FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended April 1, 1995
Commission File Number 0-2585
DIXIE YARNS, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-0183370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Indentification No.)
1100 South Watkins Street
Chattanooga, Tennessee 37404
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 698-2501
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.
Class Outstanding as of May 1, 1995
Common Stock, $3 Par Value 11,507,767 shares (1)
Class B Common Stock, $3 Par Value 735,228 shares
Class C Common Stock, $3 Par Value 0 shares
(1) The shares outstanding include 1,029,446 shares subject to put option
issued pursuant to the acquisition of the assets of Masland Carpets, Inc.
on July 9, 1993.
DIXIE YARNS, INC 2
INDEX
Part I. Financial Information: Page No.
Consolidated Condensed Balance Sheets --
April 1, 1995 and December 31, 1994 3
Consolidated Statements of Income (Loss) --
Three Months Ended April 1, 1995
and April 2, 1994 5
Consolidated Condensed Statements of Cash Flows --
Three Months Ended April 1, 1995
and April 2, 1994 6
Notes to Consolidated Condensed Financial Statements 8
Management's Discussion and Analysis of Results of
Operations and Financial Condition 10
Part II. Other Information:
Item 6 - Exhibits and Reports on Form 8-K 12
PART I - ITEM 1 3
FINANCIAL INFORMATION
DIXIE YARNS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
April 1, December 31,
1995 1994
____________ ____________
(dollar amounts in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,088 $ 1,904
Accounts receivable (less allowance for
doubtful accounts of $3,601 in 1995
and $3,617 in 1994) 36,883 28,918
Inventories 117,589 109,964
Other 8,774 11,939
____________ ____________
TOTAL CURRENT ASSETS 165,334 152,725
PROPERTY, PLANT AND EQUIPMENT 493,234 480,920
Less accumulated amortization and
depreciation 224,250 215,406
____________ ____________
NET PROPERTY, PLANT AND EQUIPMENT 268,984 265,514
INTANGIBLE ASSETS (less accumulated
amortization of $11,155 in 1995
and $10,659 in 1994) 63,124 63,620
OTHER ASSETS 6,508 6,461
____________ ____________
TOTAL ASSETS $ 503,950 $ 488,320
____________ ____________
____________ ____________
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 4
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
April 1, December 31,
1995 1994
____________ ___________
(dollar amounts in thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 41,221 $ 33,055
Accrued expenses 27,989 30,148
Current portion of long-term debt 506 584
____________ ____________
TOTAL CURRENT LIABILITIES 69,716 63,787
LONG-TERM DEBT
Senior indebtedness 95,292 87,025
Subordinated notes 50,000 50,000
Convertible subordinated debentures 44,782 44,782
____________ ____________
TOTAL LONG-TERM DEBT 190,074 181,807
OTHER LIABILITIES 11,933 11,676
DEFERRED INCOME TAXES 42,680 42,364
COMMON STOCK, SUBJECT TO PUT OPTION -
1,029,446 shares in 1995 and 1994 18,178 18,178
STOCKHOLDERS' EQUITY
Common Stock - issued and outstanding,
including shares in treasury,
13,857,642 shares in 1995 and 1994 41,573 41,573
Class B Common Stock - issued and
outstanding, 735,228 shares in 1995
and 1994 2,206 2,206
Additional paid-in capital 131,710 131,710
Retained earnings 55,509 54,626
Minimum pension liability adjustment (4,330) (4,330)
____________ ____________
226,668 225,785
Less Common Stock in treasury at cost -
3,379,090 shares in 1995 and
3,375,990 shares in 1994 55,299 55,277
____________ ____________
TOTAL STOCKHOLDERS' EQUITY 171,369 170,508
____________ ____________
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 503,950 $ 488,320
____________ ____________
____________ ____________
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 5
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(UNAUDITED)
Three Months Ended
_________________________________
April 1, April 2,
1995 1994
______________ ______________
(dollar amounts in thousands,
except per share data)
Net sales $ 181,646 $ 163,391
Cost of sales 153,094 145,228
____________ ____________
GROSS PROFIT 28,552 18,163
Selling, general and
administrative expenses 21,802 20,513
Other income (expense) - net (953) (1,167)
____________ ____________
INCOME (LOSS) BEFORE INTEREST AND TAXES 5,797 (3,517)
Interest expense 3,926 3,220
____________ ____________
INCOME (LOSS) BEFORE INCOME TAXES 1,871 (6,737)
Income tax provision (benefit) 988 (2,395)
____________ ____________
NET INCOME (LOSS) $ 883 $ (4,342)
____________ ____________
____________ ____________
Per common and common
equivalent share:
Net income (loss) $ 0.06 $ (0.33)
Cash dividends declared:
Common stock $ 0.00 $ 0.05
Class B common stock $ 0.00 $ 0.05
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 6
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
___________________________
April 1, April 2,
1995 1994
____________ ____________
(dollar amounts in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 883 $ (4,342)
Depreciation and amortization 9,480 9,326
Provision for deferred
income taxes 313 388
____________ ____________
10,676 5,372
Changes in operating assets and
liabilities (6,337) (6,990)
____________ ____________
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 4,339 (1,618)
CASH FLOWS FROM INVESTING ACTIVITIES
Net proceeds from sale of
property, plant and equipment 318 -0-
Purchase of property, plant and
equipment (12,642) (11,037)
____________ ____________
NET CASH USED IN INVESTING ACTIVITIES (12,324) (11,037)
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 7
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
- CONTINUED
(UNAUDITED)
Three Months Ended
___________________________
April 1, April 2,
1995 1994
____________ ____________
(dollar amounts in thousands)
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in credit
line borrowings 8,299 11,700
Dividends paid -0- (613)
Capital stock acquired (21) (35)
Other (109) (78)
____________ ____________
NET CASH PROVIDED BY
FINANCING ACTIVITIES 8,169 10,974
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 184 (1,681)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 1,904 4,047
____________ ____________
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 2,088 $ 2,366
____________ ____________
____________ ____________
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 4,177 $ 3,316
____________ ____________
____________ ____________
Income taxes paid, net of
refunds received $ (2,315) $ 992
____________ ____________
____________ ____________
See Notes to Consolidated Condensed Financial Statements.
DIXIE YARNS, INC. 8
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial statements which do not include all of the
information and footnotes required in annual financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended April 1, 1995 are not
necessarily indicative of the results that may be expected for the entire
year.
NOTE B - RECLASSIFICATIONS
Net sales, selling, general and administrative expenses and corporate
expenses for 1994 have been reclassified to conform with the 1995
presentation.
NOTE C - INVENTORIES
Inventories are summarized as follows:
April 1, December 31,
1995 1994
____________ ____________
(dollar amounts in thousands)
At current cost
Raw materials $ 30,204 $ 28,458
Work-in-process 28,911 28,091
Finished goods 70,571 64,401
Supplies, repair parts
and other 8,100 7,858
____________ ____________
137,786 128,808
Excess of current cost
over LIFO value (20,197) (18,844)
____________ ____________
$ 117,589 $ 109,964
____________ ____________
____________ ____________
NOTE D - DEBT AND CREDIT ARRANGEMENTS 9
The Company's revolving credit facility, which was renewed in the first
quarter of 1995, provides for aggregate borrowings of up to $125.0 million
in addition to the availability of a $10.0 million term-loan facility which
may be utilized to fund the stock repurchase (see Note E.) At April 1,
1995, the available combined unused borrowing capacity under the revolving
credit and term-loan facilities was approximately $40.8 million.
NOTE E - COMMON STOCK, SUBJECT TO PUT OPTION
The holder of 1,029,446 shares of common stock issued in connection with
the Company's 1993 acquisition of Masland Carpets, Inc. has exercised its
option to put the shares to the Company for $18.3 million, effective July
10, 1995.
PART I - ITEM 2 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
The following is presented to update the discussion of results of
operations and financial condition included in the Company's 1993 Annual
Report.
RESULTS OF OPERATIONS
Net sales for the quarter ended April 1, 1995, increased 11.2% to $181.6
million from sales of $163.4 million for the first quarter of 1994. Net
income was $.9 million, or $.06 per share, in the first quarter of 1995
compared to a net loss of $4.3 million, or $.33 per share, for the
comparable period in 1994.
Selling, general and administrative expenses improved to 12.0% of sales in
the first quarter of 1995 from 12.6% of sales in the first quarter of 1994,
although total dollars increased by $1.3 million in the comparative periods
primarily as a result of the inclusion of the operations of Patrick Carpet
Mills, Inc. subsequent to its acquisition on June 20, 1994.
The following table sets forth selected operating data (in millions of
dollars) related to the two business segments of the Company. Operating
profit or loss for each segment excludes general corporate overhead,
certain items classified as other income (expense), interest expense, and
income taxes.
Quarter Ended
April 1, April 2,
1995 1994
Sales - Textile products $ 88.4 $ 81.5
- Floorcovering 94.2 82.6
- Intersegment elimination (1.0) (0.7)
Total sales $181.6 $163.4
Operating profit/(loss)
- Textile products $ 0.8 $ (7.1)
- Floorcovering 6.5 4.8
Total operating profit/(loss) $ 7.3 $ (2.3)
Textile operating profits for the first quarter of 1995 were $.8 million,
an improvement of $7.9 million from the corresponding period in 1994 on an
increase in sales of $6.9 million, or 8.4%. Although cotton and other raw
material costs increased in 1995 compared to 1994, the significant
improvement was due to higher margins resulting from manufacturing and
administrative cost reductions and higher selling prices on increased
demand.
Operating profits in the Company's floorcovering business increased $1.7
million in the first quarter of 1995 compared to 1994 and was primarily
attributable to an increase in sales of $11.6 million, or 14.1% and an
increase in margins as a result of lower manufacturing costs.
Although signs of reduced demand are being seen in certain markets, the
Company expects sales in 1995 to remain ahead of the 1994 levels and
profits to further improve as the year progresses.
11
LIQUIDITY AND CAPITAL RESOURCES
During the quarter ended April 1, 1995, the Company increased borrowings
under its revolving credit and term-loan agreement by $8.3 million. These
funds were supplemented by $4.3 million generated by operating activities
and were used to support its operations and fund expenditures for property,
plant and equipment.
Although purchases of property, plant and equipment for fiscal 1995 are
expected to be below annual non-cash charges for depreciation and
amortization, the first quarter of 1995 had a higher proportional share of
the anticipated annual spending level for such expenditures.
The holder of 1,029,446 shares of common stock issued in connection with
the Company's 1993 acquisition of Masland Carpets, Inc. has exercised its
option to put the shares to the Company for $18.3 million, effective July
10, 1995.
During the first quarter of 1995, the Company's revolving credit and term-
loan agreement was renewed for another five years. The agreement provides
for revolving credit of up to $125.0 million and additional availability of
a $10.0 million term-loan to be utilized in funding the stock repurchase.
At April 1, 1995, the available combined unused borrowing capacity under
the revolving credit and term-loan agreement was approximately $40.8
million.
The Company expects to fund operations, planned capital expenditures and
the stock repurchase through its credit facilities and operating cash
flows.
PART II. OTHER INFORMATION 12
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(i) Exhibits Incorporated by Reference
None.
(ii) Exhibits Filed with this Report
Exhibit (4) listed below omits certain schedules and exhibits,
which are listed therein on Page vii of the Table of Contents.
The Registrant hereby undertakes to furnish a copy of any such
omitted schedule or exhibit supplementally upon request of the
Commission's Staff.
(4) Third Amended and Restated Credit Agreement dated
as of March 31, 1995.
(11) Statement re: Computation of Earnings Per Share.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed by the registrant
during the three month period ended April 1, 1995.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DIXIE YARNS, INC.
__________________________
(Registrant)
May 15, 1995
____________________
(Date)
/s/GLENN M. GRANDIN
__________________________
Glenn M. Grandin
Senior Vice President and
Chief Financial Officer
QUARTERLY REPORT ON FORM 10-Q 14
ITEM 6(a)
EXHIBITS
QUARTER ENDED APRIL 1, 1995
DIXIE YARNS, INC.
CHATTANOOGA, TENNESSEE
Exhibit Index
EXHIBIT
NO. EXHIBIT DESCRIPTION INCORPORATION BY REFERENCE
(4) Third Amended and Filed herewith.
Restated Credit
Agreement dated
as of March 31, 1995.
(11) Statement re: Computation Filed herewith.
of Earnings Per Share.
EXECUTION COUNTERPART
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of March 31, 1995
By and Among
DIXIE YARNS, INC.
AND
TRUST COMPANY BANK,
individually and as Agent,
NATIONSBANK, N. A. (CAROLINAS),
individually and as Lead Manager, and
CHEMICAL BANK<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS...................................... 3
1.01 Definitions...................................... 3
1.02 Accounting Terms................................ 19
ARTICLE II AMOUNT AND TERMS OF REVOLVING LOAN
COMMITMENTS..................................... 19
2.01 Revolving Loan Commitments and Revolving
Credit Notes.................................... 19
2.02 Mandatory Reduction of Commitments.............. 20
2.03 Voluntary Reduction of the Commitments.......... 21
2.04 Prepayment of Borrowings Under the
Revolving Loan Commitments...................... 21
2.05 Revolving Credit Period; Termination Date....... 21
2.06 Use of Proceeds................................. 22
2.07 Participation in Bonds.......................... 22
ARTICLE III AMOUNT AND TERMS OF WORKING CAPITAL LOANS....... 22
3.01 Working Capital Commitment and Working
Capital Note ................................... 22
3.02 Prepayment of Working Capital Loans............. 23
3.03 Working Capital Commitment Period............... 23
3.04 Use of Proceeds................................. 23
ARTICLE IV AMOUNT AND TERMS OF TERM LOAN COMMITMENTS....... 23
4.01 Term Loan Commitments and Term Notes............ 23
4.02 Mandatory Reduction of Term Loan Commitments.... 24
4.03 Repayment of Term Notes......................... 24
4.04 Prepayment of Term Loans.........................24
Table of Contents - Page i<PAGE>
4.05 Term Loan Period................................ 25
4.06 Use of Proceeds................................. 25
ARTICLE V GENERAL PAYMENT PROVISIONS...................... 25
5.01 Method of Borrowing Under the Commitments....... 25
5.02 Selection of Successive Interest Rates and
Interest Periods................................ 26
5.03 Interest on Notes............................... 27
5.04 Interest Payment Dates.......................... 28
5.05 Fees............................................ 28
5.06 Making of Payments.............................. 29
5.07 Default Rate of Interest........................ 30
5.08 Proration of Payments........................... 30
5.09 Lenders' Obligations Several.................... 31
5.10 Illegality...................................... 31
5.11 Increased Costs................................. 31
5.12 Failure to Complete Borrowings.................. 32
5.13 Capital Adequacy................................ 32
5.14 Net Payments.................................... 33
5.15 Survival........................................ 33
5.16 Calculation of Interest......................... 34
5.17 Interest Rate Arrangements...................... 34
ARTICLE VI CONDITIONS TO BORROWINGS........................ 34
6.01 Conditions Precedent to Initial Advances........ 34
6.02 Conditions Precedent to Each Advance............ 36
6.03 Condition Precedent to Agent's Purchasing
Bonds........................................... 36
Table of Contents - Page ii<PAGE>
ARTICLE VII REPRESENTATIONS AND WARRANTIES.................. 37
7.01 Corporate Existence............................. 37
7.02 Corporate Power and Authority;
Contravention................................... 37
7.03 Enforceability.................................. 37
7.04 Governmental Consent............................ 37
7.05 Subsidiaries.................................... 38
7.06 Insurance....................................... 38
7.07 Financial Statements............................ 38
7.08 Taxes........................................... 39
7.09 Actions Pending................................. 39
7.10 Title to Properties............................. 39
7.11 Federal Reserve Regulations..................... 40
7.12 ERISA........................................... 40
7.13 Outstanding Debt................................ 41
7.14 Conflicting Agreements or Other Matters......... 41
7.15 Pollution and Environmental Control............. 41
7.16 Possession of Franchises, Licenses, Etc........ 42
7.17 Disclosure...................................... 42
7.18 Investment Company Act.......................... 42
ARTICLE VIII AFFIRMATIVE COVENANTS......................... 42
8.01 Corporate Existence; Maintenance of
Properties...................................... 42
8.02 Compliance with Laws, Etc....................... 43
8.03 Taxes and Claims................................ 43
8.04 Compliance with Other Agreements................ 44
8.05 Inspection of Property.......................... 44
Table of Contents - Page iii<PAGE>
8.06 Insurance....................................... 44
8.07 Business........................................ 44
8.08 Keeping of Books................................ 44
8.09 Environmental Compliance........................ 44
8.10 Reporting Covenants............................. 45
8.11 Additional Credit Parties....................... 48
ARTICLE IX NEGATIVE COVENANTS.............................. 48
9.01 Liens, Etc...................................... 48
9.02 Debt of Subsidiaries............................ 51
9.03 Restrictions on Loans, Advances, Investments
and Contingent Liabilities...................... 52
9.04 Merger and Sale of Assets....................... 54
9.05 Issuance of Stock by Subsidiaries............... 55
9.06 Lease Obligations............................... 55
9.07 Sale and Lease-Back............................. 55
9.08 Sale or Discount of Receivables................. 55
9.09 Compliance with ERISA........................... 55
9.10 Contracts with Affiliates, Directors, or
Controlling Shareholders........................ 56
9.11 Financial Covenants............................. 56
9.12 Actions Under Certain Documents................. 58
ARTICLE X EVENTS OF DEFAULT AND REMEDIES.................. 59
10.01 Events of Default............................... 59
10.02 Remedies on Default............................. 62
ARTICLE XI THE AGENT AND THE LEAD MANAGER.................. 63
11.01 Appointment and Authorization................... 63
Table of Contents - Page iv<PAGE>
11.02 Nature of Duties of the Agent................... 63
11.03 Lack of Reliance on the Agent................... 64
11.04 Certain Rights of the Agent..................... 64
11.05 Liability of the Agent and Lead Manager......... 65
11.06 Indemnification................................. 66
11.07 Agent and Affiliates............................ 67
11.08 Successor Agent................................. 67
ARTICLE XII MISCELLANEOUS................................... 68
12.01 No Waiver....................................... 68
12.02 Notices......................................... 68
12.03 Governing Law................................... 69
12.04 Survival of Representations and
Warranties...................................... 69
12.05 Descriptive Headings............................ 69
12.06 Severability.................................... 69
12.07 Time is of the Essence.......................... 69
12.08 Counterparts.................................... 69
12.09 Payment of Costs................................ 70
12.10 Benefit of Agreement............................ 70
12.11 Cumulative Remedies; No Waiver.................. 72
12.12 Amendments; Consents............................ 72
12.13 Set-Off......................................... 73
12.14 Indemnity....................................... 73
12.15 Usury........................................... 73
12.16 Jurisdiction and Venue.......................... 73
12.17 Waiver of Jury Trial............................ 74
Table of Contents - Page v<PAGE>
12.18 Construction.................................... 74
12.19 Entire Agreement................................ 74
Table of Contents - Page vi<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Form of Assignment and Acceptance
Exhibit B - Form of Revolving Credit Note
Exhibit C - Form of Subsidiary Subordination Agreement
Exhibit D - Form of Term Note
Exhibit E - Form of Working Capital Note
Exhibit F - Borrower's Counsel Opinion
Exhibit G - Form of Closing Certificate
Exhibit H - Officer's Compliance Certificate
Exhibit I - Officer's Certificate Regarding Debt of
Subsidiaries
Exhibit J - Officer's Certificate Regarding Investments
Schedule 1.1 - Commitments
Schedule 7.02 - Corporate Matters
Schedule 7.05 - Subsidiaries
Schedule 7.09 - Litigation
Schedule 7.12 - ERISA
Schedule 7.14 - Conflicting Agreements
Schedule 7.15 - Environmental Matters
Schedule 9.01 - Existing Liens
Schedule 9.02 - Intercompany Advances from Borrower to
Subsidiaries
Schedule 9.03 - Investments in Subsidiaries
Table of Contents - Page vii<PAGE>
THIRD AMENDED AND RESTATED
CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated
as of March 31, 1995 (the "Agreement"), by and among DIXIE YARNS,
INC., a corporation organized and existing under the laws of the
State of Tennessee (the "Borrower"), TRUST COMPANY BANK, a Georgia
banking corporation, NATIONSBANK, N.A. (CAROLINAS), formerly,
NationsBank of North Carolina, N.A., a national banking
association and CHEMICAL BANK, a New York banking corporation,
(collectively, the "Lenders" and individually, a "Lender"), TRUST
COMPANY BANK, as agent for the Lenders (in such capacity, the
"Agent"), and NATIONSBANK, N.A. (CAROLINAS), as lead manager for
the Lenders (in such capacity, the "Lead Manager").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lenders entered into that
certain Revolving Credit and Term Loan Agreement, dated as of
June 19, 1989, as amended by that certain First Amendment to Loan
Agreement dated as of September 22, 1989 providing for certain
revolving credit and term loans to Borrower in an aggregate
principal amount not to exceed $100,000,000;
WHEREAS, the Borrower requested and the Lenders agreed
to increase the aggregate amount of financing available to the
Borrower and to evidence such agreement the Borrower and the
Lenders entered into that certain Amended and Restated Revolving
Credit and Term Loan Agreement dated as of August 23, 1990, as
amended by that certain First Amendment to Revolving Credit and
Term Loan Agreement dated as of July 15, 1991 (the "Amended and
Restated Agreement") providing for certain revolving credit and
term loans to the Borrower in an aggregate principal amount not to
exceed $225,000,000;
WHEREAS, following the execution of the Amended and
Restated Agreement, the Borrower requested and the Lenders agreed
to extend to Ti-Caro, Inc., a wholly-owned subsidiary of the
Borrower, a revolving credit demand loan in aggregate principal
amount not to exceed $50,000,000 (the "Threads Loan") pursuant to
a Revolving Credit Loan Agreement dated as of September 16, 1991
by and among the Lenders and Ti-Caro, Inc. and assumed by T-C
Threads, Inc., a Tennessee corporation ("T-C Threads"), a
wholly-owned subsidiary of Ti-Caro, Inc. on September 17, 1991 (as
assumed by T-C Threads, the "Threads Agreement");
WHEREAS, as a condition of the extension to, and the
assumption by, T-C Threads of the Threads Loan, the Lenders
required that (i) both the Borrower and Ti-Caro, Inc. guarantee in<PAGE>
full the obligations of T-C Threads pursuant to the Threads
Agreement, (ii) the commitments of the Lenders to the Borrower
pursuant to the Amended and Restated Agreement be reduced by the
amount of the commitments of the Lenders pursuant to the Threads
Agreement, and (ii) the Borrower agree that, upon a failure of the
Borrower to pay any amount owing under its guarantee of the
obligations of T-C Threads under the Threads Agreement, the
Borrower would be deemed to have requested a reinstatement of the
reduced commitments pursuant to the Amended and Restated Agreement
and to have requested an advance thereunder in such amount to be
paid to the Lenders in satisfaction of the Borrower's obligations
pursuant to such guarantee, as more fully set forth in that
certain Waiver and Consent Agreement dated as of September 16,
1991 by and among the Lenders and the Borrower;
WHEREAS, thereafter the Borrower and the Lenders agreed
to amend and restate the Amended and Restated Agreement to reduce
the available commitments provided thereunder and to provide for
certain additional amendments to the Amended and Restated
Agreement, all as more particularly set forth in that certain
Second Amended and Restated Revolving Credit and Term Loan
Agreement, dated as of January 31, 1992 by and among the Borrower
and the Lenders (as amended through the date hereof, the "Prior
Agreement");
WHEREAS, the Borrower has again requested and the
Lenders have agreed to amend and restate the Prior Agreement to
(i) provide for certain additional credit facilities, (ii) provide
for different pricing criteria, and (iii) amend certain other
provisions of the Prior Agreement, all as more particularly set
forth below;
WHEREAS, in connection with the execution and delivery
hereof, the Lenders will advance funds to the Borrower to be
further lent to Threads pursuant to an Intercompany Note (as such
term is defined below) made by Threads in favor of the Borrower
(which has been pledged to the Agent for the benefit of the
Lenders) with such funds to be used by Threads to repay all
amounts outstanding pursuant to the Threads Agreement in full,
whereupon the Threads Agreement shall terminate;
NOW THEREFORE, for and in consideration of the sum of
$10.00 in hand paid by the Lenders to the Borrower and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
-2-<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.01 Definitions. In addition to the other
terms defined herein, the following terms used herein shall have
the meanings herein specified (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined):
"Advance" shall mean any advance by a Lender under the
Revolving Loan Commitments or the Term Loans, which may be either
a Base Rate Advance, a Secondary C/D Rate Advance, or a Eurodollar
Advance, or any advance by Trust Company Bank under the Working
Capital Commitment, which may be either a Base Rate Advance, Cost
of Funds Rate Advance, a Secondary C/D Rate Advance or a
Eurodollar Advance.
