) Before giving any notice pursuant to SECTION 4.15(A) or
making any demand pursuant to SECTION 4.15(C) or (D), each Lender agrees to use
its reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different lending office if the making
of such a designation would avoid the need for such notice or demand, or reduce
the amount of such increased cost, reduction in return or tax and would not, in
the judgment of such Lender, be otherwise disadvantageous to such Lender.
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(f) A certificate of the Lender claiming compensation under
SECTION 4.15(C) or (D) shall be conclusive in the absence of manifest error.
Such certificate shall set forth the nature of the occurrence giving rise to
such compensation, the additional amount or amounts to be paid to it hereunder,
and the method by which such amounts were determined. In determining such
amount, a Lender may use any reasonable averaging and attribution methods.
SECTION 4.16. Cash Collateral Account. The Borrowers shall
establish a Cash Collateral Account with the Agent in which to deposit
Collateral consisting of cash or Cash Equivalents from time to time: (a)
representing payments received pursuant to SECTIONS 2.3(C) and 4.9 in excess of
then outstanding Revolving Credit Loans or on account of LIBOR Loans which would
otherwise result in repayment of such Loans prior to the end of the Interest
Period applicable thereto, (b) with respect to Letter of Credit Obligations (i)
at the request of the Agent upon the occurrence of an Event of Default, or (ii)
for the purposes set forth in SECTION 4.6 in the event of termination of this
Agreement, or (c) for any other purpose appropriate under this Agreement to
provide security for the Secured Obligations. On the last day of the applicable
Interest Period as to any amounts deposited to the Cash Collateral Account
pursuant to CLAUSE (A) above or if a drawing under a Letter of Credit occurs
with respect to any amounts deposited to the Cash Collateral Account pursuant to
CLAUSE (B) above, each Borrower hereby authorizes the Agent to use the monies
deposited in the Cash Collateral Account to make payment to the payee with
respect to such Loan or drawing. The Cash Collateral Account shall be in the
name of the Agent and the Agent shall have sole dominion and control over, and
sole access to, the Cash Collateral Account. Neither any Borrower nor any Person
claiming on behalf of or through any Borrower shall have any right to withdraw
any of the funds held in the Cash Collateral Account. Each Borrower agrees that
it will not at any time sell or otherwise dispose of any interest in the Cash
Collateral Account or any funds held therein or create or permit to exist any
Lien upon or with respect to the Cash Collateral Account or any funds held
therein, except as provided in or contemplated by this Agreement. The Agent
shall exercise reasonable care in the custody and preservation of any funds held
in the Cash Collateral Account and shall be deemed to have exercised such care
if such funds are accorded treatment substantially equivalent to that which the
Agent accords other funds deposited with the Agent, it being understood that the
Agent shall not have any responsibility for taking any necessary steps to
preserve rights against any parties with respect to any funds held in the Cash
Collateral Account. Subject to the right of the Agent to withdraw funds from the
Cash Collateral Account as provided herein, the Agent will, so long as no
Default or Event of Default shall have occurred and be continuing, from time to
time invest funds on deposit in the Cash Collateral Account, reinvest proceeds
of any such investments which may mature or be sold, and invest interest or
other income received from any such investments, in each case, in Cash
Equivalents, as the Borrowers may direct prior to the occurrence of a Default or
Event of Default and as the Agent may select after the occurrence and during the
continuance of a Default or Event of Default. Such proceeds, interest and income
which are not so invested or reinvested in Cash Equivalents shall be deposited
and held by the Agent in the Cash Collateral Account. The Agent makes no
representation or warranty as to, and shall not be responsible for, the rate of
return, if any, earned in any Cash Collateral. Any earnings on Cash Collateral
shall be held as additional Cash Collateral on the terms set forth in this
SECTION 4.16.
SECTION 4.17. Borrowers' Agent. Each of the Borrowers and
Obligors other than Tultex hereby appoints Tultex as, and Tultex shall act under
this Agreement as, the agent, attorney-in-fact and legal representative of such
other Borrowers and Obligors for all purposes, including requesting Borrowings
and receiving account statements and other notices and communications to the
Borrowers and the Obligors (or any of them) from the Agent, the Issuing Bank or
any Lender. The Agent, the Issuing Bank and the Lenders may rely, and shall be
fully protected in relying, on any Notice of Borrowing, Notice of Conversion or
Continuation, request for a Letter of Credit, disbursement instruction, report,
information or any other notice or communication made or given by Tultex,
whether in its own name, on behalf of any other Borrower or
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Obligor or on behalf of "the Borrowers" or "the Obligors," and neither the
Agent, the Issuing Bank nor any Lender shall have any obligation to make any
inquiry or request any confirmation from or on behalf of any other Borrowers or
Obligors as to the binding effect on it of any such Notice, request,
instruction, report, information, other notice or communications, nor shall the
joint and several character of the Borrowers' and other Obligors' liability for
the Secured Obligations be affected, PROVIDED that the provisions of this
SECTION 4.17 shall not be construed so as to preclude any Borrower from directly
requesting Borrowings or taking other actions permitted to be taken by "a
Borrower" hereunder. The Agent and each Lender intend to maintain a single Loan
Account in the name of "Tultex Corporation" hereunder and each Borrower
expressly agrees to such arrangement and confirms that such arrangement shall
have no effect on the joint and several character of its liability for the
Secured Obligations.
SECTION 4.18. Joint and Several Liability.
(a) Joint and Several Liability. The Secured Obligations shall
constitute one joint and several direct and general obligation of all of the
Borrowers. Notwithstanding anything to the contrary contained herein, each of
the Borrowers shall be jointly and severally, with each other Borrower, directly
and unconditionally liable to the Agent, the Issuing Bank and the Lenders for
all Secured Obligations and shall have the obligations of co-maker with respect
to the Loans, the Notes and the Secured Obligations, it being agreed that the
advances to each Borrower inure to the benefit of all Borrowers, and that the
Agent, the Issuing Bank and the Lenders are relying on the joint and several
liability of the Borrowers as co-makers in extending the Loans hereunder and
issuing Letters of Credit. Each Borrower hereby unconditionally and irrevocably
agrees that upon default in the payment when due (whether at stated maturity, by
acceleration or otherwise) of any principal of, or interest on, any Loan or
other Secured Obligation payable to the Agent, the Issuing Bank or any Lender,
it will forthwith pay the same, without notice or demand.
(b) No Reduction in Obligations. No payment or payments made by
any of the Borrowers or any other Person or received or collected by the Agent,
the Issuing Bank or any Lender from any of the Borrowers or any other Person by
virtue of any action or proceeding or any setoff or appropriation or application
at any time or from time to time in reduction of or in payment of the Secured
Obligations shall be deemed to modify, reduce, release or otherwise affect the
liability of each Borrower under this Agreement, which shall remain liable for
the Secured Obligations until the Secured Obligations are paid in full and the
Revolving Credit Facility is terminated.
SECTION 4.19. Obligations Absolute. Each Borrower agrees that the
Secured Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Agent, the Issuing Bank or any Lender with respect thereto. All Secured
Obligations shall be conclusively presumed to have been created in reliance
hereon. The liabilities under this Agreement shall be absolute and unconditional
irrespective of: (a) any lack of validity or enforceability of any Loan
Documents or any other agreement or instrument relating thereto; (b) any change
in the time, manner or place of payments of, or in any other term of, all or any
part of the Secured Obligations, or any other amendment or waiver thereof or any
consent to departure therefrom, including any increase in the Secured
Obligations resulting from the extension of additional credit to any Borrower or
other Obligor or otherwise; (c) any taking, exchange, release or non-perfection
of any collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured Obligations; (d) any
change, restructuring or termination of the corporate structure or existence of
any Borrower or other Obligor; or (e) any other circumstance which might
otherwise constitute a defense available to, or a discharge of, any Borrower or
a Guarantor. This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Secured Obligations is
rescinded or must otherwise be returned by the Agent, the Issuing Bank or
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any Lender upon the insolvency, bankruptcy or reorganization of any Borrower or
other Obligor or otherwise, all as though such payment had not been made.
SECTION 4.20. Waiver of Suretyship Defenses. Each Borrower agrees
that the joint and several liability of the Borrowers provided for in SECTION
4.18 shall not be impaired or affected by any modification, supplement,
extension or amendment of any contract or agreement to which the other Borrowers
may hereafter agree (other than an agreement signed by the Agent and the Lenders
specifically releasing such liability), nor by any delay, extension of time,
renewal, compromise or other indulgence granted by the Agent, the Issuing Bank
or any Lender with respect to any of the Secured Obligations, nor by any other
agreements or arrangements whatever with the other Borrowers or with anyone
else, each Borrower hereby waiving all notice of such delay, extension, release,
substitution, renewal, compromise or other indulgence, and hereby consenting to
be bound thereby as fully and effectually as if it had expressly agreed thereto
in advance. The liability of each Borrower is direct and unconditional as to all
of the Secured Obligations, and may be enforced without requiring the Agent, the
Issuing Bank or any Lender first to resort to any other right, remedy or
security. Each Borrower hereby expressly waives promptness, diligence, notice of
acceptance and any other notice (except to the extent expressly provided for
herein or in another Loan Document) with respect to any of the Secured
Obligations, the Notes, this Agreement or any other Loan Document and any
requirement that the Agent, the Issuing Bank or any Lender protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right
or take any action against any Borrower or any other Person or any collateral,
including any rights any Borrower may otherwise have under O.C.G.A. ss. 10-7-24
or any successor statute or any analogous statute in any jurisdiction under the
laws of which any Borrower is incorporated or in which any Borrower conducts
business.
ARTICLE 5
CONDITIONS PRECEDENT
SECTION 5.1. Conditions Precedent to Loans and Letters of Credit.
Notwithstanding any other provision of this Agreement, the initial Loans will
not be made, and no Letters of Credit will be issued, until the fulfillment of
each of the following conditions prior to or contemporaneously with the making
of the first to be made of such Loans or issuance of such Letters of Credit:
(a) Financial Condition. The Obligors shall have delivered to the
Agent (i) a fair saleable value balance sheet prepared (and certified
to) by the Financial Officer in form and substance satisfactory to the
Agent, dated the Effective Date, and setting forth valuations of their
assets, (ii) the Projections, (iii) the Pro Forma, and (iv) a
certificate executed by the Financial Officer or the chief financial
officer of each Obligor, in form and substance satisfactory to the
Agent, certifying that as of the Effective Date, after giving effect to
the repurchase or redemption of any Bonds on the Effective Date, the
extension of the initial Loans, and the payment of all fees and expenses
in connection with such transactions, the fair saleable value of each
Obligor's assets will exceed the amount required to pay its debts as
they become absolute and matured (including contingent, subordinated,
unmatured and unliquidated liabilities), that each Obligor is able and
anticipates that it will be able to meet its debts as they mature, and
that each Obligor has adequate capital to conduct the business in which
it is or proposes to be engaged, together with attachments demonstrating
the basis of such conclusions.
(b) Fees. The Borrowers shall have paid all of the fees payable
on the Effective Date.
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(c) Bond Tenders and Consents. On the Effective Date: (i) Tultex
shall repurchase, simultaneous with the making of the Initial Loan,
Bonds in an aggregate principal amount of $70,000,000 in accordance with
the terms of the Invitation and Consent Solicitation; (ii) the proposed
amendments to the Indentures set forth in the Invitation and Consent
Solicitation shall have become effective in accordance with the terms of
the Invitation and Consent Solicitation, pursuant to and in accordance
with the terms of the Indentures, subject only to such modifications and
revisions thereto as may be acceptable to the Agent; (iii) all requisite
Governmental Approvals by governmental authorities and regulatory bodies
having jurisdiction over the parties to the Indentures shall have been
obtained by such parties, and no such approvals shall impose any
conditions to the consummation of the transactions contemplated by the
Invitation and Consent Solicitation; and (iv) the Agent shall have
received a certificate from Tultex's chief executive officer (or such
other officer as may be acceptable to the Agent), and such other
evidence satisfactory to it, that each of the conditions set forth above
shall have been satisfied.
(d) Security Interests. The Agent shall have received
satisfactory evidence that the Agent (for the benefit of the Secured
Creditors) has a valid and perfected security interest as of such date
in all of the Collateral, subject only to Permitted Liens, and that such
security interest is of a first priority as to the Bank Priority
Collateral.
(e) Closing Documents. The Agent shall have received each of the
following documents, all of which shall be satisfactory in form and
substance to the Agent and its counsel and to the Lenders:
(i) certified copies of the articles or certificate of
incorporation and bylaws (or equivalent constitutive documents)
of each Obligor as in effect on the Effective Date,
(ii) certified copies of all corporate action, including
shareholder approval, if necessary, taken by each Obligor to
authorize the execution, delivery and performance of this
Agreement, the other Loan Documents, and in the case of the
Borrowers, the borrowings under this Agreement,
(iii) certificates of incumbency and specimen signatures
with respect to each of the officers of each Obligor authorized
to execute and deliver this Agreement and the other Loan
Documents on behalf of each Obligor executing any document,
certificate or instrument to be delivered in connection with this
Agreement or the other Loan Documents and, in the case of the
Borrowers, to request borrowings under this Agreement,
(iv) a certificate evidencing the good standing of each
Obligor in the jurisdiction of its incorporation and in each
other jurisdiction in which it is required to be qualified as a
foreign corporation to transact its business as presently
conducted,
(v) copies of all financial statements referred to in
Section 6.1(n) and meeting the requirements thereof,
(vi) a signed opinion of Hunton & Williams, counsel for
the Obligors, substantially in the form of EXHIBIT C, and of such
local counsel for the Obligors as may
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be required, opining as to such matters in connection with the
transactions contemplated by this Agreement as the Agent or its
counsel may reasonably request,
(vii) the Financing Statements duly executed and delivered
by the Obligors and acknowledgment copies evidencing the filing
of such Financing Statements in each jurisdiction where such
filing may be necessary or appropriate to perfect the Security
Interest,
(viii) a certification from the principal officers of the
Obligors as to such factual matters as shall be requested by the
Agent,
(ix) certificates or binders of insurance relating to each
of the policies of insurance covering any of the Collateral,
together with loss payable clauses which comply with the terms of
SECTION 8.8,
(x) a certificate of the Financial Officer (or such other
officer of Tultex as may be acceptable to the Agent) stating
that, to the best of his knowledge and based on an examination
sufficient to enable him to make an informed statement, (A) all
of the representations and warranties made or deemed to be made
under this Agreement are true and correct as of the Effective
Date, after giving effect to the Loans to be made at such time
and the application of the proceeds thereof, and (B) no Default
or Event of Default exists,
(xi) a Borrowing Base Certificate prepared as of May 1,
1999, and a Schedule of Inventory and a Schedule of Receivables
prepared as of April 3, 1999.
(xii) landlord's, warehousemen's or mortgagee's waiver and
consent agreements duly executed on behalf of each landlord,
warehouseman or mortgagee, as the case may be, of Real Estate and
any other real property on which any Bank Priority Collateral is
located,
(xiii) Agency Account Agreements and the related Lockbox
Agreements, each duly executed by the applicable Borrowers and
the Clearing Bank party thereto,
(xiv) the Initial Notice of Borrowing, duly executed by
the Borrowers' Agent,
(xv) the Intercreditor Agreement, duly executed by the
Indenture Trustees and duly acknowledged by the Obligors;
(xvi) copies of the Mortgages, duly executed and delivered
by the Obligors, in proper form for recording in the appropriate
jurisdictions, in order to create a valid second Lien on and
security title to the Mortgaged Real Estate described therein,
(xvii) flood zone certifications with respect to the
Mortgaged Real Estate, together with evidence of any necessary
flood insurance coverage,
(xviii) copies of each of the other Loan Documents duly
executed by the parties thereto, together with evidence
satisfactory to the Agent of the due authorization and binding
effect of each such Loan Document on such party, and
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(xix) such other documents and instruments as the Agent or
any Lender may reasonably request.
(f) Notes. Each Lender shall have received a Revolving Credit
Note duly executed and delivered by the Borrowers, complying with the
terms of SECTION 2.4.
(g) Other Security Documents. The Agent shall have received each
other Security Document, in form and substance satisfactory to the Agent
and the Lenders, duly executed and delivered by the applicable Borrowers
and Guarantors, including the Patent Assignment and the Trademark
Assignment.
(h) Availability. The Agent shall be provided with evidence
satisfactory to it that, as of the Effective Date, after giving effect
to the Initial Loans and the issuance of any Letters of Credit on the
Effective Date and the repurchase or redemption of any Bonds on the
Effective Date, Availability is not less than $25,000,000 (after
disbursements and advances, and with all obligations of the Obligors
current based on terms agreed to or acquiesced in by vendors and
consistent with the Obligors' usual payment practices), PROVIDED that,
for purposes of this CLAUSE (H) only, Availability will be calculated
without reduction for up to $5,000,000 of Loans used for paying interest
on the Effective Date to holders of the Bonds in accordance with the
Invitation and Consent Solicitation.
(i) No Injunctions, Etc. No action, proceeding, investigation,
regulation or legislation shall have been instituted, threatened or
proposed before any court, governmental agency or legislative body to
enjoin, restrain, or prohibit, or to obtain damages in respect of, or
which is related to or arises out of this Agreement, the repurchase or
redemption of any Bonds, or the consummation of the transactions
contemplated hereby or thereby, or which, in the Lenders' discretion,
would make it inadvisable to consummate the transactions contemplated by
this Agreement.
(j) Material Adverse Change. As of the Effective Date, there
shall not have occurred any change which is materially adverse, in the
Agent's discretion, to the assets, liabilities, businesses, operations,
condition (financial or otherwise) or prospects of the Borrowers or the
other Obligors from those presented by the financial statements
described in SECTION 6.1(N).
(k) Release of Security Interests. The Agent shall have received
evidence satisfactory to it of the release and termination of all Liens
other than Permitted Liens.
(l) Repayment of Bridge Loan. Simultaneous with the making of the
Initial Loan, Tultex shall have paid in full all principal, interest and other
obligations outstanding under the April 20, 1999 Loan and Security Agreement
between Tultex and NationsBank.
(m) Repayment of Existing Bank Facility. Simultaneous with the
making of the Initial Loan, Tultex shall have satisfied all principal, interest
and other obligations outstanding under its existing senior credit facility with
NationsBank and a syndicate of other lenders on the terms set forth in the April
10, 1999 letter agreement from Moore & Van Allen, PLLC, as counsel to
NationsBank as agent under such credit facility, to, inter alia, Tultex.
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(n) PBGC Memorandum of Understanding. Tultex shall have delivered
to the Agent a true and correct copy of the Memorandum of Understanding (the
"PBGC Memorandum of Understanding") between Tultex and the PBGC with respect to
Tultex's agreement to make certain additional cash contributions to its Plan,
which Memorandum of Understanding shall be in full force and effect.
SECTION 5.2. All Loans; Letters of Credit. At the time of the
making of each Loan, including the Initial Loans and all subsequent Loans, and
the issuance of each Letter of Credit:
(a) all of the representations and warranties made or deemed to
be made under this Agreement and the other Loan Documents shall be true
and correct at such time both with and without giving effect to the Loan
to be made at such time (and the application of the proceeds thereof) or
the Letter of Credit to be issued at such time,
(b) the corporate actions of the Obligors referred to in SECTION
5.1(E)(II) shall remain in full force and effect and the incumbency of
officers shall be as stated in the certificates of incumbency delivered
pursuant to SECTION 5.1(E)(III) or as subsequently modified and
reflected in a certificate of incumbency delivered to the Agent, and
(c) each request or deemed request for any Borrowing hereunder
shall be deemed to be a certification by the Borrowers to the Agent and
the Lenders as to the matters set forth in SECTION 5.2(A) and (B) and
the Agent may, without waiving either condition, consider the conditions
specified in SECTIONS 5.2(A) and (B) fulfilled and a representation by
the Borrowers to such effect made, if no written notice to the contrary
is received by the Agent prior to the making of the Loan then to be made
or the issuance of the Letter of Credit then to be issued.
SECTION 5.3. Conditions as Covenants. In the event that the
Lenders make the Initial Loans or a Letter of Credit is issued prior to the
satisfaction of all conditions precedent set forth in SECTION 5.1, and such
conditions are not waived in writing by the Agent, the Borrowers shall
nevertheless cause such condition or conditions to be satisfied within 30 days
after the making of such Initial Loans or the issuance of such Letter of Credit.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
SECTION 6.1. Representations and Warranties. Each Obligor
represents and warrants to the Agent and to the Lenders as follows:
(a) Organization; Power; Qualification. Each Obligor and each of
its Subsidiaries is a corporation, duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation,
having the power and authority to own its properties and to carry on its
business as now being and hereafter proposed to be conducted and, except
as set forth on SCHEDULE 6.1(A), is duly qualified and authorized to do
business in each jurisdiction in which the character of its properties
or the nature of its business requires such qualification or
authorization. The jurisdictions in which each Obligor and each of its
Subsidiaries is qualified to do business as a foreign corporation are
listed on SCHEDULE 6.1(A).
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(b) Capitalization. The outstanding capital stock of each Obligor
has been duly and validly issued and is fully paid and nonassessable,
and the number and owners of such shares of capital stock of each
Obligor are set forth on SCHEDULE 6.1(B). The issuance and sale of each
Obligor's capital stock have been registered or qualified under
applicable federal, state and foreign securities laws or are exempt
therefrom. Except as set forth on SCHEDULE 6.1(B), there are no
shareholder agreements, options, subscription agreements or other
agreements or understandings to which any Obligor is a party in effect
with respect to the capital stock of such Obligor, including agreements
providing for special voting requirements or arrangements for approval
of corporate actions or other matters relating to corporate governance
or restrictions on share transfer or providing for the issuance of any
securities convertible into shares of the capital stock of such Obligor,
any warrants or other rights to acquire any shares or securities
convertible into such shares, or any agreement that obligates such
Obligor, either by its terms of at the election of any other Person, to
repurchase such shares under any circumstances.
(c) Subsidiaries. SCHEDULE 6.1(C) correctly sets forth the name
of each Subsidiary of the Obligors, its jurisdiction of incorporation,
the name of its immediate parent or parents, and the percentage of its
issued and outstanding securities owned by an Obligor or any other
Subsidiary of an Obligor and indicating whether such Subsidiary is a
Consolidated Subsidiary. Except as set forth on SCHEDULE 6.1(C), (i) no
Subsidiary of an Obligor has issued any securities convertible into
shares of such Subsidiary's capital stock or any options, warrants or
other rights to acquire any shares or securities convertible into such
shares, (ii) the outstanding stock and securities of each Subsidiary of
each Obligor are owned by Tultex or a wholly-owned Subsidiary of Tultex,
or by Tultex and one or more of its wholly-owned Subsidiaries, free and
clear of all Liens, warrants, options and rights of others of any kind
whatsoever, and (iii) no Obligor has any Subsidiaries. The outstanding
capital stock of each Subsidiary of the Obligors has been duly and
validly issued and is fully paid and nonassessable by the issuer, and
the number and owners of the shares of such capital stock are set forth
on SCHEDULE 6.1(C).
(d) Authorization of Agreement, Notes, Loan Documents and
Borrowing. Each Obligor has the right and power, and has taken all
necessary action to authorize such Obligor, to execute, deliver and
perform this Agreement and each of the other Loan Documents to which it
is a party in accordance with their respective terms. This Agreement and
each of the other Loan Documents have been duly executed and delivered
by the duly authorized officers of each Obligor party thereto and each
is, or each when executed and delivered in accordance with this
Agreement will be, a legal, valid and binding obligation of each Obligor
party thereto, enforceable in accordance with its terms.
(e) Compliance of Agreement, Notes, Loan Documents and Borrowing
with Laws, Etc. Except as set forth on SCHEDULE 6.1(E), the execution,
delivery and performance of this Agreement and each of the other Loan
Documents in accordance with their respective terms and the borrowings
hereunder do not and will not, by the passage of time, the giving of
notice or otherwise, (i) require any Governmental Approval or violate
any Applicable Law relating to any Obligor or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute a default under
the articles or certificate of incorporation or by-laws of any Obligor
or any of its Subsidiaries, (iii) conflict with, result in a breach of
or constitute a default under any material provisions of any indenture,
agreement or other instrument to which any Obligor or any of its
Subsidiaries is a party or by which any Obligor or any of its
Subsidiaries or any of an Obligor's or such Subsidiaries' property may
be bound or any Governmental Approval relating to an Obligor or any of
its Subsidiaries, or (iv) result in or require the creation or
imposition of any
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Lien upon or with respect to any property now owned or hereafter
acquired by any Obligor or any of its Subsidiaries other than the
Security Interest.
(f) Business. The Obligors and their Subsidiaries are engaged
principally in the business set forth on SCHEDULE 6.1(F).
(g) Compliance with Law; Governmental Approvals.
(i) Except as set forth on SCHEDULE 6.1(G), each Obligor
and each of its Subsidiaries (A) has all Governmental Approvals,
including permits relating to federal, state, local and foreign
Environmental Laws, ordinances and regulations, required by any
Applicable Law for it to conduct its business, each of which is
in full force and effect, is final and not subject to review on
appeal and is not the subject of any pending or, to the knowledge
of any Obligor, threatened attack by direct or collateral
proceeding, and (B) is in compliance with each Governmental
Approval applicable to it and in compliance with all other
Applicable Laws relating to it, including all Environmental Laws
and all occupational health and safety laws applicable to any
Obligor, any of its Subsidiaries or their respective properties,
except for instances of noncompliance which would not, singly or
in the aggregate, cause a Default or Event of Default or have a
Materially Adverse Effect and in respect of which reserves in
respect of such Obligor's or such Subsidiary's reasonably
anticipated liability therefor have been established on the
consolidated books of the Obligors.
(ii) Without limiting the generality of the above, except
with respect to matters which could not reasonably be expected to
have, singly or in the aggregate, a Materially Adverse Effect:
(A) the operations of each Obligor and each of its Subsidiaries
comply in all material respects with all applicable
environmental, health and safety requirements of Applicable Law;
(B) each Obligor and each of its Subsidiaries has obtained all
environmental, health and safety permits necessary for its
operation, and all such permits are in good standing and each
Obligor and each of its Subsidiaries is in compliance in all
material respects with all terms and conditions of such permits;
(C) neither any Obligor nor any of its Subsidiaries nor any of
their respective present or past property or operations are
subject to any order from or agreement with any public authority
or party respecting (x) any environmental, health or safety
requirements of Applicable Law, (y) any Remedial Action, or (z)
any liabilities and costs arising from the Release or threatened
Release of a Contaminant into the environment; (D) none of the
operations of any Obligor or of any of its Subsidiaries is
subject to any judicial or administrative proceeding alleging a
violation of any environmental, health or safety requirement of
Applicable Law; (E) none of the present nor past operations of
any Obligor or any of its Subsidiaries is the subject of any
investigation by any public authority evaluating whether any
Remedial Action is needed to respond to a Release or threatened
Release of a Contaminant into the environment; (F) neither any
Obligor nor any of its Subsidiaries has filed any notice under
any requirement of Applicable Law indicating past or present
treatment, storage or disposal of a hazardous waste, as that term
is defined under 40 CFR Part 261 or any state equivalent; (G)
neither any Obligor nor any of its Subsidiaries has filed any
notice under any requirement of Applicable Law reporting a
Release of a Contaminant into the environment; (H) except in
compliance in all material respects with applicable Environmental
Laws, during the course of any Obligor's or any of its
Subsidiaries' ownership of or operations on the Real Estate,
there
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have been no (1) generation, treatment, recycling, storage or
disposal of hazardous waste, as that term is defined under 40 CFR
Part 261 or any state equivalent, (2) use of underground storage
tanks or surface impoundments, (3) use of asbestos-containing
materials, or (4) use of polychlorinated biphenyls (PCB) used in
hydraulic oils, electrical transformers or other equipment; (I)
neither any Obligor nor any of its Subsidiaries has entered into
any negotiations or agreements with any Person (including any
prior owner of any of the Real Estate or other property of any
Obligor or any of its Subsidiaries) relating to any Remedial
Action or environmental related claim; (J) neither any Obligor
nor any of its Subsidiaries has received any notice or claim to
the effect that it is or may be liable to any Person as a result
of the Release or threatened Release of a Contaminant into the
environment; (K) neither any Obligor nor any of its Subsidiaries
has any material contingent liability in connection with any
Release or threatened Release of any Contaminant into the
environment; (L) no Environmental Lien has attached to any of the
Real Estate or other property of any Obligor or of any of its
Subsidiaries; (M) the presence and condition of all
asbestos-containing material which is on or part of the Real
Estate (excluding any raw materials used in the manufacture of
products or products themselves) do not violate in any material
respect any currently applicable requirement of Applicable Law;
and (N) neither any Obligor nor any of its Subsidiaries
manufactures, distributes or sells, or has ever manufactured,
distributed or sold, products which contain asbestos-containing
material.
(iii) Each Obligor has notified the Agent of the receipt
by it or any of its Subsidiaries of any notice of a material
violation of any Environmental Laws and occupational health and
safety laws applicable to such Obligor, Subsidiaries or any of
their respective properties.
(h) Title to Properties. Except as set forth on SCHEDULE 6.1(H),
each Obligor and each of its Subsidiaries has valid and legal title to
or leasehold interest in all personal property, Real Estate and other
assets used in its business, including those reflected on the most
recent balance sheets of the Obligors delivered pursuant to SECTION
6.1(N).
(i) Liens. Except as set forth on SCHEDULE 6.1(I), none of the
properties and assets of any Obligor or any of its Subsidiaries is
subject to any Lien, except Permitted Liens. Other than the Financing
Statements, no financing statement under the Uniform Commercial Code or
similar laws of any jurisdiction or other instrument evidencing a Lien
which names any Obligor or any of its Subsidiaries as debtor has been
filed (and has not been terminated) in any jurisdiction, and neither any
Obligor nor any of its Subsidiaries has signed any such financing
statement or other instrument or any security agreement authorizing any
secured party thereunder to file any such financing statement or
instrument, except to perfect Permitted Liens.
(j) Indebtedness and Guaranties. SCHEDULE 6.1(J) is a complete
and correct listing of all Indebtedness for Money Borrowed and
Guaranties of each Obligor and its Subsidiaries. Each Obligor and its
Subsidiaries has performed and is in compliance with all of the terms of
such Indebtedness and Guaranties and all instruments and agreements
relating thereto, and no default or event of default, or event or
condition which with notice or lapse of time or both would constitute
such a default or event of default, exists with respect to any such
Indebtedness or Guaranty.
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(k) Litigation. Except as set forth on SCHEDULE 6.1(K), there are
no actions, suits or proceedings pending (nor, to the knowledge of any
Obligor, are there any actions, suits or proceedings threatened, or any
reasonable basis therefor) against or in any other way relating to or
affecting any Obligor or any of its Subsidiaries or any of any Obligor's
or any of its Subsidiaries' properties in any court or before any
arbitrator of any kind or before or by any governmental body, except
actions, suits or proceedings of the character normally incident to the
kind of business conducted by the Obligors or any of their Subsidiaries
which, if adversely determined, would not singly or in the aggregate
have a Materially Adverse Effect, and there are no strikes or walkouts
in progress, pending or contemplated, relating to any labor contracts to
which any Obligor or any of its Subsidiaries is a party, relating to any
labor contracts being negotiated, or otherwise.
(l) Tax Returns and Payments. Except as set forth on SCHEDULE
6.1(L), all United States federal, state and local as well as foreign
national, provincial and local and other tax returns of each Obligor and
each of its Subsidiaries required by Applicable Law to be filed have
been duly filed, and all United States federal, state and local and
foreign national, provincial and local and other taxes, assessments and
other governmental charges or levies upon each Obligor and each of its
Subsidiaries and each Obligor's and any of its Subsidiaries' property,
income, profits and assets which are due and payable have been paid,
except any such nonpayment which is at the time permitted under SECTION
9.6. The charges, accruals and reserves on the books of each Obligor and
each of its Subsidiaries in respect of United States federal, state and
local and foreign national, provincial and local taxes for all fiscal
years and portions thereof since the organization of each Obligor and
each of its Subsidiaries are in the judgment of each Obligor adequate,
and no Obligor knows of any reason to anticipate any additional
assessments for any of such years which, singly or in the aggregate,
might have a Materially Adverse Effect.
(m) Burdensome Provisions. Neither any Obligor nor any of its
Subsidiaries is a party to any indenture, agreement, lease or other
instrument, or subject to any charter or corporate restriction,
Governmental Approval or Applicable Law compliance with the terms of
which might have a Materially Adverse Effect.
(n) Financial Statements.
(i) The Obligors have furnished to the Agent and the
Lenders (A) copies of the annual audited consolidated balance
sheet of Tultex and its Consolidated Subsidiaries as of January
2, 1999 and the related audited consolidated statements of
operations, cash flows and shareholder's equity for the fiscal
year ended on such date, reported on by Price Waterhouse Coopers
and (B) copies of the unaudited consolidated balance sheet of
Tultex and its Consolidated Subsidiaries as of April 3, 1999 and
of the related statements of operations and cash flows for the
three-month period then ended. Such financial statements present
fairly, in all material respects, as of their respective dates
and in accordance with GAAP (subject to year-end adjustments and
but for the omission of footnotes in the unaudited statements)
the consolidated financial condition of Tultex and its
Consolidated Subsidiaries as of such dates and the consolidated
results of operations of Tultex and its Consolidated Subsidiaries
for the periods ended on such dates.
(ii) The Obligors have furnished to the Agent and the
Lenders copies of the Pro Forma. The Pro Forma is complete and
correct and presents fairly, on a pro forma
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basis, the financial position of Tultex and its Consolidated
Subsidiaries as at the Effective Date.
(iii) The Obligors have furnished to the Agent and the
Lenders copies of the Projections. The Projections have been be
prepared by Tultex in light of the past operations of the
business of Tultex and its Consolidated Subsidiaries and
represent as of the respective dates thereof the good faith
opinion of Tultex and its senior management concerning the most
probable course of business of Tultex and its Consolidated
Subsidiaries.
(iv) Except as disclosed or reflected in the financial
statements described in CLAUSES (I) and (II) above, no Obligor
nor any of its Subsidiaries has any material liabilities,
contingent or otherwise, and there were no material unrealized or
anticipated losses of any Obligor or any of its Subsidiaries.
(o) Adverse Change. Since the date of the audited financial
statements of the Obligors delivered to the Agent pursuant to SECTION
6.1(N)(I), (i) no material adverse change has occurred in the business,
assets, liabilities, financial condition, results of operations or
business prospects of any Obligor or any of its Subsidiaries, and (ii)
no event has occurred or failed to occur which has had, or may have,
singly or in the aggregate, a Materially Adverse Effect.
(p) ERISA.
(i) Neither any Obligor nor any Related Company maintains
or contributes to any Benefit Plan other than those listed on
SCHEDULE 6.1(P).
(ii) No Benefit Plan has been terminated or partially
terminated, and no Multiemployer Plan is insolvent or in
reorganization, nor have any proceedings been instituted to
terminate any Benefit Plan or to reorganize any Multiemployer
Plan.
(iii) Neither any Obligor nor any Related Company has
withdrawn from any Benefit Plan or Multiemployer Plan, nor has a
condition occurred which if continued would result in a
withdrawal.
(iv) Neither any Obligor nor any Related Company has
incurred any withdrawal liability, including contingent
withdrawal liability, to any Multiemployer Plan pursuant to Title
IV of ERISA.
(v) Neither any Obligor nor any Related Company has
incurred any liability to the PBGC other than for required
insurance premiums which have been paid when due.
(vi) No Reportable Event has occurred with respect to a
Plan.
(vii) No Benefit Plan has an "accumulated funding
deficiency" (whether or not waived) as defined in Section 302 of
ERISA or in Section 412 of the Internal Revenue Code.
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(viii) Each Plan is in substantial compliance with ERISA,
and neither any Obligor nor any Related Company has received any
communication from a governmental agency asserting that a Plan is
not in compliance with ERISA.
(ix) Each Plan which is intended to be a qualified Plan
has been determined by the IRS to be qualified under Section
401(a) of the Internal Revenue Code as currently in effect or
will be submitted to the IRS for such determination prior to the
end of the remedial amendment period under Section 401(b) of the
Internal Revenue Code and the regulations promulgated thereunder
and neither any Obligor nor any Related Company knows or has
reason to know why each such Plan should not continue to be so
qualified, and each trust related to such Plan that has been
submitted to the IRS for determination of exempt status has been
determined to be exempt from federal income tax under Section
501(a) of the Internal Revenue Code or will be submitted to the
IRS for a determination of exempt status.
(x) Except as provided on SCHEDULE 6.1(P), neither any
Obligor nor any Related Company maintains or contributes to any
employer welfare benefit plan within the meaning of Section 3(l)
of ERISA which provides benefits to employees after termination
of employment other than as required by Section 601 of ERISA.
(xi) Schedule B to the most recent annual report filed
with the IRS with respect to each Benefit Plan and furnished to
the Lender is complete and accurate. Since the date of each such
Schedule B, there has been no adverse change in funding status or
financial condition of the Benefit Plan relating to such Schedule
B.
(xii) Neither any Obligor nor any Related Company has
failed to make a required installment under Subsection (m) of
Section 412 of the Internal Revenue Code or any other payment
required under Section 412 of the Internal Revenue Code on or
before the due date for such installment or other payment, except
to the extent any such failure has been cured.
(xiii) Neither any Obligor nor any Related Company is
required to provide security to a Benefit Plan under Section
401(a)(29) of the Internal Revenue Code due to a Benefit Plan
amendment that results in an increase in current liability for
the plan year.
(xiv) Neither any Obligor, nor any Related Company, nor
any other "party-in-interest" or "disqualified person" has
engaged in a nonexempt "prohibited transaction," as such terms
are defined in Section 4975 of the Internal Revenue Code and
Section 406 of ERISA, in connection with any Plan or has taken or
failed to take any action which would constitute or result in a
Termination Event.
(xv) Neither any Obligor nor any Related Company has
failed to comply with the health care continuation coverage
requirements of Section 4980B of the Internal Revenue Code in
respect of employees and former employees of such Obligor or such
Related Company and their dependents and beneficiaries which
alone or in the aggregate would subject such Obligor or such
Related Company to any material liability.
(xvi) Neither any Obligor nor any Related Company has (i)
failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made a complete or
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partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. Except as provided on SCHEDULE 6.1(P), to the
best knowledge of each Obligor after due inquiry, neither any
Obligor nor any Related Company shall have any obligation to (A)
make contributions to any Multiemployer Plan on or after the
Effective Date, or (B) pay withdrawal liability to any
Multiemployer Plan in an amount in excess of a "de minimis
amount" as such term is defined in Section 4209 of ERISA.
(q) Absence of Defaults. Neither any Obligor nor any of its
Subsidiaries is in default under its articles or certificate of
incorporation or by-laws and no event has occurred, which has not been
remedied, cured or waived, (i) which constitutes a Default or an Event
of Default, or (ii) which constitutes, or which with the passage of time
or giving of notice or both would constitute, a default or event of
default by any Obligor or any of its Subsidiaries under any material
agreement (other than this Agreement) or judgment, decree or order to
which any Obligor or any of its Subsidiaries is a party or by which any
Obligor, any of its Subsidiaries or any of their properties may be bound
or which would require any Obligor, or any of its Subsidiaries to make
any payment under any such agreement, judgment, decree or order prior to
the scheduled maturity date therefor, except, in the case only of any
such agreement, for alleged defaults which are being contested in good
faith by appropriate proceedings and with respect to which reserves in
respect of any Obligor's or such Subsidiary's reasonably anticipated
liability have been established on the books of such Obligor or
Subsidiary.
(r) Accuracy and Completeness of Information.
(i) All written information, reports and other papers and
data produced by or on behalf of the Obligors and furnished to
the Agent or any Lender were, at the time the same were so
furnished, complete and correct in all material respects, to the
extent necessary to give the recipient a true and accurate
knowledge of the subject matter. No fact is known to any Obligor
which has had, or may in the future have (so far as such Obligor
can foresee), a Materially Adverse Effect which has not been set
forth in the financial statements or disclosure delivered prior
to the Effective Date, in each case referred to in SECTION
6.1(N), or in such written information, reports or other papers
or data or otherwise disclosed in writing to the Agent and the
Lenders prior to the Agreement Date. No document furnished or
written statement made to the Agent or any Lender by any Obligor
or any of its Subsidiaries in connection with the negotiation,
preparation or execution of this Agreement or any of the other
Loan Documents contains or will contain any untrue statement of a
fact material to the creditworthiness of any Obligor or any of
its Subsidiaries or omits or will omit to state a material fact
necessary in order to make the statements contained therein not
misleading.
(ii) No Obligor has any reason to believe that any
document furnished or written statement made to the Agent or any
Lender by any Person other than the Obligors in connection with
the negotiation, preparation or execution of this Agreement or
any of the other Loan Documents contained any incorrect statement
of a material fact or omitted to state a material fact necessary
in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
(s) Solvency. In each case after giving effect to the
Indebtedness represented by the Loans outstanding and to be incurred and
the transactions contemplated by this Agreement, the Obligors and their
Subsidiaries are solvent on a consolidated basis, having assets of a
fair salable
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value which exceeds the amount required to pay their debts as they
become absolute and matured (including contingent, subordinated,
unmatured and unliquidated liabilities), and each Obligor and each of
its Subsidiaries is able to and anticipates that it will be able to meet
its debts as they mature and has adequate capital to conduct the
business in which it is or proposes to be engaged.
(t) Receivables.
(i) Status.
(A) Each Receivable reflected in the computations
included in any Borrowing Base Certificate meets the
criteria enumerated in the definition of Eligible
Receivables (or, as applicable, Eligible Bill and Hold
Receivables), except as disclosed in such Borrowing Base
Certificate or as disclosed in a timely manner in a
subsequent Borrowing Base Certificate or otherwise in
writing to the Agent.
(B) No Obligor has any knowledge of any fact or
circumstance not disclosed to the Agent in a Borrowing
Base Certificate or otherwise in writing which would
impair the validity or collectibility of any Eligible
Receivables of $50,000 or more or of Eligible Receivables
which (regardless of the individual amount thereof)
aggregate $100,000 or more.
(ii) Chief Executive Office. The chief executive office of
each Obligor and the books and records relating to the
Receivables (and the General Intangibles and Tax Refund Claims)
are located at the address or addresses set forth on SCHEDULE
6.1(T); no Obligor has maintained its chief executive office or
books and records relating to any Receivables at any other
address at any time during the five years immediately preceding
the Agreement Date except as disclosed on SCHEDULE 6.1(T).
(u) Inventory.
(i) Schedule of Inventory. All Inventory included in any
Schedule of Inventory or Borrowing Base Certificate delivered to
the Agent pursuant to SECTION 8.12 meets the criteria enumerated
in the definition of Eligible Inventory, except as disclosed in
such Schedule of Inventory or Borrowing Base Certificate or in a
subsequent Schedule of Inventory or Borrowing Base Certificate,
or as otherwise specifically disclosed in writing to the Agent.
(ii) Condition. All Eligible Inventory is in good
condition, meets all standards imposed by any governmental
agency, or department or division thereof, having regulatory
authority over such goods, their use or sale, and is currently
either usable or salable in the normal course of the applicable
Obligor's business, except to the extent reserved against in the
financial statements referred to in SECTION 6.1(N) or delivered
pursuant to ARTICLE 10 or as disclosed on a Schedule of Inventory
delivered to the Agent pursuant to SECTION 8.12(B).
(iii) Location. All Inventory is located on the premises
set forth on SCHEDULE 6.1(U) or is Inventory in transit to one of
such locations, except as otherwise disclosed in
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writing to the Agent. No Obligor has, in the last four months,
located such Inventory at premises other than those set forth on
SCHEDULE 6.1(U).
(v) Equipment. All Equipment is in good order and repair in all
material respects and is located on the premises set forth on SCHEDULE
6.1(V).
(w) Real Property. No Obligor nor any of its Subsidiaries owns
any Real Estate or leases any Real Estate other than that described on
SCHEDULE 6.1(W) and other than Real Estate acquired or leased after the
Effective Date for which the Obligors have complied with the
requirements of SECTION 8.14.
(x) Corporate and Fictitious Names. Except as otherwise disclosed
on SCHEDULE 6.1(X), during the five-year period preceding the Agreement
Date, no Obligor, nor any predecessor thereof, has been known as or used
any corporate or fictitious name other than the corporate names of the
Obligors on the Effective Date.
(y) Federal Reserve Regulations. No Obligor nor any of its
Subsidiaries is engaged and none will 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" (as each of the
quoted terms is defined or used in Regulation U of the Board of
Governors of the Federal Reserve System). No part of the proceeds of any
of the Loans will be used for so purchasing or carrying margin stock or,
in any event, for any purpose which violates, or which would be
inconsistent with, the provisions of Regulation T, U or X of such Board
of Governors. If requested by the Agent or any Lender, the Obligors will
furnish to the Agent and the Lenders a statement or statements in
conformity with the requirements of said Regulation T, U or X to the
foregoing effect.
(z) Investment Company Act. No Obligor nor any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in
the Investment Company Act of 1940, as amended).
(aa) Employee Relations. Each Obligor and each of its
Subsidiaries has a stable work force in place and is not, except as set
forth on SCHEDULE 6.1(AA), party to any collective bargaining agreement
nor has any labor union been recognized as the representative of any
Obligor's or any of its Subsidiaries' employees, and no Obligor knows of
any pending, threatened or contemplated strikes, work stoppage or other
labor disputes involving any Obligor's or any of its Subsidiaries'
employees.
(bb) Proprietary Rights. SCHEDULE 6.1(BB) sets forth a correct
and complete list of all of the Obligor's Proprietary Rights. None of
the Obligor's Proprietary Rights is subject to any licensing agreement
or similar arrangement except as set forth on SCHEDULE 6.1(BB) or as
entered into in the sale or distribution of any Obligor's Inventory in
the ordinary course of business. To the best of each Obligor's
knowledge, none of the Proprietary Rights infringes on or conflicts with
any other Person's property, and no other Person's property infringes on
or conflicts with the Proprietary Rights. The Proprietary Rights
described on SCHEDULE 6.1(BB) constitute all of the property of such
type necessary to the current and anticipated future conduct of each
Obligor's business.
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(cc) Trade Names. All trade names or styles under which any
Obligor sells Inventory or Equipment or creates Receivables, or to which
instruments in payment of Receivables are made payable, are listed on
SCHEDULE 6.1(CC).
(dd) Bond Tenders and Consents. The Borrowers have heretofore
furnished to the Agent true, complete and correct copies of the
Invitation and Consent Solicitation and the Indentures (including any
schedules, exhibits and annexes thereto). Upon the Effective Date, the
transactions contemplated by the Invitation and Consent Solicitation
(including the tender offer and repurchase of Bonds set forth therein
and the issuance of warrants contemplated thereby) and the Indentures
will have been consummated in accordance with Applicable Law and, except
as previously approved in writing by the Agent, in the manner provided
therein in accordance with the terms thereof.