"Agent" shall mean Trust Company Bank, as agent for the
Lenders hereunder and under the other Loan Documents, and each
successor agent appointed pursuant to Article XI hereof.
"Affiliate" shall mean, with respect to any Person, a
Person directly or indirectly controlling or controlled by, or
under direct or indirect common control with, such Person, other
than a Subsidiary of such Person. A Person shall be deemed to
control a corporation if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the
management and policies of such corporation, whether through the
ownership of voting securities, by contract or otherwise.
"Agreement" shall mean this Third Amended and Restated
Credit Agreement, either as originally executed or as it may be
from time to time supplemented, amended, renewed or extended.
"Applicable Margin" shall mean, (i) with respect to all
Eurodollar Borrowings, Cost of Funds Rate Borrowings and Secondary
C/D Rate Borrowings outstanding hereunder through June 30, 1995,
one and one quarter of one percent (1.25%) per annum, (ii) with
respect to all Eurodollar Borrowings, Cost of Funds Rate
Borrowings and Secondary C/D Rate Borrowings outstanding hereunder
thereafter, the relevant percentage indicated below calculated
based upon the Borrower's Interest Coverage Ratio and Leverage
Ratio, as determined quarterly for the immediately preceding four
fiscal quarters based upon the financial statements delivered by
the Borrower to the Lenders pursuant to this Agreement, with such
Applicable Margin to be effective, with respect to calculations
based upon the quarterly unaudited financial statements delivered
pursuant to Section 8.10(b) of this Agreement, as of the first day
of the second calendar quarter immediately following the fiscal
quarter for which such financial statements are delivered and with
such Applicable Margin to be effective with respect to
-3-<PAGE>
calculations based upon the annual audited financial statements of
the Borrower delivered pursuant to Section 8.10(a) of this
Agreement, on the earlier of (y) delivery of such financial
statements (but in no event earlier than 90 days after the end of
any fiscal year), and (z) the date which is 95 days after the end
of each fiscal year of the Borrower:
INTEREST COVERAGE RATIO
LEVERAGE greater than equal to or greater
than 2.0:1.0 less than
RATIO 3.0:1.0 & less than or equal
to 3.0:1.0 2.0:1.0
greater than
40% 1.00% 1.25% 1.50%
equal to or
greater than
30% but less
than or equal
to 40% .75% 1.00% 1.25%
less than 30% .50% .75% 1.00%
; provided that, the Applicable Margin effective as of July 1,
1995 shall be calculated based upon the Leverage Ratio and
Interest Coverage Ratio of the Borrower for the first fiscal
quarter of 1995, the Applicable Margin effective as of October 1,
1995 shall be calculated based upon the Leverage Ratio and
Interest Coverage Ratio of the Borrower for the first two fiscal
quarters of 1995, and the Applicable Margin effective as of
January 1, 1996 shall be calculated based upon the Leverage Ratio
and Interest Coverage Ratio of the Borrower for the first three
fiscal quarters of 1995.
"Assessment Rate" shall mean, for any Interest Period
for any Secondary C/D Rate Borrowing, the net annual assessment
rate (rounded upward, if necessary, to the nearest whole multiple
of 1/100 of 1%) estimated by the Agent as of the first day of such
Interest Period to be the then current annual assessment payable
by Agent to the Federal Deposit Insurance Corporation or any
successor (the "FDIC") for insuring time deposits made in Dollars
at offices of Agent in the United States.
"Asset Disposition" shall mean the disposition whether
by sale, transfer, damage, destruction or condemnation or other
disposition of any or all of the assets of Borrower or any of its
Subsidiaries (including the stock of Subsidiaries) other than (i)
-4-<PAGE>
sales of inventory in the ordinary course of business, and (ii)
damage, destruction, condemnation theft or similar loss of assets
to the extent that the insurance and/or condemnation proceeds
resulting therefrom are utilized to replace such damaged,
destroyed or condemned assets within one year after receipt of the
Net Proceeds thereof.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and another financial
institution in accordance with the terms of this Agreement and
substantially in the form of Exhibit A.
"Bankruptcy Code" shall mean The Bankruptcy Code of
1978, as amended and in effect from time to time (11 U.S.C. 101
et seq.).
"Base Rate" shall mean (with any change in the Base Rate
to be effective as of the date of change of either of the
following rates) the higher of (i) the Federal Funds Rate, as in
effect from time to time, plus one-half of one percent (0.50%) per
annum, and (ii) the rate which the Agent publicly announces from
time to time as its prime lending rate, as in effect from time to
time. The Agent's prime lending rate is a reference rate and does
not necessarily represent the lowest or best rate actually charged
to customers; the Agent may make commercial loans or other loans
at rates of interest at, above or below the Agent's prime lending
rate.
"Base Rate Advance" shall mean any Advance hereunder
that bears interest based on the Base Rate.
"Base Rate Borrowing" shall mean any Borrowing hereunder
that bears interest based on the Base Rate.
"Bonds" shall mean those certain $7,000,000 State
Industrial Development Authority Taxable Revenue Bonds, Series
1995 (Masland Carpets, Inc. Project), which are guaranteed by the
Borrower pursuant to the Parent Guaranty.
"Blocked Amount" shall mean the reserves against the
Total Revolving Loan Commitments established pursuant to Section
2.02(a).
"Borrowing" shall mean a borrowing under the Revolving
Loan Commitments or the Term Loans consisting of simultaneous
Advances by the Lenders or a borrowing under the Working Capital
Commitment consisting of an Advance by Trust Company Bank.
"Business Day" shall mean a day of the year on which
commercial banks are not required or authorized to close in
Atlanta, Georgia, Charlotte, North Carolina or New York, New York,
and, if the applicable Business Day relates to any Eurodollar
-5-<PAGE>
Borrowing, on which dealings are carried on in the London
interbank market.
"C/D Reserve Percentage" shall mean, for any day, the
stated maximum rate (expressed as a decimal) of all reserve
requirements as specified in Regulation D of the Board of
Governors of the Federal Reserve System, or by any successor
thereto (including, without limitation, any basic, marginal,
emergency, supplemental, special, transitional or other reserves)
applicable during such Interest Period to new non-personal time
deposits in the United States of any member of the Federal Reserve
System in an amount equal to or greater than $100,000 with a
maturity comparable to the relevant Interest Period for the
applicable Secondary C/D Rate Borrowing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and the
rulings issued thereunder.
"Commitments" shall mean, collectively, the Revolving
Loan Commitments, the Term Loan Commitments and the Working
Capital Commitment.
"Commitment Factor" shall mean, with respect to the
calculation of the Revolving Loan Commitment Fees and the Working
Capital Commitment Fees, the percentage set forth below opposite
the relevant Applicable Margin as in effect during the majority of
the calendar quarter for which such fees are being calculated:
Applicable Margin Commitment Factor
.50% - 1.00% 0.25%
1.25% - 1.50% 0.375%; and
shall mean, with respect to the calculation of the Term Loan
Commitment Fees, the percentage set forth below opposite the
relevant Applicable Margin as in effect during the majority of the
calendar quarter for which such fees are being calculated:
Applicable Margin Commitment Factor
.50% - 1.00% 0.20%
1.25% - 1.50% 0.30%.
"Commitment Fees" shall mean collectively the Revolving
Loan Commitment Fee, the Working Capital Commitment Fee and the
Term Loan Commitment Fee.
"Controlling Shareholder" shall mean with respect to any
of the Borrower or the Subsidiaries, a Person possessing, either
directly or indirectly, the power to direct or cause the direction
of the management or policies of such corporation through
-6-<PAGE>
ownership of voting securities, which shall mean, in the case of
the Borrower, J. Burton Frierson and members of the family of J.
Burton Frierson, including his issue, any spouse of such issue and
any estate or trust created by any such member where J. Burton
Frierson or such member controls such trust.
"Cost of Funds" shall mean, with respect to any
Interest Period, that rate of interest per annum quoted by Trust
Company Bank to be its cost of funds rate for such Interest
Period, as determined by Trust Company Bank in its sole discretion
with reference to its funding sources.
"Cost of Funds Rate Borrowing" shall mean any Advance
hereunder which bears interest based on the Cost of Funds Rate.
"Cost of Funds Rate Borrowing" shall mean any Borrowing
hereunder which bears interest based on the Cost of Funds Rate.
"Credit Parties" shall mean, collectively, the Borrower
and each of its Subsidiaries party to any Loan Document.
"Debt" shall mean (i) indebtedness for borrowed money or
for the deferred purchase price of property or services (other
than trade accounts payable on customary terms in the ordinary
course of business), (ii) financial obligations evidenced by
bonds, debentures, notes or other similar instruments, (iii)
financial obligations as lessee under leases which shall have been
or should be, in accordance with generally accepted accounting
principles, recorded as capital leases, and (iv) obligations under
direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of,
indebtedness or financial obligations of others of the kinds
referred to in clauses (i) through (iii) above.
"Deemed Debt" shall mean the amount of Debt incurred by
the Borrower, its Subsidiaries or any special purpose
corporation or trust which is an Affiliate of the Borrower in
connection with any accounts receivable financing facility,
operating lease facility or other financing vehicle designed to
provide the Borrower or any Subsidiary thereof with off-balance
sheet financing whether not shown on the balance sheet of Borrower
or such Subsidiary in accordance with GAAP to the extent not
included in the definition of Debt and including, without
limitation, the Securitization Program.
"Default" shall mean any event that, with notice or
lapse of time or both, would constitute an Event of Default.
"Dollar" and the sign "$" shall mean lawful money of the
United States of America.
-7-<PAGE>
"EBIT" shall mean, for any period, the Net Income of the
Borrower and its Subsidiaries for such period, plus, to the extent
deducted in determining Net Income, Interest Expense of the
Borrower and its Subsidiaries for such period, and provision for
taxes (whether paid or deferred) of the Borrower and its
Subsidiaries for such period, and without giving effect to any
extraordinary gains or losses, any other non-cash charges
associated with restructuring or consolidation charges or gains or
losses from sales of assets other than inventory sold in the
ordinary course of business, determined for the Borrower and its
Subsidiaries on a consolidated basis in accordance with generally
accepted accounting principles.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time, and the
regulations promulgated and rulings issued thereunder.
"ERISA Affiliate" shall mean each trade or business
(whether or not incorporated) which, together with the Borrower,
is treated as a single employer under Section 414(b), (c), (m) or
(o) of the Code.
"Eurodollar Advance" shall mean any Advance hereunder
which bears interest based on LIBOR.
"Eurodollar Borrowing" shall mean any Borrowing
hereunder which bears interest based on LIBOR.
"Event of Default" shall have the meaning set forth in
Article X.
"Federal Funds Rate" shall mean, 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 member banks of the Federal Reserve System
arranged by Federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business
Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average
of the quotations for such day on such transactions received by
the Agent from three Federal funds brokers of recognized standing
selected by it.
"Financial Officer" of any corporation shall mean
the chief or principal financial officer, principal accounting
officer or treasurer of such corporation.
"Funded Debt" shall mean, with respect to any Person (a
"Specified Person"), all Debt which would, in accordance with
generally accepted accounting principles constitute long term or
short term debt, including (a) any Debt for borrowed money
including all revolving and term Debt and lines of credit, (b) any
-8-<PAGE>
other Debt (other than trade debt of such Specified Person
incurred in the ordinary course of business) which is evidenced by
bonds, debentures, notes or other similar instruments, (c) other
Debt constituting purchase money Debt, or Debt incurred pursuant
to conditional sales contracts, title retention agreements or
other agreements for the deferred purchase price of properties or
services, (d) any capitalized lease obligations, (e) all
reimbursement obligations under any letters of credit or
acceptances (excluding letters of credit not issued with respect
to Debt of another Person and incurred in the ordinary course of
such Specified Person, including, without limitation, letters of
credit issued for workers compensation and other insurance
liabilities and trade letters of credit), and (f) all obligations
of other Persons which such Specified Person has guaranteed,
directly or indirectly, contingent or otherwise, including but not
limited to the obligation of such Specified Person to purchase or
otherwise acquire, or otherwise insure any creditor against loss
in respect of, Debt of any other Person.
"Installment Date" shall have the meaning set forth in
Section 4.03(a) hereof.
"Intangible Assets" shall have the meaning afforded such
term under generally accepted accounting principles, calculated on
a consolidated basis.
"Intercompany Advances" shall mean cash advances, loans
or Investments from the Borrower to any Subsidiary of the Borrower
or from any Subsidiary of the Borrower to the Borrower or another
Subsidiary of the Borrower, as the context may indicate.
"Intercompany Notes" shall mean, collectively the
promissory notes executed by any of the Subsidiaries of the
Borrower in favor of a Credit Party to evidence Intercompany
Advances.
"Interest Coverage Ratio" shall mean, with respect to
any period, the ratio of (i) EBIT for such period to (ii) Interest
Expense for such period, each as determined on a consolidated
basis.
"Interest Expense" shall mean, for any period, interest
expense as determined according to generally accepted accounting
principles, calculated on a consolidated basis for the Borrower
and its Subsidiaries.
"Interest Period" shall mean, with respect to any
Eurodollar Borrowing, a period of 1, 2, 3 or 6 months, with
respect to any Secondary C/D Rate Borrowing, a period of 30, 60,
90 or 180 days, and, with respect to a Cost of Funds Borrowing, a
period of 1-29 days, as the Borrower may elect as provided in this
Agreement; provided, that (i) the first day of an Interest Period
-9-<PAGE>
must be a Business Day, (ii) any Interest Period that would
otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business Day, unless such Business
Day falls in the next calendar month, in which case the Interest
Period shall end on the next preceding Business Day, and (iii) the
Borrower may not elect an Interest Period which would extend
beyond the Termination Date or the Maturity Date, as those terms
are defined herein.
"Investment" shall mean any investment in any Person,
whether by means of share or other equity purchase (whether for
cash or exchange of assets), capital contribution, loan, advance,
time deposit, endorsement or other incurrence of a contingent
obligation with respect to such Person or otherwise.
"Lead Manager" shall mean NationsBank, N.A. (Carolinas),
and its successors.
"Leverage Ratio" shall mean, at any date, the ratio of
(i) Senior Debt to (ii) Total Capitalization of the Borrower and
its Subsidiaries on a consolidated basis as of such date,
expressed as a percentage.
"LIBOR" shall mean with respect to any Interest Period
during which interest is accruing at a rate based upon LIBOR, the
rate per annum equal to the quotient of (i) the indicated offered
rate (rounded upwards to the nearest whole multiple of 1/100 of
1%) at 10:00 A.M. (Atlanta, Georgia time) (or as soon thereafter
as practicable) for Eurodollar deposits as shown on page 3750 of
the Telerate Service (or its successor) two Business Days prior to
the beginning of such Interest Period in an amount comparable to
the then current outstanding principal balance on which interest
is accruing at a rate based upon LIBOR and for a period comparable
to such Interest Period, divided by (ii) a number equal to 1.00
minus the Reserve Percentage, the rate so determined to be rounded
upwards to the nearest whole multiple of 1/100 of 1%.
"Lien" shall mean any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any
written agreement to give any of the foregoing, any conditional
sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction.)
"Loan Documents" shall mean and include, as the context
requires, this Agreement, the Notes, the Subsidiary Subordination
Agreement, the Subsidiary Note Assignments, the Bonds, the Parent
Guaranty and any and all other instruments, agreements, documents
and writings contemplated hereby or executed in connection
herewith.
-10-<PAGE>
"Masland" shall mean Masland Carpets, Inc., an Alabama
corporation and a wholly-owned Subsidiary of the Borrower.
"Material Subsidiary" shall mean (i) each Subsidiary of
the Borrower which is owed an Intercompany Advance from the
Borrower or any other active Subsidiary of the Borrower in excess
of $25,000 and (ii) each other Subsidiary of the Borrower, now ex-
isting or hereafter established or acquired, that at any time
prior to the Termination Date, has or acquires total assets in
excess of $5,000,000, or that accounted for or produced more than
5% of the Net Income of the Borrower on a consolidated basis
during any of the three most recently completed fiscal years of
the Borrower, or that is otherwise material to the operations or
business of the Borrower or another Material Subsidiary; provided
that, for so long as Dixie Funding, Inc. holds no assets and
undertakes no activities other than in connection with the
Securitization Program, Dixie Funding, Inc. shall not be deemed to
be a Material Subsidiary of the Borrower.
"Maturity Date" shall mean the Maturity Date of the Term
Loan as defined in Section 4.05 of this Agreement.
"Multiemployer Plan" shall mean a "multiemployer plan"
as defined in section 4001(a)(3) of ERISA.
"Net Income" shall have the meaning afforded such term
by generally accepted accounting principles, calculated on a
consolidated basis for the Borrower and its Subsidiaries.
"Net Proceeds" shall mean, with respect to any Asset
Disposition, the cash proceeds received by the Borrower or any of
its Subsidiaries from any Asset Disposition (including payments
under notes or other debt securities received in connection with
an Asset Disposition), net of (a) the costs of such sale, transfer
or other disposition (including cash taxes attributable to such
sale, transfer or other disposition), (b) amounts applied to
repayment of Debt (other than Obligations) secured by a Lien on
the asset or property disposed and (c) in the case of an Asset
Disposition arising out of the sale of a Subsidiary, entire
manufacturing or storage facility or identifiable division of the
Borrower or a Subsidiary to an unrelated third party, the amount
of the purchase price relating thereto directly attributable (as
determined in accordance with the procedure set forth below) to
accounts receivable and inventory, (including raw materials, work
in process, and finished goods) included in such sale, as such
amount is reduced by the amount of trade payables or other Debt
related thereto which is paid or assumed by the buyer in
connection with such sale. Notwithstanding the foregoing, no
deduction from the proceeds of any Asset Disposition pursuant to
subsection (c) above shall be allowed unless each of the following
conditions is met, as determined in the sole discretion of the
Agent and the Required Lenders:
-11-<PAGE>
(1) The Borrower shall have provided to the Agent and each of
the Lenders a certificate of a Financial Officer of Borrower
certifying that, following the consummation of the sale, the
Borrower or one of its Subsidiaries will increase its existing
manufacturing capacity or utilize previously under utilized
capacity and, in either case, will continue to manufacture and
sell products of similar kind and quality as the inventory sold in
connection with such Asset Disposition and reasonably believes
that it will acquire or manufacture replacement inventory and
generate accounts receivable from such inventory in an amount
substantially equal to, and of comparable credit quality to, the
accounts receivable subject to the Asset Disposition within a
period of six (6) months following such sale and that no legal or
other impediment exists to the Borrower's ability to do so.
(2) The Borrower shall have provided to the Agent and each
of the Lenders a certificate of a Financial Officer of Borrower
certifying the portion of the purchase price directly attributable
to such inventory and accounts receivable as well as any trade
payables or Debt related thereto, accompanied by a copy of the
purchase agreement, appraisals, accountant's reports and such
other information as the Borrower may have obtained to support the
fairness of the Borrower's allocation.
In the event that at the end of the six month period
described in (1) above, the Borrower has not replaced the
inventory or accounts receivable as planned, the Borrower shall
notify the Agent and the Total Revolving Loan Commitments shall be
reduced pursuant to Section 2.02(b) by 50% of amount deducted from
the Net Proceeds of the Asset Disposition pursuant to subsection
(c) above. In the event of any dispute with respect to the
interpretation of subsection (c) of this definition or the
allocation required thereby, the decision of the Agent and the
Required Lenders shall be controlling.
"Net Tangible Assets" shall mean, as of any date, the
assets of the Borrower and its Subsidiaries, calculated on a
consolidated basis, less (without duplication) the sum of the
following items: (i) any surplus resulting from any write-up of
assets subsequent to June 30, 1990, (ii) good will, including any
amounts (however designated on the balance sheet of the Borrower
or any of its Subsidiaries) representing the cost of acquisitions
of Subsidiaries in excess of the value of such entity's underlying
tangible assets, unless an appraisal of such assets made by a
reputable firm of appraisers at the time of such acquisition shall
indicate sufficient value to cover such excess, (iii) any
Investments that are included within the permitted Investments
allowed pursuant to Section 9.03(i) hereof, (iv) patents,
trademarks, copyrights, leasehold improvements not recoverable at
the expiration of a lease, and deferred charges (including, but
not limited to, unamortized debt discount and expense,
organization expenses, experimental and development expenses, but
-12-<PAGE>
excluding prepaid expenses), and (v) any other items which would
be classified as intangible assets in accordance with generally
accepted accounting principles.
"Net Worth" shall mean, at any date, stockholders equity
of the Borrower as determined under generally accepted accounting
principles, calculated on a consolidated basis, which shall be a
positive number.
"Notes" shall mean, collectively, the Revolving Credit
Notes, the Working Capital Note and the Term Notes.
"Obligations" shall mean all amounts owing to the Agent,
the Lead Manager or any Lender pursuant to the terms of this
Agreement or any other Loan Document, including, without
limitation, all Borrowings (including all principal and interest
payments due thereunder), fees, expenses, indemnification and
reimbursement payments, indebtedness, liabilities, and obligations
of the Credit Parties, direct or indirect, absolute or contingent,
liquidated or unliquidated, now existing or hereafter arising,
together with all renewals, extensions, modifications or
refinancings thereof.
"Parent Guaranty" shall mean that certain Guaranty of
the Borrower, dated as of even date herewith, in favor of the
Agent, unconditionally guaranteeing the repayment of the
obligations of Masland in connection with the Bonds.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation and any successor thereto.
"Person" shall mean an individual, partnership,
corporation (including a business trust), joint stock company,
trust, unincorporated association, joint venture or other entity,
or a government or any political subdivision or agency thereof.