(ee) Bank Accounts, Lockboxes, Etc. SCHEDULE 6.1(EE) is a
complete and correct list of all checking accounts, deposit accounts,
lockboxes and other bank accounts maintained by any Obligor.
(ff) Year 2000 Compliance. Each Obligor (i) has initiated a
review and assessment of all areas within its and each of its
Subsidiaries' business and operations (including those affected by
suppliers, vendors and customers) that could be adversely affected by
the "Year 2000 Problem" (that is, the risk that computer applications
used by such Obligor or any of its Subsidiaries (or suppliers, vendors
and customers) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date
after December 31, 1999), (ii) has developed a plan and timeline for
addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented that plan in accordance with that timetable. Based on the
foregoing, each Obligor believes that all computer applications
(including those of its suppliers, vendors and customers) that are
material to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "Year 2000 compliant").
(gg) Subordinated Indebtedness. The Secured Obligations
constitute "Funded Debt" as defined in the Convertible Subordinated
Notes.
SECTION 6.2. Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this ARTICLE 6 and all statements
contained in any certificate, financial statement, or other instrument,
delivered by or on behalf of any Obligor pursuant to or in connection with this
Agreement or any of the other Loan Documents (including any such representation,
warranty or statement made in or in connection with any amendment thereto) shall
constitute representations and warranties made under this Agreement. All
representations and warranties made under this Agreement shall be made or deemed
to be made at and as of the Agreement Date, at and as of the Effective Date, and
at and as of the date of each Loan, except that representations and warranties
which, by their terms are applicable only to one such date shall be deemed to be
made only at and as of such date. All representations and warranties made or
deemed to be made under this Agreement shall survive and not be waived by the
execution and delivery of this Agreement, any investigation made by or on behalf
of the Agent or any Lender, or any borrowing hereunder.
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ARTICLE 7
SECURITY INTEREST
SECTION 7.1. Security Interest.
(a) To secure the payment, observance and performance of the
Secured Obligations, each Obligor hereby mortgages, pledges and assigns all of
its right, title and interest in and to the Collateral to the Agent, for the
benefit of the Secured Creditors, and grants to the Agent, for the benefit of
the Secured Creditors, a continuing security interest in, and a continuing Lien
upon, all of its right, title and interest in and to the Collateral.
(b) As additional security for all of the Secured Obligations,
each Obligor grants to the Agent, the Lenders and the Affiliates of the Lenders,
for the benefit of the Secured Creditors, a security interest in, and assigns to
the Agent, the Lenders and the Affiliates of the Lenders, for the benefit of the
Secured Creditors, all of such Obligor's right, title and interest in and to,
any deposits or other sums at any time credited by or due from the Agent, each
Lender and each Affiliate of a Lender to such Obligor, or credited by or due
from any participant of any Lender to such Obligor, with the same rights therein
as if the deposits or other sums were credited by or due from such Lender. Each
Obligor hereby authorizes the Agent, each Lender and each Affiliate of such
Lender and each participant to pay or deliver to the Agent, for the account of
the Secured Creditors, without any necessity on the Agent's or any Lender's part
to resort to other security or sources of reimbursement for the Secured
Obligations, at any time during the continuation of any Event of Default or in
the event that the Agent, on behalf of the Secured Creditors, should make demand
for payment hereunder and without further notice to any Obligor (such notice
being expressly waived), any of the aforesaid deposits (general or special, time
or demand, provisional or final) or other sums for application to any Secured
Obligation, irrespective of whether any demand has been made or whether such
Secured Obligation is mature, and the rights given the Agent, the Lenders, their
Affiliates and participants hereunder are cumulative with such Person's other
rights and remedies, including other rights of setoff. The Agent will promptly
notify the Borrowers' Agent of its receipt of any such funds for application to
the Secured Obligations, but failure to do so will not affect the validity or
enforceability thereof. The Agent may give notice of the above grant of a
security interest in and assignment of the aforesaid deposits and other sums,
and authorization, to, and make any suitable arrangements with, any Lender, any
such Affiliate of any Lender or participant for effectuation thereof, and each
Obligor hereby irrevocably appoints the Agent as its attorney to collect any and
all such deposits or other sums to the extent any such payment is not made to
the Agent or any Lender by such Lender, Affiliate or participant.
SECTION 7.2. Continued Priority of Security Interest.
(a) The Security Interest granted by each Obligor shall at all
times be valid, perfected and enforceable against each Obligor and all third
parties in accordance with the terms of this Agreement, as security for the
Secured Obligations, and the Collateral shall not at any time be subject to any
Liens that are prior to, on a parity with or junior to the Security Interest,
other than Permitted Liens.
(b) Each Obligor shall, at its sole cost and expense, take all
action that may be necessary or desirable, or that the Agent may reasonably
request, so as at all times to maintain the validity, perfection, enforceability
and rank of the Security Interest in the Collateral in conformity with the
requirements of SECTION 7.2(A), or to enable the Agent and the Lenders to
exercise or enforce their rights hereunder, including: (i) paying all taxes,
assessments and other claims lawfully levied or assessed
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on any of the Collateral, except to the extent that such taxes, assessments and
other claims constitute Permitted Liens, (ii) obtaining, after the Agreement
Date, landlords' and mortgagees' agreements, releases, subordinations or
waivers, and consents and sublicense agreements from licensors of Proprietary
Rights to such Obligor (iii) delivering to the Agent, for the benefit of the
Secured Creditors, endorsed or accompanied by such instruments of assignment as
the Agent may specify, and stamping or marking, in such manner as the Agent may
specify, any and all chattel paper, instruments, letters and advices of guaranty
and documents evidencing or forming a part of the Collateral, and (iv) executing
and delivering financing statements, pledges, designations, hypothecations,
notices and assignments in each case in form and substance satisfactory to the
Agent relating to the creation, validity, perfection, maintenance or
continuation of the Security Interest under the Uniform Commercial Code or other
Applicable Law.
(c) The Agent is hereby authorized to file one or more financing
or continuation statements or amendments thereto without the signature of or in
the name of any Obligor for any purpose described in SECTION 7.2(B). The Agent
will give the Borrowers' Agent notice of the filing of any such statements or
amendments, which notice shall specify the locations where such statements or
amendments were filed. A carbon, photographic, xerographic or other reproduction
of this Agreement or of any of the Security Documents or of any financing
statement filed in connection with this Agreement is sufficient as a financing
statement.
(d) Each Obligor shall mark its books and records as directed by
the Agent and as may be necessary or appropriate to evidence, protect and
perfect the Security Interest and shall cause its financial statements to
reflect the Security Interest.
ARTICLE 8
COLLATERAL COVENANTS
Until the Revolving Credit Facility has been terminated and all
the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided in SECTION 16.11:
SECTION 8.1. Collection of Receivables.
(a) At the request of the Agent, the Obligors will cause all
monies, checks, notes, drafts and other payments relating to or constituting
proceeds of trade accounts receivable to be forwarded to a Lockbox for deposit
in an Agency Account in accordance with the procedures set out in the
corresponding Agency Account Agreement. The Obligors will promptly cause all
monies, checks, notes, drafts and other payments relating to or constituting
proceeds of Receivables, of any other Collateral, and of any trade accounts
receivable that are not forwarded to a Lockbox, to be transferred to or
deposited in an Agency Account. In particular, each Obligor will: (i) advise
each Account Debtor on trade accounts receivable to address all remittances with
respect to amounts payable on account thereof to a specified Lockbox, (ii)
advise each other Account Debtor that makes payment to such Obligor by wire
transfer, automated clearinghouse transfer or similar means to make payment
directly to an Agency Account, (iii) stamp all invoices relating to trade
accounts receivable with a legend satisfactory to the Agent indicating that
payment is to be made to such Obligor via a specified Lockbox, and (iv) cause
all monies, checks, notes, drafts and other payments received at any retail
store to be transferred to a single Agency Account established by the Obligors
for all collections from retail stores.
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(b) The Obligors and the Agent shall cause all collected balances
in each Agency Account to be transmitted daily by wire transfer, depository
transfer check or other means in accordance with the procedures set forth in the
corresponding Agency Account Agreement, to the Agent at the Agent's Office: (i)
for application, on account of the Secured Obligations, as provided in SECTIONS
2.3(C), 12.2, and 12.3, such credits to be entered as of the Business Day they
are received if they are received prior to 1:30 p.m. and to be conditioned upon
final payment in cash or solvent credits of the items giving rise to them, and
(ii) with respect to the balance, so long as no Default or Event of Default has
occurred and is continuing, for transfer by wire transfer or depository transfer
check to a Disbursement Account.
(c) Any monies, checks, notes, drafts or other payments referred
to in SUBSECTION (A) of this SECTION 8.1 which, notwithstanding the terms of
such subsection, are received by or on behalf of an Obligor will be held in
trust for the Agent and will be delivered to the Agent or a Clearing Bank, as
promptly as possible, in the exact form received, together with any necessary
endorsements for application by the Agent directly to the Secured Obligations
or, if applicable, for deposit in the Agency Account maintained with a Clearing
Bank and processing in accordance with the terms of the corresponding Agency
Account Agreement.
(d) Notwithstanding the foregoing, the foregoing subsections
shall not apply to Tultex Canada, but, instead, the provisions of this
SUBSECTION (D) shall apply to Tultex Canada. Upon written notice given by the
Agent to Tultex Canada (which may be given by notice to the Borrowers' Agent) of
the occurrence of an Event of Default (the "Notice"), Tultex Canada will cause
all moneys, checks, notes, drafts and other payments relating to or constituting
proceeds of Receivables, or of any other Collateral, to be forwarded to a
Lockbox for deposit in an Agency Account in accordance with the procedures set
out in the corresponding Agency Account Agreement, and in particular Tultex
Canada will (i) advise each Account Debtor to address all remittances with
respect to amounts payable on account of any Receivables to a specified Lockbox,
(ii) advise each other Account Debtor that makes payment to Tultex Canada by
wire transfer, automated clearinghouse transfer or similar means to make payment
directly to an Agency Account, and (iii) stamp all invoices relating to any such
amounts with a legend satisfactory to the Agent indicating that payment is to be
made to Tultex Canada via a specified Lockbox. After the giving of the Notice,
Tultex Canada and the Agent shall cause all collected balances in each such
Agency Account to be transmitted daily by wire transfer or depository transfer
check or Automated Clearing House transfer in accordance with the procedures set
forth in the corresponding Agency Account Agreement to the Agent at the Agent's
Office for application, on account of the Secured Obligations as provided in
SUBSECTION (B) above. Any moneys, checks, notes, drafts or other payments
referred to above which are received by or on behalf of Tultex Canada will be
held in trust for the Agent and, after the giving of the Notice, will be
delivered to the Agent at the Agent's Office as promptly as possible in the
exact form received, together with any necessary endorsements.
SECTION 8.2. Verification and Notification. The Agent shall have
the right at any time and from time to time, (a) in the name of the Agent, the
Lenders or in the name of any Obligor, to verify the validity, amount or any
other matter relating to any Receivables by mail, telephone, telegraph or
otherwise, (b) to review, audit and make extracts from all records and files
related to any of the Receivables, and (c) to notify the Account Debtor under
any Receivables of the assignment of such Receivables to the Agent, for the
benefit of the Secured Creditors, and to direct such Account Debtor to make
payment of all amounts due or to become due thereunder directly to the Agent,
for the account of the Secured Creditors, and, upon such notification and at the
expense of the Obligors, to enforce
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collection of any such Receivables and to adjust, settle or compromise the
amount or payment thereof, in the same manner and to the same extent as the
Obligors might have done.
SECTION 8.3. Disputes, Returns and Adjustments.
(a) In the event any amounts due and owing under any Receivable
for an amount in excess of $100,000 are in dispute between an Account Debtor and
an Obligor, the Borrowers' Agent shall provide the Agent with prompt written
notice thereof.
(b) The Borrowers' Agent shall notify the Agent promptly of all
returns and credits in excess of $100,000 in respect of any Receivable (other
than any re-bill or correction arising in the ordinary course of the Obligors'
business), which notice shall specify the Receivable affected.
(c) The Obligors may, in the ordinary course of business unless a
Default or an Event of Default has occurred and is continuing, grant any
extension of time for payment of any Receivable or compromise, compound or
settle the same for less than the full amount thereof, or release wholly or
partly any Person liable for the payment thereof, or allow any credit or
discount whatsoever therein; PROVIDED that (i) no such action results in the
reduction of more than $100,000 in the amount payable with respect to any
Receivable or of more than $2,000,000 with respect to all Receivables in fiscal
year 1999 or $1,000,000 in any fiscal year thereafter (in each case, excluding
the allowance of credits or discounts generally available to Account Debtors in
the ordinary course of the Obligors' business and appropriate adjustments to the
accounts of Account Debtors in the ordinary course of business), and (ii) the
Agent is promptly notified of the amount of such adjustments and the
Receivable(s) affected thereby.
SECTION 8.4. Invoices.
(a) No Obligor will use any invoices other than invoices in the
form delivered to the Agent prior to the Agreement Date without giving the Agent
at least 30 days prior notice of the intended use of a different form of invoice
together with a copy of such different form.
(b) Upon the request of the Agent, each Obligor shall deliver to
the Agent, at the Obligors' expense, copies of customers' invoices or the
equivalent, original shipping and delivery receipts or other proof of delivery,
customers' statements, customer address lists, the original copy of all
documents, including repayment histories and present status reports, relating to
Receivables and such other documents and information relating to the Receivables
as the Agent shall specify.
SECTION 8.5. Delivery of Instruments. In the event any Receivable
is at any time evidenced by a promissory note, trade acceptance or any other
instrument for the payment of money, the Obligors will immediately thereafter
deliver such instrument to the Agent, appropriately endorsed to the Agent, for
the benefit of the Secured Creditors.
SECTION 8.6. Sales of Inventory. All sales of Inventory will be
made in compliance with all requirements of Applicable Law.
SECTION 8.7. Ownership and Defense of Title.
(a) Except for Permitted Liens, the Obligors shall at all times
be the sole owner or lessee of each and every item of Collateral and shall not
create any lien on, or sell, lease, exchange,
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assign, transfer, pledge, hypothecate, grant a security interest or security
title in or otherwise dispose of, any of the Collateral or any interest therein,
except for sales of Inventory in the ordinary course of business, for cash or on
open account or on terms of payment ordinarily extended to its customers, and
except for dispositions that are otherwise expressly permitted under this
Agreement. The inclusion of "proceeds" of the Collateral under the Security
Interest shall not be deemed a consent by the Agent or the Lenders to any other
sale or other disposition of any part or all of the Collateral.
(b) Each Obligor shall defend its title or leasehold interest in
and to, and the Security Interest in, the Collateral against the claims and
demands of all Persons.
SECTION 8.8. Insurance.
(a) The Obligor shall at all times maintain insurance on the
Inventory and Equipment against loss or damage by fire, theft (excluding theft
by employees), burglary, pilferage, loss in transit and such other hazards as
the Agent shall reasonably specify, in amounts not to exceed those obtainable at
commercially reasonable rates and under policies issued by insurers acceptable
to the Agent in the exercise of its reasonable judgment. All premiums on such
insurance shall be paid by the Obligors and copies of the policies delivered to
the Agent. The Obligors will not use or permit the Inventory to be used in
violation of Applicable Law or in any manner which might render inapplicable any
insurance coverage.
(b) All insurance policies required under SECTION 8.8(A) shall
name the Agent, for the benefit of the Secured Creditors, as an additional
insured and shall contain loss payable clauses in the form submitted to the
Obligors by the Agent, or otherwise in form and substance satisfactory to the
Agent, naming the Agent, for the benefit of the Secured Creditors, as loss
payee, as its interests may appear, and providing that (i) all proceeds
thereunder shall be payable to the Agent, for the benefit of the Secured
Creditors, (ii) no such insurance shall be affected by any act or neglect of the
insurer or owner of the property described in such policy, and (iii) such policy
and loss payable clauses may be canceled, amended or terminated only upon at
least 30 days prior written notice given to the Agent.
(c) Any proceeds of insurance referred to in this SECTION 8.8
which are paid to the Agent, for the account of the Secured Creditors, shall be,
at the option of the Required Lenders in their sole discretion, either (i)
applied to replace the damaged or destroyed property, or (ii) applied to the
payment or prepayment of the Secured Obligations; PROVIDED that in the event
that the proceeds from any single casualty do not exceed $100,000, then, upon
the Borrowers' Agent's written request to the Agent, PROVIDED that no Default or
Event of Default shall have occurred and be continuing, such proceeds shall be
disbursed by the Agent to the Obligors pursuant to such procedures as the Agent
shall reasonably establish for application to the replacement of the damaged or
destroyed property.
SECTION 8.9. Location of Offices and Collateral.
(a) No Obligor will change the location of its chief executive
office or the place where it keeps its books and records relating to the
Collateral or change its name, its identity or corporate structure without
giving the Agent at least 60 days prior written notice thereof.
(b) All Inventory and Equipment, other than Inventory in transit
to any such location, will at all times be kept by each Obligor at the locations
set forth on SCHEDULES 6.1(U) and (V), and shall not, without the prior written
consent of the Agent, be removed therefrom except pursuant to sales of Inventory
permitted under SECTION 8.7(A).
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(c) If any Inventory is in the possession or control of any of an
agent or processor of an Obligor, such Obligor shall notify such agent or
processor of the Security Interest (and shall promptly provide copies of any
such notice to the Agent and the Lenders) and, upon the occurrence of an Event
of Default, shall instruct them (and cause them to acknowledge such instruction)
to hold all such Inventory for the account of the Lenders, subject to the
instructions of the Agent.
SECTION 8.10. Records Relating to Collateral.
(a) Each Obligor will at all times (i) keep complete and accurate
records of Inventory on a basis consistent with past practices of such Obligor
so as to permit comparison of Inventory records relating to different time
periods, itemizing and describing the kind, type and quantity of Inventory and
such Obligor's cost therefor and a current price list for such Inventory, and
(ii) keep complete and accurate records of all other Collateral.
(b) Each Obligor will prepare a physical listing of all
Inventory, wherever located, at least annually, and shall deliver such listing
to the Agent promptly after completion thereof.
SECTION 8.11. Inspection. The Agent and each Lender (by any of
their officers, employees or agents) shall have the right, to the extent that
the exercise of such right shall be within the control of the Obligors, at any
time or times to: (a) visit the properties of the Obligors and their
Subsidiaries, inspect the Collateral and the other assets of the Obligors and
their Subsidiaries, and inspect and make extracts from the books and records of
the Obligors and their Subsidiaries, including management letters prepared by
independent accounts, all during customary business hours at such premises; (b)
discuss the Obligors' and their Subsidiaries' business, assets, liabilities,
financial condition, results of operations and business prospects, insofar as
the same are reasonably related to the rights of the Agent or the Lenders
hereunder or under any of the other Loan Documents, with the Obligors' and their
Subsidiaries' (i) principal officers, (ii) independent accountants, and (iii)
any other Person (except that any such discussion with any third parties shall
be conducted only in accordance with the Agent's or such Lender's standard
operating procedures relating to the maintenance of the confidentiality of
confidential information of borrowers); and (c) verify the amount, quantity,
value and condition of, or any other matter relating to, any of the Collateral
and in this connection to review, audit and make extracts from all records and
files related to any of the Collateral. The Obligors will deliver to the Agent,
for the benefit of the Lenders, any instrument necessary for the Agent to obtain
records from any service bureau maintaining records on behalf of the Obligors or
any of their Subsidiaries (or any of them).
SECTION 8.12. Information and Reports.
(a) Schedule of Receivables. The Borrowers' Agent shall deliver
to the Agent, not later than the 20th day of each fiscal month, a Schedule of
Receivables which (i) shall be as of the last Business Day of the immediately
preceding fiscal month, (ii) shall be reconciled to the Borrowing Base
Certificate as of such last Business Day, and (iii) shall set forth a detailed
aged trial balance of all of the Obligors' then existing Receivables, specifying
the names, addresses and balance due for each Account Debtor obligated on a
Receivable so listed.
(b) Schedule of Inventory. The Borrowers' Agent shall deliver to
the Agent, not later than the 20th day of each fiscal month, a Schedule of
Inventory as of the last Business Day of the immediately preceding fiscal month,
itemizing and describing the kind, type and quantity of the Obligors' Inventory,
the Obligors' cost thereof, and the location thereof.
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(c) Accounts Payable Listings. The Borrowers' Agent shall deliver
to the Agent, no later than 20 days after the end of each fiscal month of the
Obligors, a listing of all of the Obligors' then existing trade payables as of
the last Business Day of such fiscal month, specifying the name of and balance
due to each trade creditor of the Obligors and the invoice number of each trade
payable. Upon the Agent's request, the Borrowers' Agent shall deliver to the
Agent monthly detailed trade payable agings in form acceptable to the Agent.
(d) Borrowing Base Certificate. The Borrowers' Agent shall
deliver to the Agent, (i) not later than the third Business Day of each calendar
week, a Borrowing Base Certificate prepared as of the close of business on the
last Business Day of the immediately preceding calendar week, and (ii)
concurrently with each Schedule of Receivables and Schedule of Inventory, a
Borrowing Base Certificate prepared as of the close of business on the last
Business Day of the applicable fiscal month.
(e) Additional Information. The Agent may in its discretion from
time to time request that the Obligors deliver the schedules, certificates and
listings described in SECTIONS 8.12(A), (B), (C) and (D) more or less often and
on different schedules than specified in such Sections and the Obligors will
comply with such requests. The Obligors will also furnish to the Agent and each
Lender such other information with respect to the Collateral as the Agent or
such Lender may from time to time reasonably request.
(f) Inventory Appraisals and Reports. At any time upon the
request of the Agent, the Obligors shall, at their expense, promptly provide the
Agent with (i) current appraisals of all of the Obligors' Inventory (on an
orderly liquidation value basis and/or such other bases as the Agent may
request), which appraisals shall be prepared by an appraisal firm satisfactory
to the Agent (the "Inventory Appraiser") and shall be in form and scope
satisfactory to the Agent, and (ii) updates to the Moore Colson inventory report
delivered to the Agent prior to the Agreement Date, which updates shall be
prepared by Moore Colson and shall be in form and scope satisfactory to the
Agent, provided no such updates to the Moore Colson inventory report shall be
required after the date on which the Obligors have replaced and/or updated their
standard inventory costing system with a system which, in the Agent's opinion,
is capable of accurately reflecting the cost of the Obligors' Inventory for
purposes of calculating the Borrowing Base.
SECTION 8.13. Power of Attorney. Each Obligor hereby appoints the
Agent as its attorney, with power (a) to endorse the name of such Obligor on any
checks, notes, acceptances, money orders, drafts or other forms of payment or
security that may come into the Agent's or any Lender's possession, and (b) to
sign the name of such Obligor on any invoice or bill of lading relating to any
Receivable, Inventory or other Collateral, on any drafts against customers
related to letters of credit, on schedules and assignments of Receivables
furnished to the Agent or any Lender by the Obligors (or any of them), on
notices of assignment, financing statements and other public records relating to
the perfection or priority of the Security Interest, and verifications of
account and notices to or from customers.
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SECTION 8.14. Additional Real Estate and Leases.
(a) Promptly upon any Obligor's acquisition of any ownership
interest in any Real Estate, the Obligors shall deliver to the Agent, for the
benefit of the Secured Creditors, an executed Mortgage in form and substance
satisfactory to the Agent, conveying to the Agent, for the benefit of the
Secured Creditors, a second priority Lien on such Real Estate, subject only to a
prior Lien in favor of the Indenture Trustees.
(b) Promptly upon any Obligor's entry into any lease of Real
Estate, such Obligor shall use its best efforts to deliver to the Agent an
executed landlord's agreement, release, subordination or waiver with respect to
such lease in form and substance satisfactory to the Agent.
SECTION 8.15. Assignment of Claims Act. Upon the request of the
Agent, the Obligors (or any of them) shall execute any documents or instruments
and shall take such steps or actions reasonably required by the Agent so that
all monies due or to become due under any contract with the United States of
America, the District of Columbia or any state, county, municipality or other
domestic or foreign governmental entity, or any department, agency or
instrumentality thereof, will be assigned to the Agent, for the benefit of the
Secured Creditors, and notice given thereof in accordance with the requirements
of the Assignment of Claims Act of 1940, as amended, or any other laws, rules or
regulations relating to the assignment of any such contract and monies due to or
to become due.
ARTICLE 9
AFFIRMATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all
the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided for in SECTION 16.11, each
Obligor will, and will cause each of its Subsidiaries to:
SECTION 9.1. Preservation of Corporate Existence and Similar
Matters. Preserve and maintain its corporate existence, rights, franchises,
licenses and privileges in the jurisdiction of its incorporation and qualify and
remain qualified as a foreign corporation and authorized to do business in each
jurisdiction in which the character of its properties or the nature of its
business requires such qualification or authorization.
SECTION 9.2. Compliance with Applicable Law. Comply with all
Applicable Law relating to it, except to the extent being contested in good
faith by appropriate proceedings and for which reserves in respect of such
Obligor's or such Subsidiary's reasonably anticipated liability therefor have
been appropriately established.
SECTION 9.3. Maintenance of Property. In addition to, and not in
derogation of, the requirements of SECTION 8.7 and of the Security Documents,
(a) protect and preserve all properties material to its business, including
Copyrights, Patents, and Trademarks, and maintain in good repair, working order
and condition in all material respects, with reasonable allowance for wear and
tear, all tangible properties, and (b) from time to time make or cause to be
made all needed and appropriate repairs, renewals, replacements and additions to
such properties necessary for the conduct of its business, so that the business
carried on in connection therewith may be properly and advantageously conducted
at all times.
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SECTION 9.4. Conduct of Business. At all times carry on its
business in an efficient manner and engage only in the business described in
SECTION 6.1(F).
SECTION 9.5. Insurance. Maintain, in addition to the coverage
required by SECTION 8.8 and the Security Documents, insurance with responsible
insurance companies against such risks and in such amounts as is customarily
maintained by similar businesses (including business interruption insurance) or
as may be required by Applicable Law, and from time to time deliver to the Agent
or any Lender upon its request a detailed list of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of the
insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
SECTION 9.6. Payment of Taxes and Claims. Pay or discharge when
due (a) all taxes, assessments and governmental charges or levies imposed upon
it or upon its income or profits or upon any properties belonging to it, except
that real property ad valorem taxes shall be deemed to have been so paid or
discharged if the same are paid before they become delinquent, and (b) all
lawful claims of materialmen, mechanics, carriers, warehousemen and landlords
for labor, materials, supplies and rentals which, if unpaid, might become a Lien
on any of its properties; PROVIDED that this SECTION 9.6 shall not require the
payment or discharge of any such tax, assessment, charge, levy or claim which is
being contested in good faith by appropriate proceedings and for which reserves
in respect of the reasonably anticipated liability therefor have been
appropriately established.
SECTION 9.7. Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP.
SECTION 9.8. Use of Proceeds.
(a) Use the proceeds of (i) the initial Revolving Credit Loan to
pay amounts indicated on SCHEDULE 9.8 to the Persons indicated thereon, and (ii)
all subsequent Loans only for working capital and general business purposes and,
to the extent otherwise permitted hereunder, repurchases and redemptions of
Bonds.
(b) Not use any part of such proceeds to purchase or, to carry or
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System) or, in any event, for any purpose which would
involve a violation of such Regulation U or of Regulation T or X of such Board
of Governors, or for any purpose prohibited by law or by the terms and
conditions of this Agreement.
SECTION 9.9. Hazardous Waste and Substances; Environmental
Requirements.
(a) In addition to, and not in derogation of, the requirements of
SECTION 9.2 and of the Security Documents, comply with all Environmental Laws
and all Applicable Laws relating to occupational health and safety (except for
instances of noncompliance that are being contested in good faith by appropriate
proceedings if reserves in respect of such Obligor's or such Subsidiary's
reasonably anticipated liability therefor have been appropriately established),
promptly notify the Agent of its receipt of any notice of a violation of any
such Environmental Laws or other such Applicable Laws, and indemnify and hold
the Agent and the Lenders harmless from all loss, cost, damage, liability, claim
and
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expense incurred by or imposed upon the Agent or any Lender on account of such
Obligor's or Subsidiary's failure to perform its obligations under this SECTION
9.9.
(b) Whenever such Obligor gives notice to the Agent pursuant to
this SECTION 9.9 with respect to a matter that reasonably could be expected to
result in liability to such Obligor or Subsidiary in excess of $250,000 in the
aggregate, such Obligor shall, at the Agent's request and the Obligors' expense
(i) cause an independent environmental engineer acceptable to the Agent to
conduct an assessment, including tests where necessary, of the site where the
noncompliance or alleged noncompliance with Environmental Laws has occurred and
prepare and deliver to the Agent a report setting forth the results of such
assessment, a proposed plan to bring such Obligor or Subsidiary into compliance
with such Environmental Laws (if such assessment indicates noncompliance) and an
estimate of the costs thereof, and (ii) provide to the Agent a supplemental
report of such engineer whenever the scope of the noncompliance, or the response
thereto or the estimated costs thereof, shall materially adversely change.
SECTION 9.10. Year 2000 Compliance. Promptly notify the Agent in
the event such Obligor discovers or determines that any computer application
(including those of its suppliers, vendors and customers) that is material to
its or any of its Subsidiaries' business and operations will not be Year 2000
compliant (as defined in SECTION 6.1(FF)).
SECTION 9.11. Additional Borrowers. Upon Tultex's request and the
approval of the Agent (such approval to be granted or denied in the Agent's
discretion), cause any wholly-owned United States Subsidiary of Tultex to become
a party to this Agreement as a Borrower by, at the Obligors' expense, (a)
causing such Subsidiary to execute a Joinder Agreement in substantially the same
form as EXHIBIT F hereto, (b) at the request of any Lender, causing such
Subsidiary to execute a Note in favor of such Lender, and (c) delivering such
other documentation as the Agent may reasonably request in connection with the
foregoing, including appropriate UCC-1 financing statements (and lien searches),
security agreements, landlord waivers, certified resolutions and other
organizational and authorizing documents of such Subsidiary, and favorable
opinions of counsel to such Subsidiary (which shall cover, among other things,
the legality, validity, binding effect and enforceability of the documentation
referred to above), all in form, content and scope reasonably satisfactory to
the Agent. The provisions of this Section shall not in any manner limit the
restrictions on the formation or acquisition of Subsidiaries set forth in
SECTION 11.4.
SECTION 9.12. Additional Guarantors. Upon the formation or
acquisition of any new direct or indirect Subsidiary by Tultex, if such
Subsidiary is not made a Borrower pursuant to SECTION 9.11, then, within 10 days
after such formation or acquisition, at the Obligors' expense, the Obligors
shall (a) cause such Subsidiary to execute a Joinder Agreement in substantially
the same form as EXHIBIT F hereto, and (b) deliver such other documentation as
the Agent may reasonably request in connection with the foregoing, including
appropriate UCC-1 financing statements (and lien searches), security agreements,
landlord waivers, certified resolutions and other organizational and authorizing
documents of such Subsidiary, and favorable opinions of counsel to such
Subsidiary (which shall cover, among other things, the legality, validity,
binding effect and enforceability of the documentation referred to above), all
in form, content and scope reasonably satisfactory to the Agent; PROVIDED that
the Obligors shall not be required to comply with the foregoing provisions with
respect to any non-United States Subsidiary of Tultex to the extent that the
Agent, in its discretion, determines that compliance with such provisions would
result in materially adverse federal tax consequences to Tultex. The provisions
of this Section shall not in any manner limit the restrictions on the formation
or acquisition of Subsidiaries set forth in SECTION 11.4.
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Section 9.13. Syndication. Cooperate fully with the Agent (a)
through meetings with and providing requested information to prospective
assignees of the Commitments, and in such other matters as the Agent may
reasonably request, in connection with the syndication of the Commitments, and
(b) in considering in good faith any amendment to this Agreement or any other
Loan Document as the Agent may reasonably request in order to assure a
satisfactory syndication of the Commitments, PROVIDED the Agent shall use its
good faith efforts to syndicate the Commitments on the terms set forth herein.
Section 9.14. Indenture Trustees The Borrowers' Agent will,
promptly after learning thereof, notify the Agent in writing of any change in
any Person serving as an Indenture Trustee or the address of any Indenture
Trustee for notice purposes under any Indenture.
Section 9.15. Standard Inventory Costing System On or before the
end of the Obligors' first fiscal quarter of their 2000 fiscal year, the
Obligors shall replace and/or update their standard inventory costing system
with a system which, in the Agent's opinion, is capable of accurately reflecting
the cost of the Obligors' Inventory for purposes of calculating the Borrowing
Base.
Section 9.16. PBGC Agreement Within 60 days after the Agreement
Date, Tultex shall enter into a final agreement (the "PBGC Agreement") with the
PBGC on substantially the terms set forth in the PBGC Memorandum of
Understanding, subject only to such modifications thereof as shall be acceptable
to the Agent. Tultex shall promptly, and in any event within 5 Business Days
after the execution thereof, deliver to the Agent a true and correct copy of the
PBGC Agreement.
ARTICLE 10
INFORMATION
Until the Revolving Credit Facility has been terminated and all
the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner set forth in SECTION 16.11, the Obligors
will furnish to the Agent and to each Lender at the offices then designated for
such notices pursuant to SECTION 16.1:
SECTION 10.1. Financial Statements.
(a) Audited Year-End Statements. As soon as available, but not
later than two Business Days after the date that Tultex is required to file its
Form 10-K with the Securities and Exchange Commission or any successor
commission (or, if earlier, 120 days after the end of each fiscal year of
Tultex), copies of the consolidating and consolidated balance sheets of Tultex
and its Consolidated Subsidiaries as at the end of such fiscal year, together
with copies of the consolidated and consolidating statements of operations and
shareholders' equity and consolidated statements of cash flows of Tultex and its
Consolidated Subsidiaries for such fiscal year, in each case setting forth in
comparative form the figures for the previous fiscal year, reported on without
qualification by independent certified public accountants of nationally
recognized standing.
(b) Monthly Financial Statements. As soon as available after the
end of each month, but in any event within 30 days after the end of each fiscal
month of Tultex (60 days in the case of the fiscal month end which is also the
fiscal year end), copies of the unaudited consolidating and consolidated balance
sheet of Tultex and its Consolidated Subsidiaries as at the end of such fiscal
month and the related unaudited consolidating and consolidated statements of
operations and consolidated
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statements of cash flows for Tultex and its Consolidated Subsidiaries for such
fiscal month and for the portion of the fiscal year through such fiscal month
(which, in the case of each fiscal month that is the last fiscal month of a
fiscal quarter ending on or prior to the end of the Obligors' third fiscal
quarter for their 1999 fiscal year, shall also include consolidated statements
of operations and cash flows calculated excluding the results of Tultex Virginia
and Tultex Massachusetts for all periods on or prior to July 15, 1998),
certified by the Financial Officer as presenting fairly the financial condition
and results of operations of Tultex and its Consolidated Subsidiaries (subject
to normal year-end audit adjustments).
(c) Annual Budget. As soon as available, but in any event no more
than 30 days after the beginning of each fiscal year of Tultex, an operating
budget for Tultex and its Consolidated Subsidiaries for such fiscal year, in the
form customarily prepared by management of Tultex consistent with past practice
and acceptable to the Agent, together with a statement of the assumptions upon
which such budget was prepared.
All such financial statements referred to in CLAUSES (A) and (B) shall be
complete and correct in all material respects and prepared in accordance with
GAAP (except, with respect to interim financial statements described in CLAUSE
(B), for the omission of footnotes and for the effect of normal year-end audit
adjustments) applied consistently throughout the periods reflected therein.
SECTION 10.2. Accountants' Certificate. Together with the
financial statements referred to in SECTION 10.1(A), the Obligors shall deliver
a certificate of such accountants addressed to the Agent (a) stating that in
making the examination necessary for the certification of such financial
statements, nothing has come to their attention to lead them to believe that any
Default or Event of Default exists and, in particular, they have no knowledge of
any Default or Event of Default or, if such is not the case, specifying such
Default or Event of Default and its nature, and (b) having attached the
calculations, prepared by the Obligors and reviewed by such accountants,
required to establish the Consolidated Funded Indebtedness to Consolidated
EBITDA ratio (for purposes of determining the Applicable Margin) and whether or
not the Obligors were in compliance with the covenants contained in SECTIONS
11.1, 11.2, 11.5, 11.10, 11.11 and 11.16, as at the date of such financial
statements.
SECTION 10.3. Officer's Certificate. At the time that the
Obligors furnish the financial statements pursuant to SECTION 10.1(B) for any
fiscal month that is the last fiscal month of a fiscal quarter of the Obligors,
the Obligors shall also furnish a certificate of the Financial Officer,
substantially in the form of EXHIBIT G, (a) setting forth as at the end of such
fiscal quarter or fiscal year, as the case may be, the calculations required to
establish the Consolidated Funded Indebtedness to Consolidated EBITDA ratio (for
purposes of determining the Applicable Margin) and whether or not the Obligors
were in compliance with the requirements of SECTIONS 11.1, 11.2, 11.5, 11.10,
11.11 and 11.16, as at the end of each respective period, (b) stating that the
information on the schedules to this Agreement are complete and accurate as of
the date of such certificate or, if such is not the case, attaching to such
certificate updated schedules, and (c) stating that, based on a reasonably
diligent examination, no Default or Event of Default exists, or, if such is not
the case, specifying such Default or Event of Default and its nature, when it
occurred, whether it is continuing and the steps being taken by the Obligors
with respect to such Default or Event of Default.
SECTION 10.4. Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to any Obligor or its Board of Directors by its independent public
accountants, including any management report.
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(b) As soon as practicable, copies of all financial statements
and reports that any Obligor shall send to its shareholders generally and of all
registration statements and all regular or periodic reports which any Obligor
shall file with the Securities and Exchange Commission or any successor
commission.
(c) From time to time and as soon as reasonably practicable
following each request, such forecasts, data, certificates, reports, statements,
opinions of counsel, documents or further information regarding the business,
assets, liabilities, financial condition, results of operations or business
prospects of any Obligor or any of its Subsidiaries as the Agent or any Lender
may reasonably request and that any Obligor has or (except in the case of legal
opinions relating to the perfection or priority of the Security Interest)
without unreasonable expense can obtain. The rights of the Agent and the Lenders
under this SECTION 10.4 are in addition to and not in derogation of their rights
under any other provision of this Agreement or of any other Loan Document.
(d) If requested by the Agent or any Lender, the Obligors will
furnish to the Agent and the Lenders statements in conformity with the
requirements of Federal Reserve Form U-1 referred to in Regulation U of the
Board of Governors of the Federal Reserve System.
SECTION 10.5. Notice of Litigation and Other Matters. Prompt
notice of:
(a) the commencement, to the extent any Obligor is aware of the
same, of all proceedings and investigations by or before any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any other way relating to or affecting any Obligor, any
of its Subsidiaries or any of any Obligor's or any of its Subsidiaries'
properties, assets or businesses, which might, singly or in the aggregate,
result in the occurrence of a Default or an Event of Default, or have a
Materially Adverse Effect,
(b) any amendment of the articles of incorporation or by-laws (or
other constitutive documents) of any Obligor or any of its Subsidiaries,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of any Obligor or any of
its Subsidiaries which has had or may have, singly or in the aggregate, a
Materially Adverse Effect and any change in the executive officers of any
Obligor or any of its Subsidiaries, and
(d) any Default or Event of Default or any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default by any Obligor or any of its
Subsidiaries under any material agreement (other than this Agreement, but
including the Indentures and any agreement governing the Convertible
Subordinated Notes) to which such Obligor or any of its Subsidiaries is a party
or by which such Borrower, any of its Subsidiaries or any of their properties
may be bound.
SECTION 10.6. ERISA. As soon as possible and in any event within
30 days after any Obligor knows, or has reason to know, that: (a) any
Termination Event with respect to a Plan has occurred or will occur, or (b) any
Plan has or will become subject to an additional premium payable to the PBGC
under Section 4006(a)(3)(E), or (c) any Obligor or any of its Subsidiaries is in
"default" (as defined in Section 4219(c)(5) of ERISA) with respect to payments
to a Multiemployer Plan required by reason of any Obligor's or such Subsidiary's
complete or partial withdrawal (as described in Section
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4203 or 4205 of ERISA) from such Multiemployer Plan, a certificate of the
Financial Officer setting forth the details of such event and the action which
is proposed to be taken with respect thereto, together with any notice or filing
which may be required by the PBGC or other agency of the United States
government with respect to such event.
SECTION 10.7. Accuracy of Information. All written information,
reports, statements and other papers and data furnished to the Agent or any
Lender, whether pursuant to this ARTICLE 10 or any other provision of this
Agreement or of any other Loan Document, shall be, at the time the same is so
furnished, complete and correct in all material respects to the extent necessary
to give the Agent and the Lenders true and accurate knowledge of the subject
matter.
SECTION 10.8. Revisions or Updates to Schedules. Should any of
the information or disclosures provided on any of the Schedules originally
attached hereto become outdated or incorrect in any material respect, the
Obligors shall deliver to the Agent and the Lenders as part of the officer's
certificate required pursuant to SECTION 10.3 such revisions or updates to such
Schedule(s) as may be necessary or appropriate to update or correct such
Schedule(s), PROVIDED that no such revisions or updates to any Schedule(s) shall
be deemed to have amended, modified or superseded such Schedule(s) as originally
attached hereto, or to have cured any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule(s), unless
and until the Required Lenders in their sole and absolute discretion, shall have
accepted in writing such revisions or updates to such Schedule(s).
SECTION 10.9. Subordinated Indebtedness Certificate. Not less
than five Business Days prior to any scheduled payment of any principal of, or
interest or other amounts on, any Subordinated Indebtedness, and as a condition
precedent to making such payment, the Obligors shall furnish a certificate of
the Financial Officer stating: (a) that no Default or Event of Default is in
existence as of the date of the certificate or will be in existence as of the
date of such payment, both with and without giving effect to the making of such
payment, and (b) the amount of principal and interest to be paid.
ARTICLE 11
NEGATIVE COVENANTS
Until the Revolving Credit Facility has been terminated and all
the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner set forth in SECTION 16.11, the Obligors
will not directly or indirectly and will not permit any of their Subsidiaries
to:
SECTION 11.1. Financial Ratios.
(a) Minimum Fixed Charge Coverage Ratio. As of the end of any
fiscal quarter, permit the ratio of (i) EBITDA plus cash received from Tax
Refund Claims minus Unfunded Capital Expenditures minus taxes actually paid in
cash minus distributions and dividends paid in cash to (ii) interest expense
plus scheduled payments of principal on Indebtedness for Money Borrowed, to be
less than the ratios set forth below, all measured as of the end of each fiscal
quarter for the preceding four fiscal quarters on a Consolidated basis (except
that in the case of the second fiscal quarter of fiscal year 1999, such ratio
shall be measured based on the results of such fiscal quarter only, and in the
case of the
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third fiscal quarter of fiscal year 1999, such ratio shall be measured based on
the results of such fiscal quarter and the preceding fiscal quarter only):
Fiscal Quarter Ending Ratio
Second fiscal quarter of fiscal year .50 to 1
1999
Third fiscal quarter of fiscal year .60 to 1
1999
Fourth fiscal quarter of fiscal 1.10 to 1
year 1999
Each fiscal quarter end thereafter 1.15 to 1
(b) Minimum EBITDA. Permit the EBITDA of Tultex and its
Consolidated Subsidiaries for (i) the second fiscal quarter of fiscal year 1999
to be less than $7,300,000, or (ii) the second and third fiscal quarters of
fiscal year 1999 to be less than $16,250,000 in the aggregate.
SECTION 11.2. Indebtedness for Money Borrowed. Create, assume, or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding any Indebtedness for
Money Borrowed, except that this SECTION 11.2 shall not apply to: (a)
Indebtedness for Money Borrowed represented by the Loans and the Notes, (b)
Indebtedness for Money Borrowed represented by the Bonds, PROVIDED there shall
be no increase in the principal amount thereof, (c) Indebtedness for Money
Borrowed existing on the Effective Date and reflected on SCHEDULE 6.1(J)
(excluding any such Indebtedness that is to be paid in full on the Effective
Date), and refinancings thereof (without any increase in the then outstanding
principal balance thereof) upon terms fully disclosed to the Agent and the
Lenders and which are no less favorable to the applicable Obligor or Subsidiary
than those with respect to the Indebtedness being refinanced, (d) Permitted
Purchase Money Indebtedness, (e) Subordinated Indebtedness, and (f) Indebtedness
under Hedge Agreements which are acceptable to the Agent, with a Lender, in
order to manage existing or anticipated interest rate or exchange rate risks and
not for speculative purposes.
SECTION 11.3. Guaranties. Become or remain liable with respect to
any Guaranty of any obligation of any other Person, except for (a) Guarantees of
the Secured Obligations by the Guarantors, (b) Guarantees by the Obligors (other
than Tultex) of the Indebtedness for Money Borrowed represented by the Bonds,
and (c) Guarantees by an Obligor of the obligations of any of its Subsidiaries
under real property lease agreements or other agreements arising in the ordinary
course of business, provided such Subsidiary is a Borrower or a Guarantor
hereunder and the Obligors have complied with all of the provisions of SECTION
9.11 or 9.12, as the case may be, with respect to such Subsidiary.
SECTION 11.4. Investments. Acquire, after the Agreement Date, any
Business Unit or Investment or, after such date, maintain any Investment other
than Permitted Investments.
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SECTION 11.5. Capital Expenditures. Make or incur any Capital
Expenditures in the aggregate in excess of the amount set forth below for the
fiscal year of the Obligors set forth opposite such amount:
Fiscal Year Amount
1999 (being the fiscal year
ending on the Saturday closest
to December 31, 1999) $ 5,000,000
2000 (being the fiscal year
ending on the Saturday closest
to December 31, 2000) $ 9,000,000
2001 (being the fiscal year
ending on the Saturday closest
to December 31, 2001)
and each fiscal year thereafter $10,000,000
SECTION 11.6. Restricted Dividend Payments and Purchases, Etc.
Declare or make any Restricted Dividend Payment, Restricted Payment or
Restricted Purchase; PROVIDED that Tultex may repurchase and redeem all or any
portion of the Bonds from the proceeds of Asset Dispositions of assets other
than Bank Priority Collateral to the extent permitted under SECTIONS 4.9 and
11.7; PROVIDED FURTHER that Tultex may repurchase and redeem all or any portion
of the Bonds as long as (a) immediately after giving effect to any such
repurchase or redemption, and any Loan made in connection therewith, (i) no
Default or Event of Default exists, (ii) Availability equals or exceeds
$25,000,000 (after disbursements and advances, and with all obligations of the
Obligors current based on terms agreed to or acquiesced in by vendors and
consistent with the Obligors' usual payment practices), (iii) the Obligors are
in pro forma compliance with each of the financial covenants set forth in
SECTION 11.1, (b) the repurchase price paid for such repurchased or redeemed
Bonds shall not in the aggregate exceed 75% of the outstanding principal amount
of such Bonds, and (c) prior to making any such repurchase or redemption the
Borrowers' Agent shall deliver to the Agent a certificate of the Financial
Officer confirming the accuracy of the items set forth in CLAUSE (A) above.
SECTION 11.7. Merger, Consolidation and Sale of Assets. Merge or
consolidate with any other Person or sell, lease, transfer or otherwise dispose
of all or a substantial portion of its assets to any Person, other than (a)
sales of Inventory in the ordinary course of business, and (b) sales of the Logo
Athletic Note and Vendor Note for fair market value, PROVIDED the proceeds of
any such sale of the Logo Athletic Note or Vendor Note are applied as set forth
in SECTION 4.9. As used herein, "substantial portion" shall mean assets, the
book value of which, when added to the book value of all other assets sold,
leased, transferred or otherwise disposed of by Tultex and its Consolidated
Subsidiaries (other than Inventory sold in the ordinary course of business and
the Logo Athletic Note and the Vendor Note) (i) during the fiscal year in which
such sale, lease, transfer or other disposition occurs, exceeds $5,000,000 or
(ii) during the term of this Agreement, exceeds $10,000,000.
SECTION 11.8. Transactions with Affiliates. Effect any
transaction with any Affiliate on a basis less favorable to any Obligor than
would be the case if such transaction had been effected with a Person not an
Affiliate.
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SECTION 11.9. Liens. Create, assume or permit or suffer to exist
or to be created or assumed any Lien on any of the Collateral or other assets of
an Obligor or any of its Subsidiaries, other than Permitted Liens.
SECTION 11.10. Capitalized Lease Obligations. Incur or permit to
exist any Capitalized Lease Obligations if such Capitalized Lease Obligation
when added to existing Capitalized Lease Obligations and Permitted Purchase
Money Indebtedness of the Obligors and their Subsidiaries would exceed
$1,000,000 aggregate.
SECTION 11.11. Operating Leases. Enter into any Operating Lease
if the aggregate annual rental payable under all Operating Leases of the
Obligors and their Subsidiaries would exceed $15,000,000 in the aggregate at any
time after the Effective Date.
SECTION 11.12. Limitation on Certain Restrictions on
Subsidiaries. Create or otherwise cause or suffer to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (a) pay
dividends or make any other distributions on its capital stock or any other
interest or participation in its profits owned by an Obligor or any Subsidiary
of an Obligor, or pay any Indebtedness owed to an Obligor or a Subsidiary of an
Obligor, (b) make loans or advances to an Obligor or any of an Obligor's
Subsidiaries, or (c) transfer any of its properties or assets to an Obligor,
except for such encumbrances or restrictions existing under or by reason of (i)
Applicable Laws, and (ii) this Agreement and the other Loan Documents.
SECTION 11.13. Plans. Permit any condition to exist in connection
with any Plan which might constitute grounds for the PBGC to institute
proceedings to have such Plan terminated or a trustee appointed to administer
such Plan, and any other condition, event or transaction with respect to any
Plan which could result in the incurrence by any Obligor or its Subsidiaries of
any material liability, fine or penalty.
SECTION 11.14. Sales and Leasebacks. Enter into any arrangement
with any Person providing for any Obligor's or its Subsidiaries' leasing from
such Person any real or personal property which has been or is to be sold or
transferred, directly or indirectly, by such Obligor or Subsidiaries to such
Person.
SECTION 11.15. Amendments of Other Agreements. Amend in any way
(a) the subordination provisions applicable to any Subordinated Indebtedness,
(b) the interest rate (or formula pursuant to which such interest rate is
determined) or principal amount or schedule of payments of principal and
interest with respect to any Subordinated Indebtedness, the Bonds, or any other
Indebtedness for Money Borrowed, other than to reduce the principal amount or
interest rate or extend the schedule of payments with respect thereto, or (c)
any other provision of the Indentures if, in the Agent's reasonable judgment,
such amendment would adversely affect the Agent or any of the other Secured
Creditors.
SECTION 11.16. Minimum Availability. Permit Availability (after
disbursements and advances, and with all obligations of the Obligors current
based on terms agreed to or acquiesced in by vendors and consistent with the
Obligors' usual payment practices) to be less than $15,000,000 at any time;
PROVIDED that, notwithstanding anything to the contrary contained in this
Agreement, the Agent may in its sole discretion permit Availability to be less
than $15,000,000, but greater than or equal to $10,000,000, for no more than 60
consecutive days twice during each period of 12 consecutive months.
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SECTION 11.17. Fiscal Year. Change the end of its fiscal year
from the Saturday closest to December 31.
ARTICLE 12
DEFAULT
SECTION 12.1. Events of Default. Each of the following shall
constitute an Event of Default, whatever the reason for such event and whether
it shall be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment or order of any court or any order, rule or regulation
of any governmental or nongovernmental body:
(a) Default in Payment. The Borrowers shall default in any
payment of principal of or interest on any Loan or any Note when and as
due (whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. Any Obligor shall default in the
payment, as and when due, of any other Secured Obligation, and such
default shall continue for a period of 5 days after written notice
thereof has been given to the Borrowers' Agent by the Agent.
(c) Misrepresentation. Any representation or warranty made or
deemed to be made by any Obligor under this Agreement or any other Loan
Document, or any amendment hereto or thereto, shall at any time prove to
have been incorrect or misleading in any material respect when made.
(d) Default in Performance. Any Obligor shall default in the
performance or observance of any term, covenant, condition or agreement
to be performed by the Obligors (or any of them), contained in:
(i) except as specifically set forth in CLAUSE (II) below,
ARTICLES 7, 8, 9, 10 or 11 of this Agreement, provided that the
Agent may, in its sole discretion, waive any default under
SECTIONS 8.12 or 10.1 as long as such default is not outstanding
more than 10 days;
(ii) SECTIONS 8.3, 8.4(A), 8.9(B), 8.9(C), 8.14 or 10.8 of
this Agreement and such default shall continue for a period of 10
days after written notice thereof has been given to the
Borrowers' Agent by the Agent; or
(iii) any other provision of this Agreement (other than as
specifically provided for otherwise in this SECTION 12.1) and
such default shall continue for a period of 30 days after written
notice thereof has been given to the Borrowers' Agent by the
Agent.
(e) Indebtedness Cross-Default.
(i) Any Obligor or any Subsidiary of any Obligor shall
fail to pay when due and payable the principal of or interest on
any of the Bonds or shall fail to perform any
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of its covenants or agreements in either Indenture or the other
documents executed in connection therewith, or
(ii) any Obligor shall fail to pay when due and payable
(subject to any applicable grace period) the principal of or
interest on any Subordinated Indebtedness or any other
Indebtedness for Money Borrowed (other than the Loans) in an
amount in excess of $500,000, PROVIDED that an Obligor's failure
to make a payment of the principal of or interest on Subordinated
Indebtedness on account of the operation of the subordination
provisions applicable thereto shall not be an Event of Default,
or
(iii) the maturity of any such Indebtedness described in
CLAUSE (I) or (II) shall have (A) been accelerated in accordance
with the provisions of any indenture, contract or instrument
providing for the creation of or concerning such Indebtedness, or
(B) been required to be prepaid prior to the stated maturity
thereof, or
(iv) any event shall have occurred and be continuing which
would permit any holder or holders of such Indebtedness described
in CLAUSE (I) or (II), any trustee or agent acting on behalf of
such holder or holders or any other Person so to accelerate such
maturity, and such Obligor or Subsidiary shall have failed to
cure such default prior to the expiration of any applicable cure
or grace period.
(f) Other Cross-Defaults. Any Obligor or any of its Subsidiaries
shall default in the payment when due, or in the performance or
observance, of any obligation or condition of any agreement, contract or
lease (other than this Agreement, the Security Documents or any such
agreement, contract or lease relating to Indebtedness for Money
Borrowed) if the existence of any such defaults, singly or in the
aggregate, could in the reasonable judgment of the Agent have a
Materially Adverse Effect; PROVIDED, HOWEVER, that for the purposes of
this provision where such a default could result only in a monetary
loss, a Materially Adverse Effect shall not be deemed to have occurred
unless the aggregate of such losses would exceed $1,000,000.
(g) Voluntary Bankruptcy Proceeding. Any Obligor or any of its
Subsidiaries shall (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect), (ii) file a petition
seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or
composition for adjustment of debts, (iii) consent to or fail to contest
in a timely and appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other laws, (iv) apply
for or consent to, or fail to contest in a timely and appropriate
manner, the appointment of, or the taking of possession by, a receiver,
custodian, trustee, or liquidator of itself or of a substantial part of
its property, domestic or foreign, (v) admit in writing its inability to
pay its debts as they become due, (vi) make a general assignment for the
benefit of creditors, or (vii) take any action for the purpose of
authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against any Obligor or any of its Subsidiaries in any
court of competent jurisdiction seeking (i) relief under the federal
bankruptcy laws (as now or hereafter in effect) or under any other laws,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
winding up or adjustment of debts, or (ii) the appointment of a trustee,
receiver, custodian, liquidator or the like of such Obligor, any of its
Subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of such Obligor or any of its Subsidiaries, and such case or
proceeding shall continue
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undismissed or unstayed for a period of 60 consecutive calendar days, or
an order granting the relief requested in such case or proceeding
against such Obligor or any of its Subsidiaries (including an order for
relief under such federal bankruptcy laws) shall be entered.
(i) Failure of Agreements. Any Obligor shall challenge the
validity and binding effect of any provision of any Loan Document after
delivery thereof or shall state its intention to make such a challenge
in writing, or any Loan Document, after delivery thereof hereunder,
shall for any reason (except to the extent permitted by the terms
thereof) cease to create a valid and perfected first priority Lien
(except for Permitted Liens) on, or security interest in, any of the
Collateral purported to be covered thereby.
(j) Judgment. A final, unappealable judgment or order for the
payment of money in an amount which exceeds $200,000 shall be entered
against any Obligor or any of its Subsidiaries by any court and such
judgment or order shall continue undischarged or unstayed for 30 days.
(k) Attachment. A warrant or writ of attachment or execution or
similar process which exceeds $200,000 in value shall be issued against
any property of any Obligor or any of its Subsidiaries and such warrant
or process shall continue undischarged or unstayed for 30 days.
(l) Loan Documents. Any event of default under any Loan Document
shall occur or any Obligor shall default in the performance or
observance of any term, covenant, condition or agreement contained in,
or the payment of any other sum covenanted to be paid by any Obligor
under, any Loan Document; PROVIDED, HOWEVER that no event of default
under any Loan Document shall be deemed to have occurred until any
notice required under such Loan Document has been given and any grace
period granted under such Loan Document has expired.
(m) ERISA.
(i) Any Termination Event with respect to a Plan shall
occur that, after taking into account the excess, if any, of (A)
the fair market value of the assets of any other Plan with
respect to which a Termination Event occurs on the same day (but
only to the extent that such excess is the property of the
Obligors) over (B) the present value on such day of all vested
nonforfeitable benefits under such other Plan, results in an
Unfunded Vested Accrued Benefit in excess of $0, or
(ii) any Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue
Code or Section 302 of ERISA) for which a waiver has not been
obtained in accordance with the applicable provisions of the
Internal Revenue Code and ERISA, or
(iii) any Obligor or any of its Subsidiaries is in
"default" (as defined in Section 4219(c)(5) of ERISA) with
respect to payments to a Multiemployer Plan resulting from an
Obligor's or any of its Subsidiaries complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA) from
such Multiemployer Plan, or
(iv) a Draw Event, as defined in the PBGC Memorandum of
Understanding, occurs, or any other event occurs under the PBGC
Agreement which permits the PBGC to draw upon the Letter of
Credit to be issued under the PBGC Agreement.
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(n) Change in Control. At any time after the Agreement Date, (i)
a Person or "group" of Persons (within the meaning of Section 13(d) of
the Securities Exchange Act of 1934, as amended, and the rules
promulgated thereunder), shall acquire, beneficially or of record, 25%
or more of the outstanding voting stock (stock entitled to vote for
election of directors excluding rights subject to a contingency) of
Tultex, or (ii) during any period of two consecutive calendar years,
individuals who at the beginning of such period constituted the Board of
Directors of any Obligor (together with any new directors whose election
by the Board of Directors of such Obligor or whose nomination for
election by the shareholders of such Obligor, as the case may be, was
approved by a vote of a majority of the directors then still in office
who either were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the directors of such
Obligor, as the case may be, then in office, or (iii) Tultex ceases to
own, directly or indirectly, 100% of the capital stock of each other
Obligor (less any qualifying shares), or such ownership shall cease to
vest in Tultex voting control over any such Obligor, or (iv) a "Change
of Control" as defined in either of the Indentures occurs, or (v) a
"change of control" as defined in the Convertible Subordinated Notes
occurs.
(o) Change in Management. For any reason the person serving as
the President, Chief Financial Officer, or Executive Vice
President-General Counsel of Tultex is no longer actively involved in
such role, unless a replacement reasonably satisfactory to the Required
Lenders is appointed within 90 days.
(p) General Insecurity. The occurrence of any act, omission,
circumstance, event or condition or series of acts, omissions,
circumstances, events or conditions which have, or could reasonably be
expected to have, either individually or in the aggregate, a Materially
Adverse Effect.
SECTION 12.2. Remedies.
(a) Automatic Acceleration and Termination of Facility. Upon the
occurrence of an Event of Default specified in SECTION 12.1(G) or (H), (i) the
principal of and the interest on the Loans and any Note at the time outstanding,
and all other amounts owed to the Agent, the Issuing Bank and the Lenders under
this Agreement or any of the other Loan Documents and all other Secured
Obligations, shall thereupon become due and payable without presentment, demand,
protest, or other notice of any kind, all of which are expressly waived,
anything in this Agreement or any of the other Loan Documents to the contrary
notwithstanding, and (ii) the Revolving Credit Facility and the right of the
Borrowers to request Borrowings and Letters of Credit under this Agreement shall
immediately terminate.
(b) Other Remedies. If any Event of Default shall have occurred,
and during the continuance of any such Event of Default, the Agent may, and at
the direction of the Required Lenders in their sole and absolute discretion
shall, do any of the following:
(i) declare the principal of and interest on the Loans and
any Note at the time outstanding, and all other amounts owed to the
Agent, the Issuing Bank and the Lenders under this Agreement or any of
the other Loan Documents and all other Secured Obligations, to be
forthwith due and payable, whereupon the same shall immediately become
due and payable without presentment, demand, protest or other notice of
any kind, all of which are expressly
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waived, anything in this Agreement or the other Loan Documents to the
contrary notwithstanding;
(ii) terminate the Revolving Credit Facility and any other
right of the Borrowers to request Borrowings and Letters of Credit
hereunder;
(iii) notify, or request the Obligors to notify, in
writing or otherwise, any Account Debtor with respect to any one or more
of the Receivables to make payment to the Agent, for the benefit of the
Secured Creditors, or any agent or designee of the Agent, at such
address as may be specified by the Agent and if, notwithstanding the
giving of any notice, any Account Debtor shall make payments to the
Obligors, the Obligors shall hold all such payments they receive in
trust for the Agent, for the account of the Secured Creditors, without
commingling the same with other funds or property of, or held by, the
Obligors, and shall deliver the same to the Agent or any such agent or
designee of the Agent immediately upon receipt by the Obligors in the
identical form received, together with any necessary endorsements;
(iv) settle or adjust disputes and claims directly with
Account Debtors on Receivables for amounts and on terms which the Agent
considers advisable and in all such cases only the net amounts received
by the Agent, for the account of the Secured Creditors, in payment of
such amounts, after deductions of costs and attorneys' fees, shall
constitute Collateral and the Obligors shall have no further right to
make any such settlements or adjustments or to accept any returns of
merchandise;
(v) enter upon any premises at which Inventory or
Equipment may be located and, without resistance or interference by the
Obligors, take physical possession of any or all thereof and maintain
such possession on such premises or move the same or any part thereof to
such other place or places as the Agent shall choose, without being
liable to the Obligors on account of any loss, damage or depreciation
that may occur as a result thereof, so long as the Agent shall act
reasonably and in good faith;
(vi) require the Obligors to and the Obligors shall,
without charge to the Agent or any Lender, assemble the Inventory or
Equipment and maintain or deliver it into the possession of the Agent or
any agent or representative of the Agent at such place or places as the
Agent may designate and as are reasonably convenient to both the Agent
and the Obligors;
(vii) at the expense of the Obligors, cause any of the
Inventory or Equipment to be placed in a public or field warehouse, and
the Agent shall not be liable to the Obligors on account of any loss,
damage or depreciation that may occur as a result thereof, so long as
the Agent shall act reasonably and in good faith;
(viii) without notice, demand or other process, and
without payment of any rent or any other charge, enter any of the
Obligors' premises and, without breach of the peace, until the Agent, on
behalf of the Secured Creditors, completes the enforcement of its rights
in the Collateral, take possession of such premises or place custodians
in exclusive control thereof, remain on such premises and use the same
and any of the Obligors' Equipment, for the purpose of (A) completing
any work in process, preparing any Inventory for disposition, and
disposing thereof, and (B) collecting any Receivable, and the Agent for
the benefit of the Secured Creditors is hereby granted a license or
sublicense and all other rights as may be necessary, appropriate or
desirable to use the Proprietary Rights in connection with the
foregoing, and the rights of the Obligors under all licenses,
sublicenses and franchise agreements shall inure to the Agent for the
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benefit of the Secured Creditors; PROVIDED, HOWEVER, that any use of any
federally registered trademarks as to any goods shall be subject to the
control as to the quality of such goods of the owner of such trademarks
and the goodwill of the business symbolized thereby;
(ix) exercise any and all of its rights under any and all
of the Security Documents;
(x) apply all funds in the Cash Collateral Account and any
other Collateral consisting of cash to the payment of the Secured
Obligations in any order in which the Agent, on behalf of the Secured
Creditors, may elect or use such cash in connection with the exercise of
any of its other rights hereunder or under any of the Security
Documents;
(xi) establish or cause to be established one or more
Lockboxes or other arrangement for the deposit of proceeds of
Receivables, and, in such case, the Obligors shall cause to be forwarded
to the Agent at the Agent's Office, on a daily basis, copies of all
checks and other items of payment and deposit slips related thereto
deposited in such Lockboxes, together with collection reports in form
and substance satisfactory to the Agent; and
(xii) exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code and under any other Applicable
Law, including the right, without notice except as specified below and
with or without taking the possession thereof, to sell the Collateral or
any part thereof in one or more parcels at public or private sale, at
any location chosen by the Agent, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as the
Agent may deem commercially reasonable. The Obligors agree that, to the
extent notice of sale shall be required by law, at least 10 days notice
to the Borrowers' Agent of the time and place of any public sale or the
time after which any private sale is to be made shall constitute
reasonable notification, but notice given in any other reasonable manner
or at any other reasonable time shall constitute reasonable
notification. The Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned.
SECTION 12.3. Application of Proceeds. All proceeds from each
sale of, or other realization upon, all or any part of the Collateral following
an Event of Default shall be applied or paid over as follows: (a) first: to the
payment of all costs and expenses incurred in connection with such sale or other
realization, including reasonable attorneys' fees, (b) second: to the payment of
the Secured Obligations (with the Obligors remaining liable for any deficiency)
in accordance with SECTION 4.8(D), and (c) third: the balance (if any) of such
proceeds shall be paid to the Obligors, subject to any duty imposed by law, or
otherwise to whomsoever shall be entitled thereto. The Obligors shall remain
jointly and severally liable and will pay, on demand, any deficiency remaining
in respect of the Secured Obligations, together with interest thereon at a rate
per annum equal to the highest rate then payable hereunder on such Secured
Obligations, which interest shall constitute part of the Secured Obligations.
SECTION 12.4. Power of Attorney. In addition to the
authorizations granted to the Agent under SECTION 8.13 or under any other
provision of this Agreement or of any other Loan Document, during the
continuance of an Event of Default, each Obligor hereby irrevocably designates,
makes, constitutes and appoints the Agent (and all Persons designated by the
Agent from time to time) as such Obligor's true and lawful attorney, and agent
in fact, and the Agent, or any agent of the Agent, may,
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without notice to any Obligor, and at such time or times as the Agent or any
such agent in its sole discretion may determine, in the name of such Obligor,
another Obligor, the Agent or the Lenders, (a) demand payment of the
Receivables, (b) enforce payment of the Receivables by legal proceedings or
otherwise, (c) exercise all of the Obligors' rights and remedies with respect to
the collection of Receivables, (d) settle, adjust, compromise, extend or renew
any or all of the Receivables, (e) settle adjust or compromise any legal
proceedings brought to collect the Receivables, (f) discharge and release the
Receivables or any of them, (g) prepare, file and sign the name of any Obligor
on any proof of claim in bankruptcy or any similar document against any Account
Debtor, (h) prepare, file and sign the name of any Obligor on any notice of
Lien, assignment or satisfaction of Lien, or similar document in connection with
any of the Collateral, (i) endorse the name of any Obligor upon any chattel
paper, document, instrument, notice, freight bill, bill of lading or similar
document or agreement relating to the Receivables, the Inventory or any other
Collateral, (j) use the stationery of any Obligor and sign the name of any
Obligor to verifications of the Receivables and on any notice to the Account
Debtors, (k) open the Obligors' mail, (l) notify the post office authorities to
change the address for delivery of the Obligors' mail to an address designated
by the Agent, and (m) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Receivables, Inventory or other Collateral to which any Obligor has access.
SECTION 12.5. Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of the Agent and
the Lenders under this Agreement, the Notes and each of the other Loan Documents
shall be cumulative and not exclusive of any rights or remedies which it or they
would otherwise have. In exercising such rights and remedies the Agent and the
Lenders may be selective and no failure or delay by the Agent or any Lender in
exercising any right shall operate as a waiver of it, nor shall any single or
partial exercise of any power or right preclude its other or further exercise or
the exercise of any other power or right.
(b) Waiver of Marshaling. Each Obligor hereby waives any right to
require any marshaling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this ARTICLE 12
or elsewhere in this Agreement or in any of the other Loan Documents shall be
construed as requiring or obligating the Agent, any Lender or any agent or
designee of the Agent or any Lender to make any demand, or to make any inquiry
as to the nature or sufficiency of any payment received by it, or to present or
file any claim or notice or take any action, with respect to any Receivable or
any other Collateral or the monies due or to become due thereunder or in
connection therewith, or to take any steps necessary to preserve any rights
against prior parties, and the Agent, the Lenders and their agents or designees
shall have no liability to the Obligors (or any of them) for actions taken
pursuant to this ARTICLE 12, any other provision of this Agreement or any of the
other Loan Documents so long as the Agent or such Lender shall act reasonably
and in good faith.
(d) Appointment of Receiver. In any action under this ARTICLE 12,
the Agent shall be entitled during the continuance of an Event of Default to the
appointment of a receiver, without notice of any kind whatsoever, to take
possession of all or any portion of the Collateral and to exercise such power as
the court shall confer upon such receiver.
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ARTICLE 13
ASSIGNMENTS
SECTION 13.1. Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the benefit
of the Obligors, the Lenders, the Agent, the Issuing Bank, all future holders of
the Notes, and their respective successors and assigns, except that no Obligor
may assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of each Lender.
(b) Each Lender may, with the consent of the Borrowers' Agent
(which shall not be unreasonably withheld, and which shall not be necessary if
an Event of Default exists) and the Agent's consent, assign to one or more
Eligible Assignees all or a portion of its interests, rights and obligations
under this Agreement (including all or a portion of the Loans at the time owing
to it and the Notes held by it); PROVIDED, HOWEVER, that (i) each such
assignment shall be of a constant, and not a varying, percentage of all the
assigning Lender's rights and obligations under this Agreement, (ii) the amount
of the Commitment of the assigning Lender that is subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Agent) shall in no event be less than the
Minimum Commitment, (iii) in the case of a partial assignment, the amount of the
Commitment that is retained by the assigning Lender (determined as of the date
the Assignment and Acceptance with respect to such assignment is delivered to
the Agent) shall in no event be less than the Minimum Commitment, (iv) the
parties to each such assignment shall execute and deliver to the Agent, for its
acceptance and recording in the Register (as hereinafter defined) an Assignment
and Acceptance, together with any Note or Notes subject to such assignment, (v)
such assignment shall not, without the consent of the Borrowers' Agent, require
any Obligor to file a registration statement with the Securities and Exchange
Commission or apply to or qualify the Loans or the Notes under the blue sky laws
of any state, (vi) the representation contained in SECTION 13.2 hereof shall be
true with respect to any such proposed assignee, and (vii) the parties to such
assignment shall deliver to the Agent a processing fee of $5,000. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution thereof, (x) the assignee
thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender
hereunder, and (y) the Lender assignor thereunder shall, to the extent provided
in such assignment, be released from its obligations under this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such Lender assignor
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of the Obligors (or any of them) or the performance
or observance by the Obligors (or any of them) of any of their obligations under
this Agreement or any other Loan Document; (iii) such assignee confirms that it
has received a copy of this Agreement, together with copies of the financial
statements referred to in SECTION 6.1(N) and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such
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Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such Lender assignor or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes the Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Agent by the terms hereof and thereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) The Agent shall maintain a copy of each Assignment and
Acceptance delivered to it and a register for the recordation of the names and
addresses of the Lenders and the Commitment Percentage of, and principal amount
of the Loans owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive, in the absence of manifest error,
and the Obligors, the Agent and the Lenders may treat each person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Obligors or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an Eligible Assignee together with any Note or Notes
subject to such assignment, the fee described in CLAUSE (VII) of SECTION
13.1(B), and the written consent of the Agent to such assignment and, if
applicable, the written consent of the Borrowers' Agent, the Agent shall, if
such Assignment and Acceptance has been completed and is in the form of EXHIBIT
D, (i) accept such Assignment and Acceptance, (ii) record the information
contained therein in the Register, (iii) give prompt notice thereof to the
Lenders and the Borrowers' Agent, and (iv) promptly deliver a copy of such
Assignment and Acceptance to the Borrowers' Agent. Within five Business Days
after receipt of notice, the Borrowers shall execute and deliver to the Agent in
exchange for the surrendered Note or Notes a new Note or Notes to the order of
such Eligible Assignee in amounts equal to the Commitment Percentage assumed by
such Eligible Assignee pursuant to such Assignment and Acceptance and a new Note
or Notes to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of the assigned
Notes delivered to the assignor Lender. Each surrendered Note or Notes shall be
cancelled and returned to the Borrowers' Agent.
(f) Each Lender may, without the consent of the Obligors, sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Agreement (including all or a portion of its
commitments hereunder and the Loans owing to it and the Notes held by it);
PROVIDED, HOWEVER, that (i) each such participation shall be in an amount not
less than the Minimum Commitment, (ii) such Lender's obligations under this
Agreement (including its commitments hereunder) shall remain unchanged, (iii)
such Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iv) such Lender shall remain the holder of the
Notes held by it for all purposes of this Agreement, (v) the Obligors, the Agent
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement; PROVIDED, that such Lender may agree with any participant that such
Lender will not, without such participant's consent, agree to or approve any
waivers or amendments which would reduce the principal of or the interest rate
on any Loans, extend the term or increase the amount of the commitments of such
participant, reduce the amount of any fees to which such participant is
entitled, extend any scheduled payment date for principal or release Collateral
securing the Loans (other than
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Collateral disposed of pursuant to SECTION 8.7 hereof or otherwise in accordance
with the terms of this Agreement or the Security Documents), and (vi) any such
disposition shall not, without the consent of the Borrowers' Agent, require any
Obligor to file a registration statement with the Securities and Exchange
Commission to apply to qualify the Loans or the Notes under the blue sky law of
any state. Any Lender selling a participation to any bank or other entity that
is not an Affiliate of such Lender shall give prompt notice thereof to the
Borrowers' Agent.
(g) Any Lender may, in connection with any assignment, proposed
assignment, participation or proposed participation pursuant to this SECTION
13.1, disclose to the assignee, participant, proposed assignee or proposed
participant, any information relating to the Obligors and their Subsidiaries
furnished to such Lender by or on behalf of the Obligors; PROVIDED that, prior
to any such disclosure, each such assignee, proposed assignee, participant or
proposed participant shall agree with the Obligors or such Lender (which in the
case of an agreement with only such Lender, the Obligors shall be recognized as
a third party beneficiary thereof) to preserve the confidentiality of any
confidential information relating to the Obligors and their Subsidiaries
received from such Lender.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time 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. No such assignment shall release the assigning Lender from its
obligations hereunder.
SECTION 13.2. Representation of Lenders. Each Lender hereby
represents that it will make each Loan hereunder as a commercial loan for its
own account in the ordinary course of its business; PROVIDED, HOWEVER, that
subject to SECTION 13.1 hereof, the disposition of the Notes or other evidence
of the Secured Obligations held by any Lender shall at all times be within its
exclusive control.
ARTICLE 14
AGENT
SECTION 14.1. Appointment of Agent. Each of the Lenders hereby
irrevocably designates and appoints NationsBank, N.A. as the agent of such
Lender under this Agreement and the other Loan Documents, and each such Lender
irrevocably authorizes the Agent, as the agent for such Lender to take such
action on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are expressly
delegated to the Agent by the terms of this Agreement and such other Loan
Documents, including to make determinations as to the eligibility of Inventory
and Receivables and to adjust the advance ratios contained in the definition of
"Borrowing Base" (so long as such advance ratios, as adjusted, do not exceed
those set forth in the definition of "Borrowing Base"), together with such other
powers as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere in this Agreement or such other Loan Documents, the Agent
shall not have any duties or responsibilities, except those expressly set forth
herein and therein, or any fiduciary relationship with any Lender, and no
implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or the other Loan Documents or
otherwise exist against the Agent.
SECTION 14.2. Delegation of Duties. The Agent may execute any of
its duties under this Agreement and the other Loan Documents by or through
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall not be
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responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 14.3. Exculpatory Provisions. Neither the Agent nor any
of its trustees, officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall (a) be liable to any Lender (or any Lender's participants) for
any action lawfully taken or omitted to be taken by it or such Person under or
in connection with this Agreement or the other Loan Documents (except for its or
such Person's own gross negligence or willful misconduct), (b) be responsible in
any manner to any Lender (or any Lender's participants) for any recitals,
statements, representations or warranties made by the Obligors or any of their
Subsidiaries or any officer thereof contained in this Agreement or the other
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or the other Loan Documents, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
the other Loan Documents or for any failure of the Obligors or any of their
Subsidiaries to perform their obligations hereunder or thereunder, or (c) have
any obligation whatsoever to any of the Lenders to assure that the Collateral
exists or is owned by any Obligor or is cared for, protected or insured or has
been encumbered, or that the Agent's Liens have been properly or sufficiently or
lawfully created, perfected, protected or enforced or are entitled to any
particular priority, or to exercise at all or in any particular manner or under
any duty of care, disclosure or fidelity, or to continue exercising, any of the
rights, authorities and powers granted or available to the Agent pursuant to any
of the Loan Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Agent may act in
any manner it may deem appropriate, in its sole discretion, given the Agent's
own interest in the Collateral in its capacity as one of the Lenders and that
the Agent shall have no other duty or liability whatsoever to any Lender as to
any of the foregoing. The Agent shall not be under any obligation to any Lender
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Agreement, or to inspect the
properties, books or records of the Obligors or any of their Subsidiaries.
SECTION 14.4. Reliance by Agent. The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any Note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document or conversation believed by it to be genuine and correct and to have
been signed, sent or made by the proper Person or Persons and upon advice and
statements of legal counsel (including counsel to the Borrowers or any of its
Subsidiaries), independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner thereof for all
purposes unless such Note shall have been transferred in accordance with SECTION
13.1. The Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan Documents unless it shall first
receive such advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking or continuing to take any such action. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the Notes in accordance with a request of the Required Lenders, and such
request and any action taken or failure to act pursuant thereto shall be binding
upon all the Lenders and all future holders of the Notes.
SECTION 14.5. Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or Event of Default
hereunder unless the Agent has received notice from a Lender or the Borrowers'
Agent referring to this Agreement, describing such Default or Event of Default
and stating that such notice is a "notice of default". In the event that the
Agent receives such a notice, the Agent shall promptly give notice thereof to
the Lenders. The Agent shall take such
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action with respect to such Default or Event of Default as shall be reasonably
directed by the Required Lenders; PROVIDED that unless and until the Agent shall
have received such directions, the Agent may (but shall not be obligated to)
continue making Revolving Credit Loans to the Borrowers on behalf of the Lenders
in reliance on the provisions of SECTION 4.7 and take such other action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the Lenders.
SECTION 14.6. Non-Reliance on Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereinafter
taken, including any review of the affairs of the Obligors and their
Subsidiaries, shall be deemed to constitute any representation or warranty by
the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Obligors and their
Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Agent or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit analysis, appraisals and decisions in taking or not taking action
under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Obligors and their Subsidiaries. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent hereunder or by
the other Loan Documents, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information concerning the business,
operations, property, financial and other condition or creditworthiness of the
Obligors and their Subsidiaries which may come into the possession of the Agent
or any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates.
SECTION 14.7. Indemnification. The Lenders agree to indemnify the
Agent in its capacity as such (to the extent not reimbursed by the Obligors and
without limiting the obligation of the Obligors to do so), ratably according to
their respective Commitment Percentages, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including at any time following the payment of the Notes) be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of this Agreement or the other Loan Documents, or any documents contemplated by
or referred to herein or therein or the transactions contemplated hereby or
thereby or any action taken or omitted by the Agent under or in connection with
any of the foregoing; PROVIDED that no Lender shall be liable for the payment of
any portion of such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the Agent's gross negligence or willful misconduct or resulting solely from
transactions or occurrences that occur at a time after such Lender has assigned
all of its interests, rights and obligations under this Agreement pursuant to
SECTION 13.1 or, in the case of a Lender to which an assignment is made
hereunder pursuant to SECTION 13.1, at a time before such assignment. The
agreements in this subsection shall survive the payment of the Notes, the
Secured Obligations and all other amounts payable hereunder and the termination
of this Agreement.
SECTION 14.8. Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally engage in any
kind of business with the Obligors and their Subsidiaries as if the Agent were
not the Agent hereunder. With respect to its Commitment, the Loans made or
renewed by it and any Note issued to it and any Letter of Credit issued by it,
the Agent
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shall have and may exercise the same rights and powers under this Agreement and
the other Loan Documents and is subject to the same obligations and liabilities
as and to the extent set forth herein and in the other Loan Documents for any
other Lender. The terms "Lenders" or "Required Lenders" or any other term shall,
unless the context clearly otherwise indicates, include the Agent in its
individual capacity as a Lender or one of the Required Lenders.
SECTION 14.9. Successor Agent. The Agent may resign as Agent upon
5 days written notice to the Lenders and the Borrowers' Agent; PROVIDED,
HOWEVER, that such resignation shall not take effect until a successor agent has
been appointed. If the Agent shall resign as Agent under this Agreement, then
the Required Lenders shall appoint from among the Lenders a successor agent for
the Lenders which successor agent shall be approved by the Borrowers' Agent
(which approval shall not be unreasonably withheld), whereupon such successor
agent shall succeed to the rights, powers and duties of the Agent, and the term
"Agent" shall mean such successor agent effective upon its appointment, and the
former Agent's rights, powers and duties as Agent shall be terminated, without
any other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. If the Required Lenders
have failed to appoint a successor agent within 30 days after the resignation
notice given by the Agent as provided above, then the Agent shall be entitled to
appoint a successor agent from among the Lenders. After any Agent's resignation
hereunder as Agent, the provisions of ARTICLE 14 shall inure to its benefit as
to any actions taken or omitted to be taken by it while it was Agent under this
Agreement.
SECTION 14.10. Notices from Agent to Lenders. The Agent shall
promptly, upon the written request from any Lender, forward to each Lender
copies of any written notices, reports or other information supplied to it by
the Borrowers or other Obligors (but which the Borrowers or other Obligors are
not required to supply directly to the Lenders).
SECTION 14.11. Field Examination Reports; Disclaimer by Lenders.
Each Lender: (a) is deemed to have requested that the Agent furnish such Lender,
promptly after it becomes available, a copy of each field examination report
(each a "Report" and collectively, "Reports") prepared by the Agent or its
agents; (b) expressly agrees and acknowledges that neither the Agent nor
NationsBank makes any representation or warranty as to the accuracy of any
Report or shall be liable for any information contained in any Report; (c)
expressly agrees and acknowledges that the Reports are not comprehensive audits
or examinations, that the Agent or other party performing any audit or
examination will inspect only specific information regarding the Obligors and
will rely significantly upon the Obligors' books and records, as well as on
representations of the Obligors' personnel; (d) agrees to keep all Reports
confidential and strictly for its internal use, and not to distribute (except to
its participants) or use any Report in any other manner; and (e) without
limiting the generality of any other indemnification provision contained in this
Agreement, agrees (i) to hold the Agent and NationsBank harmless from any action
the indemnifying Lender may take or conclusion the indemnifying Lender may reach
or draw from any Report in connection with any Loans or other credit
accommodations that the indemnifying Lender has made or may make to the
Obligors, or the indemnifying Lender's participation in Letters of Credit, and
(ii) to pay and protect, and indemnify, defend and hold the Agent and
NationsBank harmless from and against, the claims, actions, proceedings,
damages, costs, expenses and other amounts (including, without limitation
reasonable attorneys' fees) incurred by the Agent and NationsBank as the direct
or indirect result of any third parties who might obtain all or part of any
Report through the indemnifying Lender.
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ARTICLE 15
GUARANTEE
SECTION 15.1. Guarantee. The Guarantors hereby jointly and
severally guarantee to the Agent and the other Secured Creditors the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) of the Loans and all of the other Secured Obligations, including any
interest, fees and expenses accrued or incurred after the filing by or against
any Obligor of any petition seeking relief in bankruptcy or under any act or law
pertaining to insolvency or debtor relief, regardless of whether such interest,
fees and expenses are allowable in any such proceeding (collectively, the
"Guaranteed Obligations"), in each case strictly in accordance with the terms of
this Agreement and the other Loan Documents. The Guarantors hereby further
jointly and severally agree that if any Borrower shall fail to pay in full when
due (whether at stated maturity, by acceleration or otherwise) any of the
Guaranteed Obligations, the Guarantors 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 extended maturity, by acceleration or
otherwise) in accordance with the terms of such extension or renewal.
Notwithstanding anything to the contrary herein provided, the "Guaranteed
Obligations" of Tultex Canada hereunder shall only include and relate to the
Loans and other Secured Obligations of Tultex and the guarantee and joint and
several liability of Tultex Canada shall not constitute any guarantee of or
joint and several liability in respect of any Loans or Guaranteed Obligations of
any other Person.
SECTION 15.2. Obligations Unconditional. The obligations of the
Guarantors hereunder are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Borrowers under this Agreement or any other Loan
Document 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
that might otherwise constitute a legal or equitable discharge or defense of a
surety or guarantor, it being the intent of this SECTION 15.2 that the
obligations of the Guarantors hereunder shall be absolute and unconditional, and
joint and several, under all circumstances. Without limiting the generality of
the foregoing, it is agreed that each Guarantor's obligations hereunder shall be
absolute and unconditional irrespective of: (a) any lack of validity or
enforceability of any Loan Document or any other agreement or instrument
relating thereto; (b) any change in the time, manner or place of payments of, or
in any other term of, all or any part of the Guaranteed Obligations, or any
other amendment or waiver thereof or any consent to departure therefrom,
including any increase in the Guaranteed Obligations resulting from the
extension of additional credit to any Borrower or otherwise; (c) any taking,
exchange, release or non-perfection of any collateral, or any release or
amendment or waiver of or consent to departure from any guaranty for all or any
of the Guaranteed Obligations; (d) any change, restructuring or termination of
the corporate structure or existence of any Obligor; or (e) any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, any Guarantor.
SECTION 15.3. Waiver of Suretyship Defenses. Each Guarantor
agrees that the joint and several liability of the Guarantors provided for in
SECTION 15.1 shall not be impaired or affected by any modification, supplement,
extension or amendment or any contract or agreement to which the other Obligors
may hereafter agree (other than an agreement signed by the Agent and the Lenders
specifically releasing such liability), nor by any delay, extension of time,
renewal, compromise or other indulgence granted by the Agent or any Lender with
respect to any of the Guaranteed Obligations, nor by any other agreements or
arrangements whatever with the other Obligors or with anyone else, each
Guarantor hereby waiving all notice of such delay, extension, release,
substitution, renewal, compromise or other indulgence,
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and hereby consenting to be bound thereby as fully and effectually as if it had
expressly agreed thereto in advance. The liability of each Guarantor is direct
and unconditional as to all of the Guaranteed Obligations, and may be enforced
without requiring the Agent or any Lender first to resort to any other right,
remedy or security. Each Guarantor hereby expressly waives promptness,
diligence, notice of acceptance and any other notice (except to the extent
expressly provided for herein or in another Loan Document) with respect to any
of the Guaranteed Obligations, this Agreement or any other Loan Document and any
requirement that the Agent or any Lender protect, secure, perfect or insure any
Lien or any property subject thereto or exhaust any right or take any action
against any Borrower or any other Person or any collateral, including any rights
any Guarantor may otherwise have under O.C.G.A. ss. 10-7-24 or any successor
statute or any analogous statute in any jurisdiction under the laws of which any
Guarantor is incorporated or in which any Guarantor conducts business.
SECTION 15.4. Reinstatement. The obligations of the Guarantors
hereunder shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of any Obligor in respect of any 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 Guarantors jointly and
severally agree that they will indemnify each of the Agent and the Lenders on
demand for all reasonable costs and expenses (including fees of counsel)
incurred by the Agent and the Lenders in connection with such rescission or
restoration, including any such costs and expenses incurred in defending against
any claim alleging that such payment constituted a preference, fraudulent
transfer or similar payment under any bankruptcy, insolvency or similar law.
SECTION 15.5. Remedies. The Guarantors jointly and severally
agree that, as between the Guarantors and the Agent and the Lenders, the
Guaranteed Obligations may be declared to be forthwith due and payable as
provided herein (and shall be deemed to have become automatically due and
payable in the circumstances provided herein) for purposes hereof,
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such Guaranteed Obligations from becoming automatically due and
payable) as against any Borrower and that, in the event of such declaration
(whether or not the Guaranteed Obligations are then due and payable by any
Borrower), the Guaranteed Obligations shall forthwith become due and payable by
the Guarantors for purposes hereof.
SECTION 15.6. Continuing Guaranty. The guaranty set forth herein
is a continuing guaranty, and shall apply to all Guaranteed Obligations,
whenever and howsoever arising.
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ARTICLE 16
MISCELLANEOUS
SECTION 16.1. Notices.
(a) Method of Communication. Except as specifically provided in
this Agreement or in any of the other Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by telephone,
subsequently confirmed in writing. Notices in writing shall be delivered
personally or sent by certified or registered mail, postage pre-paid, or by
overnight courier, telex or facsimile transmission and shall be deemed received
in the case of personal delivery, when delivered, in the case of mailing, when
receipted for, in the case of overnight delivery, on the next Business Day after
delivery to the courier, and in the case of telex and facsimile transmission,
upon transmittal, PROVIDED that in the case of notices to the Agent, notice
shall be deemed to have been given only when such notice is actually received by
the Agent. A telephonic notice to the Agent, as understood by the Agent, will be
deemed to be the controlling and proper notice in the event of a discrepancy
with or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to
it at the following addresses, or any other address of which all the other
parties are notified in writing:
If to a Borrower or Tultex Corporation, as Borrowers' Agent
any other Obligor: 101 Commonwealth Blvd.
Martinsville, Virginia 24115
Attn: O. Randolph Rollins
Facsimile No.: 540-632-8751
with a courtesy copy to: Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
Attn: Lathan M. Ewers, Jr.
Facsimile No.: 804-788-8218
If to the Agent: NationsBank, N.A.
Business Credit Division
600 Peachtree Street
13th Floor
Atlanta, Georgia 30308
Attn: Sherry Lail
Facsimile No.: 404-607-6437
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with a courtesy copy to: Troutman Sanders LLP
NationsBank Plaza
Suite 5200
600 Peachtree Street
Atlanta, Georgia 30308-2216
Attn: Michael Leveille, Esq.
Facsimile No.: 404-885-3995
If to a Lender: At the address of such Lender set
forth on the signature page hereof.
(c) Agent's Office. The Agent hereby designates its office
located at 600 Peachtree Street, Atlanta, Georgia 30308, or any subsequent
office which shall have been specified for such purpose by written notice to the
Borrowers' Agent, as the office to which payments due are to be made and at
which Loans will be disbursed.
SECTION 16.2. Expenses. The Obligors jointly and severally agree
to pay or reimburse on demand all costs and expenses incurred by the Agent,
including the reasonable fees and disbursements of counsel, in connection with
(a) the negotiation, preparation, execution, delivery, administration,
syndication, enforcement and termination of this Agreement and each of the other
Loan Documents, whenever the same shall be executed and delivered, including (i)
the out-of-pocket costs and expenses incurred in connection with the
administration, syndication and interpretation of this Agreement and the other
Loan Documents; (ii) the costs and expenses of appraisals of the Collateral;
(iii) the costs and expenses of lien searches; and (iv) all taxes, fees and
other charges for recording the Mortgages and filing the Financing Statements
and continuations, and the costs and expenses of taking other actions to
perfect, protect, and continue the Security Interests; (b) the preparation,
execution and delivery of any waiver, amendment, supplement or consent by the
Agent and the Lenders relating to this Agreement or any of the other Loan
Documents; (c) sums paid or incurred to pay any amount or take any action
required of the Obligors under the Loan Documents that the Obligors fails to pay
or take; (d) costs of inspections and verifications of the Collateral, including
standard per diem fees charged by the Agent and all out-of-pocket expenses for
travel, lodging and meals in connection with inspections of the Collateral and
the Obligors' operations and books and records by the Agent's employees or
agents up to four times per year and whenever an Event of Default exists; (e)
costs and expenses of forwarding loan proceeds, collecting checks and other
items of payment, and establishing and maintaining each Disbursement Account,
Agency Account and Lockbox; (f) costs and expenses of preserving and protecting
the Collateral; and (g) consulting, after the occurrence of a Default, with one
or more Persons, including appraisers, accountants and lawyers, concerning the
value of any Collateral for the Secured Obligations or related to the nature,
scope or value of any right or remedy of the Agent or any Lender hereunder or
under any of the other Loan Documents, including any review of factual matters
in connection therewith, which expenses shall include the fees and disbursements
of such Persons.
The Obligors further jointly and severally agree to pay or reimburse on demand
all costs and expenses incurred by the Agent, the Issuing Bank and the Lenders,
including the reasonable fees and disbursements of counsel, experts and other
consultants to the Agent, the Issuing Bank and any Lender, in connection with
(a) any Default or Event of Default or any modification, amendment, waiver,
restructuring or forbearance with respect to any of the Loan Documents in
connection with such Default or Event of Default, and (b) any actions taken to
obtain payment of the Secured Obligations, enforce the Security Interests, sell
or otherwise realize upon the Collateral, and otherwise enforce the provisions
of the Loan Documents, or to prosecute or defend any claim in any way arising
out of, related to or connected with, this Agreement or any of the other Loan
Documents.