"Plan" shall mean any "employee benefit plan" maintained
by or on behalf on the Borrower or any ERISA Affiliate as defined
in Section 3(3) of ERISA, including, but not limited to, any
defined benefit pension plan, profit sharing plan, money purchase
pension plan, savings or thrift plan, stock bonus plan, employee
stock ownership plan, Multiemployer Plan, or any plan, fund,
program, arrangement or practice providing for medical (including
post-retirement medical), hospitalization, accident, sickness,
disability, or life insurance benefits.
"Prime Rate" shall mean the per annum rate of interest
designated from time to time by Agent to be its prime rate, with
any change in the rate of interest resulting from a change in the
Prime Rate to be effective as of the opening of business of Agent
on the day of such change. On the date of this Agreement, the
Prime Rate is nine percent (9.0%) per annum.
-13-<PAGE>
"Prior Agreement" shall have the meaning set forth in
the preamble of this Agreement.
"Pro Rata Share" shall mean, with respect to each of the
Commitments of each Lender, each Revolving Loan or Term Loan to be
made by, and each payment (including, without limitation, any
payment of principal, interest or fees) to be made to each Lender,
the percentage designated as such Lender's Pro Rata Share of such
Commitments, such Loans or such payments, as applicable, set forth
under the name of such Lender on the respective signature page for
such Lender, in each case as such Pro Rata Share may change from
time to time as a result of assignments or amendments made
pursuant to this Agreement, and shall mean, with respect to the
Total Commitments (including, without limitation, any payment of
principal, interest or fees), the percentage of each of the
Lender's Total Commitment plus Term Loan determined by dividing
the amount of such Lender's Total Commitment plus Term Loans
relating thereto by the Total Commitments and Term Loans.
"Prudential" shall mean, collectively, The Prudential
Insurance Company of America and Pruco Life Insurance Company.
"Prudential Agreement" shall mean that certain Stock
Rights and Restrictions Agreement dated as of July 9, 1993 by and
among Masland, the Borrower and Prudential.
"Required Lenders" shall mean, at any time, the Lenders
holding at least 60% of the amount of the sum of the committed
funds under the Commitments, whether or not advanced, plus the
outstanding principal amount of the Term Loans or, upon the
termination of the Commitments, the Lenders holding at least 60%
of the outstanding principal balance of the Obligations.
"Reserve Percentage" shall mean, for any day, the stated
maximum rate (expressed as a decimal) of all reserves required to
be maintained with respect to liabilities or assets consisting of
or including "Eurocurrency liabilities," as prescribed by
Regulation D of the Board of Governors of the Federal Reserve
System (or by any other governmental body having jurisdiction with
respect thereto), including, without limitation, any basic,
marginal, emergency, supplemental, special, transitional or other
reserves, the rate so determined to be rounded upward to the
nearest whole multiple of 1/100 of 1%.
"Revolving Credit Note" shall mean a promissory note of
the Borrower payable to the order of any Lender, in substantially
the form of Exhibit B hereto, evidencing the maximum aggregate
principal indebtedness of the Borrower to such Lender under such
Lender's Revolving Loan Commitment, either as originally executed
or as it may be from time to time supplemented, modified, amended,
renewed or extended.
-14-<PAGE>
"Revolving Loan" shall have the meaning set forth in
Section 2.01.
"Revolving Loan Commitment" shall mean, for each Lender,
the amount set forth opposite such Lender's name in Schedule 1.1
hereto directly below the column entitled "Revolving Loan
Commitment", as same may be (x) reduced from time to time pursuant
to Sections 2.02 or 2.03 or (y) adjusted from time to time as a
result of assignments to or from such Lender pursuant to Section
12.10.
"Secondary C/D Base Rate" shall mean, with respect to
any Interest Period for any Secondary C/D Rate Borrowing, the
consensus bid-side rate of interest of the secondary certificate
of deposit market as shown on page 5 of Telerate Service or a
comparable service selected by the Agent at 9:00 A.M. (Atlanta,
Georgia time), or as soon thereafter as practicable, on the first
day of the Interest Period, for the purchase at face value of
certificates of deposit in an amount substantially equal to the
principal amount of the Secondary C/D Rate Borrowing and with a
maturity approximately equal to such Interest Period.
"Secondary C/D Rate" shall mean a rate per annum equal
to the following:
Secondary C/D Base Rate + Assessment Rate,
1.00 - C/D Reserve Percentage
to be calculated on the basis of a 365 day year, if quoted to
the Agent on that basis, otherwise on the basis of a 360 day
year.
"Secondary C/D Rate Advance" shall mean any Advance
hereunder which bears interest based on the Secondary C/D Rate.
"Secondary C/D Rate Borrowing" shall mean any Borrowing
hereunder which bears interest based on the Secondary C/D Rate.
"Securitization Documents" shall mean all documents from
time to time executed in connection with the Securitization
Program, including without limitation that certain Dixie Funding
Master Trust Pooling and Servicing Agreement, dated as of
October 15, 1993 among Dixie Funding, Inc. as transferor, Dixie
Yarns, Inc. as servicer and NationsBank of Virginia, N.A., as
Trustee for the Certificateholders as such document is originally
executed or as thereafter amended, modified or supplemented.
"Securitization Program" shall mean that certain
accounts receivable purchase program established by the Borrower
and its wholly-owned subsidiary, Dixie Funding, Inc., for the sale
of the accounts receivable of the Borrower and certain of its
Subsidiaries to Dixie Funding, Inc. for further transfer to a
-15-<PAGE>
trust or series of trusts in return for certain interests in such
trust or trusts with such interests in an aggregate amount not to
exceed $60,000,000 to be sold to certain third party investors
with all other interests in such trust or trusts to be retained by
Dixie Funding, Inc. or Dixie Yarns, Inc.
"Senior Debt" shall mean, as of any date of
determination, the sum of all Funded Debt which is not
Subordinated Debt plus all Deemed Debt.
"Senior Subordinated Note Agreement" shall mean that
certain agreement, dated February 6, 1990, by and among Borrower
and various note purchasers named therein relating to those
certain 9.96% Senior Subordinated Notes due February 1, 2010 in
aggregate principal amount of $50,000,000, as hereafter amended,
supplemented or modified.
"Subordinated Convertible Debentures" shall mean those
certain 7.0% subordinated convertible debentures issued pursuant
to that certain Indenture dated as of May 15, 1987, by and between
the Borrower and Morgan Guaranty Trust Company of New York as
Trustee, as hereafter amended, supplemented or modified.
"Subordinated Debt" shall mean all Debt of the Borrower
which is subordinated to the Obligations of the Borrower hereunder
on terms satisfactory to the Lenders in their sole discretion and
shall include the Debt of the Borrower pursuant to the Senior
Subordinated Note Agreement and the Subordinated Convertible
Debentures as in effect at the date hereof or as hereafter amended
in accordance with the terms of this Agreement.
"Subsidiary" shall mean any corporation or other entity
of which securities representing more than 50% of the outstanding
vote are at the time directly or indirectly owned by the Borrower
or any corporation or other entity required to be consolidated
with Borrower under generally accepted accounting principles.
"Subsidiary Note Assignment" shall mean the Note
Assignment Agreement executed by the Borrower and each Subsidiary
of the Borrower holding an Intercompany Note from an active
Subsidiary of the Borrower, pledging to the Agent for the benefit
of the Lenders all of such Credit Party's right, title and
interest in the Intercompany Notes payable to such Credit Party by
such Subsidiaries, either as originally executed or as hereafter
amended, modified or supplemented from time to time.
"Subsidiary Subordination Agreement" shall mean the
Subordination Agreement executed by each of the Material
Subsidiaries of the Borrower in favor of the Lenders and the
Agent, substantially in the form of Exhibit C as the same may be
amended, restated or supplemented from time to time.
-16-<PAGE>
"T-C Threads" shall mean T-C Threads, Inc., a Tennessee
corporation.
"Taxes" shall mean any present or future taxes, levies,
imposts, duties, fees, assessments, deductions, withholdings or
other charges of whatever nature, including without limitation,
income, receipts, excise, property, sales, transfer, license,
payroll, withholding, social security and franchise taxes now or
hereafter imposed or levied by the United States, or any state,
local or foreign government or by any department, agency or other
political subdivision or taxing authority thereof or therein and
all interest, penalties, additions to tax and similar liabilities
with respect thereto.
"Termination Date" shall mean the Termination Date of
the Commitments as defined in Section 2.05.
"Term Loan" shall mean the term loan made by the Lenders
to the Borrower pursuant to the Term Loan Commitment established
pursuant to Section 3.01 evidenced by the Term Notes.
"Term Loan Commitment" shall mean, for each Lender, the
amount set forth opposite such Lender's name in Schedule 1.1
hereto directly below the column entitled "Term Loan Commitment",
as the same may be (x) reduced from time to time pursuant to
Section 4.02, or (y) adjusted from time to time as a result of
assignments to or from such Lender pursuant to Section 12.10.
"Term Note" shall mean any of the promissory notes
issued by the Borrower to each of the Lenders in the amount of
their respective Term Loan Commitments substantially in the form
of Exhibit D, either as originally executed or as the same may
from time to time be supplemented, modified, amended, renewed or
extended.
"Term Termination Date" shall have the meaning set forth
in Section 4.01 hereof.
"Threads Agreement" shall have the meaning set forth in
the recitals of this Agreement.
"Threads Loan" shall have the meaning set forth in the
recitals of this Agreement.
"Total Capitalization" shall mean the sum of (i) Total
Debt, plus (ii) Net Worth.
"Total Available Revolving Loan Commitment" shall mean
at any time, the Total Revolving Loan Commitment at such time less
the Blocked Amount at such time.
-17-<PAGE>
"Total Commitments" shall mean, at any time, the sum of
the Commitments of each of the Lenders.
"Total Debt" shall mean, as of any date of
determination, with respect to any Person, the sum of (i) Senior
Debt of such Person, (ii) Subordinated Debt of such Person, plus
(iii) Debt in respect of mandatory redemption, put or mandatory
dividend rights on capital stock or other equity of such Person.
"Total Revolving Loan Commitment" shall mean the sum of
the Revolving Loan Commitments of each of the Lenders, and shall
equal $115,000,000 on the Closing Date.
"Total Term Loan Commitment" shall mean the sum of the
Term Loan Commitments of each of the Lenders, and shall equal
$10,000,000 on the Closing Date.
"Total Unutilized Revolving Loan Commitment" shall mean,
at any date, an amount equal to the remainder of (x) the then
Total Revolving Loan Commitment, less (y) the sum of the aggregate
principal amount of Revolving Loans outstanding plus the Blocked
Amount as of such date.
"Treasury Stock" shall mean stock of the Borrower
purchased or repurchased by the Borrower to be held or retired by
the Borrower.
"Unutilized Revolving Loan Commitment" with respect to
any Lender, at any date, such Lender's Revolving Loan Commitment
at such time less the sum of (i) the aggregate outstanding amount
of Revolving Loans made by such Lender, and (ii) such Lender's Pro
Rata Share of the Blocked Amount as of such date.
"Waiver and Consent" shall have the meaning set forth in
the recitals of this Agreement.
"Working Capital Commitment" shall mean the commitment
of Trust Company Bank to make Working Capital Loans to the
Borrower in an aggregate principal amount at any one time
outstanding not to exceed $10,000,000, as the same may be adjusted
from time to time as a result of assignments to or from such
Lender pursuant to Section 12.10.
"Working Capital Loan" shall have the meaning set forth
in Section 3.01.
"Working Capital Note" shall mean a promissory note of
the Borrower payable to the order of Trust Company Bank, in
substantially the form of Exhibit E hereto, evidencing the maximum
aggregate principal indebtedness of the Borrower to such Lender
under the Working Capital Commitment, either as originally
-18-<PAGE>
executed or as it may be from time to time supplemented, modified,
amended, renewed or extended.
SECTION 1.02. Accounting Terms. All accounting terms
not specifically defined herein shall be construed as having the
respective meanings customary under generally accepted accounting
principles consistently applied, except (unless otherwise
specified herein) where Borrower's independent certified public
accountants have concurred with any change, from and after the
date of the initial Advances under this Agreement. In the event
that the Financial Accounting Standards Board or a successor
organization mandates a change in generally accepted accounting
principles and such change results in a change in the method of
calculation or the interpretation of any of the financial
covenants, standards or terms found in any provision of this
Agreement, the Borrower, the Agent and the Lenders agree to amend
any such affected terms and provisions with the result that the
criteria for evaluating the Borrower's financial condition shall
be the same after implementing such changes; provided, however,
that until the Agent has received prior notice of such changes
affecting this Agreement as described above and either (a) all
affected provisions of this Agreement have been amended, or
(b) the Agent notifies the Borrower in writing that the Required
Lenders have determined that no such amendments are necessary,
compliance with all financial covenants shall be determined, and
all financial reports prepared, in compliance with generally
accepted accounting principles without regard to such changes.
ARTICLE II
AMOUNT AND TERMS OF REVOLVING LOAN COMMITMENTS
SECTION 2.01. Revolving Loan Commitments and Revolving
Credit Notes.
(a) Revolving Loan Commitments. Subject to and upon the
terms and conditions set forth in this Agreement, each of the
Lenders severally establishes until the Termination Date, its
Revolving Loan Commitment in favor of the Borrower and agrees to
make loans thereunder (each a "Revolving Loan" and collectively,
the "Revolving Loans"). Within the limits of the Revolving Loan
Commitments, the Borrower may borrow, repay and reborrow under the
terms of this Agreement; provided, however, that the Borrower may
neither borrow nor reborrow should there exist a Default or an
Event of Default and further provided that the Borrower may not
request a Revolving Loan hereunder in an amount in excess of the
Total Unutilized Revolving Loan Commitment. Borrowings under the
Revolving Loan Commitments shall be made through simultaneous
Advances by the Lenders and the amount of each Borrowing shall be
prorated among such Lenders based on each Lender's Pro Rata Share
of the Total Revolving Commitments. All Advances by each Lender
-19-<PAGE>
shall be evidenced by a single Revolving Credit Note payable to
such Lender in the form of Exhibit A attached hereto with
appropriate insertions. Each Revolving Credit Note shall be dated
the date hereof, shall be payable to the order of the respective
Lender in a principal amount equal to such Lender's Revolving Loan
Commitment, shall bear interest as hereinafter provided and shall
mature on the Termination Date. The aggregate principal amount of
each Base Rate Borrowing under the Revolving Loan Commitments
shall be not less than $1,000,000 and shall be in integral
multiples of $1,000,000; and the aggregate principal amount of
each other Borrowing under the Revolving Loan Commitments shall be
not less than $5,000,000 and shall be in integral multiples of
$1,000,000. No Lender shall have any obligation to advance
Revolving Loans in excess of the amount of its Revolving Loan
Commitment.
SECTION 2.02. Mandatory Reduction of Commitments.
(a) Bonds. The Borrower hereby agrees that as long as
the Agent is the holder of the Bonds and the Bonds remain
outstanding, the Total Revolving Loan Commitments shall be reduced
by $7,000,000, with, respective Revolving Loan Commitment such
reduction to be applied pro rata with respect to the Lenders based
upon each Lender's Pro Rata Share of the Total Revolving Loan
Commitments; provided that, in the event that the Bonds are not
purchased by the Agent on or before the Closing Date, the Borrower
agrees that the Total Revolving Loan Commitment shall nevertheless
be reduced as provided in this Section 2.02 unless and until the
Borrower and Masland deliver a certificate to the Agent that the
Bonds will not be issued. In the event of an optional redemption
or other prepayment of the Bonds, the Total Revolving Loan
Commitments hereunder shall be ratably increased by the amount of
such prepayment. The Borrower hereby further agrees that upon the
failure of Masland to repay all amounts outstanding pursuant to
Bonds in full upon maturity, whether due to demand, acceleration,
put or otherwise, and the subsequent failure of the Borrower to
immediately pay such defaulted amount pursuant to the Parent
Guaranty, the Total Revolving Loan Commitments shall be deemed to
be reinstated and the Borrower shall be deemed to have requested a
Base Rate Borrowing hereunder in an amount equal to such defaulted
amount payable to the Lenders pro rata based upon the respective
participations of the Lenders in the Bonds.
(b) Reductions from Asset Dispositions. Immediately
upon receipt of the Net Proceeds of any Asset Disposition, which
Net Proceeds exceed $1,000,000 for any single transaction or
series of related transactions, the Borrower shall permanently
reduce the Total Revolving Loan Commitments by an amount equal to
fifty percent (50%) of such Net Proceeds; provided that, the Total
Revolving Loan Commitments shall not be reduced to an aggregate
amount of less than $80,000,000 pursuant to this Section 2.02(b).
-20-<PAGE>
SECTION 2.03. Voluntary Reduction of the Commitments.
Upon thirty (30) days prior written notice to the Agent, the
Borrower may, effective as of the next Revolving Credit Commitment
Fee payment date, permanently reduce the Total Revolving Loan
Commitments prior to the Termination Date by an amount in
multiples of $5,000,000, provided, however, that any such
reduction in the Total Revolving Loan Commitments shall not become
effective with respect to Borrowings in excess of the reduced
Total Revolving Loan Commitments having Interest Periods ending
after the otherwise effective date of such reduction until the end
of the applicable Interest Period for such Borrowings.
SECTION 2.04. Prepayment of Borrowings Under the
Revolving Loan Commitments.
(a) Mandatory Prepayments of Overadvances. If at any
time, the aggregate outstanding principal amount of the Revolving
Loans exceeds the Total Available Revolving Loan Commitment, then
the Borrower shall immediately pay to the Agent, for the ratable
benefit of the Lenders, the amount by which such Revolving Loans
exceed the Total Available Revolving Loan Commitment, with such
payment to be applied to repay outstanding Revolving Loans.
(b) Voluntary Prepayments of Revolving Loans. The
Borrower shall have the right to prepay Borrowings under the
Revolving Loan Commitments, in whole at any time or in part from
time to time, pro rata as to each Lender based on each Lender's
Pro Rata Share of the Total Revolving Loan Commitment, without
premium or penalty but with accrued interest on the principal
amount prepaid to the date of such prepayment, provided that (i)
the Borrower gives the Agent at least two Business Days' prior
written notice of such prepayment (other than prepayment of a Base
Rate Borrowing which notice may be given by 10:00 A.M. (Atlanta,
Georgia time) on the date of such prepayment), specifying the date
such prepayment will occur and the Borrowing to be prepaid, (ii)
each partial prepayment of a Base Rate Borrowing shall be in an
amount of at least $1,000,000 or integral multiples thereof and
each partial prepayment of a Eurodollar Borrowing or a Secondary
C/D Rate Borrowing shall be in an amount of at least $5,000,000
and in integral multiples of $1,000,000, and (iii) a Eurodollar
Borrowing or a Secondary C/D Rate Borrowing may only be prepaid on
the last day of the then current Interest Period with respect
thereto. The Agent shall notify the Lenders promptly by telephone
of any notice of prepayment received by the Agent from the
Borrower pursuant to this Section 2.04(b).
SECTION 2.05. Revolving Credit Period; Termination
Date. The unpaid principal balance and all accrued and unpaid
interest on the Revolving Credit Notes will be due and payable
upon the first of the following dates or events to occur
(hereinafter referred to as the "Termination Date"):
(i) acceleration of the maturity of any Note in accordance with
-21-<PAGE>
the remedies contained in Section 10.02 of this Agreement; or (ii)
upon the expiration of the Revolving Loan Commitments and the
Working Capital Commitment on March 31, 2000.
SECTION 2.06. Use of Proceeds. The proceeds of each
Borrowing under the Revolving Loan Commitments will be used by the
Borrower solely for general corporate purposes, including but not
limited to, the purchase of Treasury Stock and acquisitions. As
of the Closing Date, all advances outstanding pursuant to the
Prior Agreement shall be deemed to be outstanding hereunder and
the Prior Agreement shall be of no further force or effect (except
for the survival of certain indemnification provisions provided
thereunder) Borrower shall also be deemed to have requested a
Borrowing to be lent to Threads to repay the Threads Loan in full
and the Threads Agreement shall thereupon be terminated and of no
further force and effect (except for the survival of certain
indemnification provisions provided thereunder).
SECTION 2.07. Participation in Bonds. On the Closing
Date or thereafter upon five (5) days' notice from the Borrower to
the Agent, and subject to the terms and conditions hereof, the
Agent will purchase the Bonds and pursuant hereto, shall
simultaneously sell to each Lender and each Lender shall
automatically be deemed to have purchased from the Agent a
participation in the Bonds equal to such Lender's Pro Rata Share
of the Total Revolving Loan Commitment. Each Lender shall pay the
full purchase price of its Pro Rata Share of the Bonds in
immediately available funds at the main office of the Agent prior
to 12:00 noon (Atlanta, Georgia time) upon receipt of one Business
Days' prior notice from the Agent that the Bonds are being
purchased by the Agent. The Pro Rata Shares of each of the
Lenders in the Bonds shall be ratably concurrent, without
preference or priority one over another.
ARTICLE III
AMOUNT AND TERMS OF WORKING CAPITAL LOANS
SECTION 3.01. Working Capital Commitment and Working
Capital Note. Subject to and upon the terms and conditions set
forth in this Agreement, Trust Company Bank hereby severally
establishes until the Termination Date the Working Capital
Commitment in favor of the Borrower. Within the limits of the
Working Capital Commitment, the Borrower may borrow, repay and
reborrow loans hereunder (individually, a "Working Capital Loan"
and collectively, the "Working Capital Loans") under the terms of
this Agreement; provided, however, the Borrower may neither borrow
nor reborrow should there exist a Default or an Event of Default.
All Advances under the Working Capital Commitment by Trust Company
Bank shall be evidenced by a single Working Capital Note payable
to Trust Company Bank in the form of Exhibit E attached hereto
-22-<PAGE>
with appropriate insertions. The Working Capital Note shall be
dated as of the date hereof, shall be payable to the order of
Trust Company Bank in a principal amount set forth above, shall
bear interest as hereinafter provided and shall mature on the
Termination Date. The aggregate principal amount of each Working
Capital Loan shall not be less than $100,000 and shall be in
integral multiples of $50,000. Trust Company Bank shall not have
any obligation to advance Working Capital Loans in excess of the
Working Capital Commitment.
SECTION 3.02. Prepayment of Working Capital Loans. The
Borrower shall have the right to prepay the indebtedness
represented by the Working Capital Note, in whole at any time or
in part from time to time, without premium or penalty but with
accrued interest on the principal amount prepaid to the date of
such prepayment, provided that (i) the Borrower gives Trust
Company Bank two Business Days' prior written notice thereof
(other than prepayment of a Base Rate Borrowing or a Cost of Funds
Rate Borrowing which notice may be given by 10:00 A.M. (Atlanta,
Georgia time) on the date of such prepayment), (ii) each partial
prepayment shall be in a minimum amount of $100,000 and in
integral multiples of $50,000, and (iii) a Eurodollar Borrowing,
and a Secondary C/D Rate Borrowing may only be prepaid on the last
day of the relevant Interest Period.
SECTION 3.03. Working Capital Commitment Period. The
unpaid principal balance and all accrued and unpaid interest on
the Working Capital Notes shall be due and payable in full on the
Termination Date.
SECTION 3.04. Use of Proceeds. The proceeds of each
Working Capital Loan will be used by the Borrower for short term
working capital needs of the Borrower and for general corporate
purposes.