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The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Obligors. Each Borrower
hereby authorizes the Agent and the Lenders to debit such Borrower's Loan
Accounts (by increasing the principal amount of the Revolving Credit Loans) in
the amount of any such costs and expenses owed by the Borrowers and other
Obligors when due.
SECTION 16.3. Stamp and Other Taxes. The Obligors jointly and
severally agree to pay any and all stamp, registration, recordation and similar
taxes, fees or charges, and shall jointly and severally indemnify the Agent and
the Lenders against any and all liabilities with respect to or resulting from
any delay in the payment or omission to pay any such taxes, fees or charges,
which may be payable or determined to be payable in connection with the
execution, delivery, performance or enforcement of this Agreement and any of the
other Loan Documents or the perfection of any rights or security interest
thereunder, including the Security Interest.
SECTION 16.4. Setoff. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
during the continuance of any Event of Default, each Lender, any participant
with such Lender in the Loans and each Affiliate of each Lender are hereby
authorized by each Obligor at any time or from time to time, without notice to
any Obligor or to any other Person, any such notice being hereby expressly
waived, to setoff and to appropriate and to apply any and all deposits (general
or special, including indebtedness evidenced by certificates of deposit, whether
matured or unmatured) and any other indebtedness at any time held or owing by
any Lender or any Affiliate of any Lender or any participant to or for the
credit or the account of any Obligor against and on account of the Secured
Obligations irrespective or whether or not (a) the Agent or such Lender shall
have made any demand under this Agreement or any of the other Loan Documents, or
(b) the Agent or such Lender shall have declared any or all of the Secured
Obligations to be due and payable as permitted by SECTION 12.2 and although such
Secured Obligations shall be contingent or unmatured. Each Lender acknowledges
that the provisions of this Section shall, as between such Lender and the Agent
and other Lenders, be subject to the provisions of SECTION 16.24.
SECTION 16.5. Litigation. THE OBLIGORS, THE AGENT, THE ISSUING
BANK AND THE LENDERS HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE TRIAL
BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN WHICH
AN ACTION MAY BE COMMENCED BY OR AGAINST THE OBLIGORS (OR ANY OF THEM), THE
AGENT, THE ISSUING BANK OR THE LENDERS ARISING OUT OF THIS AGREEMENT, THE
COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE
WHATSOEVER BETWEEN THE OBLIGORS (OR ANY OF THEM) AND THE AGENT, THE ISSUING BANK
OR ANY LENDER OF ANY KIND OR NATURE. THE OBLIGORS, THE AGENT, THE ISSUING BANK
AND THE LENDERS HEREBY AGREE THAT THE FEDERAL COURT OF THE NORTHERN DISTRICT OF
GEORGIA OR, AT THE OPTION OF THE AGENT, THE ISSUING BANK OR ANY LENDER, ANY
COURT IN WHICH THE AGENT, THE ISSUING BANK OR SUCH LENDER SHALL INITIATE LEGAL
OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER JURISDICTION OVER THE
MATTER IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE JURISDICTION TO HEAR AND
DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE OBLIGORS (OR ANY OF THEM) AND THE
AGENT, THE ISSUING BANK OR SUCH LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO
THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING THEREFROM.
EACH OBLIGOR EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN
ANY ACTION OR PROCEEDING COMMENCED IN SUCH COURTS,
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HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND COMPLAINT, OR OTHER PROCESS
OR PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE OF SUCH SUMMONS AND COMPLAINT
OR OTHER PROCESS OR PAPERS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED
TO THE BORROWERS' AGENT AT THE ADDRESS OF THE OBLIGORS SET FORTH IN SECTION
16.1. SHOULD ANY OBLIGOR FAIL TO APPEAR OR ANSWER ANY SUMMONS, COMPLAINT,
PROCESS OR PAPERS SO SERVED WITHIN 30 DAYS AFTER THE MAILING THEREOF, IT SHALL
BE DEEMED IN DEFAULT AND AN ORDER AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS
DEMANDED OR PRAYED FOR IN SUCH SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE
NONEXCLUSIVE CHOICE OF FORUM SET FORTH IN THIS SECTION SHALL NOT BE DEEMED TO
PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF
ANY ACTION UNDER THIS AGREEMENT TO ENFORCE SAME IN ANY APPROPRIATE JURISDICTION.
SECTION 16.6. Waiver of Rights. EACH OBLIGOR HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH SUCH Obligor HAS UNDER
CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE
ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE AGENT OR ANY LENDER, OR THE
SUCCESSORS AND ASSIGNS OF THE AGENT OR SUCH LENDER TO POSSESSION OF THE
COLLATERAL UPON AN EVENT OF DEFAULT. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING AND WITHOUT LIMITING ANY OTHER RIGHT WHICH THE AGENT OR THE LENDERS
MAY HAVE, EACH Obligor CONSENTS THAT IF THE AGENT OR ANY LENDER FILES A PETITION
FOR AN IMMEDIATE WRIT OF POSSESSION IN COMPLIANCE WITH SECTIONS 44-14-261 AND
44-14-262 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR PROVISION OF
APPLICABLE LAW, AND THIS WAIVER OR A COPY HEREOF IS ALLEGED IN SUCH PETITION AND
ATTACHED THERETO, THE COURT BEFORE WHICH SUCH PETITION IS FILED MAY DISPENSE
WITH ALL RIGHTS AND PROCEDURES HEREIN WAIVED AND MAY ISSUE FORTHWITH AN
IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE WITH CHAPTER 14 OF TITLE 44 OF THE
OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE WITH ANY SIMILAR PROVISION OF
APPLICABLE LAW, WITHOUT THE NECESSITY OF AN ACCOMPANYING BOND AS OTHERWISE
REQUIRED BY SECTION 44-14-263 OF THE OFFICIAL CODE OF GEORGIA OR BY ANY SIMILAR
PROVISION UNDER APPLICABLE LAW. EACH Obligor HEREBY ACKNOWLEDGES THAT IT HAS
READ AND FULLY UNDERSTANDS THE TERMS OF THIS WAIVER AND THE EFFECT HEREOF.
SECTION 16.7. Consent to Advertising and Publicity. With the
prior written consent of the Borrowers' Agent, which consent shall not be
unreasonably withheld, the Agent, on behalf of the Lenders, may issue and
disseminate to the public information describing the credit accommodation
entered into pursuant to this Agreement, including the name and address of each
Obligor, the amount, interest rate, maturity, collateral and a general
description of the Obligors' business.
SECTION 16.8. Reversal of Payments. The Agent and each Lender
shall have the continuing and exclusive right to apply, reverse and re-apply any
and all payments to any portion of the Secured Obligations in a manner
consistent with the terms of this Agreement. To the extent any Obligor makes a
payment or payments to the Agent, for the account of the Lenders, or any Lender
receives any payment or proceeds of the Collateral for the Obligors' benefit,
which payment(s) or proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to
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be repaid to a trustee, receiver or any other party under any bankruptcy law,
state or federal law, common law or equitable cause, then, to the extent of such
payment or proceeds received, the Secured Obligations or part thereof intended
to be satisfied shall be revived and continued in full force and effect, as if
such payment or proceeds had not been received by the Agent or such Lender.
SECTION 16.9. Injunctive Relief. Each Obligor recognizes that, in
the event such Obligor 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 the Agent and the Lenders; therefore, each Obligor
agrees that if any Event of Default shall have occurred and be continuing, the
Agent and the Lenders, if the Agent or any Lender so requests, shall be entitled
to temporary and permanent injunctive relief without the necessity of proving
actual damages.
SECTION 16.10. Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including all computations utilized by the Obligors to determine
whether they are in compliance with any covenant contained herein, shall, unless
this Agreement otherwise provides or unless Required Lenders shall otherwise
consent in writing, be performed in accordance with GAAP.
SECTION 16.11. Amendments.
(a) Except as set forth in SUBSECTION (B) below, any term,
covenant, agreement or condition of this Agreement or any of the other Loan
Documents may be amended or waived, and any departure therefrom may be consented
to by the Required Lenders, if, but only if, such amendment, waiver or consent
is in writing signed by the Required Lenders and, in the case of an amendment
(other than an amendment described in SECTION 16.11(D)), by the Borrowers' Agent
or the Obligors, and in any such event, the failure to observe, perform or
discharge any such term, covenant, agreement or condition (whether such
amendment is executed or such waiver or consent is given before or after such
failure) shall not be construed as a breach of such term, covenant, agreement or
condition or as a Default or an Event of Default; PROVIDED that (i) without the
written consent of the Issuing Bank, no amendment or waiver shall be made to any
provision of ARTICLE 3 hereof or any of the Issuing Bank's rights or obligations
with respect to Letters of Credit, (ii) without the written consent of
NationsBank, no amendment or waiver shall be made to any of NationsBank's rights
or obligations with respect to Non-Ratable Loans, (iii) without the written
consent of the Agent, no amendment or waiver shall be made to any provision of
ARTICLE 14 as such provisions apply to the Agent or to any other provision of
any Loan Document as such provisions relate to the rights and obligations of the
Agent, and (iv) the Agent may, without the consent of the Required Lenders,
waive the requirements of SECTION 11.16 to the extent expressly set forth
therein. Unless otherwise specified in such waiver or consent, a waiver or
consent given hereunder shall be effective only in the specific instance and for
the specific purpose for which given. In the event that any such waiver or
amendment is requested by the Obligors, the Agent and the Lenders may require
and charge a fee in connection therewith and consideration thereof in such
amount as shall be determined by the Agent and the Required Lenders in their
discretion.
(b) Except as otherwise set forth in this Agreement, without the
prior unanimous written consent of the Lenders, (i) no amendment, consent or
waiver shall affect the amount or extend the time of the obligation of the
Lenders to make Loans, extend the originally scheduled time or times of payment
of the principal of any Loan, alter the time or times of payment of interest on
any Loan or the amount of the principal thereof or the rate of interest thereon
or the amount of any commitment fee payable hereunder, permit any subordination
of the principal or interest on any Loan, permit the subordination of the
Security Interests in any material Collateral (meaning Collateral having a then
fair
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market value in excess of $5,000,000), or amend the provisions of ARTICLE
12 or of this SECTION 16.11(B), (ii) no material Collateral (meaning Collateral
having a then fair market value in excess of $5,000,000) shall be released by
the Agent other than releases of Collateral in connection with the sale of any
such Collateral in the ordinary course of an Obligor's business or as otherwise
specifically permitted in this Agreement, (iii) no amendment shall be made to
the definitions of "Commitment", "Commitment Percentage", "Proportionate",
"Ratable", "Required Lenders" or "Secured Obligations", (iv) neither the Agent
nor any Lender shall consent to any amendment to or waiver of the amortization,
deferral or subordination provisions of any Subordinated Indebtedness or any
other instrument or agreement evidencing or relating to obligations of the
Obligors that are expressly subordinate to any of the Secured Obligations if
such amendment or waiver would be adverse to the Lenders in their capacities as
Lenders hereunder; and (v) no amendment shall be made that increases the advance
rates set forth in the definition of "Borrowing Base"; PROVIDED, HOWEVER, that
anything herein to the contrary notwithstanding, the Required Lenders shall have
the right to waive any Default or Event of Default (unless such Default or Event
of Default arises out of a provision of this Agreement which can only be amended
with the unanimous consent of the Lenders) and the consequences hereunder of
such Default or Event of Default and shall have the right to enter into an
agreement with the Obligors providing for the forbearance from the exercise of
any remedies provided hereunder or under the other Loan Documents without
waiving any Default or Event of Default.
(c) The making of Loans hereunder by the Lenders (or the issuance
of Letters of Credit) during the existence of a Default or Event of Default
shall not be deemed to constitute a waiver of such Default or Event of Default.
(d) Notwithstanding any provision of this Agreement or any other
Loan Document to the contrary, no consent, written or otherwise, of the Obligors
shall be necessary or required in connection with any amendment to ARTICLE 14 or
SECTION 4.7, and any amendment to such provisions shall be effected solely by
and among the Agent and the Required Lenders (or Lenders, as the case may be),
PROVIDED that no such amendment shall impose any obligation on the Obligors.
SECTION 16.12. Assignment. Subject to the provisions of ARTICLE
13, all the provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
except that no Obligor may assign or transfer any of its rights under this
Agreement.
SECTION 16.13. Performance of Obligors' Duties.
(a) The Obligors' obligations under this Agreement and each of
the other Loan Documents shall be performed by the Obligors at their sole cost
and expense.
(b) If the Obligors shall fail to do any act or thing which they
have covenanted to do under this Agreement or any of the other Loan Documents,
the Agent, on behalf of the Lenders, may (but shall not be obligated to) do the
same or cause it to be done either in the name of the Agent or the Lenders or in
the name and on behalf of the Obligors, and the Obligors hereby irrevocably
authorize the Agent so to act.
SECTION 16.14. Indemnification. The Obligors jointly and
severally agree to reimburse the Agent, the Issuing Bank and the Lenders and
each of their Affiliates, agents, employees, officers, directors, Subsidiaries,
successors and assigns (the "Indemnitees") for all costs and expenses, including
reasonable counsel fees and disbursements, incurred, and to indemnify and hold
the
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Indemnitees harmless from and against all losses suffered by, any Indemnitee
in connection with (a) the exercise by the Agent, the Issuing Bank or any Lender
of any right or remedy granted to it under this Agreement or any of the other
Loan Documents, (b) any claim, and the prosecution or defense thereof, arising
out of or in any way connected with this Agreement or any of the other Loan
Documents, including any claim relating to Environmental Laws, and (c) the
collection or enforcement of the Secured Obligations or any of them, other than
such costs, expenses and liabilities arising out of such Indemnitee's gross
negligence or willful misconduct. The agreements in this Section shall survive
the payment of the Notes, the Secured Obligations and all other amounts payable
hereunder and the termination of this Agreement.
SECTION 16.15. All Powers Coupled with Interest. All powers of
attorney and other authorizations granted to the Agent and the Lenders and any
Persons designated by the Agent or the Lenders pursuant to any provisions of
this Agreement or any of the other Loan Documents shall be deemed coupled with
an interest and shall be irrevocable so long as any of the Secured Obligations
remain unpaid or unsatisfied.
SECTION 16.16. Survival. Notwithstanding any termination of this
Agreement, (a) until all Secured Obligations have been irrevocably paid in full
or otherwise satisfied, the Agent, for the benefit of the Secured Creditors,
shall retain its Security Interest and shall retain all rights under this
Agreement and each of the Security Documents with respect to such Collateral as
fully as though this Agreement had not been terminated, (b) the indemnities to
which the Agent, the Lenders and the other indemnitees are entitled under the
provisions of this ARTICLE 16 and any other provision of this Agreement and the
other Loan Documents shall continue in full force and effect and shall protect
the Agent, the Lenders and the other indemnitees against events arising after
such termination as well as before, and (c) in connection with the termination
of this Agreement and the release and termination of the Security Interests, the
Agent, on behalf of itself as agent and the Secured Creditors, may require such
assurances and indemnities as it shall reasonably deem necessary or appropriate
to protect the Agent and the Secured Creditors against loss on account of such
release and termination, including with respect to credits previously applied to
the Secured Obligations that may subsequently be reversed or revoked.
SECTION 16.17. Titles and Captions. Titles and captions of
Articles, Sections and subsections in this Agreement are for convenience only,
and neither limit nor amplify the provisions of this Agreement.
SECTION 16.18. Severability of Provisions. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 16.19. Governing Law. This Agreement, the Notes and each
of the other Loan Documents shall be construed in accordance with and governed
by the law of the State of Georgia.
SECTION 16.20. Counterparts. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original,
and all of which taken together shall constitute one and the same agreement.
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<PAGE>
SECTION 16.21. Reproduction of Documents. This Agreement, each of
the other Loan Documents and all documents relating thereto, including (a)
consents, waivers and modifications that may hereafter be executed, (b)
documents received by the Agent or any Lender, and (c) financial statements,
certificates and other information previously or hereafter furnished to the
Agent or any Lender, may be reproduced by the Agent or such Lender by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and such Person may destroy any original document so produced.
Each party hereto stipulates that, to the extent permitted by Applicable Law,
any such reproduction shall be as admissible in evidence as the original itself
in any judicial or administrative proceeding (whether or not the original shall
be in existence and whether or not such reproduction was made by the Agent or
such Lender in the regular course of business), and any enlargement, facsimile
or further reproduction of such reproduction shall likewise be admissible in
evidence.
SECTION 16.22. Term of Agreement. This Agreement shall remain in
effect from the Agreement Date through the Termination Date and thereafter until
all Secured Obligations shall have been irrevocably paid and satisfied in full.
No termination of this Agreement shall affect the rights and obligations of the
parties hereto arising prior to such termination.
SECTION 16.23. Contribution and Indemnification among the
Obligors. Each Obligor is obligated to repay the Secured Obligations as joint
and several obligors under this Agreement. To the extent that any Obligor shall,
under this Agreement as a joint and several obligor, repay any of the Secured
Obligations constituting Loans made to another Obligor hereunder or other
Secured Obligations incurred directly and primarily by any other Obligor (an
"Accommodation Payment"), then the Obligor making such Accommodation Payment
shall be entitled to contribution and indemnification from, and be reimbursed
by, each of the other Obligors in an amount, for each of such other Obligors,
equal to a fraction of such Accommodation Payment, the numerator of which
fraction is such other Obligor's "Allocable Amount" (as defined below) and the
denominator of which is the sum of the Allocable Amounts of all of the Obligors.
As of any date of determination, the "Allocable Amount" of each Obligor shall be
equal to the maximum amount of liability for Accommodation Payments which could
be asserted against such Obligor hereunder without (a) rendering such Obligor
"insolvent" within the meaning of Section 101(31) of Title 11 of the United
States Code entitled "Bankruptcy" (the "Bankruptcy Code"), Section 2 of the
Uniform Fraudulent Transfer Act (the "UFTA"), Section 2 of the Uniform
Fraudulent Conveyance Act ("UFCA"), or Section 18-2-22 of the Official Code of
Georgia Annotated, (b) leaving such Obligor with unreasonably small capital or
assets, within the meaning of Section 548 of the Bankruptcy Code, Section 4 of
the UFTA, or Section 4 of the UFCA, or (c) leaving such Obligor unable to pay
its debts as they become due within the meaning of Section 548 of the Bankruptcy
Code, Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of
contribution, indemnification and reimbursement under this SECTION 16.23 shall
be subordinate in right of payment to the prior payment in full of the Secured
Obligations.
SECTION 16.24. Restrictions on Actions by Lenders; Sharing of
Payments.
(a) Each of the Lenders agrees that it shall not, without
the express consent of the Required Lenders, and that it shall, to the extent it
is lawfully entitled to do so, upon the request of the Required Lenders, setoff
against the Secured Obligations, any amounts owing by such Lender to any Obligor
or any accounts of any Obligor now or hereafter maintained with such Lender.
Each of the Lenders further agrees that it shall not, unless specifically
requested to do so by the Agent, take or cause to be taken any action to enforce
its rights under this Agreement or against any Obligor, including the
commencement of any legal or equitable proceedings, to foreclose any Lien on, or
otherwise enforce any security interest in, any of the Collateral.
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(b) Each Lender agrees that if, as a result of the
exercise of a right of setoff, banker's lien or counterclaim or other similar
right or the receipt of a secured claim it receives any payment in respect of
the Secured Obligations, it shall promptly notify the Agent thereof (and the
Agent shall promptly notify the other Lenders). If, as a result of such payment,
such Lender receives a greater percentage of the Secured Obligations owed to it
under this Agreement than the percentage received by any other Lender, such
Lender shall purchase a participation (which it shall be deemed to have
purchased simultaneously upon the receipt of such payment) in the Secured
Obligations then held by such other Lenders so that all such recoveries of
principal and interest with respect to all Secured Obligations owed to each
Lender shall be pro rata on the basis of its respective amount of the Secured
Obligations owed to all Lenders, PROVIDED that if all or part of such
proportionately greater payment received by such purchasing Lender is thereafter
recovered by or on behalf of the Obligors from such Lender, such purchase shall
be rescinded and the purchase price paid for such participation shall be
returned to such Lender to the extent of such recovery, but without interest.
(c) Each Lender which receives such a secured claim shall
exercise its rights in respect of such secured claim in a manner consistent with
the rights of the Lenders entitled under this SECTION 16.24 to share in the
benefits of any recovery on such secured claim.
(d) Each Obligor expressly consents to the foregoing arrangements
and agrees that any holder of a participation in any Secured Obligation so
purchased or otherwise acquired may exercise any and all rights of banker's
lien, setoff or counterclaim with respect to any and all monies owing by such
Obligor to such holder as fully as if such holder were a holder of such Secured
Obligation in the amount of the participation held by such holder.
SECTION 16.25. Agency for Perfection. Each Lender hereby appoints
each other Lender as its agent for the purpose of perfecting the Lenders'
security interest in assets which, in accordance with Article 9 of the Uniform
Commercial Code can be perfected only by possession. Should any Lender (other
than the Agent) obtain possession of any such Collateral, such Lender shall
notify the Agent thereof, and, promptly upon the Agent's request therefor shall
deliver such Collateral to the Agent or in accordance with the Agent's
instructions.
SECTION 16.26. Taxes. Except as otherwise required by Applicable
Law, each payment by the Obligors under this Agreement or the other Loan
Documents or in respect of the Letters of Credit shall be made without setoff or
counterclaim and without withholding for or on account of any present or future
taxes imposed by or within the jurisdiction in which any Obligor is domiciled,
any jurisdiction from which the Obligors make any payment hereunder, or (in each
case) any political subdivision or taxing authority thereof or therein
(excluding any such tax imposed on the overall net income of the Agent or the
Lenders). If any such withholding is so required, the Obligors shall make the
withholding, pay the amount withheld to the appropriate governmental authority
before penalties attach thereto or interest accrues thereon, and forthwith pay
such additional amount as may be necessary to ensure that the net amount
actually received free and clear of such taxes (including such taxes on such
additional amount) is equal to the amount which Agent or the Lenders would have
received had such withholding not been made. If the Agent or the Lenders pay any
amount in respect of any such taxes, penalties or interest, the Obligors shall
reimburse the Agent or the Lenders (as appropriate) for that payment on demand
in the currency in which such payment was made. If an Obligor pays any such
taxes, penalties or interest, it shall deliver official tax receipts evidencing
that payment or certified copies thereof to the Agent on or before the thirtieth
day after payment.
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SECTION 16.27. Final Agreement. This Agreement and the other Loan
Documents are intended by the parties hereto as the final, complete and
exclusive expression of the agreement among them with respect to the subject
matter hereof and thereof. This Agreement and the other Loan Documents supersede
any and all prior oral or written agreements between the parties hereto relating
to the subject matter hereof and thereof, it being understood that the Fee
Letter shall survive the execution, delivery and closing of this Agreement.
SECTION 16.28. Waiver of Consequential Damages, Etc. THE OBLIGORS
AGREE NOT TO ASSERT ANY CLAIM AGAINST THE AGENT, THE ISSUING BANK, ANY LENDER,
ANY OF THEIR AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, ATTORNEYS AND AGENTS, ON ANY THEORY OF LIABILITY, FOR SPECIAL,
INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE RELATING
TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR IN ANY OTHER LOAN DOCUMENT OR
THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE LOANS.
[Signatures commence on next page.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers in several counterparts all as of
the day and year first written above.
BORROWERS:
TULTEX CORPORATION
By:
---------------------------------------------
O. Randolph Rollins
Executive Vice President and General Counsel
CALIFORNIA SHIRT SALES, INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
DOMINION STORES, INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
TULTEX/T-SHIRT CITY, INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
<PAGE>
TRACK GEAR, INC.
By:
---------------------------------------------
O. Randolph Rollins
Chairman and Chief Executive Officer
GUARANTORS:
AKOM, LTD.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
DOMINION DISTRIBUTION, INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
LIGA MAYOR DE MEXICO S.A. DE C.V.
By:
---------------------------------------------
O. Randolph Rollins
Legal Representative
<PAGE>
TULTEX SUBSIDIARY (VA), INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
TULTEX SUBSIDIARY (MASS), INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
TULTEX CANADA, INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
TULTEX INTERNATIONAL, INC.
By:
---------------------------------------------
O. Randolph Rollins
Vice President
<PAGE>
SWEATJET INCORPORATED
By:
---------------------------------------------
O. Randolph Rollins
Vice President
LENDERS:
NATIONSBANK, N.A.
By:
-----------------------------------------
Name:
----------------------------------
Title:
----------------------------------
Address: 600 Peachtree Street, N.E.
13th Floor
Atlanta, Georgia 30308
Attn.: Sherry Lail, Business Credit
Facsimile No.: 404-607-6437
AGENT:
NATIONSBANK, N.A.
By:
----------------------------------------
Scott R. McGeein
Vice President
Address: 600 Peachtree Street, N.E.
13th Floor
Atlanta, Georgia 30308
Attn.: Sherry Lail, Business Credit
Facsimile No.: 404-607-6437
<PAGE>
ANNEX I
COMMITMENTS
NationsBank, N.A. $150,000,000
<PAGE>
<TABLE>
<CAPTION>
ANNEX II
PERFORMANCE PRICING MATRIX
- -------------------------------------------------------------------------------------------------
CONSOLIDATED FUNDED
INDEBTEDNESS TO
EBITDA RATIO LIBOR APPLICABLE MARGIN PRIME RATE APPLICABLE MARGIN
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Less than or equal to 3.50 1.75% 0.0%
- -------------------------------------------------------------------------------------------------
Less than or equal to 5.50 but 2.25% 0.25%
greater than 3.50
- -------------------------------------------------------------------------------------------------
Less than or equal to 6.50 but 2.75% 0.75%
greater than 5.50
- -------------------------------------------------------------------------------------------------
Less than or equal to 7.50 but 3.25% 1.25%
greater than 6.50
- -------------------------------------------------------------------------------------------------
Greater than 7.50 3.75% 1.75%
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT A
REVOLVING CREDIT NOTE
<PAGE>
EXHIBIT B
BORROWING BASE CERTIFICATE
<PAGE>
EXHIBIT C
OPINION OF COUNSEL
<PAGE>
EXHIBIT D
ASSIGNMENT AND ACCEPTANCE
<PAGE>
EXHIBIT E
SETTLEMENT REPORT
<PAGE>
EXHIBIT F
JOINDER AGREEMENT
SECOND SUPPLEMENTAL INDENTURE
Dated as of May 7, 1999
among
TULTEX CORPORATION,
as Issuer,
AKOM, LTD.
DOMINION STORES, INC.
LOGO 7, INC.
(renamed Tultex Subsidiary (Va), Inc.)
SWEATJET, INCORPORATED
TULTEX CANADA, INC.
TULTEX INTERNATIONAL, INC.
UNIVERSAL INDUSTRIES, INC.
(renamed Tultex Subsidiary (Mass), Inc.)
and
CALIFORNIA SHIRT SALES, INC.
as Guarantors,
and
U.S. BANK NATIONAL ASSOCIATION
as Successor Trustee.
-------------------
$75,000,000
9-5/8% Senior Notes Due 2007
<PAGE>
SECOND SUPPLEMENTAL INDENTURE dated as of May 7, 1999, among Tultex
Corporation, as Issuer, Akom, Ltd., Dominion Stores, Inc., Logo 7, Inc. (renamed
Tultex Subsidiary (Va), Inc.), Sweatjet, Inc., Tultex Canada, Inc., Tultex
International, Inc., Universal Industries, Inc. (renamed Tultex Subsidiary
(Mass), Inc.) and California Shirt Sales, Inc., as Guarantors, and U.S. Bank
National Association, as Successor Trustee under the Indenture dated as of April
15, 1997, as supplemented, relating to the Issuer's $75,000,000 principal amount
of 9-5/8% Senior Notes due 2007.
RECITALS:
A. The Issuer has completed an invitation for tenders and
consent solicitation from the holders of the Notes and obtained
consents from the requisite majority of holders of the Notes to enter
into this Second Supplemental Indenture.
B. The Issuer has satisfied the conditions to effectiveness of
this Second Supplemental Indenture.
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C. The Issuer, the Guarantors and the Successor Trustee desire
to enter into this Second Supplemental Indenture to amend the
Indenture.
D. The Successor Trustee has been instructed by the holders of
the Notes to enter into an intercreditor agreement with NationsBank,
N.A., the agent bank under the Senior Credit Facility, as defined
herein.
AGREEMENT:
NOW, THEREFORE, the Issuer, the Guarantors and the Successor
Trustee agree as follows:
1. Revised Terms. The following provisions in the Indenture
are amended as follows:
a. The definition of "Interest Payment Date" in Section 101 of the
Indenture is struck in its entirety and the following definition is
substituted therefor:
"Interest Payment Date", notwithstanding the Interest Payment Dates set
forth in Exhibit A to the Indenture, means January 15, April 15, July
15 and October 15 in each year, commencing July 15, 1999 and,
notwithstanding the Record Dates set forth in such Exhibit A, the
Record Dates for the payment of interest shall be January 1, April 1,
July 1 and October 1 (whether or not a business day), as the case may
be, next preceding such Interest Payment Date."
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b. Clause (ii) of the definition of "Net Available Proceeds" in Section
101 of the Indenture is struck in its entirety and the following clause
(ii) is substituted therefor:
(ii) all payments made by such Person or its Subsidiaries on any
Indebtedness which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or by applicable law, be repaid out of the
proceeds from such Asset Disposition,
c. The following definitions shall be added to Section 101 of the
Indenture:
"Pari Passu Securities" means the Securities and the 10-5/8% Senior
Notes due 2005 issued under the Pari Passu Indenture.
"Pari Passu Indenture" means the Indenture, dated as of March 15, 1995,
among the Company, certain of its Subsidiaries, and the predecessor to
the Successor Trustee.
"Security Documents" means, collectively, the Master Collateral and
Security Agreement, dated as of May 7, 1999 (the "MCSA"), among the
Company, the Guarantors, certain other Subsidiaries of the Company
(collectively, the "Obligors") and the Trustee, the Financing
Statements (as defined in the MCSA), the Patent Assignment (as defined
in the MCSA), the Trademark Assignment (as defined in the MCSA), the
Mortgages (as defined in the MCSA), and each other writing executed and
delivered by any one or more of the Obligors securing the payment and
performance of all or any part of the obligations of the Company and
the Obligors arising under the Securities, the Indenture and/or any
other Financing Document (as defined in the MCSA).
d. The definition of "Senior Credit Facility" in Section 101 of the
Indenture is struck in its entirety and the following definition is
substituted therefor:
"Senior Credit Facility" means the Loan and Security Agreement dated as
of May 7, 1999, among the Company and certain of its Subsidiaries as
borrowers thereunder, all other Subsidiaries of the Company as
guarantors thereunder, the lenders from time to time parties thereto,
and NationsBank, N.A., as agent on behalf of itself and the other
lenders named therein, including any deferrals,
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renewals, extensions, replacements, refinancings or refundings thereof,
or amendments, modifications or supplements thereto and any agreement
providing therefor whether by or with the same or any other lenders,
creditors, group of lenders or group of creditors, as it may be secured
by a Lien over Permitted Collateral pursuant to Section 912(x) hereof.
e. The following definition is added to Section 101 of the Indenture:
"Permitted Collateral" means all of the Company's and its Subsidiaries'
accounts receivable, inventory and tax refund claims, all general
intangibles, intellectual property, contract rights, chattel paper,
instruments, documents, books, records, licenses, trademarks and
deposit accounts relating to such accounts receivable and inventory and
all equipment, fixtures and real estate of the Company and its
Subsidiaries, and all proceeds (including insurance proceeds) relating
thereto, excluding, however, all notes owned by the Company issued by
TKS Acquisition, Inc. in the original aggregate principal amount of
$12.5 million and notes receivable up to $6 million from vendors who
provide the Company with manufacturing services.
f. Clause (4) of Section 401 of the Indenture is struck and the
following is substituted therefor:
(4) the occurrence and continuance of any "Event of Default"
referred to in clause (v) of the definition of such term set forth
in the MCSA or failure to perform or to comply with any provision
of Section 701; or
g. A new Clause (11) is added to Section 401 of the Indenture as follows:
(11) failure to perform any covenant or agreement of the Company or
any applicable obligor set forth in the Security Documents or the
occurrence and continuance of any "Event of Default" referred to in
any of clauses (ii), (iii) and (iv) of the definition of such term
set forth in the MCSA; or
h. A new Section 514 is added to the Indenture to read as follows:
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SECTION 514. Action of Trustee under Security Documents.
The Trustee shall act as the secured party under the Security Documents
and shall have the rights and obligations specified therein. The
provisions of this Article Five apply to all actions or failures to act
of the Trustee thereunder.
i. Section 912 of the Indenture is struck in its entirety and the
following provisions are substituted therefor:
SECTION 912. Limitation on Liens.
The Company will not, and will not permit any of its Subsidiaries to,
Incur any Lien on or with respect to any property or assets of the
Company or any Subsidiary of the Company owned on the Issue Date or
thereafter acquired to secure Indebtedness without making, or causing
such Subsidiary to make, effective provision for securing the
Securities (and, if the Company shall so determine, any other
Indebtedness of the Company or such Subsidiary, including Indebtedness
which is subordinate in right of payment to the Securities, provided
that Liens securing the Securities and any Indebtedness pari passu with
the Securities are senior to such Liens securing such subordinated
Indebtedness) equally and ratably with such Indebtedness or, in the
event such Indebtedness is subordinate in right of payment to the
Securities, prior to such Indebtedness, as to such property or assets
for so long as such Indebtedness shall be so secured.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date in respect of Indebtedness existing on the Issue Date; (ii)
Liens securing only the Securities; (iii) Liens in favor of the
Company; (iv) Liens to secure Indebtedness Incurred for the purpose of
financing all or any part of the purchase price or the cost of
construction or improvement of the property subject to such Liens;
provided that (a) the aggregate principal amount of any Indebtedness
secured by such a Lien does not exceed 100% of such purchase price or
cost, (b) such Lien does not extend to or cover any other property
other than such item of property and any improvements on such item, (c)
the Indebtedness secured by such Lien is Incurred by the Company or its
Subsidiary within 180 days of the acquisition, construction or
improvement of such property and (d) the Incurrence of such
Indebtedness is permitted by Sections 908 and 909; (v) Liens on
property existing immediately
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prior to the time of acquisition thereof (and not created in
anticipation or contemplation of the financing of such acquisition);
(vi) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary
of the Company (and not created in anticipation or contemplation
thereof); (vii) Liens on property of the Company or any Subsidiary of
the Company in favor of the United States of America, any state thereof
or any instrumentality of either to secure payments pursuant to any
contract or statute; (viii) Liens securing an aggregate principal
amount of Indebtedness at any one time outstanding which, when taken
together with (A) all Capital Lease Obligations of the Company and its
Subsidiaries Incurred in compliance with Sections 908 and 909 and then
outstanding and (B) all other Indebtedness of Subsidiaries of the
Company Incurred in compliance with Sections 908 and 909 and then
outstanding, would not exceed 10% of Consolidated Net Tangible Assets;
(ix) Liens to secure Indebtedness incurred to extend, renew, refinance
or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, any Indebtedness secured by Liens
referred to in the foregoing clause (i) so long as such Lien does not
extend to any other property and the principal amount of Indebtedness
so secured is not increased except for the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing by means of a tender offer, exchange offer or privately
negotiated repurchase, plus the expenses of the Company or such
Subsidiary Incurred in connection with such refinancing; and (x) any
Lien on Permitted Collateral directly or indirectly securing the
payment of any Indebtedness of the Company or any of its Subsidiaries
under the Senior Credit Facility and incurred pursuant to clause (ii)
of Section 908(a) of the Indenture, whether absolute, accrued,
contingent or based upon any contingency, provided, however, that any
such Lien on equipment, fixtures and real estate shall be subordinate
in right of payment to the Lien on such assets securing the Securities.
j. Section 916(a)(iii) of the Indenture is stricken in its entirety and
the following provisions are substituted therefor:
(a) The Company will not, and will not permit any of its Subsidiaries
to, make one or more Asset Dispositions except in
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accordance with the Security Documents and for aggregate consideration
of, or in respect of assets having an aggregate fair market value of,
$5 million or more in any 12-month period, unless:
* * *
(iii) all Net Available Proceeds, less any amounts invested within
360 days of such Asset Disposition in assets related to the
business of the Company (including the Capital Stock of another
Person (other than the Company or any Person that is a Subsidiary
of the Company immediately prior to such investment), provided that
immediately after giving effect to any such investment (and not
prior thereto) such Person shall be a Subsidiary of the Company),
are applied either (A) to an Offer to Purchase outstanding Pari
Passu Securities, ratably in accordance with their respective
principal amounts, at 100% of their principal amount plus accrued
interest to the Purchase Date or (B) prorata, based on the
principal amount outstanding of each of the following categories of
indebtedness, to (1) the permanent reduction and repayment of
Indebtedness then outstanding under the Senior Credit Facility, and
(2) to the purchase of Pari Passu Securities, ratably in accordance
with their respective principal amounts, pursuant to an Offer to
Purchase outstanding Pari Passu Securities at 100% of their
principal amount plus accrued interest to the Purchase Date,
provided that (x) any Net Available Proceeds not applied to the
repayment of Indebtedness under the Senior Credit Facility in
accordance with subclause (B) of this clause (iii) shall be added
to the Net Available Proceeds to be used for an Offer to Purchase
outstanding Pari Passu Securities and (y) the Company may defer
making any Offer to Purchase outstanding Pari Passu Securities
until there are aggregate unutilized Net Available Proceeds equal
to or in excess of $5 million resulting from one or more Asset
Dispositions (at which time, the entire unutilized Net Available
Proceeds, and not just the amount in excess of $5 million, shall be
applied as required pursuant to this paragraph).
k. A new Section 921 is added to the Indenture as follows:
SECTION 921. Minimum Fixed Charge Coverage Ratio.
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As of the end of any fiscal quarter, the Company will not permit the
ratio of (i) EBITDA plus cash received from Tax Refund Claims minus
Unfunded Capital Expenditures minus taxes actually paid in cash minus
distributions and dividends paid in cash to (ii) interest expense plus
scheduled payments of principal on Indebtedness for Money Borrowed, to
be less than 60% of the ratios set forth below, all measured as of the
end of each fiscal quarter for the preceding four fiscal quarters on a
Consolidated basis (except that in the case of the second fiscal
quarter of fiscal year 1999, such ratio shall be measured based on the
results of such fiscal quarter only, and in the case of the third
fiscal quarter of fiscal year 1999, such ratio shall be measured based
on the results of such fiscal quarter and the preceding fiscal quarter
only):
Fiscal Quarter Ending Ratio
--------------------- -----
Second fiscal quarter of fiscal year 1999 .50 to 1
Third fiscal quarter of fiscal year 1999 .60 to 1
Fourth fiscal quarter of fiscal year 1999 1.10 to 1
Each fiscal quarter end thereafter 1.15 to 1
For purposes of this Section 921, defined terms not already defined in
the Indenture shall have the following definitions:
"Business Unit" means the assets constituting the business or a
division of operating unit thereof of any person.
"Capital Expenditures" means, with respect to any person, all
expenditures made and liabilities incurred for the acquisition of
assets (other than assets which constitute a Business Unit) which are
not, in accordance with GAAP, treated as expense items for such person
in the year made or incurred or as a prepaid expense applicable to a
future year or years.
"Consolidated" means, when used with reference to any accounting term
used herein, the sum of the applicable accounting term for the Company
and its consolidated Subsidiaries, as consolidated after the
elimination of intercompany items and, in
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the case of net income and tangible net worth, after appropriate
deductions for any minority interests in any Subsidiaries.
"EBITDA" means net income before provision for interest expense, income
taxes, depreciation expense and amortization. All calculations of
EBITDA shall exclude the results of Logo Athletic, Inc. and Logo
Athletic/Headwear, Inc. for all periods on or prior to July 15, 1998
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or
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not in any such case the same was for money borrowed (i) represented by
notes payable, and drafts accepted, that represent extensions of
credit, (ii) constituting obligations evidenced by bonds, debentures,
notes or similar instruments, or (iii) upon which interest charges are
customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the
ordinary course of business), (c) Indebtedness that constitutes a
Capital Lease Obligation, (d) Indebtedness under hedging agreements,
and (e) Indebtedness that is such by virtue of clause (VII) of the
definition thereof, but only to the extent that the obligations
Guaranteed are obligations that would constitute Indebtedness for Money
Borrowed.
"Tax Refund Claims" means all tax refund claims and all rights with
respect thereto, including all rights to settle or compromise the
amount of such claims, to file amendments and other documents with
respect thereto, and to receive the proceeds thereof.
"Unfunded Capital Expenditures" means Capital Expenditures which are
paid for other than with proceeds of Indebtedness for Money Borrowed
(other than loans under the Senior Credit Facility) incurred to finance
such Capital Expenditures and other than those represented by Capital
Lease Obligations.
2. Counterparts. This Second Supplemental Indenture may be executed
in one or more counterparts, each of which shall constitute an original
but all of which when taken together shall constitute one contract.
3. Defined Terms. Capitalized terms not defined herein have the
meaning given them in the Indenture.
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IN WITNESS WHEREOF, the Issuer and the Guarantors have caused this
Second Supplemental Indenture to be duly executed by its authorized
officers, and the Successor Trustee, for the benefit and with the
consent of the Holders of the Securities, has caused the same to
accepted by its authorized officer, as of the day and year first above
written.
Issuer:
TULTEX CORPORATION
By ______________________
Name_____________________
Title ___________________
Guarantors:
AKOM, LTD.
By ______________________
Name_____________________
Title ___________________
DOMINION STORES, INC.
By ______________________
Name ____________________
Title ___________________
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TULTEX SUBSIDIARY (VA), INC.
By ______________________
Name_____________________
Title ___________________
SWEATJET, INC.
By ______________________
Name_____________________
Title ___________________
TULTEX CANADA, INC.
By ______________________
Name_____________________
Title ___________________
TULTEX INTERNATIONAL, INC.
By ______________________
Name_____________________
Title ___________________
TULTEX SUBSIDIARY (MASS), INC.
By ______________________
Name_____________________
Title ___________________
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CALIFORNIA SHIRT SALES, INC.
By ______________________
Name_____________________
Title ___________________
Successor Trustee:
U.S. BANK NATIONAL
ASSOCIATION
By ______________________
Name_____________________
Title ___________________
14
SECOND SUPPLEMENTAL INDENTURE
Dated as of May 7, 1999
among
TULTEX CORPORATION,
as Issuer,
AKOM, LTD.
DOMINION STORES, INC.
LOGO 7, INC.
(renamed Tultex Subsidiary (Va), Inc.)
SWEATJET, INCORPORATED
TULTEX CANADA, INC.
TULTEX INTERNATIONAL, INC.
UNIVERSAL INDUSTRIES, INC.
(renamed Tultex Subsidiary (Mass), Inc.)
and
CALIFORNIA SHIRT SALES, INC.
as Guarantors,
and
U.S. BANK NATIONAL ASSOCIATION
as Successor Trustee.
-------------------
$110,000,000
10-5/8% Senior Notes Due 2005
<PAGE>
SECOND SUPPLEMENTAL INDENTURE dated as of May 7, 1999, among Tultex
Corporation, as Issuer, Akom, Ltd., Dominion Stores, Inc., Logo 7, Inc.
(renamed Tultex Subsidiary (Va), Inc.), Sweatjet, Inc., Tultex Canada,
Inc., Tultex International, Inc., Universal Industries, Inc. (renamed
Tultex Subsidiary (Mass), Inc.) and California Shirt Sales, Inc., as
Guarantors, and U.S. Bank National Association, as Successor Trustee
under the Indenture dated as of March 15, 1995, as supplemented,
relating to the Issuer's $110,000,000 principal amount of 10-5/8%
Senior Notes due 2005.
RECITALS:
A. The Issuer has completed an invitation for tenders and consent
solicitation from the holders of the Notes and obtained consents from
the requisite majority of holders of the Notes to enter into this
Second Supplemental Indenture.
B. The Issuer has satisfied the conditions to effectiveness of this
Second Supplemental Indenture.
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C. The Issuer, the Guarantors and the Successor Trustee desire to
enter into this Second Supplemental Indenture to amend the Indenture.
D. The Successor Trustee has been instructed by the holders of the
Notes to enter into an intercreditor agreement with NationsBank, N.A.,
the agent bank under the Senior Credit Facility, as defined herein.
AGREEMENT:
NOW, THEREFORE, the Issuer, the Guarantors and the Successor Trustee
agree as follows:
1. Revised Terms. The following provisions in the Indenture are
amended as follows:
a. The definition of "Interest Payment Date" in Section 101 of the
Indenture is struck in its entirety and the following definition is
substituted therefor:
"Interest Payment Date", notwithstanding the Interest Payment Dates set
forth in the Form of Face of Security in Section 202, means March 15,
June 15, September 15 and December 15 in each year, commencing June 15,
1999 and, notwithstanding the Record Dates set forth in such Section
202, the Record Dates for the payment of interest shall be March 1,
June 1, September 1 or December 1 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
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b. Clause (ii) of the definition of "Net Available Proceeds" in Section
101 of the Indenture is struck in its entirety and the following clause
(ii) is substituted therefor:
(ii) all payments made by such Person or its Subsidiaries on any
Indebtedness which is secured by such assets in accordance with the
terms of any Lien upon or with respect to such assets or which must by
the terms of such Lien, or by applicable law, be repaid out of the
proceeds from such Asset Disposition,
c. The following definitions shall be added to Section 101 of the
Indenture:
"Pari Passu Securities" means the Securities and the 9-5/8% Senior
Notes due 2007 issued under the Pari Passu Indenture.
"Pari Passu Indenture" means the Indenture, dated as of April 15, 1997,
among the Company, certain of its Subsidiaries, and the predecessor to
the Successor Trustee.