ARTICLE IV
AMOUNT AND TERMS OF TERM LOAN COMMITMENTS
SECTION 4.01. Term Loan Commitments and Term Notes.
Subject to and upon the terms and conditions set forth in this
Agreement, each of the Lenders severally establishes from the
period commencing on July 9, 1995 and ending on the later of (i)
July 9, 1997 and (ii) any date (prior to the Maturity Date) to
which Prudential and the Borrower shall have agreed to extend the
"Repurchase Period" as such term is defined in Section 1.1 of the
Prudential Agreement as in effect on the date hereof (the "Term
Termination Date") its Term Loan Commitment in favor of the
Borrower and agrees to make loans thereunder (each a "Term Loan"
and collectively, the "Term Loans"). Within the limits of the
Term Loan Commitments, as reduced pursuant to Section 4.02 hereof
-23-<PAGE>
from time to time, the Borrower may borrow under the terms of this
Agreement; provided, however, that the Borrower may not borrow
should there exist a Default or an Event of Default. Borrowings
under the Term Loan Commitments shall be made through simultaneous
Advances by the Lenders and the amount of each Borrowing shall be
prorated among such Lenders based on each Lender's Pro Rata Share
of the aggregate Term Loan Commitments. All Advances by each
Lender pursuant to the Term Loan Commitment shall be evidenced by
a single Term Note payable to such Lender in the form of Exhibit D
attached hereto with appropriate insertions. Each Term Note shall
be dated July 9, 1995, shall be payable to the order of the
respective Lender in a principal amount equal to Lender's Term
Loan Commitment, shall bear interest as hereinafter provided and
shall mature on the Maturity Date. The aggregate principal amount
of each Borrowing under the Term Loan Commitments shall be not
less than $1,000,000 and shall be in integral multiples of
$1,000,000. No Lender shall have any obligation to advance Term
Loans in excess of the amount of its Term Loan Commitment.
SECTION 4.02. Mandatory Reduction of Term Loan
Commitments. To the extent that the Borrower has not drawn the
full amount of the Term Loan Commitments by July 31, 1997, on each
Installment Date thereafter, commencing on September 30, 1997, the
Term Loan Commitments shall automatically and ratably reduce by an
amount equal to (i) ten percent (10%) of the unutilized Term Loan
Commitments on December 31, 1995, minus, the amount of the
principal payment made pursuant to Section 4.03(b) on such date.
SECTION 4.03. Repayment of Term Notes. (a) The
aggregate principal amount of the Term Loans advanced on or prior
to December 31, 1995 ("Tranche A") shall be payable in sixteen
(16) consecutive, equal quarterly installments, commencing on
March 31, 1996 and continuing thereafter on the last day of each
succeeding calendar quarter (the "Installment Dates") up to and
through the Maturity Date when all principal and accrued and
unpaid interest shall be due and payable in full.
(b) The aggregate amount of the Term Loans advanced
after December 31, 1995 ("Tranche B") shall be payable in ten (10)
consecutive, quarterly installments, commencing on September 30,
1997 and continuing thereafter up to and through the Maturity Date
when all principal and accrued but unpaid interest shall be due
and payable in full, in an amount equal to the lesser of (i) ten
percent (10%) of the undrawn Term Loan Commitments on December 31,
1995 and (ii) the principal amount of Tranche B outstanding on
such Installment Date.
SECTION 4.04. Prepayment of Term Loans. The Borrower
shall have the right to prepay the indebtedness represented by the
Term Loans, in whole at any time or in part from time to time,
without premium or penalty but with accrued interest on the
principal amount prepaid to the date of such prepayment, provided
-24-<PAGE>
that (i) the Borrower gives the Agent two Business Days' prior
written notice thereof, (ii) each partial prepayment of Borrowings
shall be in a minimum amount of $1,000,000 and in integral
multiples of $1,000,000, and (iii) a Eurodollar Borrowing and a
Secondary C/D Rate Borrowing may only be prepaid on the last day
of the relevant Interest Period. All partial prepayments shall be
applied to installments due under the Term Notes in inverse order
of maturity and once prepaid, may not be reborrowed.
SECTION 4.05. Term Loan Period. The unpaid principal
balance and all accrued and unpaid interest on the Term Notes will
be due and payable upon the first of the following dates or events
to occur (hereinafter referred to as the "Maturity Date"):
(i) acceleration of the maturity of any Note in accordance with
the remedies contained in Section 10.02 of this Agreement; or (ii)
December 31, 1999.
SECTION 4.06. Use of Proceeds. The proceeds of the
Term Loans will be used by the Borrower solely to finance the
redemption of the Borrower's stock by the Borrower upon
Prudential's exercise of the "Put Option" (as such term is defined
in the Prudential Agreement) pursuant to the terms of the
Prudential Agreement.
ARTICLE V
GENERAL PAYMENT PROVISIONS
SECTION 5.01. Method of Borrowing Under the
Commitments. The Borrower shall give the Agent written or
telephonic notice (promptly confirmed in writing, including
telecopy) of any requested Borrowing (a "Notice of Borrowing")
specifying (i) the amount of the Borrowing, (ii) the date the
proposed Borrowing is to be made (which shall be a Business Day),
(iii) whether the Borrowing will be a Base Rate Borrowing, a
Secondary C/D Rate Borrowing, or a Eurodollar Borrowing, or with
respect to the Working Capital Commitment, a Cost of Funds Rate
Borrowing, (iv) in the case of a Eurodollar Borrowing, a Cost of
Funds Rate Borrowing or a Secondary C/D Rate Borrowing, the
duration of the initial Interest Period applicable thereto, (v)
whether the Borrowing will be made pursuant to the Revolving Loan
Commitments, the Working Capital Commitment or the Term Loan
Commitments, and (vi) with respect to a Cost of Funds Rate
Borrowing, the interest rate quoted to the Borrower by Trust
Company Bank as the applicable interest rate for such Cost of
Funds Rate Borrowing. Each Notice of Borrowing shall be given to
the Agent (i) with respect to any Eurodollar Borrowing, not later
than 10:00 A.M. (Atlanta, Georgia time) on the third Business Day
preceding the day of such requested Borrowing, (ii) with respect
to any Secondary C/D Rate Borrowing, not later than 10:00 A.M.
(Atlanta, Georgia time) on the second Business Day preceding the
-25-<PAGE>
day of such requested Borrowing, and (iii) with respect to any
Base Rate Borrowing or Cost of Funds Rate Borrowing, not later
than 10:00 A.M. (Atlanta, Georgia time) on the day of such re-
quested Borrowing. The Agent shall be entitled to rely on any
telephonic Notice of Borrowing which it believes in good faith to
have been given by a duly authorized officer or employee of the
Borrower and any Advances made by the Lenders based on such
telephonic notice shall, when wired by the Agent to the Borrower's
account no. 0000554 at American National Bank and Trust Company of
Chattanooga, be Advances for all purposes hereunder. The Agent
shall promptly notify each Lender by telephone, which notice shall
be promptly confirmed in writing (including telecopy) by the Agent
to such Lender, of the Notice of Borrowing received from the
Borrower (other than a Borrowing pursuant to the Working Capital
Commitment), of such Lender's Pro Rata Share of the requested
Borrowing, whether the Advance will be a Base Rate Advance, a
Secondary C/D Rate Advance, or a Eurodollar Advance, the initial
Interest Period selected by the Borrower with respect thereto (if
applicable), and the initial per annum rate of interest accruing
on such Advance. Not later than 12:00 Noon (Atlanta, Georgia
time) on the date specified for the Borrowing in the Notice of
Borrowing and in the notice to such Lender provided by the Agent,
each Lender shall promptly make its portion of the Borrowing
available to the Agent in immediately available funds. The Agent
shall promptly make the amount of such Borrowing available to the
Borrower. In the event any Lender shall fail to make any Advance
available to the Agent in immediately available funds by 12:00
Noon (Atlanta, Georgia time) on the date specified, the Agent may
advance such Lender's portion of the Borrowing on behalf of such
Lender and such Lender shall promptly reimburse the Agent for the
amount thereof plus (i) if the amount of such Lender's Advance is
reimbursed to the Agent on or prior to the calendar day next
succeeding the date of the Borrowing, interest on such amount at
the rate equal to the quotient obtained by dividing (A) the
Federal Funds Rate by (B) 1 minus the C/D Reserve Percentage, or
(ii) if the amount of such Lender's Advance is reimbursed to the
Agent after the calendar day next succeeding the day of the
Borrowing, interest on such amount at the Base Rate. The amount
of interest payable as a result of any Lender's failure to make
any Advance available shall be calculated on the basis of a year
of 360 days and paid for the actual number of days such failure
has continued (including the date of payment). In the event that
any Notice of Borrowing requesting a Cost of Funds Rate Borrowing
is received by Trust Company Bank setting forth an interest rate
different from the rate of interest quoted by such Lender for such
Borrowing, Trust Company Bank shall promptly notify the Borrower
of such discrepancy but shall have no obligation to make such Cost
of Funds Rate Borrowing until an agreement regarding the interest
rate has been confirmed in writing with the Borrower.
SECTION 5.02. Selection of Successive Interest Rates
and Interest Periods. The Borrower may, on the last day of the
-26-<PAGE>
Interest Period relating thereto, convert any Eurodollar Borrowing
or Secondary C/D Rate Borrowing or Cost of Funds Rate Borrowing,
as the case may be, into a Eurodollar Borrowing, a Secondary C/D
Rate Borrowing or a Base Rate Borrowing, or continue a Eurodollar
Borrowing or Secondary C/D Rate Borrowing or Cost of Funds Rate
Borrowing, as the case may be, in the same aggregate principal
amount. The Borrower may at any time convert a Base Rate
Borrowing into a Eurodollar Borrowing or a Secondary C/D Rate
Borrowing, or with respect to a Borrowing outstanding pursuant to
the Working Capital Commitment, a Cost of Funds Rate Borrowing.
The Borrower shall give the Agent telephonic notice (promptly
confirmed in writing) at least two Business Days prior to a
conversion or continuation of any Borrowing (other than a
continuation of a Base Rate Borrowing or a Cost of Funds Rate
Borrowing), such notice to specify whether the Borrowing is to be
continued as or converted to a Secondary C/D Rate Borrowing or a
Eurodollar Borrowing or converted to a Base Rate Borrowing and, if
applicable, the Interest Period selected by the Borrower for such
Borrowing, and shall give the Agent telephonic notice (promptly
confirmed in writing) by 10:00 A.M. (Atlanta, Georgia time) on the
Business Day of any conversion into or continuation of any Cost of
Funds Rate Borrowing under the Working Capital Commitment, such
notice to specify whether the Borrowing is to be continued as or
converted to a Cost of Funds Rate Borrowing and the Interest
Period selected by the Borrower for such Borrowing, and the rate
of interest quoted by Trust Company Bank for such Cost of Funds
Rate Borrowing. If the Agent does not receive timely notice of
any succeeding interest rate and/or Interest Period selected by
the Borrower as provided for herein or if the Borrower selects an
interest rate for an Interest Period which is not available under
Section 5.03 or Section 5.10, any outstanding Borrowing for which
the Borrower failed to select an interest rate and/or Interest
Period or selected an interest rate for an Interest Period which
is not available under Section 5.03 or 5.10 or if the Borrower
sets forth a rate of interest for a Cost of Funds Rate Borrowing
other than the rate of interest quoted by Trust Company Bank
therefor, shall be converted to a Base Rate Borrowing and the
Agent shall promptly notify the Borrower by telephone, which
notice shall be promptly confirmed in writing (including telecopy)
to the Borrower, of such conversion. The Agent shall notify the
Lenders by telephone of each change in the Base Rate and of each
change in the rate of interest accruing on any Borrowing (other
than a Borrowing under the Working Capital Commitment).
SECTION 5.03. Interest on Notes. Interest shall accrue
on the unpaid principal amount of each of the Notes at the fol-
lowing per annum rates, which may be selected by the Borrower
subject to and in accordance with the terms of this Agreement:
(i) the Base Rate; or
-27-<PAGE>
(ii) LIBOR for Interest Periods of 1, 2, 3 or 6 months,
plus the Applicable Margin per annum; or
(iii) the Secondary C/D Rate for Interest Periods of 30,
60, 90 or 180 days, plus the Applicable Margin per annum; or
(iv) with respect to the Working Capital Commitment
only, the Cost of Funds Rate for Interest Periods of 1-29
days, plus the Applicable Margin per annum;
provided that, (i) each Lender's Pro Rata Share of a Borrowing
pursuant to the Revolving Loan Commitments and the Term Loans
shall bear interest at the same rate as the other Lenders' Pro
Rata Share of such Borrowing, (ii) the Borrower may not select a
rate based on LIBOR or the Secondary C/D Rate or the Cost of Funds
Rate with respect to Revolving Loans or Working Capital Loans if
the Interest Period with respect thereto would extend beyond the
Termination Date, (iii) the Borrower may not select a rate based
on LIBOR or the Secondary C/D Rate with respect to Term Loans if
the Interest Period with respect thereto would extend beyond the
Maturity Date, (iv) the Borrower may not select a rate based on
LIBOR or the Secondary C/D Rate with respect to Term Loans if the
Interest Period with respect thereto would extend beyond any
Installment Date unless the aggregate amount of the Term Loans
bearing interest at the Base Rate or with Interest Periods
maturing prior to the next Installment Date is greater than or
equal to the payment required to be made on such Installment Date,
and (v) the Borrower may not select a rate based on LIBOR or the
Secondary C/D Rate if, as a result thereof, more than seven (7)
Borrowings with different Interest Periods would be outstanding
pursuant to this Agreement.
SECTION 5.04. Interest Payment Dates. Interest on the
Notes shall be payable (i) on the last day of the relevant
Interest Period for Eurodollar Borrowings, Cost of Funds Rate
Borrowings and Secondary C/D Rate Borrowings; provided, however,
in any case where an Interest Period during which interest accrues
at a rate based upon LIBOR or the Secondary C/D Rate exceeds 90
days, interest shall be payable on the last day of each of the
90-day periods comprising such Interest Period as well as on the
last day of the Interest Period as provided above, (ii) on the
last day of each month, in arrears, commencing April 30, 1995 for
Base Rate Borrowings, and (iii) on the Termination Date with
respect to the Revolving Credit Notes and the Working Capital Note
and on the Maturity Date with respect to the Term Notes.
SECTION 5.05. Fees.
(a) Revolving Loan Commitment Fee. The Borrower shall
pay to the Agent, for the ratable benefit of each Lender, a
commitment fee (the "Revolving Loan Commitment Fee") for the
period commencing on the Closing Date to and including the
-28-<PAGE>
Termination Date, payable quarterly in arrears on the last day of
each calendar quarter, commencing on June 30, 1995, and on the
Termination Date, equal to Commitment Factor multiplied by the
average daily Total Unutilized Revolving Loan Commitment (for
purposes of this calculation, the Bonds shall not be deemed to be
a utilization of the Total Revolving Loan Commitment unless and
until the Bonds are purchased by the Agent).
(b) Working Capital Commitment Fee. The Borrower shall
pay to Trust Company Bank, a commitment fee (the "Working Capital
Commitment Fee") for the period commencing on the Closing Date to
and including the Termination Date, payable quarterly in arrears
on the last day of each calendar quarter, commencing on June 30,
1995, and on the Termination Date, equal to the Commitment Factor
multiplied by the average daily unutilized Working Capital
Commitment.
(c) Term Loan Commitment Fee. The Borrower shall pay
to the Agent, for the ratable benefit of each Lender, a commitment
fee (the "Term Loan Commitment Fee") for the period commencing on
the Closing Date to and including the Term Termination Date,
payable quarterly in arrears on the last day of each calendar
quarter, commencing on June 30, 1995, and on the Term Termination
Date, equal to Commitment Factor multiplied by the average daily
unutilized Term Loan Commitments (regardless of whether such Term
Loan Commitments are then available).
(d) Closing Fee. The Borrower shall pay to the Agent,
for the ratable benefit of the Lenders, a non-refundable closing
fee, due and payable in full on the Closing Date, in an amount
equal to one-eighth of one percent (.125%) multiplied by the Total
Commitments.
(e) Administrative Fees. The Borrower shall pay to the
Agent an administrative fee in the amount and on the dates agreed
in writing by Borrower with the Agent.
SECTION 5.06. Making of Payments. The commitment fees,
and all payments of principal of, or interest on, the Notes shall
be made in immediately available funds to the Agent at its
principal office in Atlanta, Georgia, for the accounts of the
Lenders. All payments due on a date which is not a Business Day
shall be deemed to be due on the next following Business Day. All
such payments shall be made not later than 12:00 Noon (Atlanta,
Georgia time) and funds received after that hour shall be deemed
to have been received by the Agent on the next following Business
Day. Payments to the Agent shall, as to the Borrower, constitute
payment to the applicable Lenders hereunder. On the Business Day
that a payment is received or deemed to have been received
hereunder with respect to the Commitments or with respect to the
Bonds, the Agent shall remit in immediately available funds to
each Lender its Pro Rata Share of such payment and any payment
-29-<PAGE>
received with respect to the Working Capital Note shall be
remitted by the Agent to Trust Company Bank.
SECTION 5.07. Default Rate of Interest. If the Bor-
rower shall fail to pay on the due date therefor, whether by ac-
celeration or otherwise, any principal or other amount owing under
any of the Notes or this Agreement, then interest shall accrue on
such unpaid principal, and to the extent allowed by law, other
amount due, from the due date until and including the date on
which such principal or other amount is paid in full, at the then
applicable interest rate plus an additional two percent (2%) per
annum; provided that, at the end of any Interest Period relating
to the then applicable interest rate, interest shall accrue on any
such unpaid amount at a rate of interest equal to the Base Rate
plus an additional two percent (2.0%) per annum (in either case,
the "Default Rate").
SECTION 5.08. Proration of Payments. If any Lender
shall obtain any payment or other recovery (whether voluntary,
involuntary, through exercise of any right of set-off or
otherwise) on account of the principal of or interest on any Note
or the Bonds or any fees in respect of this Agreement in excess of
its pro rata share of payments and other recoveries obtained by
all the Lenders on account of the principal of and interest on
Notes then held by them or any fees due to them in respect of this
Agreement, such Lender shall forthwith purchase from the other
Lenders such participation in the Notes or the Bonds held by them
or in such fees owed to them as shall be necessary to cause such
purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any
portion of the excess payment or other recovery is thereafter
recovered from such purchasing Lender, the purchase from each
Lender shall be rescinded and the purchase price restored by each
such Lender to the extent of such recovery, but without interest.
Disproportionate payments of interest shall be shared by the
purchase of separate participations in unpaid interest obliga-
tions, disproportionate payments of fees shall be shared by the
purchase of separate participations in unpaid fee obligations, and
disproportionate payments of principal shall be shared by the pur-
chase of separate participations in unpaid principal obligations.
The Borrower agrees that any Lender so purchasing a participation
from another Lender pursuant to this Section 5.08 may, to the
fullest extent permitted by law, exercise all its rights of
payment (including the right of set-off) with respect to such
participation as fully as if such Lender were the direct creditor
of the Borrower in the amount of such participation. Each Lender
shall give the Agent notice within five days of any payments or
other recoveries described above which it obtains. For purposes
of this Section 5.08 and determining the appropriate pro rata
share of any payment received by the Agent or any Lender after the
occurrence and during the continuance of an Event of Default, such
share shall be determined by dividing the total amount of each
-30-<PAGE>
Lender's Total Commitment plus Term Loans by the sum of all of the
Lenders' Total Commitments and Term Loans, including in each case,
the Working Capital Commitment, or if the Commitments have been
terminated, such share shall be determined by dividing the total
amount of the outstanding Obligations held by each Lender by the
sum of all of the Obligations.
SECTION 5.09. Lenders' Obligations Several. The
obligation of each Lender to make any Advance is several, and not
joint or joint and several, and is not conditioned upon the
performance by all the other Lenders of their obligations to make
Advances.
SECTION 5.10. Illegality. Notwithstanding any other
provisions of this Agreement, if any change in any applicable law,
regulation or directive, or in the interpretation or application
thereof shall make it unlawful or impractical for any Lender to
make or maintain its portion of any Eurodollar Borrowings or
Secondary C/D Rate Borrowings or to maintain Eurodollar deposits
in the London interbank market, the obligation of the Lenders
hereunder to advance or maintain Eurodollar Borrowings or
Secondary C/D Rate Borrowings, as the case may be, shall forthwith
be cancelled and the Borrower shall, if any Eurodollar Borrowings
or Secondary C/D Rate Borrowings are then outstanding, promptly
upon request from the Agent, either, at the option of the
Borrower, pay all such Eurodollar Borrowings or Secondary C/D Rate
Borrowings or convert such Eurodollar Borrowings or Secondary C/D
Rate Borrowings to Base Rate Borrowings. If any such payment or
conversion of Eurodollar Borrowings or Secondary C/D Rate
Borrowings is made on a day that is not the last day of the then
current Interest Period applicable to such Eurodollar Borrowings
or Secondary C/D Rate Borrowings, the Borrower shall promptly pay,
upon demand of such Lender (with a copy of such demand to the
Agent) such amount or amounts as may be necessary to compensate
such Lender for any loss or expense sustained or incurred by such
Lender as a result of such payment or conversion. Each Lender
shall certify the amount of such loss or expense to the Borrower,
and such certification shall be conclusive absent manifest error.
SECTION 5.11. Increased Costs. In the event that any
change (other than any change by way of imposition or increase of
reserve requirements, in the case of Eurodollar Borrowings,
included in the Reserve Percentage or, in the case of Secondary
C/D Rate Borrowings, included in the C/D Reserve Percentage) in
any applicable law, treaty or governmental regulation, or in the
interpretation or application thereof, or compliance by any Lender
with any guideline, request or directive (whether or not having
the force of law) from any central bank or other U.S. or foreign
financial, monetary or other governmental authority, shall:
(a) subject any Lender to any tax of any kind whatsoever with
respect to this Agreement or any Borrowing or change the basis of
taxation of payments to any Lender of principal, interest, fees or
-31-<PAGE>
any other amount payable hereunder (except for changes in the rate
of tax on the overall net income of any Lender); (b) impose,
modify, or hold applicable any reserve, special deposit,
assessment or similar requirement against assets held by, or
deposits in or for the account of, advances or loans by, or other
credit extended by or committed to be extended by any office of
any Lender, including, without limitation, pursuant to Regulation
D of the Board of Governors of the Federal Reserve System; or (c)
impose on any Lender or on the London interbank market any other
condition with respect to this Agreement, the Notes, or any
Eurodollar Borrowing or Secondary C/D Rate Borrowing hereunder;
and the result of any of the foregoing is to increase the cost to
any Lender of making or committing to make, renewing or
maintaining any Eurodollar Borrowing or Secondary C/D Rate
Borrowing or to reduce the amount of any payment (whether of
principal, interest or otherwise) in respect of any Eurodollar
Borrowing or Secondary C/D Rate Borrowing, THEN, IN ANY CASE, the
Borrower shall promptly pay from time to time, upon demand of such
Lender (with a copy of such demand to the Agent), such additional
amounts as will compensate such Lender for such additional cost or
such reduction, as the case may be. Each Lender shall certify the
amount of such reduced amount to the Borrower, and such
certification shall be conclusive absent manifest error
SECTION 5.12. Failure to Complete Borrowings. The
Borrower hereby agrees to indemnify each Lender and hold each
Lender harmless from any loss, cost or expense it may sustain or
incur as a consequence of the failure by the Borrower to complete
any Eurodollar Borrowing or Secondary C/D Rate Borrowing after
notice thereof has been given to the Agent, including, without
limitation, any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by
such Lender to fund its portion of such Borrowing when such
Lender's Advance, as a result of such failure, is not made on such
date. Each Lender shall certify the amount of its loss or expense
to the Borrower, and such certification shall be conclusive absent
manifest error.