"Security Documents" means, collectively, the Master Collateral and
Security Agreement, dated as of May 7, 1999 (the "MCSA"), among the
Company, the Guarantors, certain other Subsidiaries of the Company
(collectively, the "Obligors") and the Trustee, the Financing
Statements (as defined in the MCSA), the Patent Assignment (as defined
in the MCSA), the Trademark Assignment (as defined in the MCSA), the
Mortgages (as defined in the MCSA), and each other writing executed and
delivered by any one or more of the Obligors securing the payment and
performance of all or any part of the obligations of the Company and
the Obligors arising under the Securities, the Indenture and/or any
other Financing Document (as defined in the MCSA).
d. The definition of "Senior Credit Facility" in Section 101 of the
Indenture is struck in its entirety and the following definition is
substituted therefor:
"Senior Credit Facility" means the Loan and Security Agreement dated as
of May 7, 1999, among the Company and certain of its Subsidiaries as
borrowers thereunder, all other Subsidiaries of the Company as
guarantors thereunder, the lenders from time to time parties thereto,
and NationsBank, N.A., as agent on behalf of itself and the other
lenders named therein, including any deferrals,
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renewals, extensions, replacements, refinancings or refundings thereof,
or amendments, modifications or supplements thereto and any agreement
providing therefor whether by or with the same or any other lenders,
creditors, group of lenders or group of creditors, as it may be secured
by a Lien over Permitted Collateral pursuant to Section 1012(x) hereof.
e. The following definition is added to Section 101 of the Indenture:
"Permitted Collateral" means all of the Company's and its Subsidiaries'
accounts receivable, inventory and tax refund claims, all general
intangibles, intellectual property, contract rights, chattel paper,
instruments, documents, books, records, licenses, trademarks and
deposit accounts relating to such accounts receivable and inventory and
all equipment, fixtures and real estate of the Company and its
Subsidiaries, and all proceeds (including insurance proceeds) relating
thereto, excluding, however, all notes owned by the Company issued by
TKS Acquisition, Inc. in the original aggregate principal amount of
$12.5 million and notes receivable up to $6 million from vendors who
provide the Company with manufacturing services.
f. Clause (4) of Section 501 of the Indenture is struck and the following
is substituted therefor:
(4) the occurrence and continuance of any "Event of Default"
referred to in clause (v) of the definition of such term set forth
in the MCSA or failure to perform or to comply with any provision
of Section 801; or
g. A new Clause (11) is added to Section 501 of the Indenture as follows:
(11) failure to perform any covenant or agreement of the Company or
any applicable obligor set forth in the Security Documents or the
occurrence and continuance of any "Event of Default" referred to in any
of clauses (ii), (iii) and (iv) of the definition of such term set
forth in the MCSA; or
h. A new Section 614 is added to the Indenture as follows:
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SECTION 614. Action of Trustee under Security Documents.
The Trustee shall act as the secured party under the Security Documents
and shall have the rights and obligations specified therein. The
provisions of this Article Six apply to all actions or failures to act
of the Trustee thereunder.
i. Section 1012 of the Indenture is struck in its entirety and the
following provisions are substituted therefor:
SECTION 1012. Limitation on Liens.
The Company will not, and will not permit any of its Subsidiaries to,
Incur any Lien on or with respect to any property or assets of the
Company or any Subsidiary of the Company owned on the Issue Date or
thereafter acquired to secure Indebtedness without making, or causing
such Subsidiary to make, effective provision for securing the
Securities (and, if the Company shall so determine, any other
Indebtedness of the Company or such Subsidiary, including Indebtedness
which is subordinate in right of payment to the Securities, provided
that Liens securing the Securities and any Indebtedness pari passu with
the Securities are senior to such Liens securing such subordinated
Indebtedness) equally and ratably with such Indebtedness or, in the
event such Indebtedness is subordinate in right of payment to the
Securities, prior to such Indebtedness, as to such property or assets
for so long as such Indebtedness shall be so secured.
The foregoing restrictions shall not apply to (i) Liens existing on the
Issue Date in respect of Indebtedness existing on the Issue Date; (ii)
Liens securing only the Securities; (iii) Liens in favor of the
Company; (iv) Liens to secure Indebtedness Incurred for the purpose of
financing all or any part of the purchase price or the cost of
construction or improvement of the property subject to such Liens;
provided that (a) the aggregate principal amount of any Indebtedness
secured by such a Lien does not exceed 100% of such purchase price or
cost, (b) such Lien does not extend to or cover any other property
other than such item of property and any improvements on such item, (c)
the Indebtedness secured by such Lien is Incurred by the Company or its
Subsidiary within 180 days of the acquisition, construction or
improvement of such property and (d) the Incurrence of such
Indebtedness is permitted by Sections 1008 and 1009; (v) Liens on
property existing
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immediately prior to the time of acquisition thereof (and not created
in anticipation or contemplation of the financing of such acquisition);
(vi) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Subsidiary
of the Company (and not created in anticipation or contemplation
thereof); (vii) Liens on property of the Company or any Subsidiary of
the Company in favor of the United States of America, any state thereof
or any instrumentality of either to secure payments pursuant to any
contract or statute; (viii) Liens securing an aggregate principal
amount of Indebtedness at any one time outstanding which, when taken
together with (A) all Capital Lease Obligations of the Company and its
Subsidiaries Incurred in compliance with Sections 1008 and 1009 and
then outstanding and (B) all other Indebtedness of Subsidiaries of the
Company Incurred in compliance with Sections 1008 and 1009 and then
outstanding, would not exceed 10% of Consolidated Net Tangible Assets;
(ix) Liens to secure Indebtedness incurred to extend, renew, refinance
or refund (or successive extensions, renewals, refinancings or
refundings), in whole or in part, any Indebtedness secured by Liens
referred to in the foregoing clause (i) so long as such Lien does not
extend to any other property and the principal amount of Indebtedness
so secured is not increased except for the amount of any premium
required to be paid in connection with such refinancing pursuant to the
terms of the Indebtedness refinanced or the amount of any premium
reasonably determined by the Company as necessary to accomplish such
refinancing by means of a tender offer, exchange offer or privately
negotiated repurchase, plus the expenses of the Company or such
Subsidiary Incurred in connection with such refinancing; and (x) any
Lien on Permitted Collateral directly or indirectly securing the
payment of any Indebtedness of the Company or any of its Subsidiaries
under the Senior Credit Facility and incurred pursuant to clause (ii)
of Section 1008(a) of the Indenture, whether absolute, accrued,
contingent or based upon any contingency, provided, however, that any
such Lien on equipment, fixtures and real estate shall be subordinate
in right of payment to the Lien on such assets securing the Securities.
j. Section 1016(a)(iii) of the Indenture is stricken in its entirety and
the following provisions are substituted therefor:
(a) The Company will not, and will not permit any of its Subsidiaries
to, make one or more Asset Dispositions except in
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accordance with the Security Documents and for aggregate consideration
of, or in respect of assets having an aggregate fair market value of,
$5 million or more in any 12-month period, unless:
* * *
(iii) all Net Available Proceeds, less any amounts invested within
360 days of such Asset Disposition in assets related to the
business of the Company (including the Capital Stock of another
Person (other than the Company or any Person that is a Subsidiary
of the Company immediately prior to such investment), provided that
immediately after giving effect to any such investment (and not
prior thereto) such Person shall be a Subsidiary of the Company),
are applied either (A) to an Offer to Purchase outstanding Pari
Passu Securities, ratably in accordance with their respective
principal amounts, at 100% of their principal amount plus accrued
interest to the Purchase Date or (B) prorata, based on the
principal amount outstanding of each of the following categories of
the Indebtedness, to (1) the permanent reduction and repayment of
Indebtedness then outstanding under the Senior Credit Facility, and
(2) to the purchase of Pari Passu Securities, ratably in accordance
with their respective principal amounts, pursuant to an Offer to
Purchase outstanding Pari Passu Securities at 100% of their
principal amount plus accrued interest to the Purchase Date,
provided that (x) any Net Available Proceeds not applied to the
repayment of Indebtedness under the Senior Credit Facility in
accordance with subclause (B) of this clause (iii) shall be added
to the Net Available Proceeds to be used for an Offer to Purchase
outstanding Pari Passu Securities and (y) the Company may defer
making any Offer to Purchase outstanding Pari Passu Securities
until there are aggregate unutilized Net Available Proceeds equal
to or in excess of $5 million resulting from one or more Asset
Dispositions (at which time, the entire unutilized Net Available
Proceeds, and not just the amount in excess of $5 million, shall be
applied as required pursuant to this paragraph).
k. A new Section 1021 is added to the Indenture as follows:
SECTION 1021. Minimum Fixed Charge Coverage Ratio.
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As of the end of any fiscal quarter, the Company will not permit the
ratio of (i) EBITDA plus cash received from Tax Refund Claims minus
Unfunded Capital Expenditures minus taxes actually paid in cash minus
distributions and dividends paid in cash to (ii) interest expense plus
scheduled payments of principal on Indebtedness for Money Borrowed, to
be less than 60% of the ratios set forth below, all measured as of the
end of each fiscal quarter for the preceding four fiscal quarters on a
Consolidated basis (except that in the case of the second fiscal
quarter of fiscal year 1999, such ratio shall be measured based on the
results of such fiscal quarter only, and in the case of the third
fiscal quarter of fiscal year 1999, such ratio shall be measured based
on the results of such fiscal quarter and the preceding fiscal quarter
only):
Fiscal Quarter Ending Ratio
--------------------- -----
Second fiscal quarter of fiscal year 1999 .50 to 1
Third fiscal quarter of fiscal year 1999 .60 to 1
Fourth fiscal quarter of fiscal year 1999 1.10 to 1
Each fiscal quarter end thereafter 1.15 to 1
For purposes of this Section 1021, defined terms not already defined in
the Indenture shall have the following definitions:
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any person.
"Capital Expenditures" means, with respect to any person, all
expenditures made and liabilities incurred for the acquisition of
assets (other than assets which constitute a Business Unit) which are
not, in accordance with GAAP, treated as expense items for such person
in the year made or incurred or as a prepaid expense applicable to a
future year or years.
"Consolidated" means, when used with reference to any accounting term
used herein, the sum of the applicable accounting term for the Company
and its consolidated Subsidiaries, as consolidated after the
elimination of intercompany items and, in
9
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the case of net income and tangible net worth, after appropriate
deductions for any minority interests in any Subsidiaries.
"EBITDA" means net income before provision for interest expense, income
taxes, depreciation expense and amortization. All calculations of
EBITDA shall exclude the results of Logo Athletic, Inc. and Logo
Athletic/Headwear, Inc. for all periods on or prior to July 15, 1998
"Money Borrowed" means, as applied to Indebtedness, (a) Indebtedness
for money borrowed, (b) Indebtedness, whether or
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not in any such case the same was for money borrowed (i) represented by
notes payable, and drafts accepted, that represent extensions of
credit, (ii) constituting obligations evidenced by bonds, debentures,
notes or similar instruments, or (iii) upon which interest charges are
customarily paid or that was issued or assumed as full or partial
payment for property (other than trade credit that is incurred in the
ordinary course of business), (c) Indebtedness that constitutes a
Capital Lease Obligation, (d) Indebtedness under hedging agreements,
and (e) Indebtedness that is such by virtue of clause (VII) of the
definition thereof, but only to the extent that the obligations
Guaranteed are obligations that would constitute Indebtedness for Money
Borrowed.
"Tax Refund Claims" means all tax refund claims and all rights with
respect thereto, including all rights to settle or compromise the
amount of such claims, to file amendments and other documents with
respect thereto, and to receive the proceeds thereof.
"Unfunded Capital Expenditures" means Capital Expenditures which are
paid for other than with proceeds of Indebtedness for Money Borrowed
(other than loans under the Senior Credit Facility) incurred to finance
such Capital Expenditures and other than those represented by Capital
Lease Obligations.
2. Counterparts. This Second Supplemental Indenture may be executed
in one or more counterparts, each of which shall constitute an original
but all of which when taken together shall constitute one contract.
3. Defined Terms. Capitalized terms not defined herein have the
meaning given them in the Indenture.
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<PAGE>
IN WITNESS WHEREOF, the Issuer and the Guarantors have caused this
Second Supplemental Indenture to be duly executed by its authorized
officers, and the Successor Trustee, for the benefit and with the
consent of the Holders of the Securities, has caused the same to
accepted by its authorized officer, as of the day and year first above
written.
Issuer:
TULTEX CORPORATION
By ______________________
Name_____________________
Title __________________
Guarantors:
AKOM, LTD.
By ______________________
Name_____________________
Title __________________
DOMINION STORES, INC.
By _____________________
Name_____________________
Title ___________________
12
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TULTEX SUBSIDIARY (VA), INC.
By ______________________
Name_____________________
Title ___________________
SWEATJET, INC.
By ______________________
Name_____________________
Title ___________________
TULTEX CANADA, INC.
By ______________________
Name_____________________
Title __________________
TULTEX INTERNATIONAL, INC.
By _____________________
Name_____________________
Title __________________
TULTEX SUBSIDIARY (MASS), INC.
By _____________________
Name_____________________
Title ___________________
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<PAGE>
CALIFORNIA SHIRT SALES, INC.
By ______________________
Name_____________________
Title ___________________
Successor Trustee:
U.S. BANK NATIONAL
ASSOCIATION
By ______________________
Name_____________________
Title ___________________
Exhibit 10.18
- --------------------------------------------------------------------------------
TULTEX CORPORATION
CALIFORNIA SHIRT SALES, INC.
DOMINION STORES, INC.
TULTEX/T-SHIRT CITY, INC.
TRACK GEAR, INC.
AKOM, LTD.
DOMINION DISTRIBUTION, INC.
LIGA MAYOR DE MEXICO, S.A. DE C.V.
TULTEX SUBSIDIARY (VA), INC.
TULTEX SUBSIDIARY (MASS), INC.
TULTEX CANADA, INC.
SWEATJET INCORPORATED
TULTEX INTERNATIONAL, INC.
--------------------------------------------
MASTER COLLATERAL AND
SECURITY AGREEMENT
--------------------------------------------
TO
U.S. BANK NATIONAL ASSOCIATION, AS TRUSTEE
DATED AS OF MAY 7, 1999
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
1. PRELIMINARY STATEMENTS...............................................................1
2. INTERPRETATION OF THIS AGREEMENT.....................................................2
2.1 Terms Defined.................................................................2
2.2 Section Headings and Table of Contents and Construction, etc.................12
2.3 Separate Agreements..........................................................13
2.4 Partial Invalidity...........................................................13
2.5 Governing Law................................................................13
3. COLLATERAL..........................................................................13
3.1 Grant of Security Interest...................................................13
3.2 Collateral-Related Rights and Undertakings...................................14
3.3 Covenant Regarding Additional Real Estate and Leases.........................21
3.4 Covenant Regarding Proprietary Rights........................................21
3.5 Covenant Regarding Notices to the Agent......................................22
3.6 Assignment of Claims Act.....................................................22
4. REPRESENTATIONS AND WARRANTIES......................................................22
4.1 Ownership of Collateral......................................................22
4.2 Incorporation................................................................22
4.3 Corporate Powers and Authorization...........................................23
4.4 Governmental Filings; Registration...........................................23
4.5 Enforceability...............................................................24
4.6 Location of Inventory and Equipment, etc.....................................24
4.7 Proprietary Rights...........................................................25
4.8 Receivables..................................................................25
4.9 Real Property................................................................25
4.10 Year 2000 Compliance.........................................................25
4.11 Accuracy of Preliminary Statements...........................................25
5. DEFAULTS -- REMEDIES................................................................25
5.1 Default Remedies.............................................................25
5.2 Other Enforcement Rights.....................................................28
5.3 Power of Attorney............................................................28
5.4 Effect of Sale, etc..........................................................29
5.5 Delay or Omission; No Waiver.................................................29
5.6 Restoration of Rights and Remedies...........................................30
5.7 Application of Proceeds......................................................30
5.8 Cumulative Remedies..........................................................30
5.9 Waivers by the Obligors......................................................30
5.10 Consent......................................................................31
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6. MISCELLANEOUS.......................................................................31
6.1 Communications...............................................................31
6.2 Waiver and Amendment.........................................................31
6.3 Survival.....................................................................31
6.4 Successors and Assigns.......................................................32
6.5 Reproduction of Documents....................................................32
6.6 Additional Parties...........................................................32
6.7 Consistent with Indentures and Intercreditor Agreement.......................32
6.8 Term of Agreement............................................................33
6.9 Entire Agreement.............................................................33
6.10 Execution in Counterpart.....................................................33
Annex 1 -- Principal Executive Offices; Location of Books and Records; Trade Names
Annex 2 -- Locations of Inventory and Equipment
Annex 3 -- Trademarks, Trade Names and Patents
Annex 4 -- Real Estate
Annex 5 - Five Specified Real Properties
Annex 6 - Nine Specified Real Properties
Exhibit A -- Form of Acknowledgment and Agreement
</TABLE>
iii
<PAGE>
MASTER COLLATERAL AND SECURITY AGREEMENT
MASTER COLLATERAL AND SECURITY AGREEMENT (as may be amended, restated,
supplemented or otherwise modified from time to time, this "AGREEMENT"), dated
as of May 7, 1999, among each of TULTEX CORPORATION, a Virginia corporation
(together, with its successors and assigns, the "COMPANY"), CALIFORNIA SHIRT
SALES, INC., a Virginia corporation ("CALIFORNIA SHIRT"), DOMINION STORES, INC.,
a Virginia corporation ("DOMINION STORES"), TULTEX/T-SHIRT CITY, INC., a
Virginia corporation, TRACK GEAR, INC., a Virginia corporation, AKOM, LTD., a
Cayman Islands, B.W.I. corporation ("AKOM"), DOMINION DISTRIBUTION, INC., a
Virginia corporation, LIGA MAYOR DE MEXICO S.A. DE C.V., a Mexican corporation,
TULTEX SUBSIDIARY (VA) INC., a Virginia corporation formerly known as Logo
Athletic, Inc. and Logo 7, Inc. ("TULTEX VIRGINIA"), TULTEX SUBSIDIARY (MASS)
INC., a Massachusetts corporation formerly known as Universal Industries, Inc.
and as Logo Athletic/Headwear, Inc. ("TULTEX MASSACHUSETTS"), TULTEX CANADA,
INC., a Canadian corporation ("TULTEX CANADA"), SWEATJET INCORPORATED, a
Virginia corporation ("SWEATJET"), and TULTEX INTERNATIONAL, INC., a Virginia
corporation ("TULTEX INTERNATIONAL") (all of the foregoing (other than the
Company), together with their respective successors and assigns, referred to
herein, individually, as a "SUBSIDIARY GRANTOR," and, collectively, as the
"SUBSIDIARY GRANTORS;" the Company and the Subsidiary Grantors being
collectively referred to herein as the "OBLIGORS"), and U.S. BANK NATIONAL
ASSOCIATION, a national banking association, as beneficiary and grantee ("US
BANK"), not in its individual corporate capacity but solely in its capacity as
security trustee (in its capacity as such security trustee, and together with
any successor or co-security trustee that becomes such in accordance with the
provisions of the Indentures (as hereinafter defined), the "TRUSTEE") for the
Noteholders (as hereinafter defined) pursuant to the Indentures. Capitalized
terms used herein, and not otherwise defined herein, have the respective
meanings ascribed thereto in Section 2.1; and interpretive provisions with
respect to certain other terms used herein are set forth in Section 2.2.
1. PRELIMINARY STATEMENTS
1.1 The Company, as issuer, AKOM, Dominion Stores, California Shirt,
Tultex International, Logo 7, Inc. (predecessor to Tultex Virginia), Universal
Industries, Inc. (predecessor to Tultex Massachusetts), Tultex Canada and
Sweatjet, as guarantors, and First Union National Bank of Virginia ("FIRST
UNION"), as trustee, entered into an indenture, dated as of March 15, 1995 (the
"1995 INDENTURE"), pursuant to which the Company was authorized to issue
$110,000,000 in Securities (as defined therein) and said guarantors were
obligated to Guarantee (as defined therein) any such issued Securities. The 1995
Indenture was amended by that certain First Supplemental Indenture, dated May
1, 1997, and is being further amended by that certain Second Supplemental
Indenture, on or about the date hereof (the 1995 Indenture, as amended by said
First and Second Supplemental Indentures, is referred to herein as the "FIRST
INDENTURE").
1.2 The Company, as issuer, AKOM, Dominion Stores, Logo 7, Inc.
(predecessor to Tultex Virginia), Universal Industries, Inc. (predecessor to
Tultex Massachusetts), Sweatjet, Tultex International and Tultex Canada, as
guarantors, and First Union, as trustee, entered into an indenture, dated as of
April 15, 1997 (the "1997 INDENTURE"), pursuant to which the Company was
authorized to issue $75,000,000 in Securities (as defined therein) and said
guarantors were obligated to Guarantee (as defined therein) any such issued
Securities. The 1997 Indenture was amended by that certain First Supplemental
Indenture, dated May
1
<PAGE>
1, 1997, and is being further amended by that certain Second Supplemental
Indenture, on or about the date hereof (the 1997 Indenture, as amended by said
First and Second Supplemental Indentures, is referred to herein as the "SECOND
INDENTURE"; the First Indenture and the Second Indenture are collectively
referred to herein as the "INDENTURES," which term shall refer to such
Indentures, as each may be amended, supplemented, restated or otherwise modified
from time to time).
1.3 Pursuant to the First Indenture the Company issued certain 10-5/8%
Senior Notes due March 15, 2005. Pursuant to the Second Indenture the Company
issued certain 9-5/8% Senior Notes due April 15, 2007. Such notes, as amended,
extended, renewed, consolidated or otherwise modified from time to time,
together with any and all notes that may be given from time to time in
substitution or replacement therefor, are collectively referred to herein as the
"NOTES." The Persons whose names appear on the register, maintained pursuant to
each Indenture for the registration and for the transfer and exchange of Notes,
as the registered owners from time to time of any of the Notes are collectively
referred to herein as the "NOTEHOLDERS."
1.4 The indebtedness evidenced by the Notes bears interest and is
payable as provided in the Notes and the Indentures.
1.5 To induce the Noteholders to enter into the Second Supplemental
Indenture which amends the 1995 Indenture and the Second Supplemental Indenture
which amends the 1997 Indenture, the Obligors have agreed to execute and deliver
this Agreement as security for the Secured Obligations.
1.6 The Liens granted herein to the Trustee by each of the Obligors are
for the ratable benefit of the Noteholders, as provided in the Indentures.
1.7 The Trustee is to act as trustee on behalf of the Noteholders, in
accordance with the terms of the Indentures, this Agreement and the other
Financing Documents.
1.8 All acts and proceedings required by law and by the certificate or
articles of incorporation and bylaws of each of the Obligors necessary to
constitute this Agreement a valid and binding agreement for the uses and
purposes set forth herein, in accordance with its terms, have been done and
taken, and the execution and delivery hereof has been in all respects duly
authorized.
2. INTERPRETATION OF THIS AGREEMENT
2.1 TERMS DEFINED.
As used in this Agreement, the following terms have the respective
meanings set forth below or provided for in the section or other part of this
Agreement referred to immediately following such term (such definitions to be
equally applicable to both the singular and plural forms of the terms defined)
or, if not defined herein, then as defined in the Indentures.
ACCOUNT DEBTOR -- means a Person who is obligated on a Receivable.
AGENT - means NationsBank, N.A., in its capacity as Agent for the
Lenders under the Loan Agreement, together with its successors and assigns in
such capacity.
AGREEMENT -- has the meaning set forth in the introductory sentence
hereof.
2
<PAGE>
AKOM -- has the meaning specified in the introductory sentence hereof.
BOOKS AND RECORDS -- means all books, records, operator's manuals,
ledger cards, computer programs, computer disks and tapes and other similar
Property and general intangibles at any time evidencing or relating to any of
the Obligors' Receivables, Inventory or other Property constituting Collateral.
CALIFORNIA SHIRT - has the meaning set forth in the introductory
sentence hereof.
CAPITAL LEASE -- means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
CAPITALIZED LEASE OBLIGATION -- means Indebtedness represented by
obligations under a Capital Lease, and the amount of such Indebtedness shall be
the capitalized amount of such obligations determined in accordance with GAAP.
COLLATERAL -- means and includes, collectively, all of the collateral
referred to in each of the Security Documents and all of each Obligor's right,
title and interest in and to each of the following, wherever located and whether
now or hereafter existing or now owned or hereafter acquired or arising:
(a) all Receivables;
(b) all Inventory;
(c) all Contract Rights;
(d) all General Intangibles;
(e) all Tax Refund Claims;
(f) all Equipment;
(g) all Real Estate;
(h) all goods and other Property, whether or not
delivered, (i) the sale or lease of which gives or purports to give rise
to any Receivable, including all merchandise returned or rejected by or
repossessed from customers, or (ii) securing any Receivable, including
all rights as an unpaid vendor or lienor (including stoppage in transit,
replevin and reclamation) with respect to such goods and other Property;
(i) all mortgages, deeds to secure debt and deeds of trust
on real or personal Property, guaranties, leases, security agreements,
and other agreements and Property which secure or relate to any
Receivable or other Collateral, or are acquired for the purpose of
securing and enforcing any item thereof;
(j) all documents of title, policies and certificates of
insurance, securities, chattel paper and other documents and instruments
evidencing or pertaining to any and all items of Collateral;
3
<PAGE>
(k) all files, correspondence, computer programs, tapes,
discs and related data processing software which contain information
identifying or pertaining to any Tax Refund Claim or any of the
Receivables or any Account Debtor, or showing the amounts thereof or
payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof;
(l) any demand, time, savings, passbook, money market or like
depository account, and all certificates of deposit, maintained with a
bank, savings and loan association, credit union or like organization;
(m) all cash deposited with the Trustee or any Noteholder,
or which the Trustee, for the benefit of the Secured Creditors, or any
Noteholder, is entitled to retain or otherwise possess as collateral
pursuant to the provisions of this Agreement or any of the Security
Documents; and
(n) any and all products and proceeds of the foregoing (including
any claim to any item referred to in this definition, and any claim
against any third party for loss of, damage to or destruction of any or
all of, the Collateral or for proceeds payable under, or unearned
premiums with respect to, policies of insurance) in whatever form,
including cash, negotiable instruments and other instruments for the
payment of money, investment property, chattel paper, security
agreements and other documents.
COMPANY -- has the meaning specified in the introductory sentence
hereof.
CONTRACT RIGHTS - means any rights under contracts not yet earned
by performance and not evidenced by an instrument or chattel paper,
which contracts relate to or arise out of any of the Receivables or
Inventory.
COPYRIGHTS - means and includes, in each case whether now
existing or hereafter arising, all of each Obligor's right, title and
interest in and to: (a) all copyrights, rights and interests in
copyrights, works protectable by copyright, copyright registrations and
copyright applications; (b) all renewals of any of the foregoing; (c)
all income, royalties, damages and payments now or hereafter due and/or
payable under any of the foregoing, including damages or payments for
past or future infringements of any of the foregoing; (d) the right to
sue for past, present and future infringements of any of the foregoing;
and (e) all rights corresponding to any of the foregoing throughout the
world.
DEFAULT -- means an event or condition the occurrence of which
would, with the lapse of time or the giving of notice or both, become an
Event of Default.
DOLLAR and $ mean freely transferable United States dollars.
DOMINION STORES -- has the meaning specified in the introductory
sentence hereof.
EFFECTIVE DATE - means May 7, 1999, or such later date upon which
this Agreement shall first become effective.
ENVIRONMENTAL PROTECTION LAW -- means any and all Federal, state,
local, and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants, franchises,
licenses, agreements or governmental restrictions relating to pollution
and the
4
<PAGE>
protection of the environment or the release of any materials into the
environment, including but not limited to those related to hazardous
substances or wastes, air emissions and discharges to waste or public
systems.
EQUIPMENT - means all machinery, apparatus, equipment, motor
vehicles, tractors, trailers, rolling stock, fittings and fixtures and
other tangible personal property (other than Inventory) of every kind
and description used in the Obligors' business operations or owned by an
Obligor or in which an Obligor has an interest, and all parts,
accessories and special tools and all increases and accessions thereto
and substitutions and replacements therefor.
EVENT OF DEFAULT -- means, at any time, the occurrence and
continuance of any one or more of the following, for any reason
whatsoever (and whether such occurrence shall be voluntary or
involuntary or come about or be effected by operation of law or
otherwise):
(i) an "Event of Default" under and as defined in either
or both of the Indentures; or
(ii) a failure by any Obligor to perform or comply in any
material respect with any covenant or agreement of such Obligor
set forth in this Agreement or any other Financing Document; or
(iii) any warranty, representation or other statement by
or on behalf of any Obligor contained in any of the Financing
Documents, in any written amendment, supplement, modification or
waiver with respect to any Financing Document or in any
instrument furnished in compliance herewith or in reference
hereto, shall have been false or misleading in any material
respect when made; or
(iv) any Financing Document shall cease to be in full
force and effect or shall be declared by a court or other
Govenmental Authority of competent jurisdiction to be void,
voidable or unenforceable against any Obligor party thereto; the
validity or enforceability of any Financing Document against any
Obligor party thereto shall be contested by any Obligor or any
Affiliate thereof; or any Obligor shall deny that any one or more
of the Obligors has any further liability or obligation under any
Financing Document to which it is a party; or
(v) the failure of the Obligors, prior to June 24, 1999,
to (A) grant to the Trustee, subject to the following clauses
(B), (C), (D), (E), (F) and (G), (1) perfected first priority
Liens (subject only to prior Permitted Liens) on all of the
Noteholder Priority Collateral (as defined in the Intercreditor
Agreement) (other than leasehold interests in retail outlet
stores) in which any of the Obligors possess any right, title or
interest on and as of the Effective Date and (2) perfected Liens,
prior to all Liens other than those granted to the Agent pursuant
to the Loan Agreement, on all of the Bank Priority Collateral (as
defined in the Intercreditor Agreement) in which any of the
Obligors possess any right, title or interest on and as of the
Effective Date, (B) obtain landlord consents and lien waivers
(substantially in the form and on the terms requested by Trustee)
with respect to each of the real Properties listed on Annex 5,
(C) obtain landlord consents and lien waivers (substantially in
the form and on the terms requested by Trustee) with respect to
seven of the nine real Properties listed on Annex 6, (D) have
used their best efforts to (1) grant to the Trustee perfected
first
5
<PAGE>
priority Liens on all of its interests in real Property located
in Jamaica and (2) obtain landlord consents and lien waivers
(substantially in the form and on the terms requested by Trustee)
with respect to such real Property, (E) obtain landlord lien
waivers (substantially in the form and on the terms requested by
Trustee) with respect to substantially all other real Properties
leased by any of the Obligors, (F) deliver to the Trustee one or
more survey maps, reasonably satisfactory in form and substance
to Trustee and prepared by a surveyor licensed in Virginia,
depicting all of the Company's real Property located in
Martinsville, Virgina, and all of the Company's real Property
located in Henry County, Virginia, and cooperate with Trustee's
efforts to develop correct legal descriptions for each site
forming part of such real Property (including correction of any
errors or oversights with respect to the legal descriptions
presently attached to the Mortgages) and take all steps required
to correct or supplement the Mortgages accordingly, and (G)
comply with the obligations referred to in the last sentence of
Section 3.2(c)(ii) as the Trustee shall request in order to
perfect such Liens and protect the Trustee's interest in such
Collateral, except, in each of the foregoing cases, for such
failures that shall have been expressly waived by the Trustee in
writing.
FINANCING DOCUMENTS - means the Notes, the Indentures, this
Agreement, the Security Documents and all other documents and
instruments now or hereafter evidencing, securing or guarantying all or
any part of the Secured Obligations or otherwise governing the
responsibilities of the Obligors, or any of them, in connection with the
Secured Obligations, the Collateral or any other security for the
Secured Obligations.
FINANCING STATEMENTS -- means any and all Uniform Commercial Code
financing statements (or other similar documents), in form and substance
satisfactory to the Trustee, executed and delivered by any Obligor to
the Trustee, naming the Trustee, for the benefit of the Secured
Creditors, as secured party, and such Obligor as debtor, in connection
with this Agreement.
FIRST INDENTURE - has the meaning specified in Section 1.1.
FIRST UNION - has the meaning specified in Section 1.1.
GAAP -- means generally accepted accounting principles as in
effect from time to time in the United States of America.
GENERAL INTANGIBLES -- means all of the Obligors' now owned or
hereafter acquired general intangibles and other intangible personal
property of every kind and nature which relate to or arise out of any of
the Receivables or Inventory, including all of the following which
relate to or arise out of any of the Receivables or Inventory: all
Proprietary Rights, corporate or other business records, inventions,
designs, blueprints, plans, specifications, goodwill, computer software,
customer lists, registrations, licenses, franchises, rights and claims
against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any
similar type of insurance and any proceeds thereof, and any letter of
credit, guarantee, claims, security interest or other security held by
or granted to any Obligor to secure payment by an Account Debtor of any
of the Receivables.
6
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GOVERNMENTAL AUTHORITY -- means
(a) the government of
(i) the United States of America or any state or
other political subdivision thereof, or
(ii) any jurisdiction in which the Company or any
Subsidiary thereof conducts all or any part of its
business, or which asserts jurisdiction over any
Properties of the Company or any Subsidiary thereof, or
(b) any entity exercising executive, legislative,
judicial, regulatory or administrative functions of, or
pertaining to, any such government.
INDENTURES - has the meaning specified in Section 1.2.
INTERCREDITOR AGREEMENT -- means the Intercreditor Agreement,
dated as of the date of this Agreement, between the Agent and Trustee.
INVENTORY - means all "inventory" as such term is defined in the
Uniform Commercial Code and shall include, without limitation, (a) all
goods intended for sale or lease by the Obligors, or for display or
demonstration, (b) all work in process, (c) all raw materials and other
materials and supplies of every nature and description used or which
might be used in connection with the manufacture, packing, shipping,
advertising, selling, leasing or furnishing of such goods or otherwise
used or consumed in the Obligors' business, and (d) all documents
evidencing and general intangibles relating to any of the foregoing.
LENDERS - means, at any time, all of the financial institutions
party to the Loan Agreement at such time, including their successors and
assigns.
LIEN - means, as applied to the Property of any Person: (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge,
lease constituting a Capitalized Lease Obligation, conditional sale or
other title retention agreement, or other security interest, security
title or encumbrance of any kind in respect of any Property of such
Person, or upon the income or profits therefrom; (b) any arrangement,
express or implied, under which any Property of such Person is
transferred, sequestered or otherwise identified for the purpose of
subjecting the same to the payment of Indebtedness or performance of any
other obligation in priority to the payment of the general, unsecured
creditors of such Person; (c) any Indebtedness which is unpaid more than
60 days after the same shall have become due and payable and which if
unpaid might by law (including bankruptcy and insolvency laws), or
otherwise, be given any priority whatsoever over the claims of general
unsecured creditors of such Person; and (d) the filing of, or any
agreement to give, any financing statement under the Uniform Commercial
Code or its equivalent in any jurisdiction, excluding informational
financing statements relating to leased property.
LOAN AGREEMENT - means the Loan and Security Agreement, dated as
of the date hereof, among the Obligors, the Lenders and the Agent, as in
effect on the date hereof.
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LOGO ATHLETIC NOTE - means, collectively, (a) the Non-Negotiable
Subordinated Promissory Note of TKS Acquisition, Inc., dated July 15,
1998, payable to the Company in the Company in the principal amount of
$5,000,000, (b) the Non-Negotiable Subordinated Promissory Note of TKS
Acquisition, Inc., dated July 15, 1998, payable to the Company in the
Company in the principal amount of $2,500,000, (c) the Non-Negotiable
Subordinated Promissory Note of TKS Acquisition, Inc., dated July 15,
1998, payable to the Company in the Company in the principal amount of
$5,000,000.
MAJORITY NOTEHOLDERS -- means, at any time, (a) the holders of a
majority in aggregate principal amount of the "Securities" (as defined
in the First Indenture) and (b) the holders of a majority in aggregate
principal amount of the "Securities" (as defined in the Second
Indenture), in each case, excluding any such Securities held by, or
owing to, one or more of the Company, any Obligor, or any of their
respective Subsidiaries or Affiliates.
MATERIAL ADVERSE EFFECT -- means a material adverse effect on
(a) the business, operations, affairs, financial
condition, assets or properties of the Obligors, taken as a
whole, or
(b) the fair market value of the Collateral, taken as a
whole, or
(c) the ability of any Obligor to perform its material
obligations under any of the Financing Documents to which it is a
party, or
(d) the validity or enforceability of any of the Financing
Documents.
MORTGAGED REAL ESTATE -- means and includes all "Property" (as
such term is defined in each of the Mortgages) subject to the Lien in
favor of the Trustee granted pursuant to the Mortgages and (without
duplication) all of the Real Estate described on ANNEX 4, together with
all Real Estate with respect to which the Obligors are required to
deliver a Mortgage to the Trustee pursuant to Section 3.3(a).
MORTGAGES - means and includes any and all of the mortgages,
deeds of trust, deeds to secure debt, assignments and other instruments
executed and delivered by the Obligors pursuant to which the Obligors
grant to the Trustee, for the benefit of the Secured Creditors, a Lien
on all Mortgaged Real Estate, and all amendments, modifications and
supplements thereto.
1995 INDENTURE - has the meaning specified in Section 1.1.
1997 INDENTURE - has the meaning specified in Section 1.2.
NOTEHOLDERS - has the meaning specified in Section 1.3.
NOTES - has the meaning specified in Section 1.3.
OBLIGORS -- has the meaning specified in the introductory
sentence hereof.
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PATENT ASSIGNMENT -- means the Collateral Assignment and Patent
Security Agreement, dated on or about the Effective Date, made by the
Obligors to the Trustee, for the benefit of the Secured Creditors.
PATENTS -- means and includes, in each case whether now existing
or hereafter arising, all of the Obligors' right, title and interest in
and to (a) any and all patents and patent applications, (b) inventions
and improvements described and claimed therein, (c) reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof,
(d) income, royalties, damages, claims and payments now or hereafter due
and/or payable under and with respect thereto, including damages and
payments for past and future infringements thereof, (e) rights to sue
for past, present and future infringements thereof, and (f) all rights
corresponding to any of the foregoing throughout the world.
PERMITS AND WARRANTIES -- means all permits, licenses,
manufacturer's warranties, performance guarantees, service contracts,
maintenance contracts, and other similar general intangibles which are
necessary for, or used or useful in connection with, the operation or
use of any of the Collateral or any of the Mortgaged Real Estate.
PERMITTED EQUIPMENT SALE - means a sale of Equipment of any
Obligor in an arms-length transaction, PROVIDED that: (i) the
consideration for such sale shall be at least equal to the fair market
value of the items of Equipment so sold, as determined in good faith by
the Board of Directors of such Obligor and as evidenced by a certified
resolution of such Board of Directors delivered to the Trustee on or
before the date of the transfer of title, together with an accurate and
complete copy of the agreement pursuant to which such transaction is to
be, or shall have been, consummated; and (ii) the consideration for such
sale, when combined with the consideration for all other Equipment Sales
(as hereinafter defined) consummated within the period of twelve
consecutive months immediately preceding the transfer of title of such
Equipment, shall not exceed $2,000,000 in the aggregate. As used herein,
the term "Equipment Sales" means any and all sales of Equipment and any
and all sales of like personal Property encumbered by any of the
Security Documents prior to the consummation of such sale or sales.
PERMITTED LIEN S -- means
(a) one or more Liens or security interests in favor of
the Trustee securing the Secured Obligations and
(b) other Liens that comply with the terms of all of the
Financing Documents, including Liens granted to the Agent
pursuant to the Loan Agreement, provided such Liens are
consistent in all respects with the Intercreditor Agreement.
PERSON -- means an individual, sole proprietorship, partnership,
corporation, trust, joint venture, unincorporated organization, limited
liability company or a government or agency or political subdivision
thereof.
PROPRIETARY RIGHTS -- means all of the Obligors' now owned and
hereafter arising or acquired Patents, Copyrights, and Trademarks,
including those Proprietary Rights set forth on ANNEX 3 hereto, and all
other rights under any of the foregoing, all extensions, renewals,
reissues,
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divisions, continuations, and continuations-in-part of any of the
foregoing, and all rights to sue for past, present and future
infringement of any of the foregoing.
PROPERTY -- means any interest in any kind of property or asset,
whether real, personal or mixed, and whether tangible or intangible.
REAL ESTATE -- means all of the Obligors' now or hereafter owned
or leased estates in real Property, including the real Property
described on ANNEX 4.
RECEIVABLES -- means and includes, as to each Obligor, (a) any
and all rights to the payment of money or other forms of consideration
of any kind (whether classified under the Uniform Commercial Code as
accounts, contract rights, chattel paper, general intangibles, or
otherwise) including accounts receivable, letters of credit and the
right to receive payment thereunder, chattel paper, tax refunds,
insurance proceeds, Contract Rights, notes, drafts, instruments,
documents, acceptances, and all other debts, obligations and liabilities
in whatever form from any Person, but excluding the Logo Athletic Note
and the Vendor Note, (b) all guarantees, security and Liens for payment
thereof, (c) all goods, whether now owned or hereafter acquired, and
whether sold, delivered, undelivered, in transit or returned, which may
be represented by, or the sale or lease of which may have given rise to,
any such right to payment or other debt, obligation or liability, and
(d) all proceeds of any of the foregoing.
SECOND INDENTURE - has the meaning specified in Section 1.2.
SECURED CREDITORS - means, collectively, the Trustee and the
Noteholders.
SECURED OBLIGATIONS -- means and includes, in each case whether
now in existence or hereafter arising, (a) all principal, interest,
premium, if any, and other obligations of the Company and the other
Obligors under the Notes, the Indentures and the other Financing
Documents, and (b) all indebtedness, liabilities, obligations, covenants
and duties of the Obligors to any one or more of the Secured Creditors
of every kind, nature and description arising under or in respect of
this Agreement, the Notes or any of the other Financing Documents,
whether direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money,
including, without limitation, fees required to be paid and expenses
required to be paid or reimbursed, indemnities, and any other amounts
whatsoever.
SECURITY DOCUMENTS - means this Agreement, the Financing
Statements, the Patent Assignment, the Trademark Assignment, the
Mortgages, and each other writing executed and delivered by any one or
more of the Obligors securing the Secured Obligations.
SUBSIDIARY GRANTOR -- has the meaning specified in the
introductory sentence hereof.
SWEATJET - has the meaning specified in the introductory sentence
hereof.
TAX REFUND CLAIMS - means all tax refund claims and all rights
with respect thereto, including all rights to settle or compromise the
amount of such claims, to file amendments and other documents with
respect thereto, and to receive the proceeds thereof.
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TRADEMARK ASSIGNMENT -- means the Conditional Assignment and
Trademark Security Agreement, dated on or about the Effective Date,
entered into by the Trustee with the Obligors.
TRADEMARKS - means and includes, in each case whether now
existing or hereafter arising, all of the Obligors' right, title and
interest in and to (a) trademarks (including service marks), trade names
and trade styles and the registrations and applications for registration
thereof and the goodwill of the business symbolized by the trademarks,
(b) licenses of the foregoing, whether as licensee or licensor, (c)
renewals thereof, (d) income, royalties, damages and payments now or
hereafter due and/or payable with respect thereto, including damages,
claims and payments for past and future infringements thereof, (e)
rights to sue for past, present and future infringements thereof,
including the right to settle suits involving claims and demands for
royalties owing, and (f) all rights corresponding to any of the
foregoing throughout the world.
TRUSTEE -- has the meaning set forth in the introductory sentence
hereof.
TULTEX CANADA -- has the meaning specified in the introductory
sentence hereof.
TULTEX INTERNATIONAL -- has the meaning specified in the
introductory sentence hereof.
TULTEX MASSACHUSETTS -- has the meaning specified in the
introductory sentence hereof.
TULTEX VIRGINIA -- has the meaning specified in the introductory
sentence hereof.
UNIFORM COMMERCIAL CODE --means the Uniform Commercial Code as in
effect from time to time in any specified or applicable jurisdiction.
US BANK -- has the meaning specified in the introductory sentence
hereof.
VENDOR NOTE - means, collectively, (a) a promissory note dated
July 1, 1997 of Textiles Arco, S.A. de C.V., as amended, payable to the
Company in the amount of $198,000 as of April 3, 1999, and (b) the
contract obligations due from [OMSA] and related parties under the
agreement dated October 11, 1995, as amended on July 1, 1997, payable to
the Company in the amount of $4,354,000 as of April 3, 1999.
2.2 SECTION HEADINGS AND TABLE OF CONTENTS AND CONSTRUCTION, ETC.
(A) SECTION HEADINGS AND TABLE OF CONTENTS, ETC. The
titles of the Sections of this Agreement and the Table of
Contents of this Agreement appear as a matter of convenience
only, do not constitute a part hereof and shall not affect the
construction hereof. The words "herein," "hereof," "hereunder"
and "hereto" refer to this Agreement as a whole and not to any
particular Section or other subdivision. References to Sections
are, unless otherwise specified, references to Sections of this
Agreement. References to Annexes, Schedules, Exhibits and
Attachments are, unless otherwise specified, references to
Annexes, Schedules, Exhibits and Attachments attached to this
Agreement.
(B) CONSTRUCTION. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained
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herein, and compliance with any one covenant shall not (absent
such an express contrary provision) be deemed to excuse
compliance with one or more other covenants.
(C) OTHER TERMS AND RULES OF CONSTRUCTION.
(i) The terms "accounts," "chattel paper,"
"contract rights," "documents," "equipment,"
"instruments," "general intangibles," "investment
property" and "inventory," as and when used in the lower
case in this Agree ment (and not as a capitalized term) or
the other Security Documents, shall have the meanings
given those terms in the Uniform Commercial Code.
(ii) Unless otherwise specified, the word
"including" means "including but not limited to".
(iii) References to any legislation or statute or
code, or to any provisions of any legislation or statute
or code, shall include any modification or reenactment of,
or any legislative, statutory or code provision
substituted for, such legislation, statute or code or
provision thereof.
(iv) Unless otherwise specified with respect
thereto, references to any document or agreement
(including this Agreement) shall include references to
such document or agreement as amended, novated,
supplemented, modified or replaced from time to time, so
long as and to the extent that such amendment, novation,
supplement, modification or replacement is either not
prohibited by the terms of any Financing Document or is
consented to by the Majority Noteholders and the Trustee.
(v) References to any Person include its successor
or permitted substitutes and assigns.
2.3 SEPARATE AGREEMENTS.
Notwithstanding that this Agreement is among each of the Obligors
and the Trustee, this Agreement shall be construed and interpreted as a
separate Agreement between each Obligor, respectively, and the Trustee,
and any whole or partial invalidity of this Agreement in respect of any
Obligor shall not have any effect on the validity or enforceability of
this Agreement as among each other Obligor, respectively, as the case
may be, and the Trustee.
2.4 PARTIAL INVALIDITY.
The unenforceability or invalidity of any provision or provisions
of this Agreement shall not render any other provision or provisions
contained in this Agreement unenforceable or invalid.
2.5 GOVERNING LAW.
THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE INTERNAL LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT
THE PERFECTION OF THE LIENS IN AND TO THE
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COLLATERAL ARE GOVERNED BY THE LAWS OF ANY JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
3. COLLATERAL
3.1 GRANT OF SECURITY INTEREST.
(a) To secure the payment, observance and performance of
the Secured Obligations, each Obligor hereby mortgages, pledges
and assigns all of its right, title and interest in and to the
Collateral to the Trustee, for the benefit of the Secured
Creditors, and grants to the Trustee, for the benefit of the
Secured Creditors, a continuing security interest in, and a
continuing Lien upon, all of its right, title and interest in and
to the Collateral.