SECTION 5.13. Capital Adequacy. If, after the date of
this Agreement, the Lender shall have determined that the
adoption, implementation of phase-in of any applicable law, rule
or regulation regarding capital adequacy, or any change therein,
or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or
compliance by the Lender with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the Lender's
capital (whether on this credit facility or otherwise) as a
consequence of its obligations hereunder to a level below that
which the Lender could have achieved but for such adoption, change
-32-<PAGE>
or compliance (taking into consideration the Lender's policies
with respect to capital adequacy) by a material amount, then from
time to time, promptly upon demand by the Lender, the Borrower
shall pay the Lender such additional amount or amounts as will
compensate the Lender for such reduction. A certificate of the
Lender claiming compensation under this Section 5.13 and setting
forth the additional amount or amounts to be paid to it hereunder
shall be conclusive absent manifest error. In determining any
such amount, the Lender may use any reasonable averaging and
attribution methods generally accepted in the banking industry.
SECTION 5.14. Net Payments. (a) All payments hereunder
or under any other Loan Document will be made free and clear of
and without deduction or withholding for any Taxes in respect of
this Agreement, the Notes or other Loan Documents, or any payments
of principal, interest or other amounts hereunder or thereunder
(but excluding, except as provided in paragraph (b) hereof, any
Taxes imposed on the overall net income of the Lender). If any
Taxes are so levied or imposed, the Borrower agrees (A) to pay the
full amount of such Taxes, and such additional amounts as may be
necessary so that every net payment of all amounts due hereunder
and under the other Loan Documents, after withholding or deduction
for or on account of any such Taxes (including additional sums
payable under this Section 5.14), will not be less than the amount
provided for herein, (B) to make such withholding or deduction and
(iii) to pay the full amount deducted to the relevant authority in
accordance with applicable law. The Borrower will furnish to the
Agent within 30 days after the date the payment of any Taxes is
due pursuant to applicable law certified copies of tax receipts
evidencing such payment by the Borrower. The Borrower will
indemnify and hold harmless the Agent and the Lenders and
reimburse the Agent and the Lenders upon written request for the
amount of any Taxes so levied or imposed and paid by the Agent and
the Lenders and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or
not such Taxes were correctly or illegally asserted.
(b) The Borrower shall also reimburse the Agent and the
Lenders, upon written request of the Agent and the Lenders, for
any Taxes imposed on the overall net income of the Agent and the
Lenders pursuant to the laws of the jurisdiction in which the
principal executive office of the Agent and the Lenders is located
as the Agent or any Lender shall determine are payable by the
Lender in respect of amounts paid to or on behalf of the Agent or
such Lender pursuant to subparagraph (a) hereof.
SECTION 5.15. Survival. The obligations of the
Borrower under Sections 5.10, 5.11, 5.12 and 5.13 shall survive
termination of this Agreement and payment of the Notes for a
period of one year.
-33-<PAGE>
SECTION 5.16. Calculation of Interest. Interest
payable on the Notes shall be calculated on the basis of a year of
360 days and paid for the actual number of days elapsed.
SECTION 5.17. Interest Rate Arrangements. The Borrower
may from time to time enter into an interest rate swap agreement,
forward rate agreement, interest rate protection agreement or
other form of interest rate hedging arrangement with respect to
its Debt which arrangement provides the Borrower effective fixed,
maximum, and/or minimum rates of interest with Persons and on
terms satisfactory to the Borrower.
ARTICLE VI
CONDITIONS TO BORROWINGS
The obligation of each Lender to make an Advance to the
Borrower hereunder is subject to the satisfaction of the following
conditions:
SECTION 6.01. Conditions Precedent to Initial Advances.
At the time of the making by each Lender of its initial Advance
hereunder, all obligations of the Borrower to the Agent or any
Lender incurred prior to the initial Advances (including, without
limitation, the Borrower's obligation to reimburse the fees and
disbursements of counsel to the Agent and any fees payable to the
Agent or the Lenders on or prior to such date) shall have been
paid in full or shall be paid simultaneously with such initial
Advances, and the Agent shall have received the following, each
dated as of the date of the initial Advances, in form and
substance satisfactory to the Lenders and (except for the Notes)
in sufficient copies for each Lender:
(a) Duly completed Note payable to the order of each
Lender in the principal amount of each of such Lender's
Commitments.
(b) A duly executed Subsidiary Subordination Agreement
from each of the Material Subsidiaries of the Borrower;
(c) A duly executed Subsidiary Note Assignment from the
Borrower and each of its Subsidiaries which have made
Intercompany Advances to active Subsidiaries of the Borrower,
together with the original Intercompany Notes evidencing such
Intercompany Advances, duly endorsed to the Agent;
(d) Copies of the organizational papers of each of the
Credit Parties which is a Material Subsidiary, certified as
true and correct by the Secretary of State of the State of
such Credit Party's incorporation, and certificates from the
Secretaries of State of the State of such Credit Party's
-34-<PAGE>
incorporation and of those States in which such Credit Party
is legally required to qualify to transact business as a
foreign corporation, certifying such Credit Party's good
standing as a corporation in such States.
(e) Certified copies of the by-laws of each of the
Credit Parties which is a Material Subsidiary, of resolutions
of the Board of Directors of the Borrower approving this
Agreement, the Notes and the other Loan Documents hereunder,
and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to
the Loan Documents.
(f) A certificate of the Secretary or Assistant
Secretary of each of the Credit Parties which is a Material
Subsidiary certifying the names and true signatures of the
officers of such Credit Party authorized to execute this
Agreement and the Notes and the other Loan Documents to be
delivered hereunder.
(g) A favorable written opinion of Witt, Gaither &
Whitaker, counsel for the Credit Parties, substantially in
the form of Exhibit F hereto, and covering such additional
matters relating to the transactions contemplated hereby as
the Required Lenders may reasonably request, addressed to the
Agent and the Lenders.
(h) Original executed counterparts of consents to the
transactions contemplated in this Agreement required pursuant
to those agreements of Borrower listed on Schedule 7.14
hereof.
(i) Certified copies of each of the documents
evidencing the Subordinated Debt.
(j) A duly executed closing certificate from the
Borrower substantially in the form of Exhibit G hereto.
(k) Projections for the next five years in the form of
balance sheets, statements of income and statements of cash
flow prepared with respect to the Borrower and each of its
Subsidiaries on a division by division basis, together with a
break-down of such forecast for Fiscal Year 1995 by division
and by fiscal quarter, each in form and detail satisfactory
to the Lenders and certified by a Financial Officer of the
Borrower.
(l) All corporate and other proceedings taken or to be
taken in connection with the transactions contemplated hereby
and all Loan Documents and other documents incident thereto
or delivered in connection therewith shall be satisfactory in
form and substance to each Lender.
-35-<PAGE>
SECTION 6.02. Conditions Precedent to Each Advance. At
the time of the making by each Lender of each Advance hereunder
(including the initial Advance), (a) the following statements
shall be true (and each of the giving by the Borrower of a Notice
of Borrowing in accordance with the terms of this Agreement and
the acceptance by the Borrower of the proceeds of such Borrowing
shall constitute a representation and warranty by the Borrower
that on the date of such Borrowing, before and after giving effect
thereto and to the application of the proceeds therefrom and after
giving effect thereto such statements are true):
(i) The representations and warranties contained in
Sections 7.01, 7.02, 7.03, 7.04, 7.10, 7.11, 7.14, 7.16, and
7.18 hereof, are true and correct on and as of the date of
such Borrowing as though made on and as of such date, and
(ii) No Default or Event of Default exists or would
result from such Borrowing or from the application of the
proceeds therefrom; and
(b) the Agent shall have received such other approvals,
opinions or documents as any Lender through the Agent may
reasonably request with respect to the representations, warranties
and covenants set forth in this Agreement.
SECTION 6.03. Condition Precedent to Agent's Purchasing
Bonds. At the time of the purchase by the Agent of the Bonds, the
Agent shall have received the following, each in form and
substance satisfactory to the Lenders and (except for the Bonds)
in sufficient copies for each Lender:
(a) Original executed counterpart of the Parent
Guaranty.
(b) Copies of the Bonds and all documents executed and
delivered in connection therewith certified as true and correct by
a Financial Officer of the Borrower.
(c) Evidence satisfactory to the Agent that all
conditions precedent to the issuance of the Bonds have been
fulfilled and that the Lenders are prepared to purchase their
respective participations in the Bonds hereunder.
(d) Such opinions, certificates and other documents as
the Agent may request with respect to the Bonds and the compliance
by the Borrower with the terms and conditions hereof.
-36-<PAGE>
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants as follows:
SECTION 7.01. Corporate Existence. The Borrower is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Tennessee and each Subsidiary is
duly organized, validly existing and in good standing under the
law of the jurisdiction in which it is incorporated where the
failure to maintain such valid existence or good standing could
have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole. The Borrower and each Subsidiary
is duly qualified and in good standing as a foreign corporation
authorized to do business in each jurisdiction (other than the
jurisdiction of its incorporation) in which the nature of its
activities or the character of the properties it owns or leases
makes such qualification necessary where the failure to qualify
could have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole.
SECTION 7.02. Corporate Power and Authority;
Contravention. Except as disclosed on Schedule 7.02 hereto, the
execution, delivery and performance by the Borrower of this
Agreement and the Notes are within the Borrower's corporate
powers, have been duly authorized by all necessary corporate
action (including any necessary shareholder action), and do not
and will not (i) violate any provision of any law, rule or
regulation, any judgment, order or ruling of any court or
governmental agency, the organizational papers or by-laws of the
Borrower, or any indenture, agreement or other instrument to which
the Borrower is a party or by which the Borrower or any of any of
its properties is bound, or (ii) be in conflict with, result in a
breach of, or constitute with notice or lapse of time or both a
default under any such indenture, agreement or other instrument,
where such violation, conflict, breach or default could have a
material adverse effect on the Borrower and its Subsidiaries taken
as a whole.
SECTION 7.03. Enforceability. This Agreement, the
Notes, and all other Loan Documents are the legal, valid and
binding agreements of the Credit Parties which are a party
thereto, enforceable against the Credit Parties which are a party
thereto in accordance with their respective terms, except as the
enforceability of any of them may be limited by bankruptcy,
insolvency, reorganization, moratorium and other laws affecting
creditors' rights and remedies generally and by general principles
of equity, whether considered in a proceeding at law or in equity.
SECTION 7.04. Governmental Consent. Neither the nature
of the Borrower or any of its Subsidiaries nor any of their
-37-<PAGE>
respective businesses or properties, nor any relationship between
the Borrower or any Subsidiary and any other Person, nor any
circumstance in connection with the execution and delivery of the
Loan Documents and the consummation of the transactions
contemplated thereby is such as to require any authorization,
consent, approval, order, license, exemption or other action by or
notice to or filing with any court or administrative or
governmental body (other than routine filings, if any, after the
date of closing with the Securities and Exchange Commission and/or
state Blue Sky authorities) in connection with the execution and
delivery of this Agreement, the Notes, and the other Loan
Documents or fulfillment of or compliance with the terms and
provisions hereof or thereof.
SECTION 7.05. Subsidiaries. Schedule 7.05 attached
hereto correctly sets forth the name of each Subsidiary of the
Borrower and the jurisdiction of its incorporation and indicated
whether or not such Subsidiary is a Material Subsidiary as of the
date hereof. All the outstanding shares of the capital stock of
each such Subsidiary have been validly issued and are fully paid
and nonassessable and all such outstanding shares, except as noted
on such Schedule, are owned of record and beneficially by the
Borrower or a wholly-owned Subsidiary of the Borrower free of any
Lien or claim.
SECTION 7.06. Insurance. Each property owned by the
Borrower or any of its Subsidiaries is insured for the benefit of
the Borrower or a Subsidiary in amounts deemed adequate by the
Borrower's management against risks customarily insured against by
Persons operating businesses similar to those of the Borrower or
its Subsidiaries in the localities where such properties are
located.
SECTION 7.07. Financial Statements. The Borrower has
furnished the Lenders with the following financial statements,
identified by a Financial Officer of the Borrower:
(i) consolidated balance sheets of the Borrower and its
Subsidiaries as at December 28, 1991, December 26, 1992 and
December 25, 1993, and related consolidated statements of income,
stockholders' equity and statements of cash flows of the Borrower
and its Subsidiaries for each of the three years in the period,
all certified by Ernst & Young LLP; and (ii) unaudited
consolidated condensed balance sheets of the Borrower and its
Subsidiaries as at October 1, 1994 and unaudited consolidated
condensed statements of income and cash flows for the nine month
period ended on such date, prepared by the Borrower. All such
financial statements (including any related schedules and/or
notes) are true and correct in all material respects (subject, as
to interim statements, to changes resulting from audits and normal
year end adjustments), have been prepared in accordance with
generally accepted accounting principles consistently applied
throughout the periods involved and show all liabilities, direct
-38-<PAGE>
and contingent, of the Borrower and its Subsidiaries required to
be shown in accordance with such principles. The consolidated
balance sheets fairly present the financial condition of the
Borrower and its Subsidiaries as at the dates thereof, and the
statements of income, stockholders' equity and statements of cash
flows fairly present the results of the operations of the Borrower
and its Subsidiaries for the periods indicated. Except as set
forth in that certain letter from the Borrower to the Agent and
the Lenders dated as of even date herewith (and accepted by the
Agent), there has been no material adverse change in the business,
condition or operations (financial or otherwise), or prospects of
the Borrower and its Subsidiaries taken as a whole since
December 25, 1993.
SECTION 7.08. Taxes. The Borrower and each of its
Subsidiaries has filed all federal, state and other income tax
returns which are required to be filed, and each has paid all
taxes as shown on such returns and on all assessments received by
it to the extent that such taxes have become due or except such as
are being contested in good faith by appropriate proceedings and
for which adequate reserves have been established in accordance
with generally accepted accounting principles. Federal, state and
other income tax returns of the Borrower and its Subsidiaries have
been examined and reported on by the taxing authorities or closed
by applicable statutes and satisfied for all fiscal years prior to
and including the fiscal year ended on December 30, 1989.
SECTION 7.09. Actions Pending. Except as specified in
Schedule 7.09 attached hereto, there is no action, suit,
investigation, or proceeding pending or, to the best knowledge of
the Borrower, threatened against the Borrower or any of its
Subsidiaries or any properties or rights of the Borrower or any of
its Subsidiaries, by or before any court, arbitrator or
administrative or governmental body, which might result in any
material adverse change in the business, condition or operations
(financial or otherwise), or prospects of the Borrower and its
Subsidiaries taken as a whole or which in any manner draws into
question the validity of this Agreement or any of the Notes.
SECTION 7.10. Title to Properties. The Borrower and
each of its Subsidiaries has good and marketable title to its
respective real properties (other than real properties that it
leases) and good title to all of its other respective properties
and assets, including the properties and assets reflected in the
balance sheet as at December 25, 1993 hereinabove described (other
than properties and assets disposed of in the ordinary course of
business), subject to no Lien of any kind except Liens permitted
by Section 9.01. The Borrower and each of its Subsidiaries enjoys
peaceful and undisturbed possession under all leases necessary in
any material respect for the operation of its respective
properties and assets, none of which contains any unusual or
burdensome provisions which might materially affect or impair the
-39-<PAGE>
operations of such properties and assets. All such leases are
valid and subsisting and in full force and effect.
SECTION 7.11. Federal Reserve Regulations. Neither the
Borrower nor any Subsidiary is in the business of extending credit
for the purpose of purchasing or carrying any "margin stock" as
defined in Regulation U (12 C.F.R. Part 221) of the Board of
Governors of the Federal Reserve System (hereinafter called
"margin stock"). Each Borrowing will be used solely for the
purposes specified in this Agreement and none of such proceeds
will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin stock or for the purpose of
reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin stock or for any other
purpose which might constitute this transaction a "purpose credit"
within the meaning of Regulation U. Neither the Borrower nor any
agent of the Borrower acting on its behalf has taken or will take
any action which might cause this Agreement or any of the Notes to
violate Regulations G, T, U, or X or (to the best knowledge of the
Borrower) any other regulation of the Board of Governors of the
Federal Reserve System or to violate the Securities Exchange Act
of 1934, as amended, in each case as now in effect or as the same
may hereafter be in effect.
SECTION 7.12. ERISA. Except as disclosed on Schedule
7.12 attached hereto:
(a) Identification of Plans. Neither the Borrower nor
any ERISA Affiliate maintains or contributes to, or has maintained
or contributed to, any Plan.
(b) Liabilities. Neither the Borrower nor any
Subsidiary is currently or will become subject to any liability
(other than routine Plan expenses or contributions, if timely
paid), tax or penalty whatsoever to any person whomsoever, which
liability, tax or penalty is directly or indirectly related to
any Plan including, but not limited to, any penalty or liability
arising under Title I or Title IV of ERISA, any tax or penalty
resulting from a loss of deduction under Sections 404 or 419 of
the Code, or any tax or penalty under Chapter 43 of the Code,
except such liabilities, taxes, or penalties (when taken as a
whole) as will not have a material adverse effect on the Borrower
and its Subsidiaries taken as a whole, or upon their financial
condition, assets, business, operations, liabilities or prospects;
and
(c) Funding. The Borrower and each ERISA Affiliate has
made full and timely payment of all amounts (i) required to be
contributed under the terms of each Plan and applicable law and
(ii) required to be paid as expenses of each Plan. No Plan would
have an "amount of unfunded benefit liabilities" (as defined in
Section 4001(a)(18) of ERISA) in excess of $6,500,000 if such Plan
-40-<PAGE>
were terminated as of the date on which this representation and
warranty is made.
SECTION 7.13. Outstanding Debt. Neither the Borrower
nor any of its Subsidiaries has outstanding any Debt, on a
consolidated basis, except as disclosed on the footnotes to the
financial statements described in Section 7.07 and as permitted by
Section 9.02. There exists no default not waived in writing under
the provisions of any instrument evidencing or securing such Debt
or of any agreement otherwise relating thereto.
SECTION 7.14. Conflicting Agreements or Other Matters.
Neither the Borrower nor any of its Subsidiaries is a party to any
contract or agreement or subject to any charter or other corporate
restriction which materially and adversely affects its business,
property or assets, or financial condition or prospects. Neither
the execution or delivery of this Agreement or the other Loan
Documents, nor fulfillment of or compliance with the terms and
provisions hereof and thereof, will conflict with, or result in a
breach of the terms, conditions or provisions of, or constitute a
default under, or result in any violation of, or result in the
creation of any Lien upon any of the properties or assets of the
Borrower or any of its Subsidiaries pursuant to, the charter or
by-laws of the Borrower or any Subsidiary, any award of any
arbitrator or any agreement (including any agreement with
stockholders), instrument, order, judgment, decree, statute, law,
rule or regulation to which the Borrower or any of its
Subsidiaries is subject. Neither the Borrower nor any of its
Subsidiaries is a party to, or otherwise subject to any provision
contained in, any instrument evidencing indebtedness of the
Borrower or any of its Subsidiaries, any agreement relating
thereto or any other contract or agreement (including its charter)
which limits the amount of, or otherwise imposes restrictions on
the incurring of, Debt of the Borrower of the type to be evidenced
by the Notes, except as set forth in the agreements listed on
Schedule 7.14 attached hereto.
SECTION 7.15. Pollution and Environmental Control.
Except as listed on Schedule 7.15 attached hereto, each of the
Borrower and its Subsidiaries has obtained all permits, licenses
and other authorizations which are required under, and is in
compliance with, all federal, state, and local laws and
regulations relating to pollution, reclamation, or protection of
the environment, including laws relating to emissions, discharges,
releases or threatened releases of pollutants, contaminants, or
hazardous or toxic materials or wastes into air, water, or land,
or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or
handling of pollutants, contaminants or hazardous or toxic
materials or wastes where such failure to maintain or comply could
have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole.
-41-<PAGE>
SECTION 7.16. Possession of Franchises, Licenses, Etc.
The Borrower and its Subsidiaries possess all franchises,
certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities, and
all patents, trademarks, service marks, trade names, copyrights,
licenses and other rights, free from burdensome restrictions, that
are necessary for the ownership, maintenance and operation of any
of their respective properties and assets, and neither the
Borrower nor any of its Subsidiaries is in violation of any
thereof where such failure to possess or obtain or such violation
could have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole.
SECTION 7.17. Disclosure. Neither this Agreement nor
any other document, certificate or statement furnished to the
Lenders or the Agent by or on behalf of the Borrower in connection
herewith contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements
contained herein and therein not misleading. There is no fact
known or which should be known to the management of Borrower
peculiar to the Borrower or any of its Subsidiaries which
materially adversely affects or in the future may (so far as the
management of Borrower can now foresee) materially adversely
affect the business, property or assets, or financial condition of
the Borrower or any of its Subsidiaries which has not been set
forth in this Agreement or in the other documents, certificates
and statements furnished to the Lenders or the Agent by or on
behalf of the Borrower prior to the date hereof in connection with
the transactions contemplated hereby.
SECTION 7.18. Investment Company Act. The Borrower is
not an "investment company," or a company "controlled" by an
"investment company," within the meaning of the Investment Company
Act of 1940, as amended.
ARTICLE VIII
AFFIRMATIVE COVENANTS
So long as any Obligations shall remain unpaid or any
Lender shall have any Commitment hereunder, the Borrower will,
unless the Required Lenders shall otherwise consent in writing:
SECTION 8.01. Corporate Existence; Maintenance of
Properties. (i) Do or cause to be done all things necessary to
preserve and maintain, and cause each of its Subsidiaries to
preserve and maintain, its respective corporate existence, rights
and franchises, except as otherwise permitted pursuant to Section
9.04 hereof, (ii) cause its properties and the properties of its
Subsidiaries used or useful in the conduct of their respective
businesses to be maintained and kept in good condition, repair and
-42-<PAGE>
working order and supplied with all necessary equipment and cause
to be made all necessary repairs, renewals, replacements,
betterments and improvements thereto, all as in the judgment of
the Borrower may be necessary so that the businesses carried on in
connection therewith may be properly and advantageously conducted
at all times and (iii) will and will cause each of its
Subsidiaries to qualify and remain qualified to conduct business
in each jurisdiction where the nature of the business or ownership
of property by the Borrower, or such Subsidiary, as the case may
be, may legally require such qualification where the failure to
comply with (i), (ii) or (iii) could have a material adverse
effect on the Borrower and its Subsidiaries taken as a whole.
SECTION 8.02. Compliance with Laws, Etc. Comply, and
cause each of its Subsidiaries to comply, with all applicable
federal, state, and local laws, rules, regulations and orders,
including, without limitation, all federal, state and local laws,
rules, regulations and orders relating to pollution, reclamation,
or protection of the environment, including laws relating to
emissions, discharges, releases or threatened releases of
pollutants, contaminants, or hazardous or toxic materials or
wastes into air, water, or land, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants or
hazardous or toxic materials or wastes where the failure to comply
could have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole.
SECTION 8.03. Taxes and Claims. Pay, and cause each of
its Subsidiaries to pay and discharge, or cause to be paid and
discharged, (i) before the same shall become delinquent, all
taxes, assessments and other governmental charges levied or
imposed upon it or upon its income, profits or properties,
provided, however, without affecting Borrower's duty to promptly
pay all taxes, no default under this Agreement shall occur by
virtue of Borrower's failure, through clerical error, to promptly
pay taxes, assessments and other governmental charges in an
aggregate amount of less than $1,000,000 so long as such clerical
error is promptly corrected upon discovery unless such taxes,
assessments or charges are contested pursuant to clause (ii)
hereof, and (ii) all claims (including, without limitation, claims
for labor, materials, supplies or services) which might, if
unpaid, become a Lien upon and of its property, provided that, in
each case, neither the Borrower nor any Subsidiary shall be
required to pay or cause to be paid or discharged any such tax,
assessment, charge or claim in an aggregate amount less than
$5,000,000 whose amount or validity is being contested in good
faith by appropriate proceedings, or in an aggregate amount
greater than $5,000,000 where the amount is being contested in
good faith by appropriate proceedings and with respect to the
amount in excess of $5,000,000, where adequate reserves are being
maintained or capacity under the Commitments or other committed
-43-<PAGE>
credit facilities of the Borrower exists in an amount sufficient
to pay such portion of the tax, assessment, charge or claim and,
provided, further, that the Borrower shall, and shall cause each
Subsidiary to, pay all such taxes, assessments, charges and claims
forthwith upon the commencement of proceedings to foreclose any
Lien which may have attached as security therefor where such
foreclosure could have a material adverse effect on the Borrower
and its Subsidiaries taken as a whole.
SECTION 8.04 Compliance with Other Agreements.
Conduct, and cause each Subsidiary to conduct, its business
operations and obtain all necessary permits and licenses in
compliance with all agreements, indentures and mortgages to which
it is a party or by which it or any of its properties is bound
(unless waived) where the failure to comply could have a material
adverse effect on the Borrower and its Subsidiaries taken as a
whole.
SECTION 8.05. Inspection of Property. Permit any
Person designated in writing by the Agent or any Lender, at the
Agent's or such Lender's expense, to visit and inspect any of the
properties of the Borrower and any of its Subsidiaries, to examine
the corporate books and financial records of the Borrower and its
Subsidiaries and make copies thereof and take extracts therefrom,
and to discuss the affairs, finances and accounts of any of such
corporations with the principal officers of the Borrower and its
independent public accountants, all at such reasonable times and
as often as the Agent or any Lender may reasonably request.
SECTION 8.06. Insurance. Maintain, and cause each
Subsidiary to maintain, with financially sound and reputable
carriers insurance in such amounts and against such liabilities
and hazards as customarily is maintained by other companies
operating similar businesses.
SECTION 8.07. Business. Remain, and cause each
Subsidiary to remain, principally in the textile, carpet and
related businesses including, without limitation, the business in
which the Borrower and each of the Subsidiaries is engaged on the
date of this Agreement.
SECTION 8.08. Keeping of Books. Keep, and cause each
of its Subsidiaries to keep, proper books of record and account,
containing complete and accurate entries of all financial and
business transactions of the Borrower and each Subsidiary.
SECTION 8.09. Environmental Compliance. Immediately
notify the Agent orally and in writing of (i) any notice received
by the Borrower or any Subsidiary with respect to any occurrence
on any property owned or leased by the Borrower or its
Subsidiaries (the "Premises") involving the spill, release, leak,
seepage or discharge of any pollutant, contaminant, or hazardous
-44-<PAGE>
or toxic material or waste ("Hazardous Substance") into the air,
water or land, or (ii) any complaint, order or citation received
by the Borrower or any Subsidiary with respect to any such
occurrence ("Environmental Complaint") with respect to both (i)
and (ii), involving an aggregate amount in excess of $1,500,000 or
which could have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole.
SECTION 8.10. Reporting Covenants. Deliver to each of
the Lenders:
(a) as soon as available and in any event within 95
days after the end of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such fiscal year and the
related consolidated statements of income, stockholders'
equity and statement of cash flows for such fiscal year,
setting forth in each case in comparative form the figures
for the previous fiscal year, all in reasonable detail and
accompanied by a report thereon of Ernst & Young or other
independent public accountants acceptable to the Required
Lenders, which report will be unqualified as to scope of
audit and shall state that such consolidated financial
statements present fairly, in all material respects, the
consolidated financial position of the Borrower and its
Subsidiaries as at the end of such fiscal year, and the
consolidated results of operations and statement of cash
flows of the Borrower and its Subsidiaries for such fiscal
year in accordance with generally accepted accounting
principles and that the audit by such accountants in
connection with such consolidated financial statements was
made in accordance with generally accepted auditing standards
provided, however, that this subsection (a) shall be deemed
satisfied by the delivery of Borrower's Annual Report on Form
10K as filed with the Securities Exchange Commission
delivered in the time allotted above;
(b) as soon as available and in any event within 50
days after the end of the first three quarters of each fiscal
year of the Borrower, a consolidated condensed balance sheet
of the Borrower and its Subsidiaries as of the end of such
quarter and the related consolidated condensed statements of
income and cash flows for such quarter and for the portion of
the Borrower's fiscal year ended at the end of such quarter,
setting forth in each case in comparative form the figures
for the corresponding quarter and the corresponding portion
of the Borrower's previous fiscal year, all certified
(subject to normal year end adjustments) as to fairness of
presentation, preparation in accordance with generally
accepted accounting principles and consistency of accounting
methods (except where the Borrower's independent certified
public accountants have concurred with any change) by a
-45-<PAGE>
Financial Officer of the Borrower; provided, however, that
this subsection (b) shall be deemed satisfied by the delivery
of Borrower's Quarterly Report on Form 10Q as filed with the
Securities Exchange Commission delivered in the time allotted
above;
(c) simultaneously with the delivery of each set of
financial statements referred to in clauses (a) and (b)
above, a duly completed certificate of a Financial Officer of
the Borrower substantially in the form of Exhibit H attached
hereto (i) setting forth in reasonable detail the
calculations required to establish whether the Borrower was
in compliance with the requirements of Sections 9.01, 9.02,
9.03(b) and (i), 9.04, 9.07 and 9.11 on the date of such
financial statements, and (ii) stating whether there exists
on the date of such certificate any Default or Event of
Default and, if any Default or Event of Default then exists,
setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of
financial statements referred to in clause (a) above, a
statement of the firm of independent public accountants which
reported on such statements stating whether anything has come
to its attention to cause it to believe that there existed on
the date of such statements any Default or Event of Default;
(e) by no later than December 31st of each calendar
year, a budget, together with a projected balance sheet and
income statement of the Borrower and its Subsidiaries for the
upcoming Fiscal Year, certified by a Financial Officer of the
Borrower.
(f) forthwith upon the occurrence of any Default or
Event of Default, a certificate of a Financial Officer of the
Borrower setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect
thereto;
(g) promptly upon the mailing or filing thereof, copies
of all reports and proxy statements which the Borrower sends
to its securityholders, and copies of all reports and
registration statements which the Borrower or any Subsidiary
files with the Securities and Exchange Commission or any
national securities exchange;
(h) promptly after (i) the occurrence thereof, notice
of the institution by any Person of any action, suit or
proceeding or any governmental investigation or any
arbitration, before any court or arbitrator or any
governmental or administrative body, agency, or official,
against the Borrower, any Subsidiary, or any material
-46-<PAGE>
property of any of them, or (ii) the receipt of actual
knowledge thereof, notice of the threat of any such action,
suit, proceeding, investigation or arbitration, each such
notice under this subsection to specify, if known, the amount
of damages being claimed or other relief being sought, the
nature of the claim, the Person instituting the action, suit,
proceeding, investigation or arbitration, and any other
significant features of the claim, in either case, involving
an aggregate amount greater than $1,500,000 or which could
have a material adverse effect on the Borrower and its
Subsidiaries taken as a whole.
(i) promptly after the occurrence thereof with respect
to any Plan, or any trust established thereunder, notice of
(A) a "reportable event" described in Section 4043 of ERISA
and the regulations issued from time to time thereunder
(other than a "reportable event" not subject to the
provisions for 30-day notice to the PBGC under such
regulations), or (B) any other event which could subject the
Borrower or any ERISA Affiliate to any material tax, penalty
or liability under Title I or Title IV of ERISA or Chapter 43
of the Code;
(j) at the same time and in the same manner as such
notice must be provided to the PBGC, or to a Plan
participant, beneficiary or alternative payee, any notice
required under Section 101(d), 302(f)(4), 303, 307,
4041(b)(1)(A) or 4041(c)(1)(A) of ERISA or under
Section 401(a)(29) or 412 of the Code with respect to any
Plan;
(k) on an annual basis, together with the financial
report required by subsection (a) hereof, a list, as of a
recent date, of the Debt of Subsidiaries, accompanied by duly
completed certificate of a Financial Officer of the Borrower
in the form of Exhibit I attached hereto;
(l) promptly after the occurrence thereof, copies of
executed amendments, modifications or waivers with respect to
the Senior Subordinated Note Agreement or the notes issued
pursuant thereto or the Subordinated Convertible Debentures
or the indenture executed in connection therewith or the
Bonds;
(m) promptly after any merger involving the Borrower as
described in Section 9.04, a notice describing such event and
including a duly completed certificate of a Financial Officer
of the Borrower certifying that, following such action, no
Default or Event of Default exists hereunder;
(n) promptly upon the formation or acquisition of any
Subsidiary, or any other event resulting in the creation of a
-47-<PAGE>
new Subsidiary, notice of the formation or acquisition of
such Subsidiary or such occurrence, including a description
of the assets of such entity, the activities in which it will
be engaged, and such other information as the Agent or any of
the Lenders may request;
(o) promptly upon any Investment specified in Section
9.03(i), a notice describing such event and including a duly
completed certificate of a Financial Officer of the Borrower
substantially in the form of Exhibit J attached hereto
certifying that such Investment does not result in a
violation thereof; and
(p) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of
its Subsidiaries or of any Plan, as any Lender through the
Agent may from time to time reasonably request.
All such financial statements referred to in subsections 8.10(a)
and (b) above shall conform to generally accepted accounting
principles applied on a basis consistent with those in effect on
the date of this Agreement except where Borrower's independent
certified public accountants have concurred with any change.
SECTION 8.11. Additional Credit Parties. Promptly
after the formation or acquisition of any Material Subsidiary that
is not a Credit Party, the Borrower shall execute and deliver, and
cause to be executed and delivered a Subsidiary Subordination
Agreement from each such Material Subsidiary, together with
related corporate authorization documents, organizational
documents, secretary's certificates and opinions, all in form and
substance satisfactory to the Agent and the Required Lenders.)
ARTICLE IX
NEGATIVE COVENANTS
So long as any Obligations shall remain outstanding or
any Lender shall have any Commitment hereunder, the Borrower will
not, without the written consent of the Required Lenders:
SECTION 9.01. Liens, Etc. Create, assume or suffer to
exist, or permit any of its Subsidiaries to create, assume or
suffer to exist, any Lien upon any of its property or assets
whether now owned or hereafter acquired, except:
(a) Liens existing on the date hereof as set forth on
Schedule 9.01 attached hereto; plus
(b) purchase money Liens upon any property acquired or
held by the Borrower or any Subsidiary in the ordinary course
-48-<PAGE>
of business to secure the purchase price of such property or
to secure Debt incurred solely for the purpose of financing
the acquisition of such property, provided that such Lien
does not extend to any other property and further provided
that such Lien does not exceed (i) the purchase price which
shall not exceed the fair market value (which may include
goodwill and intangibles) on the date of such purchase of
such property and (ii) prior to the date on which the
Borrower delivers financial statements and appropriate
certifications thereof required by Section 8.01 to the
Lenders evidencing that, the Borrower's ratio of Total Debt
to Total Capitalization was less than 50% for such period, an
aggregate amount of $10,000,000 and thereafter, regardless of
the Borrower's future leverage, there shall be no dollar
limit on such purchase money liens; plus
(c) Liens existing on any property held in the ordinary
course of business by the Borrower or any Subsidiary at the
time of its acquisition (other than any such Lien created in
contemplation of such acquisition except as otherwise
permitted hereunder); plus
(d) Liens existing on property of any Person acquired
by the Borrower or any of its Subsidiaries at the time of
acquisition of such Person (other than any such Lien created
in contemplation of such acquisition except as otherwise
permitted hereunder); plus
(e) purchase money Liens on the property of any Person
acquired or property acquired or held by the Borrower or any
Subsidiary to secure the purchase price of such property or
such Person or to secure Debt incurred solely for the purpose
of financing the acquisition of such property or such Person,
provided that such Lien does not extend to any other property
and further provided that such Lien does not exceed the
purchase price not to exceed the fair market value (which may
include goodwill and intangibles) at the time of purchase of
such property or such Person and further provided that such
purchase shall not result in a violation of Section 8.07
hereof or 9.01(b) above; plus
(f) Liens for taxes or assessments or other
governmental charges or levies not yet due or which are being
actively contested in good faith by appropriate proceedings
if, with respect to the amount of such Liens in excess of
$5,000,000, adequate reserves with respect thereto are
maintained on the books of the Borrower or its Subsidiaries,
as the case may be, in accordance with generally accepted
accounting principles and/or with respect to which capacity
exists under this Agreement or other committed credit
facilities of the Borrower; plus
-49-<PAGE>
(g) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and other Liens imposed
by law created in the ordinary course of business for amounts
not yet due or which are being contested in good faith by
appropriate proceedings and with respect to which adequate
reserves are being maintained; plus
(h) Liens (other than any Lien imposed by ERISA)
incurred or deposits made in the ordinary course of business
in connection with workmen's compensation, unemployment
insurance and other types of social security, or to secure
the performance of tenders, statutory obligations, surety and
appeal bonds, bids, leases, government contracts, performance
and return-of-money bonds and other similar obligations
(other than obligations for the payment of borrowed money);
plus
(i) easements, rights-of-way, restrictions and other
similar charges or encumbrances which do not interfere with
the ordinary conduct of the business of the Borrower or any
of its Subsidiaries or any of their respective properties;
plus
(j) Liens arising from maturity factoring arrangements
of Borrower or any of its Subsidiaries occurring in the
normal course of business and which do not exceed the actual
amount of the accounts factored pursuant to such arrangement;
plus
(k) Liens resulting from judgments (not covered by
insurance) which have not been in existence over 30 days or
which judgments are being appealed in good faith provided
that such Liens may not exceed an aggregate amount of
$5,000,000 unless with respect to the amount of such Lien
exceeding $5,000,000 Borrower maintains adequate reserves in
accordance with generally accepted account principles and/or
the capacity exists under this Agreement or other committed
credit facilities of the Borrower to remove such Liens; plus
(l) Liens which do not secure Debt and which will not,
in the aggregate, have a material adverse effect on the
business, properties or prospects of the Borrower and its
Subsidiaries; plus
(m) extensions, renewals or replacements of any Lien
referred to in clauses (a) through (l) of this Section 9.01,
provided that the principal amount of the Debt or obligation
secured thereby is not increased and that any such extension,
renewal or replacement is limited to the property originally
encumbered by the Lien.
-50-<PAGE>
SECTION 9.02. Debt of Subsidiaries. Permit any of its
Subsidiaries to create, incur, assume or suffer to exist, any
Debt, other than:
(a) Debt owing to the Borrower in the form of
Intercompany Advances evidenced by Intercompany Notes,
payable on demand, pledged to the Agent pursuant to the
Subsidiary Note Assignment; provided that, the aggregate
amount of Intercompany Advances at any one time outstanding
from the Borrower to its Subsidiaries (excluding amounts owed
by Dixie Funding to the Borrower in connection with the
Securitization Program) including the Intercompany Advances
outstanding on the Closing Date and set forth on Schedule
9.02 hereto shall not exceed $85,000,000 at any time
outstanding;
(b) Intercompany Advances from one Subsidiary to
another Subsidiary evidenced by Intercompany Notes, payable
on demand, pledged to the Agent pursuant to a Subsidiary Note
Assignment; plus
(c) purchase money Debt to the extent permitted by
Section 9.01(b)); plus
(d) unsecured current liabilities (not resulting from
any borrowing) incurred in the ordinary course of business
for current purposes and not represented by a promissory note
or other evidence of indebtedness; plus
(e) other Debt (other than Intercompany Advances);
provided that the aggregate outstanding principal amount of
such Debt of the Subsidiaries shall not at any one time
outstanding exceed the sum of $10,000,000 for each Subsidiary
and an aggregate sum of $50,000,000 for all Subsidiaries;
plus
(f) Debt incurred after the date hereof for the
purchase of the property of any Person or for the purchase of
any Person plus Debt of such Person existing on the date of
its acquisition or Debt secured by any property acquired or
held by any Person on the date of its acquisition (and
refinancings and renewals thereof), to the extent that such
Debt does not exceed the purchase price plus any Debt
directly or indirectly assumed as a result of such
acquisition, such amount not to exceed the fair market value
(which may include goodwill and intangibles) on the date of
such acquisition of such Person or property of such Person;
provided that, a certificate of a Financial Officer of the
Borrower is delivered to the Lenders prior to the incurrence
of such Debt demonstrating compliance on a pro forma basis
with the financial covenants set forth in Section 9.11 both
before and after giving effect to such incurrence of Debt and
-51-<PAGE>
further provided no other Default or Event of Default exists
hereunder or would result therefrom; plus
(g) Debt incurred by Masland in connection with the
Bonds as long as such Bonds are owned by the Agent and the
Debt incurred by Dixie Funding in connection with the
Securitization Program.
SECTION 9.03. Restrictions on Loans, Advances,
Investments and Contingent Liabilities. Make or permit to remain
outstanding or permit any Subsidiary to make or permit to be
outstanding, any loan or advance to, or extend credit (other than
credit extended in the normal course of business to any Person)
to, or guarantee, endorse or otherwise be or become contingently
liable, directly or indirectly, in connection with the
obligations, stock or dividends of, or any other Investment in,
any Person, except that the Borrower or any Subsidiary may:
(a) make or permit to remain outstanding (i)
Intercompany Advances permitted by Section 9.02(a) and (b),
and (ii) Intercompany Advances from a Subsidiary to Borrower
which are subordinated to the Obligations of the Borrower
pursuant to the Subsidiary Subordination Agreement; plus
(b) permit to remain outstanding any Investments in any
Subsidiary existing on the Closing Date and set forth on
Schedule 9.03 plus additional Investments (in addition to
cash Intercompany Advances permitted above) in Subsidiaries
in an aggregate amount not to exceed $10,000,000 at any time
outstanding; plus
(c) acquire and own stock, obligations or securities
received in settlement of debts (created in the ordinary
course of business) owing to the Borrower or any Subsidiary;
plus
(d) acquire and own:
(1) prime commercial paper and certificates of
deposit in and banker's acceptances of United States
commercial banks having total assets in excess of
$1,000,000,000, in each case due within one year from
the date of purchase and payable in the United States in
Dollars;
(2) Eurodollar certificates of deposit in
commercial banks having total assets in excess of
$1,000,000,000, due within one year from the date of
purchase and payable in the United States in Dollars;
-52-<PAGE>
(3) directly or indirectly through mutual funds,
obligations of United States of America or any agency
thereof;
(4) directly or indirectly through mutual funds,
corporate securities or municipal notes or bonds rated
"A" or better by Moody's Investors Service or the
comparable rating of Standard & Poors Corporation;
(5) adjustable rate preferred stock rated "A" or
better by Moody's Investors Service or Standard & Poors
Corporation;
(6) repurchase agreements of United States banks
having total assets in excess of $1,000,000,000 with
respect to certificates and obligations described in
clauses (1) through (5) above; plus
(e) acquire for cash or capital stock of Borrower, a
minority interest in any Person engaged in the textile,
carpet or related businesses, with the reasonable intention
of acquiring majority control of such Person within a
reasonable period of time and with the financial ability to
acquire such majority control with Debt, existing cash, or
capital stock of Borrower; provided that, a certificate of a
Financial Officer of the Borrower is delivered to the Lenders
prior to such acquisition demonstrating compliance on a pro
forma basis with the financial covenants set forth in Section
9.11 both before and after giving effect to such acquisition
and further provided no other Default or Event of Default
exists hereunder or would result therefrom; plus
(f) acquire, under such circumstances that the
provisions of this Agreement are not violated, a majority
interest in any Person engaged in the textile, carpet or
related businesses provided that, a certificate of a
Financial Officer of the Borrower is delivered to the Lenders
prior to such acquisition demonstrating compliance on a pro
forma basis with the financial covenants set forth in Section
9.11 both before and after giving effect to such acquisition
and further provided no other Default or Event of Default
exists hereunder or would result therefrom; plus
(g) endorse negotiable instruments for collection in
the ordinary course of business; plus
(h) make or permit to remain outstanding (i) loans and
advances to employees participating in the Borrower's
Employee Stock Purchase Plan, and (ii) travel and other like
advances to officers and employees in the ordinary course of
business, except that the aggregate amount of (i) and (ii) at
any time outstanding shall not exceed $1,500,000; plus
-53-<PAGE>
(i) make additional Investments in any other Person
(except Subsidiaries), provided that the sum of such
Investments, shall not exceed in aggregate amount, the
greater of (x) $25,000,000, or (y) 15% of Net Worth at the
time of such transaction; and further provided, that no
Subsidiary shall acquire any stock or securities of, the
Borrower; plus
(j) make or permit to remain outstanding Investments to
fund non-qualified employee benefit plans for highly
compensated employees.
SECTION 9.04. Merger and Sale of Assets. Enter into or
permit any Subsidiary to enter into any transaction of merger,
consolidation, pooling of interest, joint venture, syndicate or
other combination with any other Person or enter into any Asset
Disposition or permit any Subsidiary to enter into any Asset
Disposition except that:
(a) any Subsidiary may merge with the Borrower,
provided that the Borrower shall be the continuing or
surviving corporation, or with any one or more other
Subsidiaries;
(b) any Subsidiary may sell, lease or otherwise dispose
of any of its assets to the Borrower or another Subsidiary,
and upon disposal of substantially all of its assets as
permitted by this subsection (b), such Subsidiary may be
liquidated;
(c) Borrower may merge with another Person; provided,
that following such merger, (i) Borrower shall be the
surviving corporation, and (ii) Borrower's Total Debt shall
not exceed the greater of (x) 65% of Total Capitalization, or
(y) the percentage of Total Capitalization immediately prior
to such merger, and (iii) no Default or Event of Default
shall exist hereunder;
(d) Any Subsidiary may merge with another Person;
provided, that following such merger the Subsidiary shall be
the surviving corporation and no Default or Event of Default
shall exist hereunder;
(e) Borrower and its Subsidiaries may, in any one
fiscal year, make Asset Dispositions (at then current market
value) of assets (including stock of a Subsidiary) (i) having
a book value less than twenty-five percent (25%) of Net
Tangible Assets as of the end of the most recent preceding
fiscal quarter, and (ii) which contributed less than ten
(10%) of positive EBIT, for the immediately preceding four
fiscal quarters; provided, however, following any Asset
Disposition of the stock of a Subsidiary resulting in a
-54-<PAGE>
minority interest in such former Subsidiary, any resulting
Investment in such former Subsidiary must be permitted
pursuant to Section 9.03(i) hereof;
(f) The Borrower and any Subsidiary may make any
Investment permitted by Section 9.03 hereof.