(b) As additional security for all of the Secured
Obligations, each Obligor grants to the Trustee and the
Noteholders, for the benefit of the Trustee and the Noteholders,
a security interest in, and assigns to the Trustee and the
Noteholders, for the benefit of the Trustee and the Noteholders,
all of such Obligor's right, title and interest in and to, any
deposits or other sums at any time credited by or due from the
Trustee and each Noteholder to such Obligor, or credited by or
due from any participant of any Noteholder to such Obligor, with
the same rights therein as if the deposits or other sums were
credited by or due from such Noteholder. Each Obligor hereby
authorizes the Trustee and each Noteholder to pay or deliver to
the Trustee, for the account of the Trustee and the Noteholders,
without any necessity on the Trustee's or any Noteholder's part
to resort to other security or sources of reimbursement for the
Secured Obligations, at any time during the continuation of any
Event of Default or in the event that the Trustee, on behalf of
the Secured Creditors, should make demand for payment under any
Financing Document and without further notice to any Obligor
(such notice being expressly waived), any of the aforesaid
deposits (general or special, time or demand, provisional or
final) or other sums for application to any Secured Obligation,
irrespective of whether any demand has been made or whether such
Secured Obligation is mature, and the rights given the Trustee
and the Noteholders hereunder and under each other Financing
Document are cumulative with such Person's other rights and
remedies, including other rights of setoff. The Company will
promptly notify the Trustee of its receipt of any such funds for
application to the Secured Obligations, but failure to do so will
not affect the validity or enforceability thereof. The Trustee
may give notice of the above grant of a security interest in and
assignment of the aforesaid deposits and other sums, and
authorization, to, and make any suitable arrangements with, any
Noteholder for effectuation thereof, and each Obligor hereby
irrevocably appoints the Trustee as its attorney to collect any
and all such deposits or other sums to the extent any such
payment is not made to the Trustee or any Noteholder by such
Noteholder.
3.2 COLLATERAL-RELATED RIGHTS AND UNDERTAKINGS.
(A) CHIEF EXECUTIVE OFFICE; NOTICE OF CHANGES OF ADDRESS
OR NAME. Each of the Obligors hereby represents, warrants and
covenants to the Trustee that,
(1) the chief executive office of each of the
Obligors (and the office where all of the Books and
Records of each of the Obligors are maintained) is located
at the applicable address set forth on ANNEX 1, and
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(2) the Inventory and Equipment currently owned by
such Obligor is physically located at the address or
addresses set forth on ANNEX 2.
None of the Obligors shall
(1) change the address of such chief
executive office, or merge or consolidate with any
Person or change its name, or
(2) change the specified locations of such
Inventory (other than pursuant to sales of such
Inventory in the normal course of business) and
Equipment,
unless such Obligor shall have given thirty (30) days prior
written notice thereof to the Trustee.
(B) OWNERSHIP OF COLLATERAL; LIEN OF THE TRUSTEE; TAXES.
Each of the Obligors hereby represents, warrants and covenants to
the Trustee that the Collateral granted by each Obligor hereunder
is now, and at all times shall be, solely owned by such Obligor
free and clear of all Liens, security interests, claims and
encumbrances, except Permitted Liens. Each of the Obligors hereby
represents, warrants and covenants to the Trustee that the
security interests of the Trustee in the Collateral are now, and
shall at all times be, valid, perfected, first priority security
interests in the Noteholder Priority Collateral (as defined in
the Intercreditor Agreement) and perfected Liens, prior to all
Liens other than those granted to the Agent pursuant to the Loan
Agreement, on all of the Bank Priority Collateral (as defined in
the Intercreditor Agreement), in all cases subject only to
Permitted Liens. Each of the Obligors shall defend the Collateral
from all claims and demands of all other Persons, except the
holders of Permitted Liens. Each of the Obligors shall comply
with the requirements of all state and federal laws, rules and
regulations in order to grant the security interests herein
granted in and to the Collateral, to maintain the perfection and
priority of such security interests and to permit the Trustee to
realize promptly and directly on such Collateral, as provided
herein. Each of the Obligors shall pay all taxes, assessments and
other claims lawfully levied or assessed on any of the
Collateral, except to the extent that such taxes, assessments and
other claims constitute Permitted Liens.
(C) FINANCING STATEMENTS; FURTHER ASSURANCES
(i) Each of the Obligors hereby agrees to execute
such financing statements
(A) as may be requested by the Trustee or
the Noteholders on or prior to the Effective Date,
and
(B) as the Trustee or the Majority
Noteholders may from time to time request, and
(C) at all times take such action
(including, without limitation, the preparation and
filing, at its own expense, of all continuation
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statements) as may be required to perfect
(including in respect of after-acquired Property in
the nature of Collateral) and to keep continuously
perfected the Trustee's security interest and Lien
in the Collateral.
The Trustee is hereby authorized by each of the Obligors
to execute and file any such financing statements and
continuation statements on such Obligor's behalf, unless
prohibited by law, and, if such Obligor fails to make such
filings within five (5) days of any request therefor by
the Trustee, the Trustee shall make such filings subject
to the provisions hereof.
(ii) Each of the Obligors shall, at its sole cost
and expense, perform all acts and execute all documents
reasonably requested by the Trustee or the Majority
Noteholders from time to time to evidence, perfect,
preserve the priority of, maintain or enforce the
Trustee's security interests granted herein or otherwise
in furtherance of the provisions of this Agreement. At any
time and from time to time, each of the Obligors shall, at
its sole cost and expense, execute and deliver to the
Trustee such financing statements pursuant to the Uniform
Commercial Code or other applicable law of any applicable
jurisdiction, and shall execute, acknowledge, deliver and
record, or will cause to be executed, acknowledged,
delivered or recorded, all such further instruments,
deeds, conveyances, mortgages, supplemental indentures,
transfers, continuation statements and assurances as are
necessary or reasonably appropriate to perfect, preserve,
protect, continue and maintain the perfection and priority
of the Lien of the Trustee in and to the Collateral or, as
the Trustee may reasonably require, for the better
granting, bargaining, selling, remising, releasing,
confirming, conveying, warranting, assigning,
transferring, mortgaging, pledging, delivering and setting
over to the Trustee every part of such security, or as may
be required in order to transfer to any successor trustee
or trustees the estate, powers, instruments and funds held
in trust hereunder. Each of the Obligors hereby authorizes
the Trustee to execute and file at any time and from time
to time one or more financing statements or copies thereof
or of this Agreement (and any continuation statements in
respect thereof) with respect to the Collateral signed
only by Trustee. In particular, and without limiting the
generality of this clause (ii), (A) each of the Obligors
shall comply with the foregoing provisions of this clause
(ii) with respect to (I) any and all of its Property
located in any one or more of Canada and Mexico, and (II)
any and all of its Property consisting of motor vehicles,
and (B) the Company shall comply, prior to June 24, 1999,
with the obligations described in clause (v) of the
definition of "Event of Default" set forth herein.
(D) SALE OF COLLATERAL. No Obligor shall assign, sell,
transfer, or otherwise dispose of, nor shall any Obligor suffer
or permit any of the same to occur with respect to, any
Collateral other than
(i) in respect of the sale of Inventory in the
ordinary course of business,
(ii) (A) as otherwise permitted under each of the
Financing Documents and (B) Equipment which is disposed of
in a Permitted Equipment Sale,
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(iii) in respect of the collection of checks,
drafts, money orders or other instruments in respect of
the Receivables as contemplated by Section 3.2(i)(ii), or
(iv) with the prior written consent of the Majority
Noteholders.
The foregoing notwithstanding and notwithstanding anything to the
contrary in the Financing Documents, the Majority Noteholders
may, in their sole discretion, withdraw the aforesaid permissions
to assign, sell, transfer or otherwise dispose of Inventory upon
the occurrence and continuance of any Event of Default.
(E) ACCESS TO COLLATERAL; MAINTENANCE OF BOOKS AND
RECORDS. The Trustee shall at all times have free access to and
right of inspection of the Collateral and any records pertaining
thereto (and the right to make extracts from and to receive from
the Obligors originals or true copies of such records and any
papers and instruments relating to any Collateral upon request
therefor at reasonable times and as reasonably requested). Each
of the Obligors shall maintain the Books and Records and such
other records as will enable it and the Trustee to accurately
determine the status of the Collateral in a prompt manner. All of
the Books and Records and such other records shall be maintained
at the respective addresses set forth on ANNEX 1 until such time
as any Obligor shall be permitted to change such location in
accordance with this Section 3.2.
(F) USE OF EQUIPMENT; NOTICES REGARDING CHANGES IN
EQUIPMENT.
(i) Each of the Obligors hereby represents,
warrants and covenants to the Trustee that all of the
Equipment is used in the business of such Obligor (and not
for personal, family, household or farming use) for lawful
purposes only and in compliance in all material respects
with all laws, rules and governmental regulations relating
thereto.
(ii) Each Obligor will, at such Obligor's sole
expense, keep each item of Equipment (other than obsolete
Equipment) in functional condition and repair, running and
marketable condition.
(iii) The Obligors shall promptly (and in any event
within ten (10) Business Days) advise the Trustee and the
Noteholders in sufficient detail of any substantial change
relating to the type, quantity, quality or location of the
Equipment or any event which would have a material adverse
effect on the value of the Equipment.
(G) [INTENTIONALLY DELETED].
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(H) INSURANCE.
(i) Anything contained in the other Financing
Documents notwithstanding, the Obligors agree to maintain
insurance, with financially sound and reputable insurers,
with respect to the Inventory and any returned,
repossessed or reclaimed tangible personal Property
included in the Collateral against casualties,
contingencies, hazards and such other risks (including,
without limitation,
(A) fire, hurricane, tornado, wind damage,
and such other risks insured against by a standard
all-risk property and fire insurance policy and
endorsement for extended coverage and
(B) flood, earthquake and public
disturbance insurance)
and in such amounts (and with such reasonable deductibles)
as shall be customary in the case of corporations of
established reputations engaged in the same or a similar
business and similarly situated (it being understood that
the deductibles in respect of such insurance on the
Effective Date shall be deemed to be reasonable for the
purposes hereof). The Obligors shall deliver copies of the
policies of such insurance to the Trustee, with
satisfactory lender's loss payable endorsements naming the
Trustee as loss payee to the extent of its interest and as
such interest may appear. Each such policy of insurance or
endorsement shall contain a clause requiring the insurer
to give not less than thirty (30) days prior written
notice to the Trustee in the event of cancellation of the
policy for any reason whatsoever and a clause that the
interest of the Trustee shall not be impaired or
invalidated by any act or neglect of any Obligor. If the
Obligors shall fail to provide and pay for such insurance,
or have the same provided and paid for, the Trustee, upon
being instructed by the Majority Noteholders, may, at the
sole expense of the Obligors, procure the same, but may
not be required by the Obligors to do so. Each of the
Obligors agrees to deliver to the Trustee, promptly as
rendered, true copies of all material reports made in any
reporting form to insurance companies.
(ii) Anything contained in the other Financing
Documents notwithstanding, each Obligor shall maintain or
caused to be maintained insurance, with financially sound
and reputable insurers, with respect to its Property
(including, without limitation, the Collateral) and
business covering any public and/or product liability of
any Obligor, or its officers, agents or employees, and in
such amounts as shall be customary in the case of
corporations of established reputations engaged in the
same or a similar business and similarly situated. The
Trustee and each of the Noteholders shall be named as a
co-insured on such policies. The Obligors shall deliver to
the Trustee on the Closing Date evidence of insurance of
the type and in the amounts provided for in this Section
3.2(h)(ii) being in full force and effect and payment of
all premiums in respect thereof.
(I) COLLECTION OF RECEIVABLES, ETC. Anything herein to the
contrary notwithstanding, but subject in all cases to the
provisions of the Intercreditor Agreement:
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(i) each of the Obligors shall remain responsible
and liable to perform all of its duties and obligations
under or in respect of each of the Receivables;
(ii) until such time as the Trustee shall have
informed any of the Obligors to the contrary, the Obligors
shall remain obligated to collect, and account for all
proceeds in respect of, the Receivables and shall do so
diligently and in accordance with reasonable commercial
procedures and practices for similarly situated
corporations and shall be entitled to retain and use such
proceeds, and, if an Event of Default shall exist and if
so instructed by the Trustee, each of the Obligors shall
deliver all such proceeds to the Trustee, or as directed
by the Trustee, for application to the Secured Obligations
and the obligations secured by the Permitted Liens; and
(iii) the execution and delivery of this Agreement,
and the granting of the security interests in and to the
Collateral, shall not subject the Trustee or any holder of
the Secured Obligations to, or transfer or pass to such
Persons, or in any way affect or modify, the liability of
the Obligors under any or all of their respective
Receivables or any obligations of the Obligors in
connection therewith, it being understood and agreed that
notwithstanding this Agreement, and the granting of the
security interests in and to the Collateral, all of the
obligations of each of the Obligors to each and every
other party under each and every one of the Receivables
shall be and remain enforceable by such other party, its
successors and assigns, only against the Obligors, and the
Trustee and each holder of Secured Obligations have not
assumed any of the obligations or duties of any of the
Obligors thereunder or in connection therewith.
(J) INDEMNIFICATION. Each of the Obligors hereby agrees to
indemnify each of the Trustee and each holder of Secured
Obligations, and hold each such Person harmless, from any and all
liability, loss or damage which any such Person may or might
incur by reason of any and all claims and demands whatsoever
which may be asserted against any such Person arising out of, as
a result of, or otherwise connected with, the security interests
hereby granted to the Trustee by the Obligors under or in respect
of any of the Collateral by reason of
(i) the failure by any of the Obligors to perform
any alleged obligations or undertakings required to be
performed by such Obligor, as the case may be, under or in
connection with the Collateral (including, without
limitation, the failure of any warranty or representation
(express or implied) in respect of the sale of any
Inventory),
(ii) any failure by any of the Obligors, in
connection with any of the Collateral, to comply with any
applicable federal, state or local law and the rules and
regulations promulgated thereunder and
(iii) any bodily injury, death or property damage
occurring in connection with the sale, lease or use of the
Collateral.
(K) CERTAIN RIGHTS OF TRUSTEE.
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(i) Neither the Trustee nor any holder of Secured
Obligations shall be obligated to, or be responsible for,
the payment of any of the amounts or sums referred to in
this Section 3.2 or the other performance of any of the
undertakings of the Obligors hereunder. Each of the
Obligors hereby agrees and acknowledges that neither the
acceptance of this Agreement by the Trustee nor the
exercise of, or failure to exercise, any right, power or
remedy in this Agreement conferred upon the Trustee shall
be deemed or construed to obligate the Trustee or any
holder of Secured Obligations to pay any sum of money,
take any other action or incur any liability in connection
with, or collect or realize upon, any of the Collateral.
It is further agreed and understood by each of the
Obligors that the Trustee and the Noteholders shall not be
liable in any way for any cost, expense or liability
connected with, or any charge or liability arising from,
any of the Collateral. All insurance expenses, all
expenses of protecting, storing, warehousing, insuring,
handling, maintaining and shipping the Collateral, and any
and all excise, property, sales, use and other taxes
imposed by any state, federal or local authority on
any of the Collateral or in respect of the sale or other
disposal thereof shall be borne and paid by the Obligors.
(ii) If any of the Obligors shall fail to pay any
of the aforesaid expenses and taxes, the Trustee may, at
the instruction of the Majority Noteholders and at such
Obligor's expense, pay the same, and any such payment
shall be deemed an advance by the Trustee to such Obligor
payable on demand together with interest at the highest
rate then payable on any of the Secured Obligations. If
any of the Obligors shall fail to perform any of its other
undertakings or agreements or obligations under this
Agreement, the Trustee may (but shall not be required to)
itself perform, or cause performance of, such undertaking,
agreement or obligation, and the expenses of the Trustee
incurred in connection therewith shall be payable by such
Obligor on demand together with interest at the highest
rate then payable on any of the Secured Obligations and
shall otherwise be treated as a Secured Obligation
hereunder.
(iii) If, by reason of any suit or proceeding of
any kind, nature or description against any of the
Obligors, or by any Obligor or any other party against any
other Person, which in the Trustee's sole discretion makes
it advisable for the Trustee to seek counsel for the
protection and preservation of the Collateral, or to
defend its own interest or the interests of the
Noteholders, such out-of-pocket expenses and reasonable
counsel fees shall be allowed to the Trustee and borne and
paid by such Obligor.
(L) NO LIABILITY FOR SAFEKEEPING. Except to the extent
specifically limited by applicable law, the Trustee shall not be
liable or responsible in any way for the safekeeping of the
Collateral or for any loss or damage thereto or for any
diminution in the value thereof, or any act or default of any
warehouseman, carrier, forwarding agency or other Person, but the
same shall be at the sole risk of the Obligor owning such
Collateral.
(M) NO VIOLATION OF LAW. No Obligor shall
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(i) violate any law, ordinance or governmental rule
or regulation (including, without limitation, any
Environmental Protection Laws) to which it or the
Collateral is subject (except to the extent being
contested in good faith by appropriate proceedings and for
which reserves in respect of such Obligor's reasonably
anticipated liability therefor have been established), nor
(ii) fail to obtain any license, permit, franchise
or other governmental authorization necessary to the
ownership of the Collateral, the sale or lease of the
Inventory, the collection of the Receivables, or the
operation of the Equipment,
which violation or failure to obtain might have a Material
Adverse Effect.
(N) FURTHER ASSIGNMENTS; MARKING OF COLLATERAL. Each of
the Obligors shall deliver to the Trustee, at such times and in
such form as may be reasonably designated by the Trustee or the
Majority Noteholders from time to time, assignments, reports and
schedules relating to the Collateral. Upon request by the Trustee
or the Majority Noteholders, each of the Obligors shall mark its
books and records to reflect the security interests of the
Trustee in the Collateral.
(O) PERMITS AND WARRANTIES. To further protect the
security afforded by this Agreement with respect to the Permits
and Warranties, each Obligor agrees:
(i) to faithfully abide by, perform and discharge
in all material respects each and every obligation,
covenant, condition, duty and agreement which each or any
of the Permits and Warranties provides are to be performed
by such Obligor;
(ii) not to amend, assign, modify, cancel,
surrender, otherwise change or terminate any of the
Permits and Warranties, or waive any provision thereof in
any manner that would materially affect the security
interest of the Trustee in the Permits and Warranties,
without the written consent of the Trustee and the
Majority Noteholders, except to the extent that such
actions would not, individually or in the aggregate, have
a Material Adverse Effect; and
(iii) to appear in and defend any action or
proceeding to the extent deemed necessary in its
reasonable business judgment arising under, growing out of
or in any manner connected with the obligations,
covenants, conditions, duties, agreements or liabilities
of such Obligor under any of the Permits and Warranties,
at the sole cost and expense of such Obligor.
3.3 COVENANT REGARDING ADDITIONAL REAL ESTATE AND LEASES.
(A) REAL ESTATE. Promptly upon any Obligor's acquisition
of any fee or leasehold interest in any Real Estate, such Obligor
shall deliver to the Trustee, for the benefit of the Secured
Creditors, an executed Mortgage in form and substance
satisfactory to the Trustee and the Majority Noteholders,
conveying to the Trustee, for the benefit of the Secured
Creditors, a first priority Lien on such Real Estate.
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(b) LEASES. Promptly upon any Obligor's entry into any
lease of Real Estate, such Obligor shall use its best efforts to
deliver to the Trustee an executed landlord's agreement, release,
subordination or waiver with respect to such lease in form and
substance satisfactory to the Trustee and the Majority
Noteholders.
3.4 COVENANT REGARDING PROPRIETARY RIGHTS.
Each Obligor shall take all action necessary or desirable, or
that the Trustee may reasonably request, in order to obtain, after the
Effective Date, sublicense agreements from licensors of Proprietary
Rights to such Obligor, in each case, in form and substance
satisfactory to the Trustee and the Majority Noteholders, except, in
each case, to the extent the foregoing requirements are otherwise
expressly waived by the Agent.
3.5 COVENANT REGARDING NOTICES TO THE AGENT.
Each Obligor shall deliver to the Trustee, contemporaneously with
the delivery thereof to the Agent or any Lender, copies of any
statement, report or certificate furnished to the Agent to the extent
that the information contained in such statement, report or certificate
has not already been delivered to the Trustee.
3.6 ASSIGNMENT OF CLAIMS ACT.
Subject to the Intercreditor Agreement, upon the request of the
Trustee, the Obligors (or any of them) shall execute any documents or
instruments and shall take such steps or actions reasonably required by
the Trustee so that all monies due or to become due under any contract
with the United States of America, the District of Columbia or any
state, county, municipality or other domestic or foreign governmental
entity, or any department, agency or instrumentality thereof, will be
assigned to the Trustee, for the benefit of the Secured Creditors, and
notice given in respect thereof in accordance with the Assignment of
Claims Act of 1940, as amended, or any other law, rules or regulations
relating to the assignment of any such contract or monies due or to
become due.
4. REPRESENTATIONS AND WARRANTIES
Each Obligor represents and warrants, as of the Effective Date,
as follows:
4.1 OWNERSHIP OF COLLATERAL.
The Collateral being granted by such Obligor is owned solely by
such Obligor, and no other Person has any right, title, interest, claim
or Lien thereon, or thereto, except for Permitted Liens.
4.2 INCORPORATION.
Such Obligor:
(a) is a corporation duly incorporated, validly existing
and in good standing under the laws of its jurisdiction of
incorporation as set forth in the introductory sentence hereof;
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(b) has all corporate power and authority necessary to own
and operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted;
(c) has all licenses, certificates, permits, franchises
and other governmental authorizations necessary to own and
operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted, except where
the failure to have such licenses, certificates, permits,
franchises and other governmental authorizations, in the
aggregate for all such failures, could not have a Material
Adverse Effect; and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state in the United States of America and in
each other jurisdiction where the failure to be so qualified or
licensed and authorized and in good standing, in the aggregate
for all such failures, could have a Material Adverse Effect.
4.3 CORPORATE POWERS AND AUTHORIZATION.
The execution, delivery and performance by such Obligor of this
Agreement and all other instruments and documents to be delivered
hereunder, and the transactions contemplated hereby and thereby, are
within the corporate powers of such Obligor, have been duly authorized
by all necessary corporate action and
(a) do not contravene such Obligor's certificate or
articles of incorporation or bylaws or, to such Obligor's
knowledge, any law, rule, regulation, order, writ, judgment,
injunction or decree presently in effect having applicability to
it,
(b) do not contravene any indenture, loan or credit
agreement or any other material agreement, lease or instrument
(1) to which such Obligor is a party or
(2) by which such Obligor or its Property may be
bound or affected, and
(c) do not result in or require the creation of any Lien,
security interest or other charge or encumbrance upon or with
respect to any of its Properties (except as provided herein).
4.4 GOVERNMENTAL FILINGS; REGISTRATION.
(A) FILINGS AND REGISTRATIONS. No authorization or
approval or other action by, and no notice to or filing with, any
Governmental Authority is required for
(i) the grant by each Obligor of the security
interest granted hereby or the due execution, delivery and
performance by such Obligor of this Agreement or any other
document or instrument to be delivered hereunder, or
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(ii) the perfection of such security interest or
the exercise by the Trustee of its rights and remedies
hereunder and under the other Financing Documents,
except for the filings of the Uniform Commercial Code financing
statements and filings under other applicable foreign laws, in
each case filed to perfect the Liens created hereby on the
Collateral, and filings with the United States Patent and
Trademark Office required by the Trademark Assignment and the
Patent Assignment, all of which shall be duly made on or
immediately after the Effective Date and will, upon the filing
thereof, be in full force and effect.
(B) NO OTHER FINANCING STATEMENTS. No effective financing
statement which names any Obligor as debtor is on file in any
jurisdiction except for the financing statements in respect of
Permitted Liens.
4.5 ENFORCEABILITY.
All acts and proceedings required by law and by the certificate
or articles of incorporation and bylaws of such Obligor necessary to
constitute this Agreement a valid and binding agreement for the uses and
purposes set forth herein, in accordance with its terms, have been done
and taken. Assuming the corporate existence, power and authority of, and
the due authorization, execution and delivery hereof by, the Trustee,
this Agreement is the legal, valid and binding obligation of such
Obligor, enforceable in accordance with its terms, except as the
enforceability hereof may be
(a) limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
enforceability of creditors' rights generally and
(b) subject to the availability of equitable remedies and
judicial discretion in the enforcement thereof.
4.6 LOCATION OF INVENTORY AND EQUIPMENT, ETC.
(A) LOCATION OF INVENTORY AND EQUIPMENT. Such Obligor does
not currently hold, nor has such Obligor held at any time during
the four months immediately preceding the date hereof, any
interest in tangible personal Property constituting a part of the
Collateral which is located in any location other than the
locations listed on ANNEX 2.
(B) CHANGES OF NAME AND ADDRESSES. Such Obligor has not,
in the last five (5) years,
(i) changed its name or operated all or a portion
of its business under any name other than its present
legal name, except as otherwise stated on ANNEX 1, or
(ii) changed the address of its chief executive
office other than as set forth on ANNEX 1.
4.7 PROPRIETARY RIGHTS.
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Such Obligor owns or possesses all Proprietary Rights necessary
for the present and presently planned future conduct of its business,
without any known conflict with the rights of others. All patents owned
by such Obligor and all of the trademarks, service marks or trade names
found on, or used in connection with the sale, lease or other
disposition of, Inventory are set forth on Annex 3.
4.8 RECEIVABLES.
(a) The Receivables evidenced by promissory notes or other
instruments do not in the aggregate exceed $1,100,000 in amount.
(b) Each of the Receivables is a true and correct
statement of the actual amount owing by each Account Debtor with
respect thereto.
4.9 REAL PROPERTY.
None of the Obligors nor any of their respective Subsidiaries
owns any Real Estate or leases any Real Estate other than as described
on ANNEX 4.
4.10 YEAR 2000 COMPLIANCE.
Each Obligor (i) has initiated a review and assessment of all
areas within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that
could be adversely affected by the "Year 2000 Problem" (that is, the
risk that computer applications used by such Obligor or any of its
Subsidiaries (or suppliers, vendors and customers) may be unable to
recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (ii) has
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis, and (iii) to date, implemented that plan in accordance
with that timetable. Based on the foregoing, each Obligor believes that
all computer applications (including those of its suppliers, vendors and
customers) that are material to its or any of its Subsidiaries' business
and operations are reasonably expected on a timely basis to be able to
perform properly date-sensitive functions for all dates before and after
January 1, 2000.
4.11 ACCURACY OF PRELIMINARY STATEMENTS.
Each statement contained in Section 1 of this Agreement is
accurate.
5. DEFAULTS -- REMEDIES
5.1 DEFAULT REMEDIES.
(A) GENERAL. If an Event of Default exists, the Trustee
may
(i) exercise all of the rights and remedies
conferred in this Agreement, in the Indenture and in the
other Financing Documents, and
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(ii) exercise all of the rights and remedies of a
secured party under the Uniform Commerical Code and all of
the rights and remedies in this Agreement or otherwise
available at law or in equity.
(B) RIGHTS AND REMEDIES.
(I) PAYMENTS TO LOCKBOX. If an Event of Default
exists, the Trustee may require the Obligors to instruct
the Account Debtors to make payment thereof directly to
the Trustee or to a Person or lockbox so designated by the
Trustee. If an Event of Default shall exist and any
Obligor receives any cash, checks, drafts, money orders or
other instruments in payment of any Receivables, it shall
hold the same in trust for the Trustee and shall segregate
the same and shall promptly deliver the same (in the
identical form as received) to the Trustee or to such
Person or lockbox as the Trustee may designate.
(II) NOTIFICATION OF DEBTORS. If an Event of
Default shall exist, each of the Obligors authorizes the
Trustee (but the Trustee shall not be obligated) to
communicate with any Account Debtor or any other Person
primarily or secondarily liable under a Receivable with
regard to any delinquent payment or other payment status
of such Receivable or any matter relating thereto or with
regard to the verification that such Account Debtor did
incur the obligations thereunder and the terms and
provisions thereof. If an Event of Default exists, each of
the Obligors agrees, upon the request of the Trustee, to
notify each Account Debtor in writing of the assignment to
the Trustee of its respective Receivables, the Trustee's
security interest therein and any other matter relating
thereto. Notwithstanding the immediately preceding
sentence, the Trustee shall, during the existence of any
Event of Default, have the right, without first making a
request of the Obligor owning such Receivable, to notify
each Account Debtor of the assignment to the Trustee of
its respective Receivable, the Trustee's security interest
therein and any other matter relating thereto.
(C) COLLECTION. The Trustee may, at any time and from time
to time during the existence of any Event of Default, demand, sue
for, collect or receive any money or Property at any time payable
or receivable on account of or in exchange for, or make any
compromise or settlement reasonably deemed desirable by the
Trustee with respect to, any Receivable, and/or extend the time
of payment, arrange for payment in installments, or otherwise
modify the terms of, or release, any Receivable or any
collateral, guaranty or insurance therefor or in respect thereof,
all without notice to or consent by the Obligors and without
otherwise discharging or affecting the Secured Obligations, the
other Collateral or the security interest granted herein. Without
limiting any of the foregoing, each of the Obligors hereby
authorizes the Trustee and any agent or designee thereof during
the existence of any Event of Default to take any and all steps
in the name of such Obligor, necessary or desirable, in the
determination of the Trustee or the Majority Noteholders, to
collect all amounts due under any and all Receivables, including,
without limitation, endorsing such Obligor's name on checks and
other instruments representing collections and/or proceeds of
Receivables and enforcing such Receivables.
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(D) POSSESSION OF COLLATERAL; ENTRY OF PREMISES. If an
Event of Default exists, the Trustee shall have the right, at any
time or from time to time, to take immediate possession of any or
all Collateral that is tangible personal Property, and may
require each of the Obligors to assemble such Collateral, at the
expense of each such Obligor, and to make it available to the
Trustee at a place to be designated by the Trustee that is
reasonably convenient to both parties, and may enter any of the
premises of each of the Obligors (or wherever such Collateral
shall be located) without force and with or without process of
law, and keep and store the same on such premises until sold (and
if such premises be the Property of any Obligor, such Obligor
agrees not to charge the Trustee for storage thereof for a period
of at least ninety (90) days after sale or disposition of such
Collateral).
(E) BOOKS AND RECORDS. At the request of the Trustee at
any time while an Event of Default exists, each of the Obligors
shall assemble all of the Books and Records which evidence the
Collateral and make the same available to the Trustee or its
designee at a place selected by the Trustee or its designee.
(F) SALE OF COLLATERAL; COMMERCIAL REASONABLENESS. Each of
the Obligors and the Trustee agree that ten (10) days notice to
such Obligor of any public or private sale or other disposition
of the Collateral shall be reasonable notice thereof, and such
sale shall be at such reasonable location as the Trustee shall
designate in such notice. Any other requirement of notice, demand
or advertisement for sale is, to the extent permitted by law,
waived by each of the Obligors. Sales for cash, or on credit to a
wholesaler, retailer or user of the Collateral, at any public or
private sale are all hereby deemed (without limitation) to be
commercially reasonable (as defined in the Uniform Commercial
Code as in effect in any applicable jurisdiction). The Collateral
may be sold at any private or public sale in one or more lots.
The Trustee shall have, to the extent permitted by applicable
law, the right to bid at any such public sale on behalf of any
one or more Noteholders (who shall also have the right to bid
individually).
(G) CERTAIN OFFSET RIGHTS IN RESPECT OF COLLATERAL. If an
Event of Default exists, the Trustee may also, with or without
proceeding with sale or foreclosure or demanding payment of the
Secured Obligations, without notice, appropriate and apply to the
payment of the Secured Obligations and the other obligations
secured under this Agreement any and all Collateral in its
possession (including, without limitation, any and all balances,
credits, deposits, accounts, reserves, or other moneys due or
owing to any of the Obligors held by the Trustee hereunder or
otherwise) in accordance with the provisions of the Indentures.
(H) UNDERTAKINGS CUMULATIVE. All covenants, conditions,
provisions, warranties, guaranties, indemnities and other
undertakings of the Obligors contained in this Agreement or any
other Financing Document, or in any document referred to in this
Agreement or any other Financing Document or contained in any
agreement supplementary to this Agreement or any other Financing
Document, shall be deemed cumulative to and not in derogation or
substitution of any of the terms, covenants, conditions or
agreements of the Obligors contained in this Agreement or any
other Financing Document.
(I) PAYMENT OF EXPENSES AND CHARGES. Each of the Obligors
shall be obligated, jointly and severally, to pay to the Trustee
all out-of-pocket expenses (including
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court costs and reasonable attorneys' fees and expenses) of, or
incident to, the enforcement of any of the provisions of this
Agreement and all other charges due against the Collateral,
including, without limitation, taxes, assessments, security
interests, Liens or encumbrances upon the Collateral and any
expenses, including transfer or other taxes, arising in
connection with any sale, transfer or other disposition of
Collateral.
5.2 OTHER ENFORCEMENT RIGHTS.
The Trustee may proceed to protect and enforce this Agreement by
suit or suits or proceedings in equity, at law or in bankruptcy, and
whether for the specific performance of any covenant or agreement in
this Agreement contained or in execution or aid of any power in this
Agreement granted, or for foreclosure under this Agreement, or for the
appointment of a receiver or receivers for the Collateral or any part
thereof, for the recovery of judgment for the obligations secured by
this Agreement or for the enforcement of any other proper, legal or
equitable remedy available under applicable law.
5.3 POWER OF ATTORNEY.
Each Obligor hereby makes, constitutes and appoints the Trustee
the true and lawful agent and attorney in fact of such Obligor with full
power of substitution:
(a) if an Event of Default shall exist, to receive, open
and dispose of all mail addressed to such Obligor and remove
therefrom any notes, checks, drafts, money orders or other
instruments included in the Collateral, with full power to
endorse the name of such Obligor upon any such checks, drafts,
money orders, or other instruments relating to the Collateral and
to effect the deposit and collection thereof, and the further
right and power to endorse the name of such Obligor on any other
document relating to the Collateral;
(b) if an Event of Default exists, to sign the name of
such Obligor to drafts against its debtors, to notices to such
debtors, to assignments and notices of assignments, financing
statements, continuation statements or other public records or
notices and all other instruments and documents; and
(c) to do any and all things necessary to take action in
the name and on behalf of such Obligor to carry out the
provisions of this Agreement.
Each of the Obligors agrees, in the absence of willful wrongdoing or
gross negligence, that neither the Trustee nor any of its agents,
designees or attorneys-in-fact will be liable for any acts of commission
or omission, or for any error of judgment or mistake of fact or law with
respect to the exercise of the power of attorney granted under this
Section 5.3. The power of attorney granted under this Section 5.3 is
coupled with an interest and shall be irrevocable so long as any Secured
Obligation remains outstanding.
5.4 EFFECT OF SALE, ETC.
(A) TITLE. Any sale or sales pursuant to the provisions of
this Agreement, whether under any right or power granted hereby
or pursuant to any legal proceedings, shall operate to divest
each of the Obligors of all of any such Obligor's right, title,
interest, claim
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and demand whatsoever, either at law or in equity, of, in and to
the Collateral, or any part thereof, so sold, and any Property so
sold shall be free and clear of any and all rights of redemption
by, through or under such Obligor. At any such sale any holder of
Secured Obligations may, to the extent permitted by applicable
law, bid for and purchase the Property sold and may make payment
therefor as set forth in Section 5.4(b), and any such Person so
purchasing any such Property, upon compliance with the terms of
sale, may hold, retain and dispose of such Property without
further accountability.
(B) APPLICATION OF PROCEEDS. The receipt by the Trustee,
or by any Person authorized under any judicial proceedings to
make any such sale, of the proceeds of any such sale shall be a
sufficient discharge to any purchaser of the Collateral, or of
any part thereof, sold as aforesaid; and no such purchaser shall
be bound to see to the application of such proceeds, or be bound
to inquire as to the authorization, necessity or propriety of any
such sale. In the event that, at any such sale, any holder of
Secured Obligations is the successful purchaser, it shall be
entitled, for the purpose of making settlement or payment, to use
and apply such Collateral to its Secured Obligations by crediting
thereon the amount apportionable and applicable thereto out of
the net proceeds of such sale.
5.5 DELAY OR OMISSION; NO WAIVER.
No course of dealing on the part of the Trustee or any holder of
Secured Obligations nor any delay or failure on the part of the Trustee
or such holder to exercise any right shall impair such right or operate
as a waiver of such right or otherwise prejudice the Trustee's or such
holder's rights, powers and remedies. No waiver by the Trustee or any
holder of Secured Obligations of any Default or Event of Default,
whether such waiver be full or partial, shall extend to or be taken to
affect any subsequent Default or Event of Default, or to impair the
rights resulting therefrom except as may be otherwise expressly provided
in this Agreement. Every right and remedy given by this Agreement, by
any other Financing Document or by law to the Trustee or any holder of
Secured Obligations may be exercised from time to time as often as may
be deemed expedient by such Person.
5.6 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee shall have instituted any proceeding to enforce
any right or remedy under this Agreement or under any other Financing
Document and such proceeding shall have been discontinued or abandoned
for any reason, or shall have been determined adversely to the Trustee,
then and in every such case the Trustee, the Obligors and the
Noteholders shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions under this
Agreement and under the other Financing Documents, and thereafter all
rights and remedies of the Trustee and the Noteholders shall continue as
though no such proceeding had been instituted.
5.7 APPLICATION OF PROCEEDS.
The proceeds of any exercise of rights with respect to the
Collateral, or any part thereof, and the proceeds and the avails of any
remedy under this Agreement shall be paid to the Trustee and applied by
the Trustee for the ratable benefit of the Noteholders, based on the
outstanding principal amount of Notes held by each Noteholder, in
accordance with the provisions of the Indentures. If
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there is a deficiency, each of the Obligors shall, subject always to the
other provisions of this Agreement, remain liable therefor and shall
forthwith pay the amount of any such deficiency to the Trustee.
5.8 CUMULATIVE REMEDIES.
No remedy under this Agreement or under any other Financing
Document is intended to be exclusive of any other remedy, but each and
every remedy shall be cumulative and in addition to any and every other
remedy given under this Agreement or under any other Financing Document
or otherwise existing; nor shall the giving, taking or enforcement of
any other or additional security, collateral or guaranty for the payment
or performance of the Secured Obligations operate to prejudice, waive or
affect the security of this Agreement or any rights, powers or remedies
under this Agreement, nor shall the Trustee or the holder of any Secured
Obligation be required to look first to, enforce or exhaust any such
other or additional security, collateral or guaranties.
5.9 WAIVERS BY THE OBLIGORS.
(ii Each of the Obligors hereby waives notice of
acceptance of this Agreement. Each of the Obligors further waives
presentment and demand for payment of any of the Secured
Obligations, protest and notice of dishonor or default with
respect to any of the Secured Obligations, and all other notices
to which such Obligor might otherwise be entitled.
(ii Each of the Obligors (to the extent that it may
lawfully do so) covenants that it shall not at any time insist
upon or plead, or in any manner claim or take the benefit or
advantage of, any stay (except in connection with a pending
appeal), valuation, appraisal, redemption or extension law now or
at any time hereafter in force that, but for this waiver, might
be applicable to any sale made under any judgment, order or
decree based on this Agreement or any other Financing Document;
and each of the Obligors (to the extent that it may lawfully do
so) hereby expressly waives and relinquishes all benefit and
advantage of any and all such laws and hereby covenants that it
will not hinder, delay or impede the execution of any power in
this Agreement or therein granted and delegated to the Trustee,
but that it will suffer and permit the execution of every such
power as though no such law or laws had been made or enacted.
5.10 CONSENT.
Each of the Obligors hereby consents that from time to time
(before or after the occurrence or existence of any Event of Default,
with or without notice to or assent from such Obligor)
(a) any Collateral or other security at any time held by
or available to the Trustee or any holder of Secured Obligations
for any of the Secured Obligations, or any other security at any
time held by or available to the Trustee or such holder for any
obligation of any other Person secondarily or otherwise liable
for any of the Secured Obligations, may be exchanged with the
Person providing such Collateral or other security, surrendered
or released, and
29
<PAGE>
(b) any of the Secured Obligations may be changed,
altered, renewed, extended, continued, surrendered, compromised,
waived or released, in whole or in part,
in each case as the Trustee or the holder thereof may see fit, and such
Obligor shall remain bound under this Agreement notwithstanding any such
exchange, surrender, release, change, alteration, renewal, extension,
continuance, compromise, waiver or release.
6. MISCELLANEOUS
6.1 COMMUNICATIONS.
All communications under this Agreement shall be in writing and
shall be made to the Persons and addresses, and in the manner, provided
in the Indentures.
6.2 WAIVER AND AMENDMENT.
No provision of this Agreement shall be waived, amended, modified
or supplemented except by a written instrument executed by the Obligors
and the Trustee in accordance with the Indentures.
6.3 SURVIVAL.
All warranties, representations, certifications and covenants
made by the Obligors in this Agreement and in the other Financing
Documents or in any certificate or other document or instrument
delivered by it or on behalf of it under this Agreement or any other
Financing Document shall be considered to have been relied upon by the
Trustee and each holder of the Secured Obligations and shall survive the
delivery to each holder of Secured Obligations of
any instrument or other document evidencing the same regardless of any
investigation made by the Trustee, any of the Noteholders or on their
behalf. All statements in any such certificate or other instrument shall
constitute warranties and representations by the Obligors under this
Agreement. This Agreement shall be binding upon the Obligors and inure
to the benefit of and be enforceable by the Trustee and the Noteholders.
6.4 SUCCESSORS AND ASSIGNS.
Whenever any of the parties to this Agreement is referred to,
such reference shall be deemed to include the successors and assigns of
such party, and all the covenants, promises and agreements in this
Agreement contained by or on behalf of any of the Obligors, or by or on
behalf of the Trustee, shall bind and inure to the benefit of the
respective successors and assigns of such parties whether so expressed
or not.
6.5 REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto may be
reproduced by the Trustee by any photographic, photostatic, microfilm,
micro-card, miniature photographic, digital or other similar process and
the Trustee may destroy any original document so reproduced. Each of the
Obligors agrees and stipulates that any such reproduction shall be
admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence
30
<PAGE>
and whether or not such reproduction was made by the Trustee in the
regular course of business) and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible
in evidence.
6.6 ADDITIONAL PARTIES.
Any Person which becomes a Subsidiary of the Company or any other
Obligor after the Effective Date shall execute and deliver an
acknowledgement and agreement in the form of Exhibit A and, upon
acceptance thereof by the Trustee, such Subsidiary shall become an
"Obligor" under this Agreement for all purposes and shall be deemed to
have made the covenants and agreements of each Obligor set forth herein
as of the date of the execution and delivery of such acknowledgment and
agreement (including, without limitation, the grant of the security
interest contained in Section 3.1) and shall comply with all other
obligations to be performed by an Obligor party hereto.
6.7 CONSISTENT WITH INDENTURES AND INTERCREDITOR AGREEMENT.
Any and all rights granted to the Trustee under this Agreement
are to be held and exercised by the Trustee as trustee for the benefit
of the Noteholders, pursuant to the provisions of the Indentures. To the
extent set forth in the Financing Documents and any other document or
instrument creating or evidencing any Secured Obligation, each of the
Noteholders shall be a beneficiary of the terms of this Agreement. Any
and all obligations under this Agreement of the parties to this
Agreement, and the rights and indemnities granted to the Trustee under
this Agreement, are created and granted consistent with, and in
furtherance (and not in limitation) of, the terms of the Indentures and
the Intercreditor Agreement. Nothing in this Agreement expressed or
implied is intended or shall be construed to give to any Person other
than the Obligors, the Noteholders, and the Trustee any legal or
equitable right, remedy or claim under or in respect of this Agreement
or any covenant, condition or provision herein contained, and all such
covenants, conditions and provisions are and shall be held to be for the
sole and exclusive benefit of the Obligors, the Noteholders and the
Trustee.
6.8 TERM OF AGREEMENT.
This Agreement shall be and remain in full force and effect until
all of the Secured Obligations shall have been indefeasibly paid in
full; PROVIDED, that all indemnities of the Obligors contained in this
Agreement shall survive, and remain operative and in full force and
effect regardless of, the termination of this Agreement.
6.9 ENTIRE AGREEMENT.
This Agreement constitutes the final written expression of all of
the terms hereof and is a complete and exclusive statement of those
terms.
6.10 EXECUTION IN COUNTERPART
This Agreement may be executed in one or more counterparts and
shall be effective when at least one counterpart shall have been
executed by each party to this Agreement, and each set of
31
<PAGE>
counterparts which, collectively, show execution by each party to
this Agreement shall constitute one duplicate original.
[Remainder of page blank. Next page is signature page.]
32
<PAGE>
IN WITNESS WHEREOF, EACH OF THE OBLIGORS has caused this
Agreement to be executed by an authorized officer, and U.S. BANK
NATIONAL ASSOCIATION, as Trustee, has caused this Agreement to be
executed by an authorized officer, all as of the day and year first
above written.
TULTEX CORPORATION
By:__________________________________
Name:
Title:
CALIFORNIA SHIRT SALES, INC.
By:__________________________________
Name:
Title:
DOMINION STORES, INC.
By:__________________________________
Name:
Title:
TULTEX/T-SHIRT CITY, INC.
By:__________________________________
Name:
Title:
TRACK GEAR, INC.
By:__________________________________
Name:
Title:
[Signature Page to Master Collateral and Security Agreement]
<PAGE>
AKOM, LTD.
By:__________________________________
Name:
Title:
DOMINION DISTRIBUTION, INC.
By:__________________________________
Name:
Title:
LIGA MAYOR DE MEXICO, S.A. DE C.V.
By:__________________________________
Name:
Title:
TULTEX SUBSIDIARY (VA), INC.
By:__________________________________
Name:
Title:
TULTEX SUBSIDIARY (MASS), INC.
By:__________________________________
Name:
Title:
TULTEX CANADA, INC.
By:__________________________________
Name:
Title:
[Signature Page to Master Collateral and Security Agreement]
<PAGE>
SWEATJET INCORPORATED
By:__________________________________
Name:
Title:
TULTEX INTERNATIONAL, INC.