Notwithstanding the foregoing, the occurrence of an Asset
Disposition described in clause (ii) of the definition thereof
shall not be deemed to be a violation of this Section 9.04.
SECTION 9.05. Issuance of Stock by Subsidiaries.
Permit any Subsidiary (either directly or indirectly by the
issuance of rights or options for, or securities convertible into
such shares) to issue, sell or dispose of any shares of its stock
of any class (other than directors' qualifying shares, if any).
SECTION 9.06. Lease Obligations. Create or suffer to
exist, or permit any of its Subsidiaries to create or suffer to
exist, any obligations for the payment of rent for any property
under operating leases or agreements to lease (other than capital
leases) having a term of one year or more which would cause the
direct or contingent liabilities of the Borrower and its
Subsidiaries, on a consolidated basis, to exceed $10,000,000
payable in any period of twelve consecutive calendar months.
SECTION 9.07. Sale and Lease-Back. Enter into or
permit any Subsidiary to enter into any arrangement, with any
lender or investor or under which such lender or investor is a
party, providing for the leasing by the Borrower or any Subsidiary
of real or personal property, used by the Borrower or any
Subsidiary in the operations of the Borrower or any Subsidiary,
which has been or is sold or transferred by the Borrower or any
Subsidiary to such lender or investor or to any Person to whom
funds have been or are to be advanced by such lender or investor
on the security of such rental obligations of the Borrower or such
Subsidiary; provided, however, the Borrower and its Subsidiaries
may enter into arrangements otherwise prohibited by this Section
9.07 where the value of the property sold and leased back by the
Borrower and its Subsidiaries (taken at the higher of book value
or fair market value at the time of the transaction) does not
exceed the aggregate amount of $5,000,000.
SECTION 9.08. Sale or Discount of Receivables. Except
for the maturity factoring arrangements contemplated by Section
9.01(j) hereof and the Securitization Program, sell or permit any
Subsidiary to sell with recourse or discount or otherwise sell for
less than the face value thereof, any of its notes or accounts
receivable.
SECTION 9.09. Compliance with ERISA. Take or fail to
take, nor permit any ERISA Affiliate to take or fail to take, any
-55-<PAGE>
action with respect to a Plan including, but not limited to
(i) establishing any Plan, (ii) amending any Plan,
(iii) terminating or withdrawing from any Plan, or (iv) incurring
an amount of unfunded benefit liabilities, as defined in
Section 4001(a)(18) of ERISA, or any withdrawal liability under
Title IV of ERISA, where such action or failure could have a
material adverse effect on the financial condition, Properties,
business, results of operations or prospects of the Borrower or
any Subsidiary, result in a lien on the property of the Borrower
or any Subsidiary, or require the Borrower or any Subsidiary to
provide any security, in either case involving an amount exceeding
$5,000,000 in the aggregate.
SECTION 9.10. Contracts with Affiliates, Directors, or
Controlling Shareholders. Shall not enter and shall not permit
any Subsidiary to enter into any contract or agreement with an
Affiliate, a Director or a Controlling Shareholder except on an
arms-length basis and without any preferential term or provision.
SECTION 9.11. Financial Covenants. The Borrower shall
not permit:
(a) Total Debt to Total Capitalization. Its ratio
of Total Debt to Total Capitalization as of the last day of
any fiscal quarter of the Borrower occurring during the
period set forth below to be greater than the ratio
(expressed as a percentage) set forth opposite such period
below:
Period Ratio
Closing Date through the last
day of fiscal year 1997 65%
First day of fiscal year
1998 through the last
day of fiscal year 1998 62.5%
First day of fiscal year
1999 and thereafter 60%
(b) Leverage Ratio. Its Leverage Ratio as of the
last day of any fiscal quarter of the Borrower occurring
during the period set forth below to be greater than the
ratio (expressed as a percentage) set forth opposite such
period below:
Period Ratio
Closing Date through the last
day of fiscal year 1997 45%
-56-<PAGE>
First day of fiscal year
1998 through the last
day of fiscal year 1998 42.5%
First day of fiscal year
1999 and thereafter 40%
(c) Interest Coverage Ratio. Its Interest Coverage
Ratio as of any of the dates set forth below to be less than
the ratio set forth opposite such period below:
Period Ratio
Fiscal quarter ending on or
about March 31, 1995 1.25:1.0
Two preceding fiscal quarters
ending on or about June 30, 1995 1.25:1.0
Three preceding fiscal quarters
ending on or about September 30, 1995 1.25:1.0
Four preceding fiscal quarters
ending on or about December
31, 1995 and on or about
March 31, 1996 1.25:1.0
Four preceding fiscal quarters
ending on or about June 30,
1996, September 30, 1996,
December 31, 1996 and March
31, 1997 1.50:1.0
Four preceding fiscal quarters
ending on or about June 30, 1997 1.75:1.0
Four preceding fiscal quarters
ending on the last day of each
fiscal quarter thereafter 1.75:1.0.
(d) Dividends, Etc. Borrower shall not declare or pay
any dividend on its capital stock, or make any payment to
purchase, redeem, retire or acquire any of its Subordinated
Debt or capital stock or any option, warrant, or other right
to acquire such Subordinated Debt or capital stock, other
than:
(i) dividends payable solely in shares of capital
stock;
-57-<PAGE>
(ii) cash dividends declared and paid, and all
other such payments made, including repurchases of stock
from employees in connection with employee benefit plans
in an aggregate amount in any fiscal year not to exceed
the greater of (x) $3,000,000, and (y) 50% of Net Income
(which must be a positive number) earned during the
Borrower's preceding fiscal year;
(iii) regularly scheduled payments of interest and
principal amortization with respect to the Senior
Subordinated Note Agreement and the Subordinated
Convertible Debentures; and
(iv) payments to Prudential pursuant to the
Prudential Agreement upon exercise by Prudential of the
"Put Option" described in Section 1.1 of such Agreement;
provided, however, no such dividend or other payment may be
declared or paid pursuant to clauses (ii), (iii) or (iv)
above unless no Default or Event of Default exists at the
time of such declaration or payment, or would exist as a
result of such declaration or payment.
SECTION 9.12. Actions Under Certain Documents. (a)
Modify, amend, cancel or rescind the Intercompany Advances or
Intercompany Notes (except for modifications and amendments to
increase the principal amount of the Intercompany Notes to the
extent otherwise permitted by this Agreement);
(b) Modify or amend Subordinated Debt or any agreements or
documents evidencing or governing the Subordinated Debt, the
Securitization Program or the Bonds other than modifications of
the Subordinated Debt, Securitization Program and the Bonds which
do not (i) increase the principal amount of the indebtedness
thereunder, (ii) increase the interest rate or any fees or
penalties thereunder, (iii) modify any requirement of prepayment
or repayment thereunder, or (iv) add or make more onerous any
other provision thereof that would cause or permit such
indebtedness to become due and payable prior to the Obligations;
or
(c) For so long as the Agent is the holder of the Bonds,
elect that the Bonds bear interest at the "Term Rate" or the
"Weekly Rate" as such terms are defined in the Trust Indenture
executed in connection with the Bonds.
-58-<PAGE>
ARTICLE X
EVENTS OF DEFAULT AND REMEDIES
SECTION 10.01. Events of Default. Any one or more of
the following shall constitute an Event of Default hereunder:
(a) The Borrower fails to pay when due any payment of
principal on any of the Notes or any other sum payable
hereunder or fails to pay interest on any of the Notes within
seven (7) calendar days after the due date hereunder (Agent
shall use its best efforts to provide notice of such
Default); or
(b) Any representation or warranty contained herein or
deemed to have been made hereunder or made by or furnished on
behalf of the Borrower in connection herewith shall be false
or misleading in any material respect as of the date made or
deemed to have been made; or
(c) The Borrower fails to perform or observe any
covenant, term or condition contained in Sections 8.01(i),
8.05, 8.07, 8.08, 8.10(a), (b), (c), (d), (f) or (h) or
Article IX of this Agreement (Agent shall use its best
efforts to provide notice of any Default with respect to
Section 8.10 (a) or (b) hereof); or
(d) The Borrower fails to perform or observe any other
covenant or agreement of this Agreement not specifically
referred to elsewhere in this Section 10.01 or any covenant
or agreement contained in any other Loan Document and such
failure shall continue for more than 30 calendar days; or
(e) The Borrower or any Subsidiary (i) defaults in any
payment of principal or interest on any other obligation for
money borrowed (or any obligation under a capital lease, any
obligation under a conditional sale or other title retention
agreement, any obligation issued or assumed as full or
partial payment for property whether or not secured by a
purchase money mortgage, or any obligation under notes
payable or drafts accepted representing extensions of credit)
in outstanding amount greater than $2,500,000 in the
aggregate, including, without limitation, the Subordinated
Debt, the Bonds, the Securitization Program, which is not
remedied or waived beyond any period of grace provided with
respect thereto, or (ii) fails to perform or observe any
other agreement, term or condition contained in any agreement
under which any obligation described in clause (i) is created
(or if any other event shall occur and be continuing
thereunder) and the effect of such failure or other event is
to cause or to permit the holder or holders of such
obligation (or a trustee on behalf of such holder or holders)
-59-<PAGE>
to cause such obligation to become due prior to any stated
maturity if not remedied or waived within any period of grace
provided with respect thereto; or
(f) The Borrower or any Subsidiary fails to pay its
debts generally as they become due or shall admit in writing
its inability to pay its debts generally; or
(g) The Borrower or any Subsidiary shall make or take
any action to make an assignment for the benefit of
creditors, petition or take any action to petition any
tribunal for the appointment of a custodian, receiver or any
trustee for it or a substantial part of its assets, or shall
commence or take any action to commence any proceeding under
any bankruptcy, reorganization, arrangement, readjustment of
debt, dissolution, liquidation or debtor relief law or
statute of any jurisdiction, whether now or hereafter in
effect including, without limitation, the Bankruptcy Code;
or, if there shall have been filed any such petition or
application, or any such proceeding shall have been commenced
against it, in which an order for relief is entered which
remains unstayed and in effect for more than 60 days; or the
Borrower or any Subsidiary by any act or omission shall
indicate its consent to, approval of or acquiescence in any
such petition, application or proceeding or order for relief
or the appointment of a custodian, receiver or any trustee
for it or any substantial part of any of its properties, or
shall suffer to exist any such custodianship, receivership or
trusteeship; or any corporate action is taken by the Borrower
or any Subsidiary for the purpose of effecting any of the
foregoing; or
(h) The Borrower or any Subsidiary shall have
concealed, removed, or permitted to be concealed or removed,
any part of its property, with intent to hinder, delay or
defraud its creditors or any of them, or made or suffered a
transfer of any of its property which may be fraudulent under
any bankruptcy, fraudulent conveyance or similar law; or
shall have made any transfer of its property to or for the
benefit of a creditor at a time when other creditors
similarly situated have not been paid while the Borrower or
such Subsidiary is insolvent; or shall have suffered or
permitted, while insolvent, any creditor to obtain a Lien
upon any of its property through legal proceedings or
distraint; or
(i) Any order, judgment or decree is entered in any
proceedings against the Borrower decreeing the dissolution of
the Borrower and such order, judgment or decree remains
unstayed and in effect for more than 60 days; or
-60-<PAGE>
(j) Any order, judgment or decree is entered in any
proceedings against the Borrower or any Subsidiary decreeing
a split-up of the Borrower or such Subsidiary which requires
the divestiture of assets representing a substantial part, or
the divestiture of the stock of a Subsidiary whose assets
represent a substantial part, of the consolidated assets of
the Borrower and its Subsidiaries (determined in accordance
with generally accepted accounting principles) or which
requires the divestiture of assets or stock of a Subsidiary,
and such order, judgment or decree remains unstayed and in
effect for more than 30 days; or
(k) A judgment or order for the payment of money in an
amount in excess of $2,500,000 or otherwise materially
adverse to the business, financial condition, results of
operations or prospects of the Borrower and its Subsidiaries
taken as a whole is rendered against the Borrower or any
Subsidiary and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order,
(ii) there shall be any period of 30 consecutive days during
which a stay of enforcement of such judgment or order, by
reason of a pending appeal or otherwise, shall not be in
effect, unless such judgment or order shall be paid or bonded
and shall therefore no longer be materially adverse to the
business, financial condition, results of operations or
prospects of the Borrower and its Subsidiaries taken as a
whole; or
(l) any individual, entity, or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act)
shall acquire the stock of the Borrower resulting in
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 50% of the
combined voting power of the then outstanding voting
securities of the Borrower entitled to vote generally in the
election of directors, but excluding, for this purpose, any
such acquisition by (i) the Borrower or any of its
Subsidiaries, (ii) any employee benefit plan (or related
trust) of the Borrower or its Subsidiaries, (iii) any other
Person of voting power pursuant to a revocable proxy, or (iv)
members of the family of J. Burton Frierson, including his
issue, any spouse of such issue and any estate or trust
created by any such member; or
(m) any Credit Party shall deny liability pursuant to,
or the enforceability of, any Loan Document; or
(n) the Borrower shall cease to own and control at
least (i) 51% of the outstanding stock of any Subsidiary
which owes Intercompany Advances to the Borrower or any other
Subsidiary of the Borrower unless such Intercompany Advances
are repaid in full in connection with the event resulting in
-61-<PAGE>
such change of control of such Subsidiary, and (ii) for so
long as the Bonds are owned by the Agent, 100% of Masland; or
(o) the Borrower shall default in its obligations
pursuant to the Prudential Agreement.
SECTION 10.02. Remedies on Default.
(a) Upon the occurrence and during the continuation of
an Event of Default (other than an Event of Default described in
Section 10.01(g)), the Agent shall, at the option and upon the
request of the Required Lenders, or may, with the consent of the
Required Lenders (i) terminate all obligations of the Lenders to
the Borrower, including, without limitation, all obligations to
make Advances under this Agreement, (ii) declare the Notes,
including, without limitation, principal, accrued interest and
costs of collection (including, without limitation, reasonable
attorneys' fees if collected by or through an attorney at law or
in bankruptcy, receivership or other judicial proceedings)
immediately due and payable, without presentment, demand, protest
or any other notice of any kind, all of which are expressly
waived.
(b) Upon the occurrence of an Event of Default under
Section 10.01(g), (i) all obligations of the Lenders to the
Borrower, including, without limitation, all obligations to make
Advances under this Agreement, shall terminate automatically and
(ii) the Notes, including, without limitation, principal, accrued
interest and costs of collection (including, without limitation,
reasonable attorneys' fees if collected by or through an attorney
at law or in bankruptcy, receivership or other judicial
proceedings) shall be immediately due and payable, without
presentment, demand, protest, or any other notice of any kind, all
of which are expressly waived.
(c) Upon the occurrence of an Event of Default and
acceleration of the Notes as provided in (a) or (b) above, the
Lenders and the Agent, or any of them, may pursue any remedy
available under this Agreement, under the Notes, or under any
other Loan Document, or available at law or in equity, all of
which shall be cumulative. The order and manner in which the
rights and remedies of the Lenders under the Loan Documents and
otherwise may be exercised shall be determined by the Required
Lenders.
(d) All payments with respect to this Agreement
received by the Agent and the Lenders, or any of them, after the
occurrence of an Event of Default and acceleration of the Notes,
shall be applied first to the costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by the
Agent, acting as Agent, and the Lenders as a result of the
Default, and thereafter paid pro rata to the Lenders in the same
-62-<PAGE>
proportion that the aggregate of the unpaid principal amount owing
on the Notes to each Lender, plus accrued and unpaid interest
thereon, bears to the aggregate of the unpaid principal amount
owing on all the Notes to all of the Lenders, plus accrued and
unpaid interest thereon. Regardless of how each Lender may treat
the payments for the purpose of its own accounting, for the
purpose of computing the Borrower's obligations hereunder and
under the Notes, payments shall be applied first, to the costs and
expenses incurred by the Agent, acting as Agent, and the Lenders
as a result of the Default, as set forth above, second, to the
payment of accrued and unpaid fees of the Agent and the Lenders,
third, to the payment of accrued and unpaid interest on the Notes,
to and including the date of such application (ratably according
to the accrued and unpaid interest on the Borrowings), fourth, to
the ratable payment of the unpaid principal of the Notes, and
fifth, to the payment of all other amounts then owing to the Agent
or the Lenders under the Loan Documents. No application of the
payments will cure any Event of Default or prevent acceleration,
or continued acceleration, of amounts payable under the Loan
Documents or prevent the exercise, or continued exercise, of
rights or remedies of the Lenders hereunder or under applicable
law.
ARTICLE XI
THE AGENT AND THE LEAD MANAGER
SECTION 11.01. Appointment and Authorization. Each
Lender hereby designates Trust Company Bank as Agent to act as
herein specified. Each Lender hereby irrevocably authorizes, and
each holder of any Note by the acceptance of a Note shall be
deemed irrevocably to authorize, the Agent to take such action on
its behalf under the provisions of this Agreement and the Notes
and any other instruments and agreements referred to herein,
including the Bonds, and to exercise such powers and to perform
such duties hereunder and thereunder as are specifically delegated
to or required of the Agent by the terms hereof and thereof and
such other powers as are reasonably incidental thereto. The Agent
may perform any of its duties hereunder by or through its agents
or employees. The Lead Manager in its capacity as such, shall not
have any duties or obligations whatsoever under this Agreement,
the Notes or any of the other Loan Documents, but shall
nevertheless be entitled to all benefits afforded to it in such
capacity hereunder.
SECTION 11.02. Nature of Duties of the Agent. The
Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement. Neither the Agent nor any
of its officers, directors, employees or agents shall be liable
for any action taken or omitted by it as such hereunder or in
connection herewith, unless caused by its or their gross
-63-<PAGE>
negligence or willful misconduct. The Agent shall not have by
reason of this Agreement a fiduciary relationship in respect of
any Lender; and nothing in this Agreement, expressed or implied,
is intended to or shall be so construed as to impose upon the
Agent any obligations in respect of this Agreement except as
expressly set forth herein. The Agent agrees to give each Lender
prompt notice of the Agent's receipt from the Borrower of any
notice under this Agreement or the Bonds.
SECTION 11.03. Lack of Reliance on the Agent.
(a) Each Lender agrees that, independently and without
reliance upon the Agent, the Lead Manager any other Lender, or the
directors, officers, agents or employees of the Agent, the Lead
Manager or of any other Lender, each Lender, to the extent it
deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial condition and affairs
of the Borrower and its Subsidiaries in connection with the taking
or not taking of any action in connection with this Agreement and
the other Loan Documents, including the decision to enter into
this Agreement and to purchase the participation in the Bonds, and
(ii) its own appraisal of the creditworthiness of the Borrower and
its Subsidiaries, and, except as expressly provided in this
Agreement, the Agent shall have no duty or responsibility, either
initially or on a continuing basis, to provide any Lender with any
credit or other information with respect thereto, whether coming
into its possession before the making of any Advance or at any
time or times thereafter.
(b) Neither the Agent nor the Lead Manager shall be
responsible to any Lender for any recitals, statements,
information, representations or warranties herein or in any
document, certificate or other writing delivered in connection
herewith or for the execution, effectiveness, genuineness,
validity, enforceability, collectibility, priority or sufficiency
of this Agreement or the Notes or the Bonds or the financial
condition of the Borrower or its Subsidiaries or be required to
make any inquiry concerning either the performance or observance
of any of the terms, provisions or conditions of this Agreement or
the Notes or the Bonds, or the financial condition of the Borrower
or its Subsidiaries, or the existence or possible existence of any
Default or Event of Default.
SECTION 11.04. Certain Rights of the Agent.
(a) If the Agent shall request instructions from the
Required Lenders with respect to any act or action (including the
failure to act) in connection with this Agreement, the Agent shall
be entitled to refrain from such act or taking such action unless
and until the Agent shall have received instructions from the
Required Lenders and the Agent shall not incur liability to any
Person by reason of so refraining. Without limiting the
-64-<PAGE>
foregoing, no Lender shall have any right of action whatsoever
against the Agent as a result of the Agent acting or refraining
from acting hereunder in accordance with the instructions of the
Required Lenders; provided, however, that the Agent shall not be
required to act or not act in accordance with any instructions of
the Required Lenders if to do so would expose the Agent to
personal liability or would be contrary to any Loan Document or to
applicable law.
(b) The Agent may assume that no Event of Default has
occurred and is continuing, unless the Agent has received notice
from the Borrower stating the nature of the Event of Default, or
has received notice from a Lender stating the nature of the Event
of Default and that such Lender considers the Event of Default to
have occurred and to be continuing.
(c) If the Agent may not, pursuant to Section 11.04(b),
assume that no Event of Default has occurred and is continuing,
the Agent shall give notice thereof to the Lenders and shall act
or not act upon the instructions of the Required Lenders, provided
that the Agent shall not be required to act or not act if to do so
would expose the Agent to personal liability or would be contrary
to any Loan Document or to applicable law, and provided further,
that if the Required Lenders fail, for five days after the receipt
of notice from the Agent, to instruct the Agent, then the Agent,
in its discretion, may act or not act as it deems advisable for
the protection of the interests of the Lenders and shall be fully
protected in so acting.
SECTION 11.05. Liability of the Agent and Lead Manager.
Neither the Agent, the Lead Manager, nor any of their respective
directors, officers, agents, or employees shall be liable for any
action taken or not taken by them in such capacity under or in
connection with the Loan Documents, except for their own gross
negligence or willful misconduct. Without limitation on the
foregoing, the Agent, the Lead Manager, and their respective
directors, officers, agents, and employees:
(a) may treat the payee of any Note as the holder
thereof until the Agent receives notice of the assignment or
transfer thereof in form satisfactory to the Agent, signed by
the payee and may treat each Lender as the owner of that
Lender's interest in the obligations due to the Lender for
all purposes of this Agreement until the Agent receives
notice of the assignment or transfer thereof, in form
satisfactory to the Agent, signed by that Lender;
(b) may consult with legal counsel, in-house legal
counsel, independent public accountants, in-house accountants
and other professionals, or other experts selected by it with
reasonable care, or with legal counsel, independent public
accountants, or other experts for the Borrower, and shall not
-65-<PAGE>
be liable for any action taken or not taken by it or them in
good faith in accordance with the advice of such legal
counsel, independent public accountants, or experts;
(c) will not be responsible to any Lender for any
statement, warranty, or representation made in any of the
Loan Documents or in any notice, certificate, report,
request, or other statement (written or oral) in connection
with any of the Loan Documents;
(d) except to the extent expressly set forth in the
Loan Documents, will have no duty to ascertain or inquire as
to the performance or observance by the Borrower or any other
Person of any of the terms, conditions, or covenants of any
of the Loan Documents or to inspect the property, books, or
records of the Borrower or any Subsidiary or other Person;
(e) will not be responsible to any Lender for the due
execution, legality, validity, enforceability, genuineness,
effectiveness, sufficiency, or value of any Loan Document,
any other instrument or writing furnished pursuant thereto or
in connection therewith;
(f) will not incur any liability by acting or not
acting in reliance upon any Loan Document, notice, consent,
certificate, document, statement, telex, telecopier message
or other instrument or writing believed by it or them to be
genuine and to have been signed, sent or made by the proper
Person; and
(g) will not incur any liability for any arithmetical
error in computing any amount payable to or receivable from
any Lender hereunder, including, without limitation, payment
of principal and interest on the Notes, Advances, and other
amounts; provided that promptly upon discovery of such an
error in computation, the Agent, the Lender, and (to the
extent applicable) the Borrower shall make such adjustments
as are necessary to correct such error and to restore the
parties to the position that they would have occupied had the
error not occurred.