By:__________________________________
Name:
Title:
U.S. BANK NATIONAL ASSOCIATION,
AS TRUSTEE
By:__________________________________
Name:
Title:
[Signature Page to Master Collateral and Security Agreement]
<PAGE>
ANNEX 1
PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY AND THE SUBSIDIARY GRANTORS;
LOCATION OF BOOKS AND RECORDS
[To be Provided]
Annex 1-1
<PAGE>
ANNEX 2
LOCATIONS OF INVENTORY AND EQUIPMENT
[To be Provided]
Annex 2-1
<PAGE>
ANNEX 3
TRADEMARKS, TRADE NAMES AND PATENTS
[To be Provided]
Annex 3-1
<PAGE>
ANNEX 4
REAL ESTATE
[To be Provided]
Annex 4-1
<PAGE>
ANNEX 5
FIVE SPECIFIED REAL PROPERTIES
1. Brownsville, TX -- Dominion Distribution, Inc.
2. Fullerton, CA - Tultex Corporation/California Shirt Sales, Inc.
3. San Diego, CA - California Shirt Sales, Inc.
4. Oakland, CA - Tultex Corporation/California Shirt Sales, Inc.
5.Cincinnati/Sycamore Township, OH (new location) - Tultex Corporation,
as sublessee (T-Shirt City)
Annex 5-2
<PAGE>
ANNEX 6
NINE SPECIFIED REAL PROPERTIES
1. Phoenix, AZ - Tultex Corporation, sublessee (Dominion Distribution, Inc.)
2. Charlotte, NC - Track Gear, Inc.
3. Tempe, AZ - Tultex Corporation (California Shirt Sales, Inc.)
4. Las Vegas, NV - - Tultex Corporation/California Shirt Sales, Inc.
5. Honolulu, HI - Tultex Corporation/California Shirt Sales, Inc.
6. Kent, WA - Tultex Corporation/California Shirt Sales, Inc.
7. Charlotte, NC - Tultex/T-Shirt City, Inc.
8. Mansfield, MA - Tultex/T-Shirt City, Inc.
9. Mississaugua, Ontario (warehouse) - Tultex Canada
Annex 6-3
<PAGE>
EXHIBIT A
[FORM OF ACKNOWLEDGMENT AND AGREEMENT]
ACKNOWLEDGMENT AND AGREEMENT
MASTER COLLATERAL AND SECURITY AGREEMENT, DATED AS OF MAY 7, 1999, AMONG TULTEX
CORPORATION, THE SUBSIDIARY GRANTORS PARTY THERETO, AND U.S. BANK NATIONAL
ASSOCIATION, AS TRUSTEE (AS MAY BE AMENDED, RESTATED OR OTHERWISE MODIFIED FROM
TIME TO TIME, THE "SECURITY AGREEMENT")
[DATE]
Reference is made to Section 6.6 of the Security Agreement as
defined above; capitalized terms used herein and not otherwise defined
herein shall have the meanings specified by the Security Agreement. The
undersigned is a Subsidiary of the Company or another Obligor and, in
accordance with the terms of the Security Agreement, is required to
become a party to the Security Agreement. By execution and delivery of
this Acknowledgment and Agreement and, upon acceptance hereof by the
Trustee, the undersigned hereby becomes a party to the Security
Agreement for all purposes, agrees to comply with all of the covenants
and agreements of each Obligor set forth in the Security Agreement as of
the date hereof (including, without limitation, the grant of the
security interest contained in Section 3.1 of the Security Agreement)
and agrees to comply with all other obligations to be performed by an
Obligor under the Security Agreement.
The correct legal name and address of the undersigned and its
address for all communications is set forth on Annex 1 hereto.
This Acknowledgment and Agreement hereby incorporates by
reference the provisions of the Security Agreement, which are deemed to
be a part hereof, and this Acknowledgment and Agreement shall also be
deemed to be a part of the Security Agreement.
[NAME OF OBLIGOR]
By:________________________
Name:
Title:
Accepted as of the date first above written:
U.S. BANK NATIONAL ASSOCIATION, as Trustee
By:____________________________
Name:
Title:
Exhibit A-1
<PAGE>
Annex 1
[NAME AND ADDRESS OF OBLIGOR TO BE ADDED]
Exhibit A-2
<PAGE>
WARRANT AGREEMENT
Dated as of
May 7, 1999
between
TULTEX CORPORATION
and
FIRST UNION NATIONAL BANK
as Warrant Agent
Warrants for
Common Stock of
Tultex Corporation
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions
SECTION 1.01. Definitions
SECTION 1.02. Other Definitions
SECTION 1.03. Rules of Construction
ARTICLE II Warrant Certificates
SECTION 2.01. Form and Dating
SECTION 2.02. Execution and Countersignature
SECTION 2.03. Warrant Registrar
SECTION 2.04. Warrantholder Lists
SECTION 2.05. Transfer and Exchange
SECTION 2.06. Replacement Certificate
SECTION 2.07. Outstanding Warrants
SECTION 2.08. Temporary Warrants
SECTION 2.09. Cancelation
SECTION 2.10. CUSIP Numbers
ARTICLE III Exercise Terms
SECTION 3.01. Exercise
SECTION 3.02. Exercise Periods
SECTION 3.03. Expiration
SECTION 3.04. Manner of Exercise
SECTION 3.05. Issuance of Warrant Shares
SECTION 3.06. Fractional Warrant Shares
SECTION 3.07. Reservation of Warrant Shares
SECTION 3.08. Compliance with Law
ARTICLE IV Antidilution Provisions
SECTION 4.01. Changes in Common Stock
SECTION 4.02. Cash Dividends and Other Distributions
SECTION 4.03. Common Stock Issue
SECTION 4.04. Issuance of Rights or Options
SECTION 4.05. Combination; Liquidation
SECTION 4.06. Other Events
SECTION 4.07. Superseding Adjustment
SECTION 4.08. Minimum Adjustment
SECTION 4.09. Notice of Adjustment
SECTION 4.10. Notice of Certain Transactions
SECTION 4.11. Adjustment to Warrant Certificate
i
<PAGE>
ARTICLE V Registration Rights; Indemnification
SECTION 5.01. Effectiveness of Registration Statement
SECTION 5.02. Suspension
SECTION 5.03. Blue Sky
SECTION 5.04. Accuracy of Disclosure
SECTION 5.05. Indemnification
SECTION 5.06. Additional Acts
SECTION 5.07. Expenses
ARTICLE VI Warrant Agent
SECTION 6.01. Appointment of Warrant Agent
SECTION 6.02. Rights and Duties of Warrant Agent
SECTION 6.03. Individual Rights of Warrant Agent
SECTION 6.04. Warrant Agent's Disclaimer
SECTION 6.05. Compensation and Indemnity
SECTION 6.06. Successor Warrant Agent
ARTICLE VII Miscellaneous
SECTION 7.01. SEC Reports
SECTION 7.02. Persons Benefiting
SECTION 7.03. Rights of Holders
SECTION 7.04. Amendment
SECTION 7.05. Notices
SECTION 7.06. Governing Law
SECTION 7.07. Successors
SECTION 7.08. Multiple Originals
SECTION 7.09. Table of Contents
SECTION 7.10. Severability
APPENDIX A PROVISIONS RELATING TO WARRANTS
EXHIBIT A Form of Warrant Certificate
EXHIBIT B Form of Election to Exercise
ii
<PAGE>
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (this "Warrant Agreement") is made and entered
into as of May 7, 1999, between TULTEX CORPORATION, a Virginia corporation (the
"Company"), and FIRST UNION NATIONAL BANK, a national banking association, as
warrant agent (the "Warrant Agent").
RECITALS
A In connection with the Invitation and Consent Solicitation
(the "Invitation and Solicitation") by the Company, dated April 12, 1999, to
holders ("Noteholders") of the Company's 10 5/8% Notes due 2005 and 9 5/8% Notes
due 2007 (collectively, the "Notes"), the Company has agreed to issue warrants
to purchase shares of the Company's common stock ("Common Stock") to Noteholders
in respect of (1) Notes that were validly tendered prior to the Consent Date (as
defined in the Invitation and Solicitation), and not withdrawn, but not accepted
for purchase by the Company and (2) Notes that were validly consented prior to
the Consent Date, and not revoked, without being tendered, as described in the
Invitation and Solicitation.
B. The Company will issue warrants to acquire, in the
aggregate, 10,350,000 shares of the Common Stock at an exercise price of $0.8125
per share and warrants to acquire, in the aggregate, 5,175,000 shares of the
Common Stock at an exercise price of $1.425 per share (collectively, the
"Warrants"). Warrants of each exercise price will be issued pro rata, based on
the principal amount of Notes held, to Noteholders eligible to receive them.
C. The Company desires to enter into this Agreement to set
forth the terms and conditions of the Warrants and the rights of the holders
thereof.
D. The Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent has been directed by the Noteholders to enter
into this Warrant Agreement and to act in connection with the issuance,
exchange, transfer, substitution and exercise of the Warrants.
NOW, THEREFORE, in consideration of the foregoing and the
mutual agreements herein contained, and other good and valuable consideration,
the receipt and sufficiency of which are hereby agreed and acknowledged, the
parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified
<PAGE>
Person or (ii) any other Person who is a director or executive officer (A) of
such specified Person, (B) of any subsidiary of such specified Person or (C) of
any Person described in clause (i) above. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Affiliate" shall also mean any beneficial owner of shares representing 5% or
more of the total voting power of all classes of Capital Stock of such Person
entitled to vote in the election of directors, managers or trustees ("Voting
Stock") (on a fully diluted basis) or of rights or warrants to purchase such
Voting Stock (whether or not currently exercisable) and any Person who would be
an Affiliate of any such beneficial owner pursuant to the first sentence hereof.
"Board of Directors" or "Board" means the Board of Directors of the
Company or any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means each day that is not a Saturday, Sunday or other
day on which banking institutions in New York State are authorized or required
by law to close.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Certificated Warrants" means certificated Warrants in fully registered
definitive form.
"Closing Price" means the last sale price, regular way, on such date
or, if no sale takes place on such date, the average of the closing bid and
asked prices on such date, in each case as officially reported on the principal
national securities exchange on which any Common Stock is then listed or
admitted to trading.
"Combination" means an event in which the Company consolidates with,
merges with or into, or conveys, transfers or leases all or substantially all of
its assets to, another Person.
"Current Market Value" per share of Common Stock or any other security
at any date means (i) if the security is not registered under the Exchange Act,
(a) the value of the security, determined in good faith by the Board of
Directors and certified in a board resolution, based on the most recently
completed arm's-length transaction between the Company and a Person other than
an Affiliate of the Company, the closing of which occurs on such date or shall
have occurred within the six-month period preceding such date, or (b) if no such
transaction shall have occurred on such date or within such six-month period,
the value of the security as determined by a nationally recognized investment
banking firm or (ii) if the security is registered under the Exchange Act, the
average of the daily Closing Prices (or the equivalent in an over-the-counter
market) for each Business Day during the period commencing 15 Business Days
before such date and ending on the date one day prior to such date, or if the
security has been registered under the Exchange Act for less than 15 consecutive
Business Days before such date, the average of the
2
<PAGE>
daily Closing Prices (or such equivalent) for all of the Business Days before
such date for which daily Closing Prices are available; provided, however, that
if the Closing Price is not determinable for at least ten Business Days in such
period, the "Current Market Value" of the security shall be determined as if the
security were not registered under the Exchange Act.
"CUSIP Number" means:
(a) in respect of the Warrants and the Warrant Shares prior to
the effectiveness of a Registration Statement therefor, a private
placement number; and
(b) in respect of the Warrants and the Warrant Shares after
the effectiveness of a Registration Statement therefor, a CUSIP Number.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercise Date" means, for a given Warrant, the day on which such
Warrant is exercised pursuant to Section 3.04.
"Holder" or "Warrantholder" means the Person in whose name a Warrant is
registered on the Warrant Registrar's books.
"IAI" has the meaning set forth in Appendix A hereto.
"Issue Date" means the date on which the Warrants are initially issued.
"Officer" means the Chairman of the Board of Directors, the Chief
Executive Officer, the Chief Financial Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Warrant Agent. Such counsel may be an employee of or counsel
to the Company or the Warrant Agent, or in the case of an opinion of counsel
required to be provided by a Holder, an employee of, or regular outside counsel
to, such Holder.
"Person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of any class or classes (however designated) which is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over shares
of Capital Stock of any other class of such Person.
3
<PAGE>
"SEC" or "Commission" means the Securities and Exchange Commission.
"Securities" means the Warrants and the Warrant Shares.
"Securities Act" means the Securities Act of 1933, as amended.
"Warrant Agent" means the party named as such in this Warrant Agreement
until a successor replaces it and, thereafter, means the successor.
"Warrant Agreement" means this Warrant Agreement as amended or
supplemented from time to time.
"Warrant Certificates" mean the registered certificates issued by the
Company under this Warrant Agreement representing the Warrants.
"Warrant Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Warrant Agent assigned by the Warrant
Agent to administer its corporate trust matters.
"Warrant Shares" mean the shares of Common Stock for which the Warrants
are exercisable or which have been issued upon exercise of Warrants.
SECTION 1.02. Other Definitions.
Defined in
Term Section
- ---- -------
"Advice" 5.01
"Common Shelf Registration Statement" 5.01
"Effectiveness Period" 5.01
"Exercise Price" 3.01
"Expiration Date" 3.02(b)
"Holders' Information" 5.01
"Registration Statement" 5.01
"Stock Registrar" 3.07
"Stock Transfer Agent" 3.05
"Successor Company" 4.05(a)
"Warrant Registrar" 2.03
"Warrant Shelf Registration Statement" 5.01
SECTION 1.03. Rules of Construction. Unless the context otherwise
requires: (i) a defined term has the meaning assigned to it; (ii) an accounting
term not otherwise defined has the meaning assigned to it in accordance with
generally accepted accounting principles as in effect from time to time; (iii)
"or" is not exclusive; (iv) "including" means including without limitation; and
(v) words in the singular include the plural and words in the plural include the
singular.
4
<PAGE>
ARTICLE II
Warrant Certificates
SECTION 2.01. Form and Dating. Provisions relating to Warrants are set
forth in the Appendix, which is hereby incorporated in and expressly made a part
of this Warrant Agreement. The Warrant Certificates shall each be substantially
in the form of Exhibit A hereto, which is hereby incorporated in and expressly
made a part of this Warrant Agreement. The Warrant Certificates may have
notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Warrant Certificate shall be dated the date that it is executed by the
Company and countersigned by the Warrant Agent.
SECTION 2.02. Execution and Countersignature. Two Officers shall sign
the Warrant Certificates for the Company by manual or facsimile signature. If an
Officer whose signature is on a Warrant Certificate no longer holds that office
at the time the Warrant Agent countersigns the Warrant Certificate, the Warrant
Certificate shall be valid nevertheless. A Warrant shall not be valid until an
authorized signatory of the Warrant Agent manually countersigns the Warrant
Certificate. The signature shall be conclusive evidence that the Warrant has
been authenticated under this Warrant Agreement. The Warrant Agent shall
countersign and make available for delivery Warrant Certificates as set forth in
the Appendix. The Warrant Agent may appoint an agent reasonably acceptable to
the Company to countersign the Warrants. Any such appointment shall be evidenced
by an instrument signed by a Warrant Officer, a copy of which shall be furnished
to the Company. Unless limited by the terms of such appointment, an agent of the
Warrant Agent may countersign Warrants whenever the Warrant Agent may do so.
Each reference in this Warrant Agreement to countersigning by the Warrant Agent
includes countersigning by such agent. Warrant No. 1 issued to U.S. Bank
National Association shall be valid notwithstanding it is not authenticated by
the Warrant Agent.
SECTION 2.03. Warrant Registrar. The Company shall maintain an office
or agency where Warrants may be presented for registration of transfer, exchange
or exercise (the "Warrant Registrar"). The Warrant Registrar shall keep a
register of the Warrants and of their transfer, exchange or exercise. The
Company may have one or more co- registrars. The term Warrant Registrar includes
any co-registrars. The Company initially appoints the Warrant Agent as Warrant
Registrar in connection with the Warrants.
The Company shall enter into an appropriate agency agreement with any
Warrant Registrar not a party to this Warrant Agreement. The agreement shall
implement the provisions of this Warrant Agreement that relate to such agent.
The Company shall notify the Warrant Agent of the name and address of any such
agent. If the Company fails to maintain a Warrant Registrar, the Warrant Agent
shall act as such and shall be entitled to appropriate compensation therefor
pursuant to Section 6.05. The Company or any of its domestically organized
wholly owned subsidiaries may act as Warrant Registrar.
5
<PAGE>
The Company may remove any Warrant Registrar upon written notice to
such Warrant Registrar and to the Warrant Agent; provided, however, that no such
removal shall become effective until (1) acceptance of an appointment by a
successor as evidenced by an appropriate agreement entered into by the Company
and such successor Warrant Registrar and delivered to the Warrant Agent or (2)
notification to the Warrant Agent that the Warrant Agent shall serve as Warrant
Registrar until the appointment of a successor in accordance with clause (1)
above. The Warrant Registrar may resign at any time upon written notice;
provided, however, that the Warrant Agent may resign as Warrant Registrar only
if the Warrant Agent also resigns as Warrant Agent in accordance with Section
6.06. The Company and the Warrant Agent may deem and treat the Person in whose
name a Warrant Certificate is registered as the absolute owner of such Warrant
Certificate for all purposes whatsoever and neither the Company nor the Warrant
Agent shall be affected by notice to the contrary.
SECTION 2.04. Warrantholder Lists. The Warrant Agent shall preserve in
as current a form as is reasonably practicable the most recent list available to
it of the names and addresses of Warrantholders. If the Warrant Agent is not the
Warrant Registrar, the Company shall furnish, or cause the Warrant Registrar to
furnish, to the Warrant Agent, at such times as the Warrant Agent may request in
writing, a list in such form and as of such date as the Warrant Agent may
reasonably require of the names and addresses of Warrantholders.
SECTION 2.05. Transfer and Exchange. The Warrants shall be issued in
registered form and shall be transferable only upon the surrender of a Warrant
Certificate for registration of transfer and in compliance with Appendix A. When
a Warrant is presented to the Warrant Registrar with a request to register a
transfer, the Warrant Registrar shall register the transfer as requested if the
requirements of Section 8-401(a) of the Uniform Commercial Code are met. When
Warrants are presented to the Warrant Registrar with a request to exchange them
for an equal number of Warrants of other denominations, the Warrant Registrar
shall make the exchange as requested if the requirements of Section 8-401(a)(1)
and (2) of the Uniform Commercial Code are met. To permit registration of
transfers and exchanges, the Company shall execute and the Warrant Agent shall
countersign Warrant Certificates at the Warrant Registrar's request. The Company
may require payment of a sum sufficient to pay all taxes, assessments or other
governmental charges in connection with any transfer or exchange pursuant to
this Section 2.05. All Warrants issued upon any transfer or exchange pursuant to
the terms of this Warrant Agreement will evidence the same Warrants as the
Warrants surrendered upon such transfer or exchange.
SECTION 2.06. Replacement Certificate. If a mutilated Warrant is
surrendered to the Warrant Agent or if the Holder of a Warrant claims that the
Warrant Certificate has been lost, destroyed or wrongfully taken, the Company
shall execute and the Warrant Agent shall countersign a replacement Warrant
Certificate if the requirements of Section 8-405 of the Uniform Commercial Code
are met (other than, if such holder is an IAI, paragraph (a)(2) of such
Section), such that the Holder (i) notifies the Company or the Warrant Agent
within a reasonable time after he has notice of such loss, destruction or
wrongful taking and the Warrant Agent does not register a transfer prior to
receiving such notification, (ii) makes such request to the Company or the
Warrant Agent prior to the Warrant being acquired by a protected purchaser as
defined in
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Section 8-303 of the Uniform Commercial Code (a "protected purchaser") and (iii)
satisfies any other reasonable requirements of the Warrant Agent. If required by
the Warrant Agent or the Company, and if such Holder is not an IAI, such Holder
shall furnish an indemnity bond sufficient in the judgment of the Warrant Agent
to protect the Company and the Warrant Agent from any loss that either of them
may suffer if a Warrant is replaced. The Company and the Warrant Agent may
charge the Holder for their expenses in replacing a Warrant Certificate. Every
replacement Warrant is an additional obligation of the Company. The provisions
of this Section 2.06 are exclusive and shall preclude (to the extent lawful) all
other rights and remedies with respect to the replacement of mutilated, lost,
destroyed or wrongfully taken Securities.
SECTION 2.07. Outstanding Warrants. Warrants outstanding at any time
are all Warrant Certificates executed by the Company and countersigned by the
Warrant Agent except for those canceled by it, those delivered to it for
cancelation and those described in this Section 2.07 as not outstanding. A
Warrant does not cease to be outstanding because an Affiliate of the Company
holds the Warrant. A Warrant ceases to be outstanding if the Company holds the
Warrant. If a Warrant Certificate is replaced pursuant to Section 2.06, it
ceases to be outstanding unless the Warrant Agent and the Company receive proof
satisfactory to them that the replaced Warrant Certificate is held by a
protected purchaser.
SECTION 2.08. Temporary Warrants. In the event that Definitive Warrants
(as defined in the Appendix) are to be issued under the terms of this Warrant
Agreement, until such Definitive Warrants are ready for delivery, the Company
may prepare and the Warrant Agent shall countersign temporary Warrant
Certificates. Temporary Warrant Certificates shall be substantially in the form
of Definitive Warrants but may have variations that the Company considers
appropriate for temporary Warrants. Without unreasonable delay, the Company
shall prepare and the Warrant Agent shall countersign Definitive Warrants and
deliver them in exchange for temporary Warrant Certificates upon surrender of
such temporary Warrant Certificates.
SECTION 2.09. Cancelation. The Company at any time may deliver Warrant
Certificates to the Warrant Agent for cancelation. The Warrant Agent and no one
else shall cancel all Warrant Certificates surrendered for registration of
transfer, exchange, exercise or cancelation and deliver canceled Warrant
Certificates to the Company pursuant to written direction by an Officer. The
Company may not issue new Warrant Certificates to replace Warrants Certificates
that have been exercised or Warrants which the Company has purchased or
otherwise acquired. The Warrant Agent shall not countersign Warrant Certificates
to replace canceled Warrant Certificates other than pursuant to the terms of
this Warrant Agreement.
SECTION 2.10. CUSIP Numbers. The Company shall obtain and thereafter
maintain a CUSIP Number in respect of the Warrants and a CUSIP Number in respect
of the Common Stock, and the Warrant Agent shall use "CUSIP" numbers in notices
to Holders; provided, however, that any such notice may state that no
representation is made as to the correctness of such numbers either as printed
on the Warrant Certificates or as contained in any notice and that reliance may
be placed only on the other identification numbers printed on the Warrant
Certificates, and any such notice shall not be affected by any defect in or
omission of such numbers.
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ARTICLE III
Exercise Terms
SECTION 3.01. Exercise. The Company is issuing Warrants to acquire, in
the aggregate, 10,350,000 shares of the Common Stock at an exercise price of
$0.8125 per share and warrants to acquire, in the aggregate, 5,175,000 shares of
the Common Stock at an exercise price of $1.425 per share (the "Exercise
Price"). Warrants having each Exercise Price will be issued pro rata, based on
the principal amount of Notes held, to Noteholders eligible to receive them.
Each Warrant shall initially entitle the Holder thereof, subject to adjustment
pursuant to the terms of this Warrant Agreement, to purchase shares of Common
Stock at the Exercise Price applicable to the particular Warrant.
SECTION 3.02. Exercise Periods. (a) Subject to the terms and conditions
set forth herein, the Warrants shall be exercisable at any time and from time to
time on any Business Day after the Issue Date; PROVIDED, HOWEVER, that holders
of Warrants will be able to exercise their Warrants only if (i) the Common Shelf
Registration Statement relating to the Warrant Shares is effective or (ii) the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act, and the Warrant Shares are qualified for sale or exempt from
qualification under the applicable securities laws of the states or other
jurisdictions in which such Holders reside.
(b) No Warrant shall be exercisable after April 15, 2007 (the
"Expiration Date").
SECTION 3.03. Expiration. A Warrant shall terminate and become void as
of the earlier of (i) the close of business on the Expiration Date or (ii) the
date such Warrant is exercised. The Company shall give notice not less than 90,
and not more than 120, days prior to the Expiration Date to the Holders of all
then outstanding Warrants to the effect that the Warrants will terminate and
become void as of the close of business on the Expiration Date; PROVIDED,
HOWEVER, that if the Company fails to give notice as provided in this Section
3.03, then the Expiration Date shall be extended to, and shall instead occur, on
the date which is 90 days after such notice is actually given.
SECTION 3.04. Manner of Exercise.
(a) Warrants may be exercised upon:
(i) surrender to the Warrant Agent at the office of the
Warrant Agent of the related Warrant Certificate, together with a properly
completed and executed Election to Exercise in the form attached hereto as
Exhibit B to purchase Common Stock; and
(ii) payment to the Warrant Agent, for the account of the
Company, of the Exercise Price for each Warrant Share or other security issuable
upon the exercise of such Warrants then exercised.
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Such payment shall be made:
(i) in cash or by certified or official bank check payable to
the order of the Company or by wire transfer of funds to an account designated
by the Company for such purpose;
(ii) by a tender of Notes pursuant to Section 3.04(b);
(iii) by a tender of cash pursuant to Section 304(a)(i) hereof
and Notes pursuant to Section 3.04(b) hereof; or
(iv) by delivery of Warrant Certificates pursuant to Section
3.04(c) hereof.
(b) To the extent that any Holder of any Warrant Certificate surrenders
with such Warrant Certificate any Note then held by such Holder, such Holder
shall be deemed to have paid that portion of the Exercise Price equal to one
hundred percent (100%) of the principal of such Note which the Holder thereof
directs the Company to accept as payment of the Exercise Price, which Note shall
be canceled and not reissued. To the extent that the principal amount of such
tendered Note is greater than the amount of the Exercise Price paid by surrender
thereof, the Company shall deliver a new Note to the tendering Holder thereof,
in accordance with the provisions of the indenture pursuant to which the Notes
were issued, in the principal amount equal to the amount not so applied to
payment of the Exercise Price. At the time of the issuance of the shares of
Common Stock pursuant to the exercise of the Warrants of any Holder, the Company
shall pay all accrued and unpaid interest on the principal amount of any Note of
such Holder canceled pursuant to this Section 3.04(b) up to but excluding the
date of such issuance. For purposes of Rule 144 under the Securities Act, 17
C.F.R. ss. 230.144, a tender of the principal of any Notes in payment of the
Exercise Price shall not be deemed a prepayment of the Notes, but rather a
conversion of such Notes, pursuant to the terms of the Notes, such indenture,
this Agreement and the Warrants, into Common Stock.
(c) In the event that any Holder of Warrant Certificates delivers such
Warrant Certificates to the Company and notifies the Company in writing that
such Holder intends to exercise all, or any portion of, the Warrants represented
by such Warrant Certificates to satisfy its obligation to pay the Exercise Price
in respect thereof by virtue of the provisions of this Section 3.04(c), such
Holder shall become entitled to receive, instead of the number of shares of
Common Stock such Holder would have received had the Exercise Price been paid
pursuant to Section 3.04(a)(i) or Section 3.04(b) hereof, a number of shares of
Common Stock in respect to the exercise of such Warrants equal to the product
of:
(i) the number of shares of Common Stock issuable upon such
exercise of such Warrant Certificate (or, if only a portion of such Warrant
Certificate is being exercised, issuable upon the exercise of such portion);
MULTIPLIED BY
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(ii) the quotient of:
(A) the difference of:
(I) the Current Market Value per share of
Common Stock at the time of such exercise; MINUS
(II) the Exercise Price per share of Common
Stock at the time of such exercise;
DIVIDED BY
(B) the Current Market Value per share of Common
Stock at the time of such exercise.
For purposes of Rule 144 under the Securities Act, 17 C.F.R. ss. 230.144, the
exercise of any Warrants in accordance with this Section 3.04(c) shall be deemed
to be a conversion of such Warrants, pursuant to the terms of this Agreement and
the Warrants, into Common Stock.
(d) Subject to Section 3.02, the rights represented by the
Warrants shall be exercisable at the election of the Holders thereof either in
full at any time or from time to time in part and in the event that a Warrant
Certificate is surrendered for exercise of less than all the Warrants
represented by such Warrant Certificate at any time prior to the Expiration
Date, a new Warrant Certificate representing the remaining Warrants shall be
issued. The Warrant Agent shall countersign and deliver the required new Warrant
Certificates, and the Company, at the Warrant Agent's request, shall supply the
Warrant Agent with Warrant Certificates duly signed on behalf of the Company for
such purpose.
SECTION 3.05. Issuance of Warrant Shares. Subject to Section 2.06, upon
the surrender of Warrant Certificates and payment of the per share Exercise
Price, as set forth in Section 3.04, the Warrant Agent shall requisition from
the Company, and the Company shall issue and, if appointed, cause the transfer
agent for the Common Stock ("Stock Transfer Agent") to countersign and deliver
to or upon the written order of the Holder and in such name or names as the
Holder may designate, a certificate or certificates for the number of full
Warrant Shares so purchased upon the exercise of such Warrants or other
securities or property to which it is entitled, registered or otherwise, to the
Person or Persons entitled to receive the same (including any depositary
institution so designated by a Holder), together with cash as provided in
Section 3.06 in respect of any fractional Warrant Shares otherwise issuable upon
such exercise. Such certificate or certificates shall be deemed to have been
issued and any Person so designated to be named therein shall be deemed to have
become a holder of record of such Warrant Shares as of the date of the surrender
of such Warrant Certificates and payment of the per share Exercise Price, as
aforesaid; PROVIDED, HOWEVER, that if, at such date, the transfer books for the
Warrant Shares shall be closed, the certificates for the Warrant Shares in
respect of which such Warrants are then exercised shall be issuable as of the
date on which such books shall next be opened and until such date the Company
shall be under no duty to deliver any certificates for such Warrant
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Shares; provided further, however, that such transfer books, unless otherwise
required by law, shall not be closed at any one time for a period longer than 20
calendar days.
SECTION 3.06. Fractional Warrant Shares. The Company shall not be
required to issue fractional Warrant Shares on the exercise of Warrants. If more
than one Warrant shall be exercised in full at the same time by the same Holder,
the number of full Warrant Shares which shall be issuable upon such exercise
shall be computed on the basis of the aggregate number of Warrant Shares which
may be purchasable pursuant thereto. If any fraction of a Warrant Share would,
except for the provisions of this Section 3.06, be issuable upon the exercise of
any Warrant (or specified portion thereof), the Company shall pay an amount in
cash equal to the Current Market Value per Warrant Share, as determined on the
day immediately preceding the date the Warrant is presented for exercise,
multiplied by such fraction, computed to the nearest whole cent.
SECTION 3.07. Reservation of Warrant Shares. The Company shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock (the "Stock Registrar") shall at
all times until the Expiration Date reserve such number of authorized shares as
shall be required for such purpose. The Company will keep a copy of this Warrant
Agreement on file with the Stock Transfer Agent if such Stock Transfer Agent is
appointed. The Company will supply such Stock Transfer Agent, if appointed, with
duly executed stock certificates for such purpose and will itself provide or
otherwise make available any cash which may be payable as provided in Section
3.06. The Company will furnish to such Stock Transfer Agent, if appointed, a
copy of all notices of adjustments (and certificates related thereto)
transmitted to each Holder. Before taking any action which would cause an
adjustment pursuant to Article IV to reduce the Exercise Price below the then
par value (if any) of the Common Stock, the Company shall take any and all
corporate action which may, in the opinion of counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
shares of Common Stock at the Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants shall, upon issue, be fully paid, nonassessable, free of
preemptive rights, free from all taxes and free from all liens, charges and
security interests with respect to the issue thereof.
SECTION 3.08. Compliance with Law. (a) Notwithstanding anything in this
Warrant Agreement to the contrary, in no event shall a Holder be entitled to
exercise a Warrant unless (i) a registration statement filed under the
Securities Act in respect of the issuance of the Warrant Shares is then
effective or (ii) in the opinion of counsel (which may be given by an employee
of, or regular outside counsel to, such Holder) the exercise of such Warrants is
exempt from the registration requirements of the Securities Act and such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states or other jurisdictions in which such
Holders reside.
(b) If any shares of Common Stock required to be reserved for
purposes of the exercise of Warrants require, under any other Federal or state
law or applicable governing rule or
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regulation of any national securities exchange, registration with or approval of
any governmental authority, or listing on any such national securities exchange
before such shares may be issued upon exercise, the Company will use its best
efforts to cause such shares to be duly registered or approved by such
governmental authority or listed on the relevant national securities exchange,
as the case may be.
ARTICLE IV
Antidilution Provisions
SECTION 4.01. Changes in Common Stock. In the event that at any time
and from time to time the Company shall (i) pay a dividend or make a
distribution on the Common Stock in shares of Common Stock or other shares of
Capital Stock, (ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, (iii) combine its outstanding shares of
Common Stock into a smaller number of shares of Common Stock or (iv) increase or
decrease the number of shares of Common Stock outstanding by reclassification of
its Common Stock, then the number of shares of Common Stock issuable upon
exercise of each Warrant immediately after the happening of such event shall be
adjusted so that, after giving effect to such adjustment, the Holder of each
Warrant shall be entitled to receive the number of shares of Common Stock upon
exercise of such Warrant that such Holder would have owned or have been entitled
to receive had such Warrants been exercised immediately prior to the happening
of the events described above (or, in the case of a dividend or distribution of
Common Stock, immediately prior to the record date therefor). An adjustment made
pursuant to this Section 4.01 shall become effective immediately after the
distribution date, retroactive to the record date therefor in the case of a
dividend or distribution in shares of Common Stock or other shares of Capital
Stock, and shall become effective immediately after the effective date in the
case of a subdivision, combination or reclassification.
SECTION 4.02. Cash Dividends and Other Distributions. In the event that
at any time and from time to time the Company shall distribute to all holders of
Common Stock (i) any dividend or other distribution (including any dividend or
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of cash, evidences of its indebtedness,
shares of its Capital Stock or any other properties or securities or (ii) any
options, warrants or other rights to subscribe for, purchase, or which are
convertible into, any of the foregoing (other than, in the case of clause (i)
and (ii) above, (A) any dividend or distribution described in Section 4.01, (B)
any rights, options, warrants or securities described in Section 4.03 or Section
4.04 and (C) any cash dividends or other cash distributions from current or
retained earnings other than extraordinary cash dividends), then the number of
shares of Common Stock issuable upon the exercise of each Warrant immediately
prior to such record date for any such dividend or distribution shall be
increased to a number determined by multiplying the number of shares of Common
Stock issuable upon the exercise of such Warrant immediately prior to such
record date for any such dividend or distribution by a fraction, the numerator
of which shall be the Current Market Value per share of Common Stock on the
record date for such dividend or distribution, and the denominator of which
shall be such Current Market Value per share of
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Common Stock less the sum of (x) the amount of cash, if any, distributed per
share of Common Stock and (y) the then fair value (as determined in good faith
by the Board of Directors, whose determination shall be evidenced by a board
resolution filed with the Warrant Agent, a copy of which will be sent to Holders
upon request) of the portion, if any, of the distribution applicable to one
share of Common Stock consisting of evidences of indebtedness, shares of stock,
securities, other property, warrants, options or subscription or purchase
rights; and subject to Section 4.08, the Exercise Price shall be adjusted to a
number determined by dividing the Exercise Price immediately prior to such
record date by the above fraction. Such adjustments shall be made, and shall
only become effective, whenever any dividend or distribution to which this
Section 4.02 applies is made; provided, however, that the Company is not
required to make an adjustment pursuant to this Section 4.02 if at the time of
such distribution the Company makes the same distribution to Holders of Warrants
as it makes to holders of Common Stock pro rata based on the number of shares of
Common Stock for which such Warrants are exercisable (whether or not currently
exercisable). No adjustment shall be made pursuant to this Section 4.02 which
shall have the effect of decreasing the number of shares of Common Stock
issuable upon exercise of each Warrant or increasing the Exercise Price.
SECTION 4.03. Common Stock Issue. In the event that at any time or from
time to time the Company shall issue shares of Common Stock for a consideration
per share that is less than the Current Market Value per share of Common Stock
as of the issuance date of such shares, the number of shares of Common Stock
issuable upon the exercise of each Warrant immediately after such issuance date
shall be determined by multiplying the number of shares of Common Stock issuable
upon exercise of each Warrant immediately prior to such issuance date by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately preceding the issuance of such shares plus the number of
additional shares of Common Stock to be issued in such transaction, and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately preceding the date for the issuance of such shares plus the total
number of shares of Common Stock which the aggregate consideration expected to
be received by the Company upon the issuance of such shares (as determined in
good faith by the Board of Directors, whose determination shall be evidenced by
a board resolution filed with the Warrant Agent, a copy of which will be sent to
Holders upon request) would purchase at the Current Market Value per share of
Common Stock as of the date of such issuance; and, subject to Section 4.08, in
the event of any such adjustment, the Exercise Price shall be adjusted to a
number determined by dividing the Exercise Price immediately prior to such date
of issuance by the aforementioned fraction; provided, however, that no
adjustment to the number of Warrant Shares issuable upon the exercise of the
Warrants or to the Exercise Price shall be made as a result of (i) the issuance
of shares of Common Stock in bona fide public offerings that are underwritten or
in which a placement agent is retained by the Company, (ii) the issuance of
shares of Common Stock (including upon exercise of options) pursuant to the
terms of and in order to give effect to the 1996 Stock Incentive Plan as in
effect on the date hereof, as it may be amended from time to time, and (iii) the
issuance of shares of Common Stock in connection with acquisitions of products
and businesses other than to Affiliates of the Company. Such adjustment shall be
made, and shall only become effective, whenever such shares are issued. No
adjustment shall be made pursuant to this Section 4.03 which shall have the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each Warrant or increasing the Exercise Price.
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SECTION 4.04. Issuance of Rights or Options. In the event that at any
time or from time to time the Company shall issue to holders of Common Stock (i)
rights, options or warrants to acquire (provided, however, that no adjustment
shall be made under Section 4.03 or 4.04 upon the exercise of such rights,
options or warrants), or (ii) securities convertible or exchangeable into
(provided, however, that no adjustment shall be made under Section 4.03 or 4.04
upon the conversion or exchange of such securities (other than issuances
specified in (i) or (ii) which are made as the result of anti-dilution
adjustments in such securities)), Common Stock entitling the holders thereof to
subscribe for or purchase shares of Common Stock at a price per share that is
less than the Current Market Value per share of Common Stock in effect
immediately prior to such issuance other than in connection with the adoption of
a shareholder rights plan by the Company, the number of shares of Common Stock
issuable upon the exercise of each Warrant immediately after such issuance shall
be determined by multiplying the number of shares of Common Stock issuable upon
exercise of each Warrant immediately prior to such issuance by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options, warrants or
securities plus the number of additional shares of Common Stock offered for
subscription or purchase or into which such securities are convertible or
exchangeable, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to the issuance of such rights,
options, warrants or securities plus the total number of shares of Common Stock
which the aggregate consideration expected to be received by the Company upon
the exercise, conversion or exchange of such rights, options, warrants or
securities (as determined in good faith by the Board, whose determination shall
be evidenced by a board resolution filed with the Warrant Agent, a copy of which
will be sent to Holders upon request) would purchase at the Current Market Value
per share of Common Stock as of the record date; and, subject to Section 4.08,
in the event of any such adjustment, the Exercise Price shall be adjusted to a
number determined by dividing the Exercise Price immediately prior to such date
of issuance by the aforementioned fraction; provided, however, that no
adjustment to the number of Warrant Shares issuable upon the exercise of the
Warrants or to the Exercise Price shall be made as a result of the issuance of
options to acquire additional shares of Common Stock pursuant to the terms of
and in order to give effect to the Company's 1996 Stock Incentive Plan and 1996
Director Compensation Plan, as in effect on the date hereof, as they may be
amended or replaced from time to time. Such adjustment shall be made, and shall
only become effective, whenever such rights, options, warrants or securities are
issued. No adjustment shall be made pursuant to this Section 4.04 which shall
have the effect of decreasing the number of shares of Common Stock issuable upon
exercise of each Warrant or increasing the Exercise Price.
SECTION 4.05. Combination; Liquidation. (a) Except as provided in
Section 4.05(b), in the event of a Combination, each Holder shall have the right
to receive upon exercise of the Warrants the kind and amount of shares of
Capital Stock or other securities or property which such Holder would have been
entitled to receive upon completion of or as a result of such Combination had
such Warrant been exercised immediately prior to such event or to the relevant
record date for any such entitlement. Unless paragraph (b) is applicable to a
Combination, the Company shall provide, and deliver to the Warrant Agent, an
Opinion of Counsel to the effect
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that the surviving or acquiring Person (the "Successor Company") in such
Combination has entered into an agreement with the Warrant Agent confirming the
Holders' rights pursuant to this Section 4.05(a) and providing for adjustments,
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Article IV. The provisions of this Section 4.05(a) shall
similarly apply to successive Combinations involving any Successor Company.
(b) In the event of (i) a Combination where consideration to
the holders of Common Stock in exchange for their shares is payable solely in
cash or (ii) the dissolution, liquidation or winding-up of the Company, the
Holders of the Warrants shall be entitled to receive, upon surrender of their
Warrant Certificates, such cash distributions on an equal basis with the holders
of Common Stock or other securities issuable upon exercise of the Warrants, as
if the Warrants had been exercised immediately prior to such event, less the
Exercise Price. In the event of any Combination described in this Section
4.05(b), the surviving or acquiring Person and, in the event of any dissolution,
liquidation or winding-up of the Company, the Company, shall deposit promptly
with the Warrant Agent the funds, if any, necessary to pay the Holders of the
Warrants the amounts to which they are entitled as described above. After such
funds and the surrendered Warrant Certificates are received, the Warrant Agent
shall make payment to the Holders by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be directed
in writing by the Holders surrendering such Warrants.
SECTION 4.06. Other Events. If any event occurs as to which the
foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors, fairly and adequately protect the purchase rights of the Warrants in
accordance with the essential intent and principles of such provisions, then the
Board of Directors shall make such adjustments in the application of such
provisions, in accordance with such essential intent and principles, as shall be
reasonably necessary, in the good faith opinion of the Board of Directors, to
protect such purchase rights as aforesaid, but in no event shall any such
adjustment have the effect of increasing the Exercise Price or decreasing the
number of shares of Common Stock issuable upon exercise of the Warrants.
SECTION 4.07. Superseding Adjustment. Upon the expiration of any
rights, options, warrants or conversion or exchange privileges which resulted in
adjustments pursuant to this Article IV, if any thereof shall not have been
exercised, the number of Warrant Shares issuable upon the exercise of each
Warrant shall be readjusted pursuant to the applicable section of Article IV as
if (i) the only shares of Common Stock issuable upon exercise of such rights,
options, warrants, conversion or exchange privileges were the shares of Common
Stock, if any, actually issued upon the exercise of such rights, options,
warrants or conversion or exchange privileges and (ii) shares of Common Stock
actually issued, if any, were issuable for the consideration actually received
by the Company upon such exercise plus the aggregate consideration, if any,
actually received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange privileges whether or not
exercised and the Exercise Price shall be readjusted inversely; PROVIDED,
HOWEVER, that no such readjustment (except by reason of an intervening
adjustment under Section 4.01) shall have the effect of decreasing the number of
Warrant Shares issuable upon the exercise of each Warrant or
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increasing the Exercise Price by an amount in excess of the amount of the
adjustment initially made in respect of the issuance, sale or grant of such
rights, options, warrants or conversion or exchange privileges.
SECTION 4.08. Minimum Adjustment. The adjustments required by the
preceding sections of this Article IV shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the Exercise Price or the number of shares of Common Stock issuable upon
exercise of the Warrants that would otherwise be required shall be made unless
and until such adjustment either by itself or with other adjustments not
previously made increases or decreases by at least 1% the Exercise Price or the
number of shares of Common Stock issuable upon exercise of the Warrants
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made as
soon as such adjustment, together with other adjustments required by this
Article IV and not previously made, would result in a minimum adjustment. For
the purpose of any adjustment, any specified event shall be deemed to have
occurred at the close of business on the date of its occurrence. In computing
adjustments under this Article IV, fractional interests in Common Stock shall be
taken into account to the nearest one-hundredth of a share.
SECTION 4.09. Notice of Adjustment. Whenever the Exercise Price or the
number of shares of Common Stock and other property, if any, issuable upon
exercise of the Warrants is adjusted, as herein provided, the Company shall
deliver to the Warrant Agent a certificate of a firm of independent accountants
selected by the Board of Directors (who may be the regular accountants employed
by the Company) setting forth, in reasonable detail, the event requiring the
adjustment and the method by which such adjustment was calculated (including a
description of the basis on which (i) the Board of Directors determined the then
fair value of any evidences of indebtedness, other securities or property or
warrants, options or other subscription or purchase rights and (ii) the Current
Market Value of the Common Stock was determined, if either of such
determinations were required), and specifying the Exercise Price and the number
of shares of Common Stock issuable upon exercise of the Warrants after giving
effect to such adjustment. The Company shall promptly cause the Warrant Agent to
mail a copy of such certificate to each Holder in accordance with Section 7.05.
The Warrant Agent shall be entitled to rely on such certificate and shall be
under no duty or responsibility with respect to any such certificate, except to
exhibit the same from time to time, to any Holder desiring an inspection thereof
during reasonable business hours. The Warrant Agent shall not at any time be
under any duty or responsibility to any Holder to determine whether any facts
exist which may require any adjustment of the Exercise Price or the number of
shares of Common Stock or other stock or property issuable on exercise of the
Warrants, or with respect to the nature or extent of any such adjustment when
made, or with respect to the method employed in making such adjustment or the
validity or value of any shares of Common Stock, evidences of indebtedness,
warrants, options, or other securities or property.
SECTION 4.10. Notice of Certain Transactions. In the event that the
Company shall propose to (a) pay any dividend payable in securities of any class
to the holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common
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Stock, (b) offer the holders of its Common Stock rights to subscribe for or to
purchase any securities convertible into shares of Common Stock or shares of
stock of any class or any other securities, rights or options, (c) issue any (i)
shares of Common Stock, (ii) rights, options or warrants entitling the holders
thereof to subscribe for shares of Common Stock or (iii) securities convertible
into or exchangeable or exercisable for Common Stock (in the case of (i), (ii)
and (iii), if such issuance or adjustment would result in an adjustment
hereunder), (d) effect any capital reorganization, reclassification,
consolidation or merger, (e) effect the voluntary or involuntary dissolution,
liquidation or winding-up of the Company or (f) make a tender offer or exchange
offer with respect to the Common Stock, the Company shall within five days after
any such action or offer send to the Warrant Agent a notice and the Warrant
Agent shall within five days after receipt thereof send the Holders a notice (in
such form as shall be furnished to the Warrant Agent by the Company) of such
proposed action or offer. Such notice shall be mailed by the Warrant Agent to
the Holders at their addresses as they appear in the books of the Warrant
Registrar, which shall specify the record date for the purposes of such
dividend, distribution or rights, or the date such issuance or event is to take
place and the date of participation therein by the holders of Common Stock, if
any such date is to be fixed, and shall briefly indicate the effect, if any, of
such action on the Common Stock and on the number and kind of any other shares
of stock and on other property, if any, and the number of shares of Common Stock
and other property, if any, issuable upon exercise of each Warrant and the
Exercise Price after giving effect to any adjustment pursuant to Article IV
which will be required as a result of such action. Such notice shall be given as
promptly as possible and (x) in the case of any action covered by clause (a) or
(b) above, at least 10 days prior to the record date for determining holders of
the Common Stock for purposes of such action or (y) in the case of any other
such action, at least 20 days prior to the date of the taking of such proposed
action or the last date for participation therein by the holders of Common
Stock, whichever shall be the earlier.