SECTION 11.06. Indemnification. Each Lender shall,
ratably in accordance with the respective outstanding principal
amount of its Advances, indemnify and hold the Agent, the Lead
Manager, and their respective directors, officers, agents, and
employees harmless against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses, or disbursements of any kind or nature whatsoever
(including, without limitation, attorneys' fees and disbursements)
that may be imposed on, incurred by, or asserted against it or
them in any way relating to or arising out of the Loan Documents
(other than losses incurred by reason of the failure by the
-66-<PAGE>
Borrower to pay the obligations due to the Lenders hereunder or
under the Notes) or any action taken or not taken by it as Agent
or Lead Manager thereunder, except for the gross negligence or
willful misconduct of such party. Without limitation of the
foregoing, each Lender shall reimburse the Agent upon demand for
that Lender's ratable share of any cost or expense incurred by the
Agent in connection with the negotiation, preparation, execution,
delivery, administration, amendment, waiver, refinancing,
restructuring, reorganization (including a bankruptcy
reorganization), or enforcement of the Loan Documents, to the
extent that the Borrower is required to pay that cost or expense
but fails to do so upon demand.
SECTION 11.07. Agent and Affiliates. Trust Company
Bank (and each successor Agent) and NationsBank, N.A. (Carolinas)
each have the same rights and powers under the Loan Documents as
any other Lender and may exercise the same as though it were not
the Agent or Lad Manager, respectively; and the term "the Lenders"
or "Lender" includes Trust Company Bank in its individual capacity
and NationsBank, N.A. (Carolinas) in its individual capacity.
Trust Company Bank (and each successor Agent), NationsBank, N.A.
(Carolinas) and their respective Affiliates may accept deposits
from, lend money to, and generally engage in any kind of banking,
trust or other business with the Borrower and any Affiliate or
Subsidiary of the Borrower, as if it were not the Agent or the
Lead Manager and without any duty to account therefor to the
Lenders. Trust Company Bank (and each successor Agent) need not
account to any other Lender for any monies received by it for
reimbursement of its costs, expenses and fees as the Agent
hereunder, or for any monies received by it in its capacity as a
Lender hereunder, except as otherwise provided herein. This
Agreement shall not be deemed to constitute a joint venture or
partnership among the Lenders.
SECTION 11.08. Successor Agent. The Agent may resign
as such at any time by written notice to the Borrower and the
Lenders, to be effective upon a successor's acceptance of
appointment as Agent. In such event, subject to the approval of
the Borrower, the Required Lenders shall appoint a successor Agent
or Agents, who must be from among the Lenders; provided, that the
Agent shall be entitled to appoint a successor Agent from among
the Lenders, subject to acceptance of appointment by that
successor Agent and subject to the approval of the Borrower, if
the Required Lenders have not appointed a successor Agent within
thirty (30) calendar days after the date the Agent gave notice of
resignation or was removed. Upon a successor's acceptance of
appointment as Agent, the successor will thereupon succeed to and
become vested with all the rights, powers, privileges, and duties
of the Agent under the Loan Documents, and the resigning Agent
will thereupon be discharged from its duties and obligations
thereafter arising under the Loan Documents.
-67-<PAGE>
ARTICLE XII
MISCELLANEOUS
SECTION 12.01. No Waiver. No delay or failure on the
part of the Agent or any Lender or any holder of any of the Notes
in the exercise of any right, power or privilege granted under
this Agreement, under any other Loan Document, or available at law
or in equity, shall impair any such right, power or privilege or
be construed as a waiver of any Event of Default or any
acquiescence therein. No single or partial exercise of any such
right, power or privilege shall preclude the further exercise of
such right, power or privilege. No waiver shall be valid against
the Lenders unless made in writing and signed by the Agent, and
then only to the extent expressly specified therein.
SECTION 12.02. Notices. Unless otherwise provided
herein, all notices, requests and other communications provided
for hereunder shall be in writing (including bank wire, telex,
telecopy or similar teletransmission or writing) and shall be
given at the following addresses:
(1) If to the Lenders, at the address specified
or Lead Manager, opposite each Lender's or the
Lead Manager's signature below
(2) If to the Agent, Trust Company Bank
P. O. Box 4418
Atlanta, Georgia 30302
25 Park Place
23rd Floor -Trust Company Tower
Atlanta, Georgia 30303
Attention: Jerry White
Telecopy: 404/588-8833
(3) If to Borrower, Dixie Yarns, Inc.
P.O. Box 751
Chattanooga, Tennessee 37401
1100 Watkins Street
Chattanooga, Tennessee 37404
Attention: Gary Harmon
Telecopy: 615/493-7353
-68-<PAGE>
with a copy to, Witt, Gaither & Whitaker
1100 First National Bank
Building
Chattanooga, Tennessee 37402
Attention: John Murrey, III,
Esq.
Telecopy: 615/266-4138
Any such notice, request or other communication shall be effective
(i) if given by telex, when such telex is transmitted to the telex
number specified above or specified opposite each Lender's
signature below and the appropriate answerback is received, (ii)
if given by mail, upon the earlier of receipt or the third
Business Day after such communication is deposited in the United
States mails, registered or certified, with first class postage
prepaid, addressed as aforesaid or (iii) if given by any other
means (including, without limitation, by air courier), when
delivered at the address specified herein. The Borrower, the
Agent, or any Lender may change its address for notice purposes by
notice to the other parties in the manner provided herein.
SECTION 12.03. GOVERNING LAW. THIS AGREEMENT AND ALL
OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF GEORGIA (WITHOUT GIVING
EFFECT TO THE CONFLICT OF LAW PROVISIONS THEREOF).
SECTION 12.04. Survival of Representations and
Warranties. All representations and warranties contained herein
or made by or furnished on behalf of the Borrower in connection
herewith shall survive the execution and delivery of this
Agreement and all other Loan Documents.
SECTION 12.05. Descriptive Headings. The descriptive
headings of the several sections of this Agreement are inserted
for convenience only and do not constitute a part of this
Agreement.
SECTION 12.06. Severability. If any part of any
provision contained in this Agreement or in any other Loan
Document shall be invalid or unenforceable under applicable law,
said part shall be ineffective to the extent of such invalidity
only, without in any way affecting the remaining parts of said
provision or the remaining provisions.
SECTION 12.07. Time is of the Essence. Time is of the
essence in interpreting and performing this Agreement and all
other Loan Documents.
SECTION 12.08. Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be
-69-<PAGE>
deemed to be an original and all of which, taken together, shall
constitute one and the same instrument.
SECTION 12.09. Payment of Costs. The Borrower shall
pay all costs, expenses, taxes and fees (i) incurred by the Agent
in connection with the preparation, execution and delivery of this
Agreement and all other Loan Documents including, without
limitation, the costs and professional fees of counsel for the
Agent, Messrs. King & Spalding, whether or not the transaction
contemplated hereby shall be consummated, and any and all stamp,
intangible or other taxes that may be payable or determined in the
future to be payable in connection therewith; (ii) incurred by the
Agent in connection with administration of the Borrowings and the
Loan Documents in accordance with the provisions thereof and the
preparation, execution and delivery of any waiver, amendment or
consent by the Lenders or the Agent relating to the Loan
Documents, including, without limitation, the costs and
professional fees of counsel for the Agent; and (iii) incurred by
the Agent, the Lead Manager and any of the Lenders in enforcing
the Loan Documents, including, without limitation, reasonable
attorneys' fees of counsel for the Agent, the Lead Manager and the
Lenders.
SECTION 12.10. Benefit of Agreement.
(a) This Agreement shall be binding upon and inure to
the benefit of and be enforceable by the respective successors and
assigns of the parties hereto, provided that Borrower may not
assign or transfer any of its interest hereunder without the prior
written consent of the Lenders.
(b) Any Lender may make, carry or transfer its Advances
at, to or for the account of, any of its branch offices or the
office of an Affiliate of such Lender.
(c) Each Lender may assign all or a portion of its
interests, rights and obligations under this Agreement (including
all or a portion of any of its Commitments and the Advances at the
time owing to it and the Notes held by it) to any financial
institution; provided, however, that (i) the Agent and Borrower
must give their prior written consent to such assignment unless
such assignment is to an Affiliate of the assigning Lender (such
consent not to be unreasonably withheld; provided that, the
Borrower may withhold its consent without any cause or
justification for a period of ninety (90) days after notice of a
proposed assignment hereunder and if the Borrower designates
another Lender acceptable to the Agent within that period willing
to purchase the assigning Lender's proposed assignment amount for
the same purchase price and on the same terms and conditions as
the assigning Lender's proposed assignee, the assigning Lender
shall sell such interest hereunder to the Borrower's proposed
assignee in accordance with this Section 12.10), (ii) the amount
-70-<PAGE>
of the Commitments of the assigning Lender subject to each
assignment (determined as of the date the assignment and ac-
ceptance with respect to such assignment is delivered to the
Agent) shall not be less than an amount equal to $5,000,000 or
greater integral multiplies thereof, (iii) such assigning Lender
shall assign a proportionate share of all of its Commitments,
outstanding Advances and its participation in the Bonds to the
such assignee, and (iv) the parties to each such assignment shall
execute and deliver to the Agent an Assignment and Acceptance,
together with the Note or Notes subject to such assignment and,
unless such assignment is to an Affiliate of such Lender, a
processing and recordation fee of $2,500. Borrower shall not be
responsible for such processing and recordation fee or any costs
or expenses incurred by any Lender or the Agent in connection with
such assignment. From and after the effective date specified in
each Assignment and Acceptance, which effective date shall be at
least five (5) Business Days after the execution thereof, the
assignee thereunder shall be a party hereto and to the extent of
the interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement.
Notwithstanding the foregoing, the assigning Lender must retain
after the consummation of such Assignment and Acceptance, a
minimum aggregate amount of Commitments of $10,000,000; provided,
however, no such minimum amount shall be required with respect to
any such assignment made at any time there exists an Event of De-
fault hereunder. Within five (5) Business Days after receipt of
the notice and the Assignment and Acceptance, Borrower, at its own
expense, 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 assignee in a principal amount equal to the applicable
Commitments assumed by it pursuant to such Assignment and
Acceptance and new Note or Notes to the assigning Lender in the
amount of its retained Commitment or Commitments. Such new Note
or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes,
shall be dated the date of the surrendered Note or Notes which
they replace, and shall otherwise be in substantially the form
attached hereto.
(d) Each Lender may, without the consent of Borrower or
the Agent, 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 in
the Loans owing to it and the Notes held by it), provided,
however, that (i) no Lender may sell a participation in its
aggregate Commitments (after giving effect to any permitted
assignment hereof) in an amount in excess of fifty percent (50%)
of such aggregate Commitments, provided, however, sales of
participations to an Affiliate of such Lender shall not be
included in such calculation; provided, however, no such maximum
amount shall be applicable to any such participation sold at any
time there exists an Event of Default hereunder, (ii) such
-71-<PAGE>
Lender's obligations under this Agreement shall remain unchanged,
(iii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, and (iv)
the participating bank or other entity shall not be entitled to
the benefit (except through its selling Lender) of the cost
protection provisions contained in Article V of this Agreement,
and (v) Borrower and the Agent and other Lenders shall continue to
deal solely and directly with each Lender in connection with such
Lender's rights and obligations under this Agreement and the other
Credit Documents, and such Lender shall retain the sole right to
enforce the obligations of Borrower relating to the Loans and to
approve any amendment, modification or waiver of any provisions of
this Agreement.
(e) Any Lender may at any time assign all or any
portion of its rights in this Agreement and the Notes issued to it
to a Federal Reserve Bank; provided that no such assignment shall
release the Lender from any of its obligations hereunder.
SECTION 12.11. Cumulative Remedies; No Waiver. The
rights, powers, and remedies of the Agent or any Lender provided
herein or in any other Loan Document are cumulative and not
exclusive of any right, power, or remedy provided by law or
equity.
SECTION 12.12. Amendments; Consents. No amendment,
modification, supplement, termination, or waiver of any provision
of this Agreement or any other Loan Document, and no consent to
any departure by the Borrower or any Subsidiary therefrom, may in
any event be effective unless in writing signed by the Required
Lenders, and then only in the specific instance and for the
specific purpose given; and without the approval in writing of
each Lender with respect to its Advances, no amendment,
modification, supplement, termination, waiver, or consent may be
effective:
(a) to amend or modify the principal of, or the amount
of principal, principal prepayments, or the rate of interest
payable on, any Borrowing or the amount of any Commitment;
(b) to prospectively postpone any date fixed for any
payment of principal of, prepayment of principal of, or any
installment of interest on, any Borrowing or to extend the
term of any Commitment; or
(c) to amend or modify the definitions of any
"Commitment" or "Required Lenders," or of this Section 12.12
or Schedule 1.1.
Any amendment, modification, supplement, termination, waiver or
consent effected in accordance with this Section 12.12 shall apply
equally to, and shall be binding upon, all Lenders and the Agent.
-72-<PAGE>
SECTION 12.13. Set-Off. Upon the occurrence and during
the continuation of an Event of Default, the Borrower authorizes
each Lender, without notice or demand, to apply any indebtedness
due or to become due to the Borrower from such Lender in
satisfaction of any of the indebtedness, liabilities or
obligations of the Borrower under this Agreement or under any
other Loan Document, including, without limitation, the right to
set-off against any deposits or other cash collateral of the
Borrower held by such Lender.
SECTION 12.14. Indemnity. The Borrower agrees to
protect, indemnify and save harmless the Agent, the Lead Manager
and each Lender, and all directors, officers, employees and agents
of the Agent and each Lender, from and against any and all (i)
claims, demands and causes of action of any nature whatsoever
brought by any Person not a party to this Agreement and arising
from or related or incident to this Agreement or any other Loan
Document, (ii) costs and expenses incident to the defense of such
claims, demands and causes of action, including, without
limitation, reasonable attorneys' fees, and (iii) liabilities,
judgments, settlements, penalties and assessments arising from
such claims, demands and causes of action, provided such claims,
costs and liabilities are not proximately caused by such Agent's,
the Lead Manager's or Lender's negligence or willful misconduct or
breach of this Agreement. The indemnity contained in this section
shall survive the termination of this Agreement.
SECTION 12.15. Usury. It is the intent of the parties
hereto not to violate any federal or state law, rule or regulation
pertaining either to usury or to the contracting for or charging
or collecting of interest, and the Borrower and the Lenders agree
that, should any provision of this Agreement or of the Notes, or
any act performed hereunder or thereunder, violate any such law,
rule or regulation, then the excess of interest contracted for or
charged or collected over the maximum lawful rate of interest
shall be applied to the outstanding principal indebtedness due to
the Lenders by the Borrower under this Agreement.
SECTION 12.16. Jurisdiction and Venue. The Borrower
agrees, without power of revocation, that any civil suit or action
brought against it as a result of any of its obligations under
this Agreement or under any other Loan Document may be brought
against it either in the Superior Court of Fulton County, Georgia,
or in the United States District Court for the Northern District
of Georgia, and the Borrower hereby irrevocably submits to the
jurisdiction of such courts and irrevocably waives, to the fullest
extent permitted by law, any objections that it may now or
hereafter have to the laying of the venue of such civil suit or
action and any claim that such civil suit or action has been
brought in an inconvenient forum, and the Borrower agrees that
final judgment in any such civil suit or action shall be
-73-<PAGE>
conclusive and binding upon it and shall be enforceable against it
by suit upon such judgment in any court of competent jurisdiction.
SECTION 12.17. WAIVER OF JURY TRIAL. THE BORROWER, THE
AGENT, THE LEAD MANAGER AND THE LENDERS EACH HEREBY IRREVOCABLY
WAIVES ANY AND ALL RIGHTS TO TRIAL BY JURY IN ANY LEGAL
PROCEEDINGS ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 12.18. Construction. Should any provision of
this Agreement require judicial interpretation, the parties hereto
agree that the court interpreting or construing the same shall not
apply a presumption that the terms hereof shall be more strictly
construed against one party by reason of the rule of construction
that a document is to be more strictly construed against the party
that itself or through its agents prepared the same, it being
agreed that the Borrower, the Agent, the Lenders and their
respective agents have participated in the preparation hereof.
SECTION 12.19. Entire Agreement. This Agreement and
the other Loan Documents executed and delivered contemporaneously
herewith, together with the exhibits and schedules attached hereto
and thereto, constitute the entire understanding of the parties
with respect to the subject matter hereof, and any other prior or
contemporaneous agreements, whether written or oral, with respect
thereto including, without limitation, any loan commitment from
the Agent to the Borrower, are expressly superseded hereby. The
execution of this Agreement and the other Loan Documents by the
Borrower was not based upon any facts or materials provided by the
Agent or any Lender, nor was the Borrower induced to execute this
Agreement or any other Loan Document by any representation,
statement or analysis made by the Agent or any Lender.
-74-<PAGE>
WITNESS the hand and seal of the parties hereto through
their duly authorized officers, as of the date first above
written.
DIXIE YARNS, INC.
By: /s/Gary A. Harmon
___________________________
Treasurer
Title: ______________________
By: /s/G. M. Grandin
___________________________
Senior Vice President
and Chief Financial
Officer
Title: ______________________
/s/Starr T. Klein
Attest: _______________________
Secretary
Title: ______________________
[CORPORATE SEAL]
Address:
Dixie Yarns, Inc.
1100 Watkins Street
Chattanooga, Tennessee 37404
Attn: Mr. Gary Harmon
Telecopy: (615) 493-7353
(Signatures continued on next page)
-75-<PAGE>
(Signature Page for Third Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of March 31, 1995, by and among Dixie
Yarns, Inc., Trust Company Bank, individually and as Agent,
NationsBank, N. A. (Carolinas), individually and as Lead Manager,
and Chemical Bank)
TRUST COMPANY BANK, individually and
as Agent
/s/Jarrette A. White III
By: ___________________________
Vice President
Title: ______________________
/s/David W. Penter
By: ___________________________
Vice President
Title: ______________________
[BANK SEAL]
Address:
Trust Company Bank
Twenty-Third Floor
25 Park Place
Atlanta, Georgia 30303
Attn: Mr. Jerry White
Telecopy: (404) 588-8833
(Signatures continued on next page)
-76-<PAGE>
(Signature Page for Third Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of March 31, 1995, by and among Dixie
Yarns, Inc., Trust Company Bank, individually and as Agent,
NationsBank, N. A. (Carolinas), individually and as Lead Manager,
and Chemical Bank
NATIONSBANK, N. A. (CAROLINAS),
individually and as Lead Manager
/s/Alison H. Mewborne
By: ______________________________
Vice President
Title: _________________________
[BANK SEAL]
Address:
NationsBank, N. A. (Carolinas)
Textile and Apparel Group
NC1-007-08-11
100 N. Tryon Street
Charlotte, N.C. 28255
Attn: Alison H. Mewborne
Vice President
Telecopy: (704) 386-1270
(Signatures continued on next page)
-77-<PAGE>
(Signature Page for Third Amended and Restated Revolving Credit and
Term Loan Agreement, dated as of March 31, 1995, by and among Dixie
Yarns, Inc., Trust Company Bank, individually and as Agent,
NationsBank, N. A. (Carolinas), individually and as Lead Manager,
and Chemical Bank)
CHEMICAL BANK
/s/Peter C. Eckstein
By: _____________________________
Vice President
Title: ________________________
[BANK SEAL]
Address:
Chemical Bank
Banking and Corporate Finance Department
10th Floor
270 Park Avenue
New York, New York 10017
Attn: Peter Eckstein
Telecopy: (212) 972-0009
-78-
EXHIBIT (11)
EXHIBIT 11
DIXIE YARNS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
__________________________
April 1, April 2,
1995 1994
___________ ___________
PRIMARY:
NET INCOME (LOSS) $ 882,717 $(4,342,442)
___________ ___________
___________ ___________
Weighted average number of
Common Shares outstanding
assuming conversion of
Class B Common Stock 12,243,604 12,258,619
Net effect of dilutive stock
options based on the
treasury stock method using
average market price 19,554 39,039
Net effect of put options
based on the reverse
treasury stock method using
average market price 1,753,462 739,010
___________ ___________
TOTAL SHARES 14,016,620 13,036,668
___________ ___________
___________ ___________
PER SHARE AMOUNT $ .06 $ (.33)
___________ ___________
___________ ___________
FULLY DILUTED:
Net income (loss) $ 882,717 $(4,342,442)
After-tax interest
requirement of
convertible subordinated
debentures (A) -0- -0-
___________ ___________
ADJUSTED NET INCOME (LOSS) $ 882,717 $(4,342,442)
___________ ___________
___________ ___________
EXHIBIT 11
DIXIE YARNS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE - CONTINUED
Three Months Ended
__________________________
April 1, April 2,
1995 1994
___________ ___________
FULLY DILUTED - CONTINUED:
Weighted average number of
Common Shares outstanding
assuming conversion of
Class B Common Stock 12,243,604 12,258,619
Net effect of dilutive stock
options based on the
treasury stock method using
quarter end market price
if higher than the average
market price 19,554 39,039
Net effect of put options
based on the reverse
treasury stock method using
quarter end market price
if lower than the average
market price 2,275,637 935,739
Net effect of conversion of
convertible subordinated
debentures (A) -0- -0-
___________ ___________
TOTAL SHARES 14,538,795 13,233,397
___________ ___________
___________ ___________
PER SHARE AMOUNT $ .06 $ (.33)
___________ ___________
___________ ___________
(A) Conversion of convertible subordinated debentures to 1,390,745 shares
with an after-tax interest requirement of $472,538 for the three months
ended April 1, 1995 and April 2, 1994 has been excluded from computation
since the effect was anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated condensed financial statements of Dixie Yarns, Inc. at and for the
three months ended April 1, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> APR-01-1995
<CASH> 2,088
<SECURITIES> 0
<RECEIVABLES> 40,484
<ALLOWANCES> 3,601
<INVENTORY> 117,589
<CURRENT-ASSETS> 165,334
<PP&E> 493,234
<DEPRECIATION> 224,250
<TOTAL-ASSETS> 503,950
<CURRENT-LIABILITIES> 69,716
<BONDS> 190,074
<COMMON> 43,779
18,178
0
<OTHER-SE> 127,590
<TOTAL-LIABILITY-AND-EQUITY> 503,950
<SALES> 181,646
<TOTAL-REVENUES> 181,646
<CGS> 153,094
<TOTAL-COSTS> 153,094
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,926
<INCOME-PRETAX> 1,871
<INCOME-TAX> 988
<INCOME-CONTINUING> 883
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 883
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