SECTION 4.11. Adjustment to Warrant Certificate. The form of Warrant
Certificate need not be changed because of any adjustment made pursuant to this
Article IV, and Warrant Certificates issued after such adjustment may state the
same Exercise Price and the same number of shares of Common Stock issuable upon
exercise of the Warrants as are stated in the Warrant Certificates initially
issued pursuant to this Warrant Agreement. The Company, however, may at any time
in its sole discretion make any change in the form of Warrant Certificate that
it may deem appropriate to give effect to such adjustments and that does not
affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or countersigned, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
ARTICLE V
Registration Rights; Indemnification
SECTION 5.01. Effectiveness of Registration Statement. Subject to
Section 5.02, the Company shall cause to be filed pursuant to Rule 415 (or any
successor provision) of the Securities Act not later than 90 days after the
Issue Date, a shelf registration statement relating to
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the offer and sale of the Warrants by the Holders from time to time in
accordance with the methods of distribution elected by such holders and set
forth in such registration statement (the "Warrant Shelf Registration
Statement"), and shall use its reasonable best efforts to cause the Warrant
Shelf Registration Statement to be declared effective under the Securities Act
on or before 150 days after the Issue Date, and shall cause to be filed a shelf
registration statement covering the issuance of Warrant Shares to the Holders
upon exercise of the Warrants by the Holders thereof (the "Common Shelf
Registration Statement", and together with the Warrant Shelf Registration
Statement, the "Registration Statements") and shall use its reasonable best
efforts to cause the Common Shelf Registration Statement to be declared
effective on or before 150 days after the Issue Date. The Company shall use its
reasonable best efforts to cause (a) the Warrant Shelf Registration Statement to
remain continuously effective until the earliest of (i) such time as all
Warrants have been sold thereunder, (ii) three years after its effective date
and (iii) such time as all Warrants can be sold without restriction under the
Securities Act and (b) the Common Shelf Registration Statement to remain
continuously effective until the earlier of (i) such time as all Warrants have
been exercised and (ii) the third anniversary of the effective date of the
Common Shelf Registration Statement. In connection with any Registration
Statement, (i) the Company shall furnish to the Warrant Agent, prior to the
filing with the Commission, a copy of any Registration Statement, and each
amendment thereof and each amendment or supplement, if any, to the prospectus
included therein and shall use its reasonable best efforts to reflect in each
such document, when filed with the Commission, such comments as the Warrant
Agent may reasonably propose, (ii) before filing any Registration Statement or
prospectus or any amendments or supplements thereto, the Company will furnish to
the Holders of the Warrants and the Warrant Shares, their counsel, and the
underwriters, if any, and their counsel, successive drafts of all such documents
proposed to be filed at such times as will permit a reasonable period for the
review thereof; the Company shall use its reasonable best efforts to reflect in
each such document, when filed with the Commission, such comments as any Holder
of Warrants or Warrant Shares shall make and shall not file any registration
statement or amendment thereto or any prospectus or any supplement thereto
(including such documents incorporated by reference) to which the holders of a
majority of the Warrant or Warrant Shares to be registered shall reasonably
object based on their review of such drafts, (iii) the Company shall furnish to
each Holder, without charge, at least one conformed copy of any Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits thereto (including those incorporated by reference), (iv) the Company
shall, for so long as any Registration Statement is effective, deliver to each
Holder, without charge, as many copies of the prospectus (including each
preliminary prospectus) included in such Registration Statement and any
amendment or supplement thereto as such Holder may reasonably request, and the
Company consents to the proper use of the prospectus therein and any amendment
or supplement thereto by each of the selling Holders in connection with the
offering and sale of the Warrants or the exercise, offering or sale of Warrant
Shares, as the case may be, covered by such prospectus and any amendment or
supplement thereto, (v) the Company may require each Holder of Warrants to be
sold pursuant to the Warrant Shelf Registration Statement or to be exercised in
connection with the Common Shelf Registration Statement to furnish to the
Company such information regarding the Holder and the distribution of such
Warrants or Warrant Shares as may be required by such Registration Statement
(the "Holders' Information"), and the Company may exclude from such registration
the Transfer
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Restricted Warrants (as defined in the Appendix) of any Holder that fails to
furnish such information within a reasonable time after receiving such request,
(vi) the Company shall, if requested, promptly incorporate in a prospectus
supplement or post-effective amendment to such Registration Statement such
information as a majority in interest of the Holders reasonably agree should be
included therein and shall make all required filings of such prospectus
supplement or post-effective amendment as soon as practicable following
notification of the matters to be incorporated in such prospectus supplement or
post-effective amendment, (vii) the Company shall enter into such agreements
(including underwriting agreements) as are appropriate, customary and reasonably
necessary in connection with any such Registration Statement and (viii) the
Company shall (A) make reasonably available for inspection by a representative
of, and counsel acting for, Holders of a majority of the Warrants and any
underwriter participating in any disposition of Warrants, all relevant financial
and other records, pertinent corporate documents and properties of the Company,
(B) use its reasonable best efforts to have its officers, directors, employees,
accountants and counsel supply all relevant information reasonably requested by
such representative, counsel or any such underwriter in connection with such
Registration Statement, and (C) if requested by Holders of a majority of
Warrants, their counsel or the managing underwriters (if any) in connection with
such Registration Statement, use its reasonable best efforts to cause (x) its
counsel to deliver an opinion relating to the Registration Statement and the
Warrants or Warrant Shares, as the case may be, in customary form, (y) its
officers to execute and deliver all customary documents and certificates
requested by Holders of a majority of the Warrants, their counsel or the
managing underwriters (if any) and (z) its independent public accountants to
provide a comfort letter or letters in customary form, subject to receipt of
appropriate documentation as contemplated, and only if permitted, by Statement
of Auditing Standards No. 72.
(b) The Company shall notify Holders and, if requested,
confirm in writing (which notice pursuant to clauses (ii)-(v) hereof shall be
accompanied by an instruction to suspend the use of the prospectus until the
requisite changes have been made):
(i) when any Registration Statement and any amendment
thereto has been filed with the Commission and when such Registration Statement
or any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments
or supplements to any Registration Statement or the prospectus included therein
or for additional information or if the Company discovers that such Registration
Statement or prospectus contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading;
(iii) of the issuance by the Commission of any stop
order suspending the effectiveness of any Registration Statement or the
initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the Warrants
or the Warrant Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose; and
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(v) of the happening of any event that requires the
making of any changes in any Registration Statement or the prospectus included
therein in order that the statements therein are not misleading and do not omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
The Company shall make every reasonable effort to obtain the withdrawal
at the earliest possible time of any order suspending the effectiveness of any
Registration Statement. If any event contemplated by clauses (ii) through (v)
occurs during the period for which the Company is required to maintain an
effective Registration Statement, the Company shall promptly prepare and file
with the Commission a post-effective amendment to the Registration Statement or
a supplement to the related prospectus or file any other required document so
that, as thereafter delivered, the prospectus shall not include an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Each Holder agrees that, upon receipt of any
notice from the Company pursuant to clauses (ii) through (v), such Holder shall
discontinue disposition of such Warrants or Warrant Shares until such Holder's
receipt of copies of a supplemental or amended prospectus or until advised in
writing (the "Advice") by the Company that the use of the applicable prospectus
may be resumed. If the Company shall give any notice under clauses (ii) through
(v) during the period that the Company is required to maintain an effective
Registration Statement (the "Effectiveness Period"), such Effectiveness Period,
in the case of the Warrant Shelf Registration Statement, shall be extended by
the number of days during such period from and including the date of the giving
of such notice to and including the date when each seller of Warrants or Warrant
Shares covered by such Registration Statement shall have received (x) the copies
of a supplemental or amended prospectus (if an amended or supplemental
prospectus is required) or (y) the Advice (if no amended or supplemental
prospectus is required).
SECTION 5.02. Suspension. During any consecutive 365-day period, the
Company shall be entitled to suspend the availability of each of the Warrant
Shelf Registration Statement and the Common Shelf Registration Statement for up
to two 45 consecutive-day periods (except for the 45 consecutive-day period
immediately prior to the Expiration Date) if the Company's Board determines in
the exercise of its reasonable judgment that there is a valid business purpose
for such suspension and provides notice that such determination was made to the
Holders of the Warrants; provided, however, that in no event shall the Company
be required to disclose the business purpose for such suspension if the Company
determines in good faith that such business purpose must remain confidential.
SECTION 5.03. Blue Sky. The Company shall use its best efforts to
register or qualify the Warrants and the Warrant Shares under all applicable
securities laws, blue sky laws or similar laws of all jurisdictions in the
United States and Canada in which any holder of Warrants may or may be deemed to
purchase Warrants or Warrant Shares upon the exercise of Warrants and shall use
its best efforts to maintain such registration or qualification for so long as
it is required to cause the Warrant Shelf Registration Statement (in the case of
the Warrants) and the Common Shelf Registration Statement (in the case of the
Warrant Shares) to remain effective under the
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Securities Act pursuant to Section 5.01; provided, however, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this Section 5.03 or
to take any action which would subject it to general service of process or to
taxation in any such jurisdiction where it is not then so subject.
SECTION 5.04. Accuracy of Disclosure. The Company represents and
warrants to each Holder and agrees for the benefit of each Holder that (i) each
of the Warrant Shelf Registration Statement and the Common Shelf Registration
Statement and any amendment thereto will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading and (ii) each
of the prospectus furnished to such Holder for delivery in connection with the
sale of Warrants and the prospectus delivered to such Holder upon the exercise
of Warrants and the documents incorporated by reference therein will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading; provided, however, that the Company shall have no liability under
clauses (i) or (ii) of this Section 5.04 with respect to any such untrue
statement or omission made in any Registration Statement in reliance upon and in
conformity with information furnished to the Company by or on behalf of the
Holders specifically for inclusion therein.
SECTION 5.05. Indemnification. (a) In connection with any Registration
Statement, the Company shall indemnify and hold harmless each Holder (including,
without limitation, the Initial Purchaser), its affiliates, their respective
officers, directors, employees, representatives and agents, and each person, if
any, who controls such Holder within the meaning of the Securities Act or the
Exchange Act (collectively referred to for purposes of this Section 5.05 as a
Holder) from and against any loss, claim, damage or liability, joint or several,
or any action in respect thereof (including, without limitation, any loss,
claim, damage, liability or action relating to purchases and sales of Warrants
or Warrant Shares), to which that Holder may become subject, whether commenced
or threatened, under the Securities Act, the Exchange Act, any other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
loss, claim, damage, liability or action arises out of, or is based upon, (i)
any violation by the Company of the Securities Act, (ii) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (iii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, and shall reimburse each Holder promptly upon demand for
any legal or other expenses reasonably incurred by that Holder in connection
with investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability or action arises out of, or is based upon, an untrue statement
or alleged untrue statement in or omission or alleged omission from any of such
documents in reliance upon and in conformity with any Holders' Information; and
provided, further, that with respect to any such untrue statement in or omission
from any related preliminary prospectus, the indemnity agreement contained in
this Section 5.05(a) shall not inure
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to the benefit of any Holder from whom the person asserting any such loss,
claim, damage, liability or action received Warrants or Warrant Shares to the
extent that such loss, claim, damage, liability or action of or with respect to
such Holder results from the fact that both (A) a copy of the final prospectus
was not sent or given to such person at or prior to the written confirmation of
the sale of such Warrants (in the case of the sale of Warrants), to such person
and (B) the untrue statement in or omission from the related preliminary
prospectus was corrected in the final prospectus unless, in either case, such
failure to deliver the final prospectus was a result of noncompliance by the
Company with Section 5.01. This indemnity agreement will be in addition to any
liability which the Company may otherwise have to a Holder. If the offering
pursuant to any Registration Statement is made through underwriters, no action
or failure to act on the part of such underwriters (whether or not any such
underwriter is an affiliate of any Holder) shall affect the obligations of the
Company to indemnify any Holder or any other Person pursuant to the provisions
hereof. The Company shall also indemnify underwriters, selling brokers,
dealer-managers and similar securities industry professionals participating in
the distribution (in each case as described in the Registration Statement),
their officers and directors and each person who controls such persons within
the meaning of the Securities Act or the Exchange Act to the same extent as
provided above with respect to the indemnification of the Holders of the
Securities if requested by such Holders.
(b) In connection with any Registration Statement each Holder,
severally and not jointly, shall indemnify and hold harmless the Company, its
affiliates, their respective officers, directors, employees, representatives and
agents, and each person, if any, who controls the Company within the meaning of
the Securities Act or the Exchange Act (collectively referred to for purposes of
this Section 5.05 as the Company), from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof, to which the
Company may become subject, whether commenced or threatened, under the
Securities Act, the Exchange Act, any other Federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim, damage,
liability or action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or in any amendment or
supplement thereto or (ii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to made the
statements therein, in the light of the circumstances under which they were
made, not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with any Holders' Information furnished to
the Company by such Holder, and shall reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending or preparing to defend against or appearing as a
third party witness in connection with any such loss, claim, damage, liability
or action as such expenses are incurred; provided, however, that no such Holder
shall be liable for any indemnity claims hereunder in excess of the amount of
net proceeds received by such Holder from the sale of Warrants, in the case of
the Warrant Shelf Registration Statement, or the Current Market Value of Warrant
Shares at the time they were received in the case of the Common Stock Shelf
Registration Statement.
(c) Promptly after receipt by an indemnified party under this
Section 5.05 of
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notice of any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party pursuant to Section 5.05(a) or 5.05(b), notify the indemnifying party in
writing of the claim or the commencement of that action; provided, however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 5.05 except to the extent that it
has been materially prejudiced (through the forfeiture of substantive rights or
defenses) by such failure; and provided, further, that the failure to notify the
indemnifying party shall not relieve it from any liability which it may have to
an indemnified party otherwise than under this Section 5.05. If any such claim
or action shall be brought against an indemnified party, and it shall notify the
indemnifying party thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it wishes, jointly with any other
similarly notified indemnifying party, to assume the defense thereof with
counsel reasonably satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 5.05 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than the reasonable costs of investigation; provided, however,
that an indemnified party shall have the right to employ its own counsel in any
such action, but the fees, expenses and other charges of such counsel for the
indemnified party will be at the expense of such indemnified party unless (1)
the employment of counsel by the indemnified party has been authorized in
writing by the indemnifying party, (2) the indemnified party has reasonably
concluded (based upon advice of counsel to the indemnified party) that there may
be legal defenses available to it or other indemnified parties that are
different from or in addition to those available to the indemnifying party, (3)
a conflict or potential conflict exists (based upon advice of counsel to the
indemnified party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct the defense
of such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel reasonably satisfactory to the indemnified
party to assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of which cases the
reasonable fees, disbursements and other charges of counsel will be at the
expense of the indemnifying party or parties. It is understood that the
indemnifying party or parties shall not, in connection with any proceeding or
related proceedings in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm of attorneys (in
addition to any local counsel) at any one time for all such indemnified party or
parties. Each indemnified party, as a condition of the indemnity agreements
contained in Sections 5.05(a) and 5.05(b), shall use all reasonable efforts to
cooperate with the indemnifying party in the defense of any such action or
claim. No indemnifying party shall be liable for any settlement of any such
action effected without its written consent (which consent shall not be
unreasonably withheld), but if settled with its written consent or if there be a
final judgment for the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party (which
consent shall not be unreasonably withheld), effect any settlement of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on
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claims that are the subject matter of such proceeding.
(d) If the indemnification provided for above is unavailable
or insufficient to hold harmless an indemnified party under Section 5.05(a) or
5.05(b), then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in respect
thereof, (i) in such proportion as shall be appropriate to reflect the relative
benefits received by the indemnifying party, on the one hand, and the
indemnified party, on the other, or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the indemnifying party, on the one hand,
and the indemnified party, on the other, with respect to the statements or
omissions that resulted in such loss, claim, damage or liability, or action in
respect thereof, as well as any other relevant equitable considerations. In the
case of the Company and the Holders, the relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to the Company or information supplied by the Company, on the one hand,
or to any Holders' Information supplied by such Holder, on the other, the intent
of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this Section 5.05(d) were to be determined by pro rata allocation or by any
other method of allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action in respect
thereof, referred to above in this Section 5.05(d) shall be deemed to include,
for purposes of this Section 5.05(d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or defending
or preparing to defend any such action or claim. Notwithstanding the provisions
of this Section 5.05(d), an indemnifying party that is a Holder shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Warrants sold, in the case of the Warrant Shelf Registration
Statement, and the Current Market Value of the Warrant Shares at the time they
were received, in the case of the Common Stock Registration Statement, by such
indemnifying party to any purchaser exceeds the amount of any damages which such
indemnifying party has otherwise paid or become liable to pay by reason of any
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
(e) The agreements contained in this Section 5.05 shall
survive the sale of the Securities pursuant to the Registration Statements and
shall remain in full force and effect, regardless of any termination or
cancelation of this Warrant Agreement or any investigation made by or on behalf
of any indemnified party.
SECTION 5.06. Additional Acts. If the sale of Warrants or the issuance
or sale of any Common Stock or other securities issuable upon the exercise of
the Warrants requires registration or approval of any governmental authority
(other than the registration requirements under the Securities Act), or the
taking of any other action under the laws of the United States or
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any political subdivision thereof before such securities may be validly offered
or sold in compliance with such laws, then the Company covenants that it will,
in good faith and as expeditiously as reasonably possible, use its reasonable
best efforts to secure and maintain such registration or approval or to take
such other action, as the case may be. The Company shall promptly notify the
Warrant Agent in writing when (i) the Company has obtained all such governmental
approvals and authorizations and (ii) such approvals and authorizations
thereafter cease to be in effect.
SECTION 5.07. Expenses. All expenses incident to the Company's
performance of or compliance with its obligations under this Article V will be
borne by the Company, including without limitation: (i) all SEC, stock exchange
or National Association of Securities Dealers, Inc. registration and filing
fees, (ii) all reasonable fees and expenses incurred in connection with the
compliance with state securities or blue sky laws, (iii) all expenses of any
Persons incurred by or on behalf of the Company in preparing or assisting in
preparing, printing and distributing the Warrant Shelf Registration Statement,
the Common Shelf Registration Statement or any other registration statement,
prospectus, any amendments or supplements thereto and other documents relating
to the performance of and compliance with this Article V, (iv) the fees and
disbursements of the Warrant Agent as agreed, (v) the fees and disbursements of
counsel for the Company and the Warrant Agent as agreed, (vi) the fees and
disbursements of one firm of attorneys (in addition to any local counsel) chosen
by a majority of the Holders of Warrants in the case of each of the Warrant
Shelf Registration Statement and the Common Stock Registration Statement and
(vii) the fees and disbursements of the independent public accountants of the
Company, including the expenses of any special audits or comfort letters
required by or incident to such performance and compliance.
ARTICLE VI
Warrant Agent
SECTION 6.01. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
provisions of this Warrant Agreement and the Warrant Agent hereby accepts such
appointment.
SECTION 6.02. Rights and Duties of Warrant Agent. (a) AGENT FOR THE
COMPANY. In acting under this Warrant Agreement and in connection with the
Warrant Certificates, the Warrant Agent is acting solely as agent of the Company
and does not assume any obligation or relationship or agency or trust for or
with any of the holders of Warrant Certificates or beneficial owners of
Warrants.
(b) COUNSEL. The Warrant Agent may consult with counsel
satisfactory to it (and may require an Opinion of Counsel before it acts or
refrains from acting), and the advice of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in accordance with the advice of such counsel.
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(c) DOCUMENTS. The Warrant Agent shall be protected and shall
incur no liability for or in respect of any action taken or thing suffered by it
in reliance upon any Warrant Certificate, notice, direction, consent,
certificate, affidavit, statement or other paper or document reasonably believed
by it to be genuine and to have been presented or signed by the proper parties.
(d) NO IMPLIED OBLIGATIONS. The Warrant Agent shall be
obligated to perform only such duties as are specifically set forth herein and
in the Warrant Certificates, and no implied duties or obligations of the Warrant
Agent shall be read into this Warrant Agreement or the Warrant Certificates
against the Warrant Agent. The Warrant Agent shall not be under any obligation
to take any action hereunder which may tend to involve it in any expense or
liability for which it does not receive indemnity if such indemnity is
reasonably requested. The Warrant Agent shall not be accountable or under any
duty or responsibility for the use by the Company of any of the Warrant
Certificates countersigned by the Warrant Agent and delivered by it to the
Holders or on behalf of the Holders pursuant to this Warrant Agreement or for
the application by the Company of the proceeds of the Warrants. The Warrant
Agent shall have no duty or responsibility in case of any default by the Company
in the performance of its covenants or agreements contained herein or in the
Warrant Certificates or in the case of the receipt of any written demand from a
Holder with respect to such default, including any duty or responsibility to
initiate or attempt to initiate any proceedings at law or otherwise.
(e) NOT RESPONSIBLE FOR ADJUSTMENTS OR VALIDITY OF STOCK. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require an adjustment of
the number of shares of Common Stock issuable upon exercise of each Warrant or
the Exercise Price, or with respect to the nature or extent of any adjustment
when made, or with respect to the method employed, or herein or in any
supplemental agreement provided to be employed, in making the same. The Warrant
Agent shall not be accountable with respect to the validity or value of any
shares of Common Stock or of any securities or property which may at any time be
issued or delivered upon the exercise of any Warrant or upon any adjustment
pursuant to Article IV, and it makes no representation with respect thereto. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any shares of Common Stock or
stock certificates upon the surrender of any Warrant Certificate for the purpose
of exercise or upon any adjustment pursuant to Article IV, or to comply with any
of the covenants of the Company contained in Article IV.
SECTION 6.03. Individual Rights of Warrant Agent. The Warrant Agent and
any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or its
affiliates and may otherwise deal with the Company or its affiliates with the
same rights it would have if it were not Warrant Agent. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
SECTION 6.04. Warrant Agent's Disclaimer. The Warrant Agent shall not
be
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responsible for and makes no representation as to the validity or adequacy of
this Warrant Agreement or the Warrant Certificates and it shall not be
responsible for any statement in this Warrant Agreement or the Warrant
Certificates other than its countersignature thereon.
SECTION 6.05. Compensation and Indemnity. The Company agrees to pay the
Warrant Agent from time to time reasonable compensation for its services as
agreed and to reimburse the Warrant Agent upon request for all reasonable
out-of-pocket expenses incurred by it, including the reasonable compensation and
expenses of the Warrant Agent's agents and counsel as agreed. The Company shall
indemnify the Warrant Agent against any loss, liability or expense (including
reasonable agents' and attorneys' fees and expenses) incurred by it without
negligence or bad faith on its part arising out of or in connection with the
acceptance or performance of its duties under this Warrant Agreement. The
Warrant Agent shall notify the Company promptly of any claim for which it may
seek indemnity. The Company need not reimburse any expense or indemnify against
any loss or liability incurred by the Warrant Agent through willful misconduct,
negligence or bad faith. The Company's payment obligations pursuant to this
Section 6.05 shall survive the termination of this Warrant Agreement.
SECTION 6.06. Successor Warrant Agent. (a) THE COMPANY TO PROVIDE AND
MAINTAIN WARRANT AGENT. The Company agrees for the benefit of the Holders that
there shall at all times be a Warrant Agent hereunder until all the Warrants
have been exercised or are no longer exercisable.
(b) RESIGNATION AND REMOVAL. The Warrant Agent may at any time
resign by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective;
provided, however, that such date shall not be less than 60 days after the date
on which such notice is given unless the Company otherwise agrees. The Warrant
Agent hereunder may be removed at any time by the filing with it of an
instrument in writing signed by or on behalf of the Company and specifying such
removal and the date when it shall become effective, which date shall not be
less than 60 days after such notice is given unless the Warrant Agent otherwise
agrees. Any removal under this Section 6.06 shall take effect upon the
appointment by the Company as hereinafter provided of a successor Warrant Agent
(which shall be a bank or trust company authorized under the laws of the
jurisdiction of its organization to exercise corporate trust powers) and the
acceptance of such appointment by such successor Warrant Agent. At any time that
the Warrant Agent is also acting as Trustee under the Indenture and holders of
the Notes remove the Trustee pursuant to Section 7.08 of the Indenture, the
Company shall remove the Warrant Agent pursuant to this Section 6.06(b).
(c) THE COMPANY TO APPOINT SUCCESSOR. In the event that at any
time the Warrant Agent shall resign, or shall be removed, or shall become
incapable of acting, or shall be adjudged a bankrupt or insolvent, or shall
commence a voluntary case under the Federal bankruptcy laws, as now or hereafter
constituted, or under any other applicable Federal or state bankruptcy,
insolvency or similar law or shall consent to the appointment of or taking
possession by a receiver, custodian, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Warrant Agent or its property or affairs, or
shall make an assignment for the benefit of creditors, or shall admit in writing
its inability to pay its debts generally as they become due, or shall take
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corporate action in furtherance of any such action, or a decree or order for
relief by a court having jurisdiction in the premises shall have been entered in
respect of the Warrant Agent in an involuntary case under the Federal bankruptcy
laws, as now or hereafter constituted, or any other applicable Federal or state
bankruptcy, insolvency or similar law, or a decree or order by a court having
jurisdiction in the premises shall have been entered for the appointment of a
receiver, custodian, liquidator, assignee, trustee, sequestrator (or similar
official) of the Warrant Agent or of its property or affairs, or any public
officer shall take charge or control of the Warrant Agent or of its property or
affairs for the purpose of rehabilitation, conservation, winding up or
liquidation, a successor Warrant Agent, qualified as aforesaid, shall be
appointed by the Company by an instrument in writing, filed with the successor
Warrant Agent. Upon the appointment as aforesaid of a successor Warrant Agent
and acceptance by the successor Warrant Agent of such appointment, the Warrant
Agent shall cease to be Warrant Agent hereunder; provided, however, that in the
event of the resignation of the Warrant Agent under this subsection (c), such
resignation shall be effective on the earlier of (i) the date specified in the
Warrant Agent's notice of resignation and (ii) the appointment and acceptance of
a successor Warrant Agent hereunder.
(d) SUCCESSOR TO EXPRESSLY ASSUME DUTIES. Any successor
Warrant Agent appointed hereunder shall execute, acknowledge and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder, and thereupon such successor Warrant Agent, without any further act,
deed or conveyance, shall become vested with all the rights and obligations of
such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then unpaid, shall thereupon become obligated to transfer, deliver and pay over,
and such successor Warrant Agent shall be entitled to receive, all monies,
securities and other property on deposit with or held by such predecessor, as
Warrant Agent hereunder.
(e) SUCCESSOR BY MERGER. If the Warrant Agent consolidates
with, merges or converts into, or transfers all or substantially all its
corporate trust business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation without any
further act shall be the successor Warrant Agent.
ARTICLE VII
Miscellaneous
SECTION 7.01. SEC Reports. Notwithstanding that the Company may not be
subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act
the Company shall file with the SEC and provide the Warrant Agent and Holders
within 15 days after it files them with the SEC, copies of its annual report and
the information, documents and other reports that are specified in Sections 13
and 15(d) of the Exchange Act. In addition, following a public offering of the
common stock of the Company, the Company shall furnish to the Warrant Agent and
the Holders, promptly upon their becoming available, copies of the annual report
to stockholders and any other information provided by the Company to its public
stockholders generally.
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SECTION 7.02. Persons Benefiting. Nothing in this Warrant Agreement is
intended or shall be construed to confer upon any Person other than the Company,
the Warrant Agent and the Holders any right, remedy or claim under or by reason
of this Warrant Agreement or any part hereof.
SECTION 7.03. Rights of Holders. Holders of unexercised Warrants are
not entitled to (i) receive dividends or other distributions, (ii) receive
notice of or vote at any meeting of the stockholders, (iii) consent to any
action of the stockholders, (iv) receive notice of any other proceedings of the
Company, (v) exercise any preemptive right or (vi) exercise any other rights
whatsoever as stockholders of the Company.
SECTION 7.04. Amendment. This Warrant Agreement may be amended by the
parties hereto without the consent of any Holder for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective provision
contained herein or adding or changing any other provisions with respect to
matters or questions arising under this Warrant Agreement as the Company and the
Warrant Agent may deem necessary or desirable (including without limitation any
addition or modification to provide for compliance with the transfer
restrictions set forth herein); provided, however, that such action shall not
adversely affect the rights of any of the Holders. Any amendment or supplement
to this Warrant Agreement that has an adverse effect on the interests of the
Holders shall require the written consent of the Holders of a majority of the
then outstanding Warrants. The consent of each Holder affected shall be required
for any amendment pursuant to which the Exercise Price would be increased, the
number of Warrant Shares issuable upon exercise of Warrants would be decreased
(other than pursuant to adjustments provided herein) or the antidilution
provisions in Article IV would be altered in a manner which adversely affects
the Holders. In determining whether the Holders of the required number of
Warrants have concurred in any direction, waiver or consent, Warrants owned by
the Company or by any Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company shall be disregarded
and deemed not to be outstanding, except that, for the purpose of determining
whether the Warrant Agent shall be protected in relying on any such direction,
waiver or consent, only Warrants which the Warrant Agent knows are so owned
shall be so disregarded. Also, subject to the foregoing, only Warrants
outstanding at the time shall be considered in any such determination.
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SECTION 7.05. Notices. Any notice or communication shall be in writing
and delivered in person or mailed by first-class mail addressed as follows:
if to the Company:
Tultex Corporation
101 Commonwealth Boulevard
Martinsville, Virginia 24112
Attention of: Regina C. Haynes, Corporate Secretary
if to the Warrant Agent:
First Union National Bank
Mail Code: 3C3 NC1153
1525 West W. T. Harris Boulevard
Charlotte, NC 28262
Attention of: Frances Beam
The Company or the Warrant Agent by notice to the other may designate
additional or different addresses for subsequent notices or communications. Any
notice or communication mailed to a Holder shall be mailed to the Holder at the
Holder's address as it appears on the records of the Warrant Agent and shall be
sufficiently given if so mailed within the time prescribed. Failure to mail a
notice or communication to a Holder or any defect in it shall not affect its
sufficiency with respect to other Holders. If a notice or communication is
mailed in the manner provided above, it is duly given, whether or not the
addressee receives it.
SECTION 7.06. Governing Law. THIS WARRANT AGREEMENT AND THE WARRANTS
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF VIRGINIA BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF
CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 7.07. Successors. All agreements of the Company in this Warrant
Agreement and the Warrant Certificates shall bind its successors. All agreements
of the Warrant Agent in this Agreement shall bind its successors.
SECTION 7.08. Multiple Originals. The parties may sign any number of
copies of this Warrant Agreement. Each signed copy shall be an original, but all
of them together represent the same agreement. One signed copy is enough to
prove this Warrant Agreement.
SECTION 7.09. Table of Contents; Headings. The table of contents and
headings of the Articles and Sections of this Warrant Agreement have been
inserted for convenience of reference
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only, are not intended to be considered a part hereof and shall not modify or
restrict any of the terms or provisions hereof.
SECTION 7.10. Severability. The provisions of this Warrant Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Warrant Agreement in any jurisdiction.
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IN WITNESS WHEREOF, the parties have caused this Warrant Agreement to
be duly executed as of the date first written above.
TULTEX CORPORATION
By:
---------------------------------
Name: O. Randolph Rollins
Title: Executive Vice President and General Counsel
FIRST UNION NATIONAL BANK,
as Warrant Agent,
By:
---------------------------------
Name:
Title:
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APPENDIX A
PROVISIONS RELATING TO WARRANTS
1. Definitions
For the purposes of this Appendix A the following additional terms
shall have the meanings indicated below:
"Warrant" means a certificated Warrant (bearing the Restricted Warrant
Legend if the transfer of such Warrant is restricted by applicable law).
"IAI" means an institutional "accredited investor" as described in Rule
501(a)(1), (2), (3) or (7) under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Restricted Warrant Legend" means the legend set forth in Section
2.3(b)(i) herein.
"Rule 501" means Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Warrant" means all Warrants issued to QIBs in reliance on
Rule 144A.
"Transfer Restricted Warrants" means any Warrants that bear or are
required to bear the Restricted Warrant Legend.
2. The Securities
2.1 Form and Dating. Each Warrant shall initially be issued to QIBs in
reliance on Rule 144A or to institutional "accredited investors" pursuant to
another rule under the Securities Act. In the event of the effectiveness of a
shelf registration statement with respect to the Warrants, the Company shall
provide notice to the Warrant Agent not less than two Business Days prior to
such date.
2.2 Countersignature. The Warrant Agent shall countersign and make
available for delivery upon a written order of the Company, signed by an
Officer, Warrant Certificates (a) at an Exercise Price of $0.08125 per Warrant
Share entitling the Holders thereof to purchase in the aggregate not more than
10,350,000 Warrant Shares and (b) at an Exercise Price of $0.1.425 per Warrant
Share entitling the Holders thereof to purchase in the aggregate not more than
5,175,000 Warrant Shares.
<PAGE>
2.3 Transfer and Exchange. (a) When Warrants are presented to the
Warrant Registrar with a request: (x) to register the transfer of such Warrants;
or (y) to exchange such Warrants for an equal principal amount of Warrants of
other authorized denominations, the Warrant Registrar shall register the
transfer if the requirements of Section 8-401(a) of the Uniform Commercial Code
are met or make the exchange as requested if the requirements of Section
8-401(a)(1) and (2) of the Uniform Commercial Code are met; PROVIDED, HOWEVER,
that the Warrants surrendered for transfer or exchange are accompanied by the
following additional information and documents, as applicable: (i) if such
Warrants are being delivered to the Warrant Registrar by a Holder for
registration in the name of such Holder, without transfer, a certification from
such Holder to that effect (in the form set forth on the reverse side of the
Warrant Certificate); or (ii) if such Warrants are being transferred to the
Company, a certification to that effect (in the form set forth on the reverse
side of the Warrant Certificate); or (iii) if such Warrants are being
transferred pursuant to an exemption from registration in accordance with Rule
144 under the Securities Act or in reliance upon another exemption from the
registration requirements of the Securities Act, (i) a certification to that
effect (in the form set forth on the reverse side of the Warrant Certificate)
and (ii) if the Company so requests in the circumstances contemplated by the
first legend set forth in Section 2.3(b)(i), an opinion of counsel (which may be
given by an employee of, or regular outside counsel to, a Holder) or other
evidence reasonably satisfactory to it as to the compliance with the
restrictions set forth in the legend set forth in Section 2.3(b)(i).
(b) Legend.
(i) Except as permitted by the following paragraphs (ii) and
(iii), each Warrant Certificate evidencing the Warrants (and all Warrants issued
in exchange therefor or in substitution thereof) shall bear a legend in
substantially the following form (each defined term in the legend being defined
as such for purposes of the legend only):
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY
BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY
BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH
SECURITY, PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS
TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO
A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE WARRANTS ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS
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OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO AN
"ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER
OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT
OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), SUBJECT TO THE COMPANY'S AND THE WARRANT AGENT'S RIGHT PRIOR TO ANY
SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL (WHICH MAY BE GIVEN BY AN EMPLOYEE OF, OR
REGULAR OUTSIDE COUNSEL TO, SUCH HOLDER), CERTIFICATION AND/OR OTHER INFORMATION
SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
Each Security will also bear the following additional legend:
"IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE WARRANT AGENT
AND THE WARRANT REGISTRAR SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH
WARRANT AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH
THE FOREGOING RESTRICTIONS."
(ii) Upon any sale or transfer of a Transfer Restricted
Warrant, the Warrant Registrar shall permit the Holder thereof to exchange such
Transfer Restricted Warrant for a Warrant that does not bear the legends set
forth above and rescind any restriction on the transfer of such Transfer
Restricted Warrant if the Holder certifies in writing to the Warrant Registrar
that its request for such exchange was made in reliance on Rule 144 (such
certification to be in the form set forth on the reverse of the Warrant
Certificate).
(iii) After a transfer of any Warrant during the period of the
effectiveness of a Warrant Shelf Registration Statement with respect to such
Warrant all requirements pertaining to the Restricted Warrant Legend on such
Warrant shall cease to apply.
(c) Obligations with Respect to Transfers and Exchanges of Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent shall countersign, Warrants at the
Warrant Registrar's request.
(ii) No service charge shall be made for any registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any transfer tax, assessments,
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or similar governmental charge payable in connection therewith.
(iii) Prior to the due presentation for registration of
transfer of any Warrant, the Company, the Warrant Agent and the Warrant
Registrar may deem and treat the person in whose name a Warrant is registered as
the absolute owner of such Warrant for all purposes whatsoever, and neither the
Company nor the Warrant Agent shall be affected by notice to the contrary.
(iv) All Warrants issued upon any transfer or exchange
pursuant to the terms of this Warrant Agreement shall evidence the same terms
and shall be entitled to the same benefits under this Warrant Agreement as the
Warrants surrendered upon such transfer or exchange.
(d) No Obligation of the Warrant Agent. The Warrant Agent shall have no
obligation or duty to monitor, determine or inquire as to compliance with any
restrictions on transfer imposed under this Warrant Agreement or under
applicable law with respect to any transfer of any interest in any Warrant other
than to require delivery of such certificates and other documentation or
evidence as are expressly required by, and to do so if and when expressly
required by, the terms of this Warrant Agreement, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
NO. __________ __________ Warrants
WARRANTS
TO PURCHASE SHARES OF COMMON STOCK OF
TULTEX CORPORATION
Tultex Corporation, a Virginia corporation (the "Company"),
for value received, hereby certifies that
----------------------------------------
or registered assigns, is the owner of the number of Warrants,
set forth above, each of which represents the right, subject to the terms and
conditions hereof and of the Warrant Agreement (as defined below), to purchase
from the Company at any time, or from time to time, from the date of original
issuance of the Warrants to the close of business on April 15, 2007 (or, if such
date is not a Business Day (as defined below), the first following Business Day)
subject to postponement of such date as provided in the Warrant Agreement, (the
"Exercise Period"), the number of shares of common stock, par value $___ per
share, of the Company (the "Common Stock") described in the Warrant Agreement
(each share of Common Stock issuable upon exercise of a Warrant is referred to
as a "Warrant Share"). Subject to the terms and conditions of the Warrant
Agreement of even date herewith between the Company and First Union National
Bank, as warrant agent (the "Warrant Agent"), the price per Warrant Share, with
respect to the Warrants represented by this Warrant Certificate shall be $_____
per share, adjusted as provided in Article IV of the Warrant Agreement (the
"Exercise Price"), payable in full as to each Warrant exercised at the time of
purchase. The term "Business Day" as used herein refers to any day of the week
other than a Saturday, Sunday or a day which in The City of New York or in the
city in which the principal office of the Warrant Agent is located shall be a
legal holiday or a day on which banking institutions are authorized or required
by law to close.
The Warrants may be exercised in whole or in part at any time
or from time to time during the Exercise Period. Any Warrants not exercised
during the Exercise Period shall become void, and all rights hereunder and all
rights in respect hereof and under the Warrant Agreement shall cease at the end
of the Exercise Period.
Each exercise of Warrants shall be made, and shall be deemed
effective for the purpose of determining the date of exercise, only upon
surrender hereof to the Company at the Company's principal executive office or
the principal office of the Warrant Agent (or any successor Warrant Agent), with
the form of Election to Exercise on the reverse hereof duly completed and
signed, and upon payment in full to the Warrant Agent for the account of the
Company of the Exercise Price in the manner as provided in the Warrant Agreement
and upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement.
A-1
All shares of Common Stock issued upon exercise of the Warrants will be validly
issued, fully paid and nonassessable shares of Common Stock.
This Warrant Certificate is issued under and in accordance
with the Warrant Agreement and is subject to the terms and provisions of the
Warrant Agreement, which terms and provisions are hereby incorporated by
reference herein and made a part hereof. The Warrant Agreement is available for
inspection by the registered holder at the principal office of the Warrant Agent
(or successor Warrant Agent).
The Company shall not be required upon the exercise of the
Warrants represented hereby to issue fractions of Warrant Shares or to
distribute share certificates that evidence fractional Warrant Shares. The
holder of this Warrant Certificate expressly waives its right to receive any
fraction of a Warrant Share or a share certificate representing a fraction of a
Warrant Share. Fractional Warrant Shares that otherwise would be issuable in
respect of such exercise shall be paid in cash as provided in the Warrant
Agreement, and the number of Warrant Shares issuable shall be rounded down to
the next nearest whole number. If the Warrants represented hereby are not
exercised in full, the Warrant Agent, on behalf of the Company, will issue to an
exercising holder a new Warrant Certificate representing the Warrants not
exercised.
This Warrant Certificate may be exchanged either separately or
in combination with other Warrant Certificates at the principal office of the
Warrant Agent (or successor Warrant Agent) for new Warrant Certificates
representing the same aggregate number of Warrants as were evidenced by the
Warrant Certificate or Warrant Certificates exchanged, upon surrender of this
Warrant Certificate and upon compliance with and subject to the conditions set
forth herein and in the Warrant Agreement.
The Warrants represented by this Warrant Certificate may be
transferred, in whole or in part (subject to restrictions set forth in the
Warrant Agreement), at the principal office of the Warrant Agent (or successor
Warrant Agent) by the registered holder hereof in person or by his attorney duly
authorized in writing, upon (i) surrender of this Warrant Certificate and (ii)
compliance with and subject to the conditions set forth herein and in the
Warrant Agreement. Upon any such transfer, a new Warrant Certificate or new
Warrant Certificates, representing in the aggregate the number of Warrants
represented by this Warrant Certificate, will be issued to the transferee. The
holder of this Warrant Certificate, by accepting this Warrant Certificate,
consents and agrees with the Company, the Warrant Agent and with every
transferee of Warrants represented by this Warrant Certificate that until due
presentation for the registration of transfer of this Warrant Certificate on the
Warrant register maintained by the Warrant Agent, the Company and the Warrant
Agent may deem and treat the person in whose name this Warrant Certificate is
registered as the lawful owner for all purposes whatsoever.
Nothing contained in the Warrant Agreement or in this Warrant
Certificate shall be construed as conferring on the holder of any Warrants or
his transferee any rights whatsoever as a shareholder of the Company.
This Warrant Certificate shall not be valid unless
countersigned manually by the Warrant Agent.
A-2
<PAGE>
The Warrant Agreement and this Warrant Certificate shall be
deemed a contract made under the laws of the Commonwealth of Virginia and for
all purposes shall be construed in accordance with the laws of the Commonwealth
of Virginia without giving effect to the principles of conflicts of law thereof.
THE WARRANTS REPRESENTED HEREBY AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE OF THE WARRANTS ARE SUBJECT TO THE CONDITIONS SPECIFIED
IN THE WARRANT AGREEMENT, DATED ___________, 1999, BETWEEN TULTEX CORPORATION
AND FIRST UNION NATIONAL BANK (THE "WARRANT AGREEMENT"). THE WARRANTS
REPRESENTED HEREBY MAY NOT BE SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE AND CURRENT REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO
FOR SUCH WARRANTS UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR AN APPLICABLE
EXEMPTION UNDER THE ACT. THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THE WARRANTS REPRESENTED HEREBY MAY NOT BE SOLD OR TRANSFERRED WITHOUT AN
EFFECTIVE AND CURRENT REGISTRATION STATEMENT OR POST-EFFECTIVE AMENDMENT THERETO
FOR SUCH SHARES UNDER THE ACT OR AN APPLICABLE EXEMPTION UNDER THE ACT IN FORM
AND SUBSTANCE SATISFACTORY TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED UNDER
THE ACT.
THE HOLDER OF THE WARRANTS REPRESENTED HEREBY BY ITS
ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH WARRANTS,
PRIOR TO THE DATE (THE "RESALE RESTRICTION TERMINATION DATE") WHICH IS TWO YEARS
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE WARRANTS ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) TO
AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7)
UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED INVESTOR ACQUIRING
THE WARRANT FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER
OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT
OR (E) PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), SUBJECT TO THE COMPANY'S AND THE WARRANT
A-3
<PAGE>
AGENT'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D)
OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL (WHICH MAY BE GIVEN BY
AN EMPLOYEE OF, OR REGULAR OUTSIDE COUNSEL TO, SUCH HOLDER), CERTIFICATION
AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO
THE WARRANT AGENT AND THE WARRANT REGISTRAR SUCH CERTIFICATES AND OTHER
INFORMATION AS SUCH WARRANT AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
A-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant
Certificate to be duly executed under its corporate seal.
Dated:___________________
TULTEX CORPORATION
(CORPORATE SEAL) By: ______________________
Name:_____________________
Its: _____________________
By: ______________________
Name:_____________________
Its: Secretary
ATTEST:
__________________________
COUNTERSIGNED: FIRST UNION NATIONAL BANK,
as Warrant Agent
By: ______________________
Name:_____________________
Its: _____________________
A-5
<PAGE>
EXHIBIT B
TULTEX CORPORATION
ELECTION TO EXERCISE
(To be executed upon exercise of Warrant)
TO TULTEX CORPORATION:
The undersigned hereby elects to exercise the right of
purchase represented by the within Warrant Certificate for, and to purchase
thereunder, _________________ shares of Common Stock, as provided for therein,
and tenders herewith payment of the purchase price in the manner provided below
in the amount of $________________________.
This election is governed by the Warrant Agreement dated May
7, 1999, between Tultex Corporation and First Union National Bank.
The undersigned elects to pay the Exercise Price as follows
(check appropriate blank):
_____ (a) In cash or by certified or official bank check
payable to the order of the Company or by wire transfer
of funds to an account designated by the Company;
_____ (b) By a tender of Notes pursuant to Section 3.04(b) of
the Agreement;
_____ (c) By a tender of cash pursuant to Section 3.04(a)(i)
of the Agreement and Notes pursuant to Section 3.04(b)
of the Agreement; or
_____ (d) By delivery of Warrant Certificates pursuant to
Section 3.04(c) of the Agreement.
Please issue a certificate or certificates for such shares of
Common Stock in the name of:
PLEASE INSERT SOCIAL SECURITY OR Name:__________________________
OTHER IDENTIFYING NUMBER OF
ASSIGNEE
_________________________ Address:__________________________
_________________________ Signature:________________________
------------------------
Note: The above signature
should correspond exactly with
the name on the face of the
Warrant Certificate or with
the name of assignee appearing
in the assignment form below.
Dated: ________________
B-1
<PAGE>
B-2
<PAGE>
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _________________________ hereby sells, assigns and transfer
unto ____________________________ the within Warrant Certificate, together with
all right, title and interest therein, and does hereby irrevocably constitute
and appoint ______________________ attorney in fact, to transfer said Warrant
Certificate on the books of the Company, with full power of substitution in the
premises.
Dated: _______________
------------------------
Note: The above signature should
correspond exactly with the name
on the face of the Warrant
Certificate
B-3
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> APR-03-1999
<CASH> 8,533
<SECURITIES> 0
<RECEIVABLES> 63,352
<ALLOWANCES> 4,441
<INVENTORY> 199,452
<CURRENT-ASSETS> 280,786
<PP&E> 316,103
<DEPRECIATION> 212,780
<TOTAL-ASSETS> 449,033
<CURRENT-LIABILITIES> 51,097
<BONDS> 253,155
0
1,698
<COMMON> 30,050
<OTHER-SE> 107,597
<TOTAL-LIABILITY-AND-EQUITY> 449,033
<SALES> 71,638
<TOTAL-REVENUES> 71,638
<CGS> 65,697
<TOTAL-COSTS> 77,557
<OTHER-EXPENSES> (1,066)
<LOSS-PROVISION> 172
<INTEREST-EXPENSE> 6,256
<INCOME-PRETAX> (11,281)
<INCOME-TAX> (4,174)
<INCOME-CONTINUING> (7,107)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,107)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
